MOHAWK INDUSTRIES INC, 10-K, 1997-03-07

MOHAWK INDUSTRIES INC
10-K, 1997-03-07
CARPETS & RUGS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[Mark One]

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from Commission File Number
to 01-19826

MOHAWK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

Delaware 52-1604305
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

P. O. Box 12069, 160 S. Industrial Blvd., Calhoun, Georgia 30701
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (706) 629-7721

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock,
$.01 par value

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]

The aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant (13,255,593 shares) on February 26, 1997 was
$352,930,164. The aggregate market value was computed by reference to the
closing price of the Common Stock on such date.

Number of shares of Common Stock outstanding as of February 26, 1997:
34,528,709 shares of Common Stock, $.01 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders Part III

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PART I

Item 1. Business

General

Mohawk Industries, Inc. ("Mohawk" or the "Company", a term which includes the
Company and its subsidiaries, including its primary operating subsidiaries,
Mohawk Carpet Corporation ("Mohawk Carpet") and Aladdin Manufacturing
Corporation ("Aladdin Manufacturing", formerly known as Mohawk Manufacturing
Corporation)) is a leading producer of woven and tufted broadloom carpet and
rugs for residential and commercial applications. The Company is the second
largest carpet and rug manufacturer in the United States, with 1996 net sales of
approximately $1.8 billion. The Company designs, manufactures and markets carpet
and rugs in a broad range of colors, textures and patterns. The Company is
widely recognized through its premier brand names, some of which are "Mohawk,"
"Alexander Smith," "Horizon," "Mohawk Commercial," "Harbinger," "Helios,"
"American Rug Craftsmen," "Karastan," "Bigelow," "Aladdin" and "Galaxy," and
markets its products primarily through retailers and commercial dealers.
Mohawk's operations are vertically integrated from the extrusion of olefin resin
into fibers to the shipment of finished products.

History

The Company was organized in Delaware in 1988 to acquire Aladdin Manufacturing
from its predecessor owner, Mohasco Corporation, in a leveraged buy-out
transaction. The Company completed its initial public offering of common stock
in April 1992, raising approximately $42.5 million in proceeds, which were used
to retire indebtedness and redeem preferred stock outstanding at that time.
Mohawk acquired Horizon Industries, Inc. ("Horizon") in October 1992 for cash of
approximately $63.9 million and 2,673,000 shares of Common Stock valued at
approximately $22.5 million. Mohawk purchased American Rug Craftsmen, Inc.
("American Rug Craftsmen") in April 1993 for approximately $32.0 million in cash
and Karastan Bigelow in July 1993 for approximately $155.5 million, which was
substantially all cash. In May 1993, the Company completed an offering of
3,150,000 shares of Common Stock. Of the total number of shares, 2.4 million
were sold by the Company and 750,000 shares were sold by selling stockholders.
The net proceeds to the Company were approximately $46.0 million. On February
25, 1994, Mohawk acquired all of the common stock of Aladdin Mills, Inc.
("Aladdin") in exchange for approximately 13.6 million shares of Common Stock,
valued at $386.5 million, based upon the closing stock price at the date the
agreement was executed. On January 13, 1995, Mohawk acquired all of the capital
stock of Galaxy for $42.2 million in cash. On January 27, 1997, the Company
entered into an agreement to acquire certain assets of Diamond Rug & Carpet
Mills, Inc. through a pre-packaged plan of organization under the Bankruptcy
Code.

Industry

According to the most recent figures available from the United States
Department of Commerce, worldwide carpet and rug sales volume of American
manufacturers and their domestic divisions was 1.6 billion square yards in 1995.
This volume represents a market in excess of approximately $9.5 billion at the
"mill level", which management believes, based on standard industry mark-ups,
translates into approximately $15 billion to $17 billion at the retail level.
Based upon data obtained from recent industry publications, the worldwide carpet
and rug sales volume of American manufacturers in 1996 was approximately 1.6
billion square yards and $9.7 billion. The overall level of sales in the carpet
industry is influenced by a number of factors, including consumer confidence in
spending for durable goods, interest rates, turnover in housing, the condition
of the residential and commercial construction industries and the overall
strength of the economy.

Broadloom carpet (defined as carpet over six feet by nine feet in size)
represented 84% of the volume shipped by the industry in 1995. Tufted broadloom
carpet (a category that refers to the manner of construction in addition to
size) represented 81% of the broadloom industry volume shipped in 1995. The
broadloom carpet industry has two primary markets, residential and commercial,
with the residential market making up approximately 75% of industry volume
shipped and the commercial market comprising approximately 25% in 1995. An
estimated 62% of industry shipments is made in response to replacement demand,
which usually involves exact yardage (or "cut order") shipments that typically

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provide higher profit margins than sales of carpet sold in full rolls. Because
the replacement business generally involves higher quality carpet cut to order
by the manufacturer, rather than the dealer, this business tends to be more
profitable for manufacturers than the new construction business.

Products and Markets

The Company designs, manufactures and markets hundreds of styles of carpet,
rugs and mats in a broad range of colors, textures and patterns. Mohawk
positions its products in all price ranges and emphasizes quality, style,
performance and service. The Company is widely recognized through its premier
brand names, "Mohawk," "Alexander Smith," "Horizon," "Mohawk Commercial,"
"Karastan Contract," "Bigelow Commercial," "Harbinger," "Helios," "American Rug
Craftsmen," "Karastan," "Bigelow," "Aladdin," "Townhouse," "Ciboney," "Modesto,"
"Hamilton," "New Visions" and "Galaxy," and markets its products primarily
through retailers, mass merchandisers, home centers, department stores,
boutiques and commercial dealers. Some products are also marketed through
private labeling programs.

Mohawk markets certain of its products outside the United States, but does not
consider sales of such products to be material.

Residential Broadloom Market

The residential market is the largest segment of the industry and represents a
significant portion of the Company's sales. The Company currently markets
approximately 350 residential products to more than 25,000 customers which
include independent retailers, department stores, mass merchandisers, buying
groups, and building and tenant improvement contractors.

The Company has positioned its premier residential brand names across all
price ranges with the Company product retail prices ranging from below $3 to
above $80 per square yard. "Mohawk," "Alexander Smith," "Horizon," "Galaxy,"
"New Visions," "Karastan" and "Bigelow" are positioned to sell primarily in the
medium-to-high retail price range in the residential broadloom market and these
lines are also sold under private labels. These lines have substantial brand
name recognition among carpet dealers and retailers with the "Karastan,"
"Mohawk," and "Bigelow" brands having the highest consumer recognition in the
industry. "Karastan" is the leader in the exclusive high end market. The
"Aladdin," "Townhouse," "Ciboney," "Modesto" and "Hamilton" brand names compete
in the low-to-medium retail price range.

Based on a recent industry survey, the Company is considered a leader within
the industry of U.S. carpet manufacturers providing marketing support. Through
dealer programs like Karastan Gallery, Mohawk Brand Excellence, New Visions,
Hamilton, Ciboney and Mohawk Carpet Color Center, the Company offers intensive
marketing and advertising support. These programs offer varying degrees of
support to dealers in such areas of sales and management training, display
racks, exclusive promotions and assistance in certain administrative functions
such as computer systems, accounting and insurance.

During 1996, the Company completed its realignment of the Aladdin, Galaxy and
Mohawk sales forces. Although these sales forces have maintained their separate
identities, they now report to common management on a regional basis. All of the
regional vice presidents report to one senior vice president of sales. Each
region has responsibility for sales, distribution and inventory management in
its region, all of which is coordinated by the senior vice president of sales at
a national level. The inventory management on a regional level is accomplished
by a hub-and-spoke warehouse network. In this system, Company trucks generally
deliver carpet from mill sites to regional warehouses. From there, it is shipped
to local distribution warehouses, then to retailers. The Company believes that
the current structure of the residential sales group has contributed to a more
efficient and profitable organization.

Commercial Market

The commercial market is divided into several segments: educational
institutions, corporate office space, hospitality facilities, retail space and
health care facilities. In addition, Mohawk produces and sells carpet for the

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export market, the federal government and other niche businesses. Different
purchase decision makers and decision-making processes exist for each segment.
For example, in the corporate office segment, decisions are usually made by
architects or specifiers, whose responsibility is to manage the project budget
and coordinate interior design. In the institutional segment, by comparison,
decisions are often made by purchasing agents employed by the end user who have
longstanding relationships with carpet manufacturers. The commercial market is
generally a more complex market in which to sell than the residential market.
The Company's participation in the commercial market allows it to offset
partially the cyclical nature of its residential business.

In the commercial market, the Company markets its products under the brand
names "Mohawk Commercial," "Harbinger," "Aladdin," "Karastan Contract" and
"Bigelow Commercial." The marketing strategy of the Mohawk Commercial, Karastan
Contract and Bigelow Commercial brands is to leverage the brands' traditional
sales strength in the educational institution segment of the market to the
office, hospitality, retail and health care segments. These brands are comprised
of specialized products for these segments that emphasize product quality and
specification rather than just price.

The Harbinger brand is a specialized line of commercial carpet generally
specified by architects and designers for end users in the hospitality,
corporate, health care and institutional market sectors. Harbinger products are
largely custom designed and colored and are marketed through its sales
organization of commercial carpet sales specialists. The Harbinger brand is
considered to be an industry leader in product quality, styling and innovation
for the high-end commercial market. Harbinger products were the first to
introduce "graphics" tufting technology to the industry and have maintained
their product development leadership by employing tufting and dyeing
technologies that produce intricate multicolored patterns.

The Aladdin brand is marketed primarily to the "mainstreet" segment of the
commercial market. The "mainstreet" segment is generally comprised of the
low-to-medium price range styles and is distributed primarily through retail
dealers for smaller installations.

Woven commercial products accounted for a significant portion of the Company's
net sales of commercial product in 1996, including the Mohawk Commercial brand's
exclusive woven interlock products, which are manufactured by a unique weaving
process that increases performance, wear and durability. The Company's ability
to make woven carpet under the Mohawk Commercial, Karastan Contract and Bigelow
Commercial brand names in large volume for commercial applications
differentiates it from other manufacturers, most of which produce tufted carpet
almost exclusively. Woven carpet and specifically the Company's woven interlock
products sell at higher prices than tufted carpet and generally produce higher
profit margins. Management believes that the Company is the largest producer of
woven carpet in the United States and that the Company has several carpet
weaving machines and processes that no other manufacturer has, thereby allowing
the Company to create carpet to meet specifications that its competitors cannot
duplicate.

Residential Rug Market

The machine-made rug market is currently the fastest growing segment of the U.
S. carpet and rug industry with an annual growth rate estimated to be
approximately 11% in 1996. Much of this growth has occurred at the low-to-
medium retail price ranges. The distribution channels for the rug market
primarily include department stores, mass merchants, floorcovering stores,
catalog stores, home centers and furniture stores.

The Company's product lines include a broad array of rugs. The Karastan brand
name rugs represent the higher retail price ranges with one of the most valued
brand names in the industry and are distributed through specialty stores, along
with department and furniture stores. These are higher quality woven wool rugs
manufactured primarily on Axminster looms.

The Company emphasizes the fast growing lower retail price ranges through its
American Rug Craftsmen brand name. The rugs sold under this brand are primarily
woven polypropylene area rugs, tufted border rugs and decorative mats, which are
made from purchased matting material that is cut, serged and screen printed by
the Company. These products are distributed primarily through mass merchants and
home centers.

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The Company also sells to the bath mat and washable bath rug segments of the
rug market through its Aladdin brand name. These are tufted nylon products which
are distributed through department stores and mass merchants.

Advertising and Promotion

The Company promotes its products in the form of co-operative advertising,
point-of-sale displays and marketing literature provided to assist in marketing
various carpet styles. Mohawk also continues to rely on the substantial brand
name identification of its "Mohawk," "Alexander Smith," "Horizon," "Mohawk
Commercial," "Harbinger," "Helios," "Karastan," "Bigelow," "Aladdin," "American
Rug Craftsmen" and "Galaxy" lines. The cost of producing display samples, a
significant promotional expense, is partially offset by sales of samples and
support from raw materials suppliers.

In 1997, the Carpet and Rug Institute approved a four-year national industry
advertising campaign with a $25 million annual budget. Funding for the program
will be raised from contributions from individual manufacturers in the carpet
industry, including suppliers of fiber, backing, latex and finished carpet and
rugs. Mohawk will be a participant in the campaign. The purpose of the program
is to advance consumer confidence, satisfaction and preference of carpet as the
floorcovering of choice.

Manufacturing and Operations

The Company's manufacturing operations are vertically integrated and include
the extrusion of resin into polypropylene and nylon fiber, yarn processing,
tufting, weaving, dyeing, coating and finishing. Capital expenditures are
primarily focused on increasing capacity, improving productivity and reducing
costs. Mohawk incurred $180.3 million in capital expenditures over the past
three years, including the $21.2 million purchase of polypropylene extrusion
equipment from Fiber One, primarily to modernize and expand manufacturing
equipment and facilities. These expenditures increased manufacturing efficiency
and capacity, while improving overall cost competitiveness.

Raw Materials and Suppliers

The principal raw materials the Company uses are nylon staple fibers; nylon
filament fibers; raw wool; polypropylene filament fibers; polyester staple
fibers; olefin resins; synthetic backing materials, polyurethane and latex; and
various dyes and chemicals. Mohawk obtains all of its major raw materials from
independent sources and all of its externally purchased nylon fibers from four
major suppliers: E.I. du Pont de Nemours and Company, Monsanto Company, BASF
Corporation and AlliedSignal, Inc. Most of the fibers the Company uses in carpet
production are treated with stain-resistant chemicals. The Company has not
experienced significant shortages of raw materials in recent years.

Competition

All of the markets in which the Company does business are highly competitive,
with approximately 100 companies engaged in the manufacture and sale of carpet
in the United States. Carpet manufacturers also face competition from the hard
surface floorcovering industry. Based on industry publications, the top twenty
North American carpet and rug manufacturers (including their American and
foreign divisions) in 1995 had worldwide sales in excess of $10 billion, and the
top twenty manufacturers in 1990 had sales in excess of $6 billion. Mohawk, with
1996 net sales of approximately $1.8 billion, is the second largest domestic
producer of carpet and rugs (in terms of sales volume).

Certain of the Company's competitors have greater financial and other
resources than the Company. In particular, the industry has one large
competitor, Shaw Industries, Inc. ("Shaw"), whose fiscal 1996 domestic wholesale
net sales were $2.4 billion representing approximately one fourth of the
estimated total industry sales for calendar 1996. Shaw's size could permit
significant raw material purchasing power and certain other manufacturing cost
advantages compared with the rest of the industry.

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The principal methods of competition within the industry are price, style,
quality and service. In both the residential and commercial markets, price
competition and market coverage are particularly important because there is
relatively little perceived differentiation among competing product lines.
Mohawk's recent investments in modernized, state-of-the-art manufacturing and
data processing equipment, the extensive diversity of equipment in which it has
invested and its marketing strategy contribute to its ability to compete
primarily on the basis of performance, quality, style and service, rather than
just price.

Trademarks

Mohawk uses several trademarks that it considers important in the marketing of
its products, including "Mohawk(R)," "Tommy Mohawk(R)," "Mohawk Color
Center(R)," "Alexander Smith(R)," "Horizon(R)," "Mohawk Commercial,"
"Harbinger(R)," "Helios(R)," "Commercial Horizons(R)," "Karastan(R),"
"Bigelow(R)," "Aladdin," "American Rug Craftsmen," "Townhouse," "Ciboney(R),"
"Hamilton(R)" and "Galaxy(R)."

Sales Terms and Major Customers

The Company's sales terms are the same as those generally available throughout
the industry. The Company generally permits its customers to return broadloom
carpet purchased from it within 30 days from the date of sale if the customer is
not satisfied with the quality of the carpet. This return policy is consistent
with the Company's emphasis on quality, style and performance and promotes
customer satisfaction without generating enough returns to affect materially the
Company's operating results or financial position.

During 1996, no single customer accounted for more than 4% of Mohawk's total
net sales. The Company believes the loss of one or a few major customers would
not have a material adverse effect on the Company's business.

Backlog

Backlog of orders is generally insignificant in the carpet manufacturing
business because most residential orders are filled within several days and
commercial backlogs reflect the terms of the relevant contracts, which generally
require delivery within four to six weeks.

Employees

As of December 31, 1996, the Company employed approximately 12,000 persons.
Approximately 290 Mohawk employees are members of the Union of Needletrades,
Industrial and Textile Employees, AFL-CIO, CLC with which the Company is party
to a collective bargaining agreement. Other than with respect to these
employees, the Company is not a party to any collective bargaining agreements.
Additionally, the Company has not experienced any strikes or work stoppages. The
Company believes that its relations with its employees are good.

Environmental Matters

The Company's operations must meet federal, state and local regulations
governing the discharge of materials into the environment. All of the plants
operated by the Company were built or have been upgraded to meet current
environmental standards. The Company believes it is in material compliance with
all applicable regulations. The Company estimates that any expenses incurred in
maintaining compliance with these regulations will not materially affect
earnings.

Cyclical Nature of Industry; Current Economic Conditions

The carpet industry is a cyclical business, influenced by a number of general
economic factors, including consumer confidence and spending for durable goods,
disposable income, interest rates, turnover in housing and the condition of the
residential and commercial construction industries (including the number of new
housing starts and the level of commercial construction). During economic
downturns, the carpet industry can be expected to experience a general decline
in sales and profitability.

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Item 2. Properties

The Company owns a 47,500 square foot headquarters office in Calhoun, Georgia
on an eight acre site. The following table lists the principal manufacturing and
distribution facilities owned by the Company:
<TABLE>
<CAPTION>

Approx.
Enclosed
Area In
Square
Location Primary Products or Purposes Footage
-------- ---------------------------- -------
<S> <C> <C>
Dalton, GA ........... Carpet and rug manufacturing and warehousing ......... 1,762,000
Chatsworth, GA........ Carpet manufacturing, warehousing and offices......... 887,000
Dublin, GA............ Carpet manufacturing, warehousing and offices......... 831,000
Lyerly, GA............ Carpet manufacturing and warehousing.................. 635,000
Eden, NC.............. Carpet and rug manufacturing.......................... 784,200
Calhoun, GA........... Carpet manufacturing and distribution center.......... 792,000
Landrum, SC........... Weaving and finishing of carpet....................... 350,000
Dalton, GA............ Carpet dyeing......................................... 259,000
Dalton, GA............ Sample storage and distribution....................... 123,000
Eden, NC.............. Carpet and rug distribution........................... 194,000
Summerville, GA....... Sample manufacturing and distribution................. 235,000
Calhoun, GA (1)....... Sample manufacturing and distribution................. 150,000
Sugar Valley, GA...... Rug manufacturing, warehousing and offices............ 472,500
Calhoun Falls, SC..... Yarn manufacturing.................................... 425,000
Bennettsville, SC..... Yarn manufacturing.................................... 412,000
Dalton, GA............ Yard manufacturing.................................... 105,400
Laurel Hill, NC....... Yarn manufacturing.................................... 203,000
Fort Oglethorpe, GA... Yarn manufacturing.................................... 194,000
Dalton, GA............ Yarn manufacturing.................................... 231,000
Calhoun, GA........... Yard manufacturing.................................... 121,000
Calhoun, GA........... Yarn manufacturing.................................... 113,800
Belton, SC (2)........ Yarn manufacturing.................................... 106,000
Tifton, GA (2)........ Yarn manufacturing.................................... 134,500
South Pittsburg, TN... Yarn manufacturing.................................... 102,000
Dalton, GA............ Warehouse............................................. 81,000
Greenville, NC........ Wool processing....................................... 103,000
Greenville, NC........ Wool processing....................................... 59,000
Philadelphia, PA...... Wool processing....................................... 50,000
</TABLE>
___________
(1) Owned by a consolidated 50% joint venture which leases the property to the
Company.
(2) Operations have been discontinued and these facilities are held for sale.

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The following table lists the Company's material leased office, manufacturing
and warehouse facilities:
<TABLE>
<CAPTION>
Approx.
Enclosed
Area In Lease
Square Term
Location Primary Products or Purposes Footage Through (1)
-------- ---------------------------- ------- ----------
<S> <C> <C> <C>
Calhoun, GA............... Carpet manufacturing (2)........................... 241,000 Dec. 2003
Calhoun, GA............... Carpet manufacturing (2)........................... 195,000 Aug. 2004
Calhoun, GA............... Carpet manufacturing............................... 65,000 Mar. 2003
Calhoun, GA............... Carpet manufacturing and administrative offices.... 62,000 Jul. 2000
Calhoun, GA............... Warehouse.......................................... 75,000 Oct. 1997
Calhoun, GA............... Mat manufacturing and warehouse.................... 164,400 Jun. 2004
Calhoun, GA............... Warehouse (2)...................................... 97,250 Dec. 1996
Calhoun, GA............... Rug manufacturing and warehouse.................... 78,000 May 2002
Philadelphia, PA.......... Warehouse.......................................... 53,100 Dec. 2000
Columbus, OH.............. Distribution warehouse............................. 90,000 Aug. 2004
Miami, FL................. Distribution warehouse............................. 109,000 Aug. 2001
Elmwood Park, NJ.......... Distribution warehouse............................. 72,000 Apr. 1999
Jessup, MD................ Distribution warehouse............................. 98,000 Dec. 2003
Grand Prairie, TX......... Distribution warehouse............................. 91,000 Dec. 1998
Fullerton, CA............. Distribution warehouse............................. 57,000 Jul. 2001
Romeoville, IL............ Distribution warehouse............................. 108,000 Oct. 2000
Kent, WA.................. Distribution warehouse............................. 53,000 Jan. 2003
San Diego, CA............. Distribution warehouse............................. 63,000 Apr. 2010
La Mirada, CA............. Distribution warehouse............................. 220,000 Aug. 2011
</TABLE>
- ------------
(1) Include renewal options exercisable by the Company.

(2) Includes a number of separately leased adjoining or adjacent buildings
with varying lease terms. The expiration date shown in the table is the
earliest expiration date of the respective group of leases.

The Company's properties are in good condition and adequate for its
requirements. The Company also believes its principal plants are generally
adequate to meet its production plans pursuant to its long-term sales goals. In
the ordinary course of its business, the Company monitors the condition of its
facilities to ensure that they remain adequate to meet long-term sales goals and
production plans.

Item 3. Legal Proceedings

The Company is involved in routine litigation from time to time in the regular
course of its business. Except as noted below, there are no material legal
proceedings pending or known to be contemplated to which the Company is a party
or to which any of its property is subject.

In June 1994, the Company and several other carpet manufacturers received
subpoenas to produce documents from a grand jury of the United States District
Court in Atlanta. The subpoenas were requested by the Antitrust Division of the
U. S. Department of Justice in connection with an investigation of the industry.
The Company believes that the results of this investigation will not have a
material adverse impact on the financial condition of the Company.

In December 1995, the Company and four other carpet manufacturers were added
as defendants in a purported class action lawsuit, In re Carpet Antitrust
Litigation, pending in the United States District Court for the Northern
District of Georgia, Rome Division. The amended complaint alleges price fixing
regarding polypropylene products in violation of Section One of the Sherman Act.
The Company is a party to two consolidation lawsuits captioned Gaehwiler v.
Sunrise Carpet Industries, Inc. et. al. and Patco Enterprises, Inc. v. Sunrise
Carpet Industries, Inc. et. al.; both of which were filed in the Superior Court
of the State of California, City and County of San Francisco in early 1996. Both
complaints were brought on behalf of a purported class of indirect purchasers of

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carpet in the State of California and seek damages for alleged violations of
California antitrust and unfair competition laws. The Company believes both of
these lawsuits are without merit and intends to vigorously defend against them.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders of the Company during
the fourth quarter ended December 31, 1996.

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

Market for the Common Stock

The Company's common stock, $.01 par value per share ("Common Stock") is
quoted on the Nasdaq National Market. As of February 26, 1997, there were 485
holders of record of Common Stock. Mohawk has not paid or declared any dividends
on shares of its Common Stock since completing its initial public offering. The
Company's policy is to retain all net earnings for the development of its
business, and it does not anticipate paying cash dividends on the Common Stock
in the foreseeable future. The payment of future cash dividends will be at the
sole discretion of the Board of Directors and will depend upon the Company's
profitability, financial condition, cash requirements, future prospects and
other factors deemed relevant by the Board of Directors. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources" for a discussion of restrictions
limiting Mohawk's ability to pay dividends.

The table below sets forth the high and low sales prices per share of the
Common Stock as reported on the Nasdaq National Market for each fiscal period
indicated.

<TABLE>
<CAPTION>
Mohawk
Common Stock
----------------
High Low
------ ------
<S> <C> <C>
1995
First Quarter.................................... $ 14.250 11.500
Second Quarter................................... 16.500 10.875
Third Quarter.................................... 19.250 14.500
Fourth Quarter................................... 18.000 13.500

1996
First Quarter.................................... 16.500 12.500
Second Quarter................................... 18.375 13.250
Third Quarter.................................... 26.125 16.375
Fourth Quarter................................... 27.875 20.625

1997
First Quarter (through February 26, 1997)........ 28.000 21.750
</TABLE>

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Item 6. Selected Financial Data

The following table sets forth the selected financial data of the Company
for the periods indicated, derived from the consolidated financial statements of
the Company. On October 23, 1992, the Company acquired all of the outstanding
common stock of Horizon. The operating results of Horizon are included in the
1992 consolidated statement of earnings from the date of its acquisition. On
April 30, 1993, the Company acquired all of the common stock of American Rug
Craftsmen. On July 30, 1993, the Company purchased the net assets of Karastan
Bigelow. The operating results of American Rug Craftsmen and Karastan Bigelow
are included in the Company's 1993 consolidated statement of earnings from their
respective acquisition dates. Each of the acquisitions of Horizon, American Rug
Craftsmen and Karastan Bigelow was recorded using the purchase method of
accounting. On February 25, 1994, the Company exchanged 13,562,224 shares of
Common Stock for all of the outstanding shares of Aladdin common stock in a
transaction recorded using the pooling-of-interests basis of accounting. All
financial data were restated to include the accounts and results of operations
of Aladdin. On January 13, 1995, the Company acquired all of the outstanding
capital stock of Galaxy. The operating results of Galaxy are included in the
1995 consolidated statement of earnings from the date of its acquisition. The
acquisition of Galaxy was recorded using the purchase method of accounting. The
selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and notes thereto included
elsewhere herein.
<TABLE>
<CAPTION>
At or for the Years ended December 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Statement of earnings data:
Net sales.............................................. $ 1,795,056 1,648,517 1,437,540 1,188,186 760,954
Cost of sales(a)....................................... 1,368,379 1,281,887 1,107,890 917,824 585,698
----------- --------- --------- --------- --------
Gross profit........................................ 426,677 366,630 329,650 270,362 175,256
Selling, general and administrative expenses........... 303,258 282,451 231,184 185,135 114,102
Restructuring costs (b)................................ 700 8,439 - 2,363 -
Carrying value reduction of property, plant
and equipment (c)................................... 3,060 23,711 - - -
Compensation expense for stock option exercises (d).... - 4,000 - - -
----------- --------- --------- --------- --------
Operating income.................................... 119,659 48,029 98,466 82,864 61,154
----------- --------- --------- --------- --------
Interest expense....................................... 31,544 34,998 27,112 18,029 9,222
Acquisition costs - Aladdin pooling (e)................ - - 10,201 - -
Other expense, net..................................... 5,390 2,570 2,987 2,659 1,242
Gain on insurance claim(a)............................. - - - (4,746) -
----------- --------- --------- --------- --------
36,934 37,568 40,300 15,942 10,464
----------- --------- --------- --------- --------
Earnings before income taxes and
extraordinary charge............................... 82,725 10,461 58,166 66,922 50,690
Income taxes(f)........................................ 33,675 4,049 25,159 27,399 20,312
----------- --------- --------- --------- --------
Earnings before extraordinary charge................ 49,050 6,412 33,007 39,523 30,378
Extraordinary charge(g)................................ - - - - 3,568
----------- --------- --------- --------- --------
Net earnings........................................ 49,050 6,412 33,007 39,523 26,810
Preferred stock dividends.............................. - - - - 132
----------- --------- --------- --------- --------
Net earnings after preferred stock dividends........ $ 49,050 6,412 33,007 39,523 26,678
=========== ========= ========= ========= ========
Earnings per common and common equivalent
share before extraordinary charge................... $ 1.42 0.19 0.99 1.19 1.06
=========== ========= ========= ========= ========
Net earnings per common and common.....................
equivalent share.................................... $ 1.42 0.19 0.99 1.19 0.93
=========== ========= ========= ========= ========
Weighted average common and common
equivalent shares outstanding....................... 34,566 33,623 33,374 33,109 28,607
=========== ========= ========= ========= ========
</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
At or for the Years ended December 31,
---------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Balance sheet data:
Working capital ...................................... 311,668 244,800 292,163 198,735 143,831
Total assets ......................................... 955,775 903,152 854,779 776,424 477,669
Short-term note payable .............................. 21,200 50,000 - - -
Long-term debt (including current portion) ........... 366,380 353,037 399,377 328,469 175,347
Stockholders' equity ................................. 333,199 274,903 264,018 229,992 147,938
</TABLE>
- --------------
(a) Certain of the Company's facilities suffered damage during the March 1993
blizzard, and the Company finalized settlement of the insurance claim during
the first quarter of 1994. The Company recorded reductions of $6.0 million
in cost of sales in each of the years 1993 and 1994 for reimbursements of
business interruption costs and $4.7 million in other income in 1993 related
to gains on fixed asset replacements.
(b) During 1995 and 1996, the Company recorded pre-tax restructuring costs of
$8.4 million and $.7 million, respectively, related to certain mill closings
whose operations have been consolidated into other Mohawk facilities. During
1993, the Company recorded pre-tax restructuring costs of $2.4 million
related to the closing of a woven carpet manufacturing operation and the
relocation and consolidation of this operation with a facility acquired in
the purchase of Karastan Bigelow.
(c) During 1995, the Company adopted FAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of
January 1, 1995. A charge of $23.7 million was recorded for the reduction of
the carrying value of property, plant and equipment at certain mills. During
1996, the Company recorded a charge of $3.1 million arising from the write
down of property, plant and equipment to be disposed of related to the
closing of a manufacturing facility in 1996 and a revision in the estimate
of fair value of certain property, plant and equipment based on current
market conditions related to mill closings in 1995.
(d) A one-time charge of $4.0 million was recorded for income tax reimbursements
to be made to certain executives related to the exercise of stock options
granted in 1988 and 1989 in connection with the Company's 1988 leveraged
buy-out.
(e) The Company recorded a one-time charge of $10.2 million in 1994 for
transaction expenses related to the acquisition of Aladdin that were
incurred during the first quarter of 1994.
(f) During 1994, the Company reduced income tax expense by $2.0 million to
reflect a reduction in its effective tax rate and certain other changes in
the Company's federal and state income tax status.
(g) The extraordinary charge in 1992 relates to (i) redemption premiums and
prepayment penalties on certain indebtedness that was redeemed or repaid
with the proceeds from the Company's initial public offering and (ii) the
write-off of deferred loan costs associated with the former credit
agreement, which was replaced with a new credit agreement after the initial
public offering.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

General

During the three-year period ended December 31, 1996, the Company continued
to experience significant growth both internally and through acquisitions. In
February 1994, the Company exchanged approximately 13.6 million shares of Common
Stock, valued at $386.5 million (based upon the closing price of the Common
Stock at December 3, 1993, the date the agreement was entered into by Mohawk,
Aladdin and the shareholders of Aladdin), for all of the outstanding shares of
Aladdin common stock in a merger accounted for using the pooling-of-interests
basis of accounting. All financial data included in the Company's historical
consolidated financial statements were restated to include the accounts and
results of operations of Aladdin. In January 1995, the Company acquired all of
the issued and outstanding capital stock of Galaxy for $42.2 million in cash in
a business combination accounted for using the purchase method of accounting.

These acquisitions have created other opportunities to enhance Mohawk's
operations by (i) expanding the Company's product lines to include many of the
most recognized brand names in the industry, (ii) increasing the Company's
ability to obtain volume discounts from suppliers, (iii) increasing production
efficiencies due to economies of scale and (iv) reducing the fixed cost

10
<PAGE>

structure of the combined entities by eliminating redundant costs.

On January 27, 1997, the Company entered into an asset purchase agreement to
acquire certain assets of Diamond Rug & Carpet Mills, Inc. The proposed purchase
price will be a maximum of $43.0 million in cash, subject to adjustment based on
the level of inventory at closing. Under the asset purchase agreement, Mohawk
has agreed to purchase selected facilities owned by Diamond's principal
shareholders. If completed, the acquisition will be accomplished through a
prepackaged or other plan of reorganization under Chapter 11 of the United
States Bankruptcy Code and will be primarily financed through existing credit
facilities.

Results of Operations
Year Ended December 31, 1996 As Compared With Year Ended December 31, 1995

Net sales for the year ended December 31, 1996 were $1,795.1 million,
reflecting an increase of $146.5 million, or 9%, over the $1,648.5 million
reported in the year ended December 31, 1995. This sales increase was
attributable to an improvement in the Company's market share which the Company
believes primarily resulted from competitive changes in the retail segment of
the industry, Mohawk's realignment of its residential sales forces under a
regional structure, and Mohawk's strong product lines. The Company experienced a
significant increase in unit shipments as a result of these factors with average
net selling prices remaining flat as compared to 1995.

Quarterly net sales and the percentage changes in net sales by quarter for
1996 versus 1995 were as follows (dollars in thousands):

1996 1995 Change
---- ---- ------
First Quarter......................... $ 383,667 378,761 1.3%
Second Quarter........................ 474,552 429,241 10.6
Third Quarter......................... 471,199 425,594 10.7
Fourth Quarter........................ 465,638 414,921 12.2
----------- --------- ----
Total Year.......................... $ 1,795,056 1,648,517 8.9%
=========== ========= ====

Gross profit for 1996 was $426.7 million (23.8% of net sales) and represented
an increase over the gross profit of $366.6 million (22.2% of net sales) for
1995. Gross profit dollars for the current year were impacted favorably by
manufacturing improvements from restructuring and consolidating the residential
operations, higher production levels resulting in better absorption of fixed
costs, a reduction in certain raw material prices and manufacturing improvements
in other divisions. The manufacturing consolidations include the closing of five
residential manufacturing facilities during 1995 as well as the realignment of
the remaining residential mills to better utilize the strengths of each mill.
The Company's integration of its manufacturing, distribution and information
systems areas is progressing as planned and continues to contribute to the
margin improvement.

Selling, general and administrative expenses for 1996 were $303.3 million
(16.9% of net sales) compared to $282.5 million (17.1% of net sales) for 1995.
Selling, general and administrative expenses as a percentage of net sales
decreased primarily due to better control of discretionary spending and better
leveraging of costs on strong sales growth.

During 1996, the Company recorded nonrecurring charges of (i) $3.1 million
which included $0.9 million, primarily to reduce the carrying value of certain
assets, related to the decision to close a spinning mill in Belton, South
Carolina and $2.2 million primarily arising from a revision in the estimate of
the fair value of certain land and buildings that were recently sold and (ii)
$0.7 million related to restructuring costs for the Belton spinning mill
closing.

The Company recorded restructuring costs of $8.4 million during 1995 related
to certain mill closings whose operations have been consolidated into other
Mohawk facilities. The after-tax effect of these costs was $5.2 million or $0.15
per share.

During 1995, the Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" (FAS No. 121) as of January 1, 1995. An impairment
loss of $23.7 million was recorded for the write-down of property, plant and
equipment at certain mills. The after-tax effect of the impairment loss was
$14.5 million, or $0.43 per share.

11
<PAGE>

A one-time charge of $4.0 million was recorded during 1995 for income tax
reimbursements to be made to certain executives for the exercise of stock
options. The income tax reimbursements were recorded in connection with stock
options granted in 1988 and 1989 related to the Company's 1988 leveraged buyout.
The agreements allow the Company to receive an income tax benefit on its tax
return for the tax effect of the taxable compensation provided to the
individuals upon exercise of these options. Such income tax benefit resulted in
a direct increase in stockholders' equity.

Interest expense for the current year was $31.5 million compared to $35.0
million in 1995. The primary factors contributing to the decrease were a
reduction in debt levels and lower interest rates on the Company's revolving
credit agreement.

In the current year, income tax expense was $33.7 million, or 40.7% of
earnings before income taxes. In 1995, income tax expense was $4.0 million,
representing 38.7% of earnings before income taxes. The primary reason for the
lower effective tax rate in 1995 was certain nonrecurring deductions that were
treated as permanent differences in 1995.

Year Ended December 31, 1995 As Compared With Year Ended December 31, 1994

Net sales for the year ended December 31, 1995 were $1,648.5 million,
reflecting an increase of $211.0 million, or 14.7%, over the $1,437.5 million
reported in the year ended December 31, 1994. This sales increase was
attributable primarily to increased unit shipments of broadloom carpet and rugs
during 1995 as a result of the acquisition of Galaxy as well as internal growth
by Aladdin and American Rug Craftsmen. The sales volume increase was partially
offset by a decrease in average net selling prices resulting from soft market
conditions, related to slow housing starts and resales in 1995, all of which
increased competitive pressures in the industry.

Quarterly net sales and the percentage changes in net sales by quarter for
1995 versus 1994 were as follows (dollars in thousands):

1996 1995 Change
---- ---- ------
First Quarter.......................... $ 378,761 327,025 15.8%
Second Quarter......................... 429,241 370,749 15.8
Third Quarter.......................... 425,594 377,484 12.7
Fourth Quarter......................... 414,921 362,282 14.5
---------- --------- ----
Total Year......................... $1,648,517 1,437,540 14.7%

Gross profit for 1995 was $366.6 million (22.2% of net sales) and
represented an increase over the gross profit of $329.7 million (22.9% of net
sales) for 1994. Gross profit dollars for the current year were impacted
favorably by the acquisition of Galaxy and the internal growth of Aladdin and
American Rug Craftsmen. The Company's gross profit was negatively impacted
during 1995 as a result of industry-wide raw material price increases in
polypropylene-based materials. In addition to the cost pressures, soft market
conditions increased competitive pressures in the industry during 1995. The
Company recorded a pre-tax reduction of $6.0 million in cost of sales in 1994
for the final reimbursement of business interruption costs related to the
insurance claim for property damage suffered in the March 1993 blizzard.

Selling, general and administrative expenses for 1995 were $282.5 million
(17.1% of net sales) compared to $231.2 million (16.1% of net sales) for 1994.
Selling, general and administrative expenses in dollars and as a percentage of
net sales increased primarily due to higher bad debt expense resulting from the
write-off of some large customers that filed for protection under bankruptcy
laws in 1995, and increased sample costs.

During 1995, the Company adopted FAS No. 121 as of January 1, 1995. An
impairment loss of $23.7 million was recorded for the write-down of property,
plant and equipment at certain mills. The after-tax effect of the impairment
loss was $14.5 million, or $0.43 per share.

12
<PAGE>

options granted in 1988 and 1989 related to the Company's 1988 leveraged buyout.
The agreements allow the Company to receive an income tax benefit on its tax
return for the tax effect of the taxable compensation provided to the
individuals upon exercise of these options. Such income tax benefit resulted in
a direct increase in stockholders' equity.

Interest expense for the current year was $35.0 million compared to $27.1
million in 1994. Factors causing the increased interest expense were additional
debt required to finance capital expenditures in 1995 to expand production
capacity, and additional debt that was incurred in January 1995 to finance the
acquisition of Galaxy.

During 1994, the Company recorded a one-time non-operating charge of $10.2
million for transaction expenses related to the acquisition of Aladdin.

In 1995, income tax expense was $4.0 million, or 38.7% of earnings before
income taxes. In 1994, income tax expense was $25.2 million, representing 43.3%
of earnings before income taxes. The Company did not record an income tax
benefit for a significant portion of the $10.2 million one-time charge resulting
in a higher effective tax rate during 1994. During 1994, the Company reduced
income tax expense by $2.0 million to reflect a reduction in its effective tax
rate and certain other changes in the Company's federal and state income tax
status.

Liquidity and Capital Resources

The Company's primary capital requirements are for working capital, capital
expenditures and acquisitions. The Company's working capital needs are met
through a combination of internally-generated funds, bank credit lines and
credit terms from suppliers.

The level of accounts receivable increased from $177.8 million at the
beginning of 1996 to $215.1 million at December 31, 1996. The $37.3 million
increase is attributable to strong sales growth. Inventories rose from $299.2
million at the beginning of 1996 to $302.7 million at December 31, 1996, due
primarily to the increased sales.

Capital expenditures totaled $63.3 million during 1996, which includes $21.2
million of equipment used primarily for the extrusion of polypropylene yarn that
was acquired in a noncash transaction in exchange for a promissory note due in
April 1997. The promissory note pays interest at a variable rate that ranges
from 0.25% to 0.875% above LIBOR and was paid in full in January 1997. The
capital expenditures made during 1996 were incurred primarily to modernize and
expand manufacturing facilities and equipment. The Company's capital projects
are primarily focused on increasing capacity, improving productivity and
reducing costs. Capital expenditures for Mohawk including the $21.2 million of
polypropylene extrusion equipment from Fiber One, have totaled $180.3 million
over the past three years. Capital spending during 1997 is expected to range
from $65 million to $70 million, the majority of which will be used to purchase
equipment to increase production capacity and productivity.

On June 6, 1996, the Company amended and restated its revolving credit
agreement to decrease its credit availability from $300 million to $250 million
due to decreasing external financing needs. At December 31, 1996, the Company
had $127.2 million of unused credit availability under its revolving credit
line. The credit agreement's interest rate either (i) ranges from 0.25% to
0.875% above LIBOR, depending upon the Company's performance measured against
specific coverage ratios, or (ii) is the prime rate. The credit agreement
contains customary financial and other covenants and restricts cumulative
dividend payments to $10.0 million as adjusted based on the Company's
performance and dividend payments. The Company must pay an annual facility fee
ranging from .0015 to .0025 of the total credit commitment, depending upon the
Company's performance measured against specific coverage ratios, under the
revolving credit line.

Impact of Inflation

Inflation affects the Company's manufacturing costs and operating expenses.
The carpet industry has experienced moderate inflation in the prices of raw
materials and outside processing for the last three years. The Company has
generally passed along nylon fiber increases to its customers.

Seasonality

The carpet business is seasonal, with the Company's second, third and fourth
quarters typically producing higher net sales and operating income. By
comparison, results for the first quarter tend to be the weakest. This

13
<PAGE>

seasonality is primarily attributable to consumer residential spending patterns
and higher installation levels during the spring and summer months.

Forward-Looking Information

Certain of the matters discussed in the preceding pages, particularly
regarding anticipating financial performance, business prospects, proposed
acquisitions, new products and similar matters, constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended. Forward-looking statements involve a number of risks and uncertainties.
Factors that would cause actual results to differ materially include, but are
not limited to, the following: marketing conditions in the carpet industry, raw
material prices, timing of capital expenditures, the successful integration of
acquisitions, the successful introduction of new products, the successful
rationalization of existing operations, and other risks identified from time to
time in the Company's SEC reports and public announcements.

Item 8. Consolidated Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors' Report............................................ 15
Consolidated Balance Sheets as of December 31, 1996 and 1995............ 16
Consolidated Statements of Earnings for the Years ended
December 31, 1996, 1995 and 1994 .................................. 17
Consolidated Statements of Stockholders' Equity for the Years ended
December 31, 1996, 1995 and 1994................................... 18
Consolidated Statements of Cash Flows for the Years ended
December 31, 1996, 1995 and 1994................................... 19
Notes to Consolidated Financial Statements...............................20

14
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Mohawk Industries, Inc.:

We have audited the consolidated financial statements of Mohawk
Industries, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in Item 14(a)2. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mohawk
Industries, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.

As discussed in note 1, the Company changed its method of accounting
for impairment of long-lived assets and for long-lived assets to be disposed of
in 1995.

KPMG PEAT MARWICK LLP

Atlanta, Georgia
February 7, 1997

15
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
December 31, 1996 and 1995

(In thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS 1996 1995
--------- ---------
<S> <C> <C>
Current assets:
Receivables................................................................... $ 215,111 177,778
Inventories................................................................... 302,723 299,191
Prepaid expenses.............................................................. 20,221 17,607
Deferred income taxes......................................................... 18,186 12,858
--------- ---------
Total current assets........................................... 556,241 507,434
Property, plant and equipment, net................................................... 324,698 317,966
Other assets......................................................................... 74,836 77,752
--------- ---------
$ 955,775 903,152
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and notes payable........................... $ 41,832 61,262
Accounts payable and accrued expenses......................................... 202,741 201,372
--------- ---------
Total current liabilities...................................... 244,573 262,634
Deferred income taxes................................................................ 27,530 21,742
Long-term debt, less current portion................................................. 345,748 341,775
Other long-term liabilities.......................................................... 4,725 2,098
--------- ---------
Total liabilities.............................................. 622,576 628,249
--------- ---------

Stockholders' equity:
Preferred stock, $.01 par value; 60,000 shares authorized; no shares issued... - -
Common stock, $.01 par value; 75,000 shares authorized; 34,471 and 34,394
shares issued in 1996 and 1995, respectively................................ 345 344
Additional paid-in capital.................................................... 131,560 122,747
Retained earnings............................................................. 201,294 152,244
--------- ---------
333,199 275,335
Less:
Treasury stock, at cost; 1,302 shares in 1995......................... - 115
Deferred compensation from stock options.............................. - 317
--------- ---------
Total stockholders' equity.................................... 333,199 274,903
Commitments and contingencies (Notes 10 and 14)
--------- ---------
$ 955,775 903,152
========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

16
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Earnings
Years Ended December 31, 1996, 1995 and 1994

(In thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ----------- -----------
<S> <C> <C> <C>
Net sales................................................................. $1,795,056 1,648,517 1,437,540
Cost of sales............................................................. 1,368,379 1,281,887 1,107,890
---------- ----------- -----------
Gross profit....................................................... 426,677 366,630 329,650
Selling, general and administrative expenses.............................. 303,258 282,451 231,184
Restructuring costs....................................................... 700 8,439 -
Carrying value reduction of property, plant and equipment................. 3,060 23,711 -
Compensation expense for stock option exercises........................... - 4,000 -
---------- ----------- -----------
Operating income................................................... 119,659 48,029 98,466
---------- ----------- -----------
Other expense:
Interest expense....................................................... 31,544 34,998 27,112
Acquisition costs - Aladdin pooling.................................... - - 10,201
Other expense, net..................................................... 5,390 2,570 2,987
---------- ----------- -----------
36,934 37,568 40,300
---------- ----------- -----------
Earnings before income taxes....................................... 82,725 10,461 58,166
Income taxes.............................................................. 33,675 4,049 25,159
---------- ----------- -----------
Net earnings....................................................... $ 49,050 6,412 33,007
========== =========== ===========

Earnings per common and common equivalent share........................... $ 1.42 0.19 0.99
========== =========== ===========
Weighted average common and common equivalent shares outstanding.......... 34,566 33,623 33,374
========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1996, 1995 and 1994

(In thousands)
<TABLE>
<CAPTION>
Common stock Additional Total
------------------ paid-in Retained Treasury Stock stockholders'
Shares Amount capital earnings stock options equity
-------- ------ --------- -------- ------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993...................... 34,289 $343 117,962 112,825 (168) (970) 229,992
Stock options exercised............................ 15 - 109 - 4 - 113
Tax benefit from exercise of stock
options....................................... - - 579 - - - 579
Amortization of deferred
compensation.................................. - - - - - 327 327
Net earnings....................................... - - - 33,007 - - 33,007
-------- ---- --------- -------- ------ ------ --------
Balances at December 31, 1994...................... 34,304 343 118,650 145,832 (164) (643) 264,018
Stock options exercised............................ 90 1 742 - 49 - 792
Tax benefit from exercise of stock
options....................................... - - 3,355 - - - 3,355
Amortization of deferred
compensation.................................. - - - - - 326 326
Net earnings....................................... - - - 6,412 - - 6,412
-------- ---- --------- -------- ------ ------ --------
Balances at December 31, 1995...................... 34,394 344 122,747 152,244 (115) (317) 274,903
Stock options exercised............................ 77 1 1,207 - 115 - 1,323
Tax benefit from exercise of stock
options....................................... - - 7,606 - - - 7,606
Amortization of deferred
compensation.................................. - - - - - 317 317
Net earnings....................................... - - - 49,050 - - 49,050
-------- ---- --------- -------- ------ ------ --------
Balances at December 31, 1996...................... 34,471 $345 131,560 201,294 - - 333,199
======== ==== ========= ======== ====== ====== ========
</TABLE>

See accompanying notes to consolidated financial statements.

18
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994

(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
----------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings.......................................................... $ 49,050 6,412 33,007
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization.................................... 55,156 52,560 49,485
Deferred income taxes............................................ 460 (10,335) 5,324
Provision for doubtful accounts.................................. 13,213 9,649 6,047
Loss on sale of property, plant and equipment.................... 1,254 105 400
Carrying value reduction of property, plant and equipment........ 3,060 23,711 -
Compensation expense for stock option exercises.................. - 4,000 -
Changes in assets and liabilities, net of effects of acquisitions:
Receivables................................................... (56,576) 21,091 (28,456)
Insurance claim receivable.................................... - - 3,884
Inventories................................................... (3,532) (5,512) (21,912)
Accounts payable and accrued expenses......................... 6,753 13,097 (35,391)
Other assets and prepaid expenses............................. (8,376) (2,183) 9,862
Other liabilities............................................. 4,868 (1,678) 291
----------- --------- ---------
Net cash provided by operating activities................... 65,330 110,917 22,541
----------- --------- ---------
Cash flows from investing activities:
Proceeds from insurance recoveries for and sale of property, plant
equipment and other assets......................................... 3,247 6,460 -
Additions to property, plant and equipment........................... (42,085) (38,961) (78,018)
Acquisitions, net of cash acquired................................... - (42,232) (13,946)
----------- --------- ---------
Net cash used in investing activities....................... (38,838) (74,733) (91,964)
----------- --------- ---------
Cash flows from financing activities:
Net change in revolving line of credit................................ (22,903) 2,241 63,038
Payments on term loans................................................ (13,754) (5,081) (4,513)
Change in outstanding checks in excess of cash........................ 919 6,671 (4,748)
Redemption of Aladdin indebtedness.................................... - - (87,617)
Redemption of Galaxy indebtedness..................................... - (44,487) -
Proceeds from new loan................................................ - - 100,000
Common stock transactions............................................. 9,246 4,472 692
----------- --------- ---------
Net cash provided by (used in) financing activities........ (26,492) (36,184) 66,852
----------- --------- ---------
Net decrease in cash....................................... - - (2,571)
Cash, beginning of year.................................................... - - 2,571
----------- --------- ---------
Cash, end of year.......................................................... $ - - -
=========== ========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994

(In thousands, except per share data)

(1) Summary of Significant Accounting Policies

(a) Basis of Presentation

The consolidated financial statements include the accounts of Mohawk
Industries, Inc. and its subsidiaries (the "Company" or "Mohawk"). All
significant intercompany balances and transactions have been eliminated in
consolidation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(b) Accounts Receivable and Revenue Recognition

The Company is a broadloom carpet and rug manufacturer and sells
carpet and rugs throughout the United States for residential and commercial use.
The Company grants credit to customers, most of whom are retail carpet dealers,
under credit terms that are customary in the industry.

Revenues are recognized when goods are shipped. The Company provides
allowances for expected cash discounts, returns, claims and doubtful accounts
based upon historical bad debt and claims experience and periodic evaluations of
the aging of the accounts receivable.

Inventories are stated at the lower of cost or market (net realizable
value). Cost is determined using the last-in, first-out (LIFO) method, which
matches current costs with current revenues, for substantially all inventories
and the first-in, first-out (FIFO) method for the remaining inventories.

(d) Property, Plant and Equipment

Property, plant and equipment is stated at cost, including interest
on funds borrowed to finance the acquisition or construction of major capital
additions. Depreciation is calculated on a straight-line basis over the
estimated remaining useful lives of the respective assets.

(e) Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

(f) Earnings Per Common and Common Equivalent Share

The Company's earnings per share are computed by dividing net earnings
by the weighted average common and common equivalent shares outstanding.
Dilutive common stock options are included in the earnings per share calculation
using the treasury stock method. Common equivalent shares outstanding for the
fourth quarter of 1995 (912 equivalent shares) and the first quarter of 1994
(1,358 equivalent shares) are excluded from the earnings per share computation
for 1995 and 1994 as the effect on loss per share for such quarters would have
been anti-dilutive.

20
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS No. 123"), which establishes a new method of accounting for
stock-based compensation arrangements with an entity's employees. The new method
is a fair value based method rather than the intrinsic value based method
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees"
("Opinion No. 25"). FAS No. 123 allows entities to retain the current approach
set forth in Opinion No. 25 for recognizing stock-based compensation expense in
the basic financial statements. Entities electing to apply the provisions of
Opinion No. 25 are required to make pro forma disclosures of net earnings and
earnings per share as if the fair value based method had been used. The Company
continues to apply the provisions of Opinion No. 25 for purposes of measuring
compensation cost in adopting FAS No. 123. The disclosure requirements of FAS
No. 123 are effective for 1996, but the effect of the pro forma disclosures on
the Company's comparative results of operations for 1995 and 1996 was
immaterial.

(g) Financial Instruments

The Company's financial instruments consist primarily of cash,
accounts receivable, accounts payable, notes payable and long-term debt. The
carrying amount of cash, accounts receivable, accounts payable and notes payable
approximates their fair value because of the short-term maturity of such
instruments. Interest rates that are currently available to the Company for
issuance of long-term debt with similar terms and remaining maturities are used
to estimate the fair value of the Company's long-term debt. The estimated fair
value of the Company's long-term debt at December 31, 1996 was $371,736,
compared to a carrying amount of $366,380.

(h) Fiscal Year

The Company ends its fiscal year on December 31. Each of the first
three quarters in the fiscal year ends on the Saturday nearest the calendar
quarter end.

(i) Goodwill

Goodwill arises in connection with business combinations accounted for
as purchases. Goodwill is amortized on a straight-line basis over 40 years.
Amortization charged to earnings was $1,481 in 1996 and 1995 and $1,506 in 1994.

(j) Impairment of Long-Lived Assets

In 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of "("FAS No. 121"), as of January 1, 1995.
Under FAS No. 121, the Company evaluates impairment of long-lived assets on a
business unit basis, rather than on an aggregate entity basis, whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. If the sum of the expected future undiscounted cash flows is
less than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets is based on the fair
value of the asset.

(k) Reclassifications

Certain prior years' financial statement balances have been
reclassified to conform with the current year's presentation.

(2) Acquisitions

On February 25, 1994, the Company acquired all of the common stock of
Aladdin in exchange for 13,562 shares of the Company's common stock. Aladdin
designs, manufactures and sells broadloom carpet and rugs. The acquisition of
Aladdin was accounted for under the pooling-of-interests basis of accounting
and, accordingly, the Company's historical consolidated financial statements
were restated to include the accounts and results of operations of Aladdin. The
Company incurred a one-time charge of $10,201 during the first quarter of 1994
for transaction expenses related to the acquisition of Aladdin, and such charge
is included as a non-operating expense for the year ended December 31, 1994.

<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

On January 13, 1995, the Company acquired all of the issued and
outstanding capital stock of Galaxy Carpet Mills, Inc. ("Galaxy") for $42,232 in
cash, including acquisition costs. Galaxy is a manufacturer and distributor of
broadloom carpet, primarily for the residential market. The acquisition was
accounted for using the purchase method of accounting and, accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed
based on the estimated fair values at the date of acquisition. The fair values
allocated were $112,583 for the assets acquired and $70,351 for the liabilities
assumed. Galaxy's results of operations are included in the Company's 1995
consolidated statement of earnings from the date of acquisition.

On January 27, 1997, the Company entered into an asset purchase
agreement to acquire certain assets of Diamond Rug & Carpet Mills, Inc.
("Diamond"). The proposed purchase price will be a maximum of $43,000 in cash,
subject to adjustment based on the level of inventory at closing. Under the
asset purchase agreement, Mohawk has agreed to purchase selected facilities
owned by Diamond's principal shareholders. If completed, the acquisition will be
accomplished through a prepackaged or other plan of reorganization under Chapter
11 of the United States Bankruptcy Code.

(3) Receivables

Receivables are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Customers, trade ..................................................... $247,485 206,015
Income tax receivable ................................................ - 1,298
Other ................................................................ 2,470 2,610
-------- --------
249,955 209,923
Less allowance for discounts, returns, claims and doubtful accounts .. 34,844 32,145
-------- --------
Net receivables ....................................... $215,111 177,778
======== ========
(4) Inventories

The components of inventories are as follows:
1996 1,995
-------- --------
Finished goods ............................................... $151,068 165,137
Work in process .............................................. 45,428 47,125
Raw materials ................................................ 106,227 86,929
-------- --------
Total inventories .................................... $302,723 299,191
======== ========

(5) Property, Plant and Equipment

Following is a summary of property, plant and equipment:
1996 1995
-------- --------
Land ................................................................. $ 7,678 7,325
Buildings and improvements ........................................... 118,224 106,819
Machinery and equipment .............................................. 370,938 318,176
Furniture and fixtures ............................................... 20,236 16,969
Leasehold improvements ............................................... 2,573 3,323
Construction in progress ............................................. 10,312 18,436
-------- --------
529,961 471,048
Less accumulated depreciation and amortization ....................... 205,263 153,082
-------- --------
Net property, plant and equipment ............................ $324,698 317,966
======== ========
</TABLE>
Property, plant and equipment includes capitalized interest of $1,180,
$2,169 and $1,382 in 1996, 1995 and 1994, respectively.

During 1996, the Company recorded a charge of $3,060 arising from (a) the
write-down of property, plant and equipment to be disposed of related to the
closing of a manufacturing facility in 1996 and (b) a revision in the estimate
of fair value of certain property, plant and equipment based on current market
conditions related to mill closings in 1995 (see Note 12). The after-tax effect
of the charge for the year was $1,815, or $0.05 per share.

22
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

In connection with the adoption of FAS No. 121 in 1995, the Company
recorded impairment losses of $21,000 for the write-down of property, plant and
equipment to be held and used at certain mills and $2,711 for the write-down of
property, plant and equipment to be disposed of related to these mill closings.
The after-tax effect of these impairment losses for the year was $14,535, or
$0.43 per share. The Company primarily used a discounted cash flow analysis to
estimate the fair value of these assets.

(6) Other Assets

The components of other assets are summarized below:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Goodwill, net of accumulated amortization of $5,589 and $4,108, respectively .... $ 53,679 55,160
Other assets .................................................................... 21,157 22,592
-------- ---------
Total other assets ..................................................... $ 74,836 77,752
======== ========
</TABLE>
(7) Note Payable and Long-Term Debt

In June 1996, the Company acquired certain equipment, primarily used for
the extrusion of polypropylene yarn, valued at $21,200 in exchange for a
promissory note due in April 1997. The promissory note pays interest at a
variable rate that ranges from 0.25% to 0.875% above LIBOR. The note was paid in
full in January 1997.

On June 6, 1996, the Company amended and restated its revolving credit
agreement to decrease its credit availability from $300,000 to $250,000 due to
decreasing external financing needs. At December 31, 1996, the Company had
$127,200 of unused credit availability under its revolving credit line. The
credit agreement's interest rate either (i) ranges from 0.25% to 0.875% above
LIBOR, depending upon the Company's performance measured against specific
coverage ratios, or (ii) is the prime rate. The credit agreement contains
customary financial and other covenants and restricts cumulative dividend
payments to $10,000 as adjusted based on the Company's performance and dividend
payments. The Company must pay an annual facility fee ranging from .0015 to
.0025 of the total credit commitment, depending upon the Company's performance
measured against specific coverage ratios, under the revolving credit line.

The capital stock of each of the Company's subsidiaries has been pledged
as collateral under the credit agreement, the term loans and the senior notes.

Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Revolving line of credit, due May 15, 1999 ............................. $122,800 95,190
8.46% senior notes, payable in annual principal installments
beginning in 1998, due September 16, 2004, interest
payable quarterly .................................................... 100,000 100,000
7.14%-7.23% senior notes, payable in annual principal
installments beginning in 1997, due September 1, 2005,
interest payable semiannually ........................................ 85,000 85,000
8.48% term loans, payable in annual principal installments
beginning in 1996, due October 26, 2002, interest payable
quarterly ............................................................ 34,286 40,000
9.5% senior notes, payable in annual principal installments,
due April 1, 1998, interest payable semiannually ..................... 7,500 11,250
7.58% senior notes, payable in annual principal installments
beginning in 1997, due July 30, 2003, interest payable
semiannually ......................................................... 10,000 10,000
7% term note, payable in annual principal and interest
installments, due July 31, 1999 (paid in full in April 1996) ......... - 3,879
Other .................................................................. 6,794 7,718
-------- ---------
Total long-term debt ................................................. 366,380 353,037
Less current portion ................................................... 20,632 11,262
-------- ---------
Long-term debt, excluding current portion ............................ $345,748 341,775
======== ========

</TABLE>

<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

The aggregate maturities of long-term debt as of December 31, 1996 are as
follows:

1997....................... $ 20,632
1998....................... 34,623
1999....................... 153,673
2000....................... 30,873
2001....................... 30,873
Thereafter................. 95,706
--------
$366,380
========

(8) Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses are as follows:

<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Outstanding checks in excess of cash.......................................... $ 31,800 30,881
Accounts payable, trade....................................................... 86,369 98,122
Accrued expenses.............................................................. 68,635 53,574
Accrued compensation.......................................................... 15,937 18,795
-------- --------
Total accounts payable and accrued expenses..................................... $202,741 201,372
======== ========
</TABLE>

(9) Stock Options

Under the Company's employee stock option plans, options may be granted
to directors and key employees through 2002 and 2003 to purchase a maximum of
1,500 and 450 shares of common stock, respectively. During 1996, options to
purchase 266 and 148 shares, respectively, were granted under these plans.
Options granted under each of these plans expire ten years from the date of
grant and become exercisable at such dates and at prices as determined by the
Compensation Committee of the Company's Board of Directors.

During 1996, the Company adopted the 1997 Non-Employee Director Stock
Compensation Plan. The plan provides for grants of up to 25 shares of common
stock of the Company for non-employee directors to receive in lieu of cash for
their annual retainers.

Additional information relating to the Company's stock option plans
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ---------- ---------
<S> <C> <C> <C>
Options outstanding at beginning of year......................... 2,559 3,225 2,780
Options granted.................................................. 414 103 620
Options exercised................................................ (1,410) (634) (55)
Options canceled................................................. (166) (135) (120)
------------ ----------- -----------
Options outstanding at end of year............................... 1,397 2,559 3,225
============ =========== ===========
Options exercisable at end of year................................ 406 1,578 2,034
============ =========== ===========

Option prices per share:
Options granted during the year.................................. $14.91-17.00 14.00-18.25 14.38-27.50
============ =========== ===========
Options exercised during the year................................ $ .02-21.75 .02-10.00 .01-10.00
============ =========== ===========
Options canceled during the year.................................. $ 8.50-28.75 8.50-28.75 8.50-28.75
============ =========== ===========
Options outstanding at end of year................................ $ .04-28.75 .02-28.75 .02-28.75
============ =========== ===========
</TABLE>
A one-time charge of $4,000 was recorded in the fourth quarter of 1995
for income tax reimbursements to be made to certain executives for the exercise
of stock options. The income tax reimbursements were recorded in accordance with
the stock option agreements in 1988 and 1989 in connection with the Company's
1988 leveraged buyout. The agreements allow the Company to receive an income tax
benefit on its tax return for the tax effect of the taxable compensation
provided to the individuals upon the exercise of these options. Such income tax
benefit resulted in a direct increase in stockholders' equity of $7,606 in 1996
primarily from the exercise of these options.

<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

(10) Employee Benefit Plans

The Company has a 401(k) retirement savings plan (the "Plan") open to
in excess of 55% of its employees who have completed one year of eligible
service. The Company contributes $0.50 for every $1.00 of employee contributions
up to a maximum of 4% of the employee's salary. Employee and employer
contributions to the Plan were $6,308 and $2,061 in 1996, $6,970 and $2,225 in
1995 and $7,073 and $2,214 in 1994, respectively.

Substantially all of the remaining employees are eligible to
participate in a defined contribution profit sharing plan. Contributions are
discretionary and the Company expensed $2,130, $1,875 and $2,441 for the years
ended December 31, 1996, 1995 and 1994, respectively.

(11) Insurance Claim

Certain of the Company's facilities located in Calhoun, Georgia
suffered damage during the blizzard that hit the Eastern United States on March
13, 1993, resulting in temporary interruptions to the operations of these
facilities. All of the damage was fully insured against (both on a business
interruption and property basis), and the Company finalized settlement of the
insurance claim during the first quarter of 1994. The Company recorded a
reduction of $6,005 in cost of sales for reimbursements of business interruption
costs for the year ended December 31, 1994.

(12) Restructuring Costs

During the fourth quarter of 1996, the Company decided to close a
spinning mill in Belton, South Carolina, the operations of which are being
consolidated into other Mohawk facilities. For the year ended December 31, 1996,
the Company recorded restructuring costs of $700 related to employee termination
benefits, environmental clean-up and other costs associated with the mill
closing. The after-tax effect of the restructuring costs for the year was $415,
or $0.01 per share.

During 1995, the Company closed five residential manufacturing
facilities, the operations of which are being consolidated into other Mohawk
facilities. During the year ended December 31, 1995, the Company recorded
restructuring costs of $8,439 related to employee termination benefits,
relocating inventories and equipment and other costs associated with the mill
closings. The amount of termination benefits accrued and charged to expense was
$2,250 for the year ended December 31, 1995. The benefits accrued were for 945
employees, who were principally involved in manufacturing operations. The amount
of actual termination benefits paid and charged against the liability as of
December 31, 1995 was $2,186, covering approximately 930 employees. The after-
tax effect of the restructuring costs for the year was $5,173, or $0.15 per
share. All of these costs have been paid as of December 31, 1996.

(13) Income Taxes

Income tax expense attributable to earnings before income taxes for
the years ended December 31, 1996, 1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
1996:
U.S. federal........................................ $31,113 (1,142) 29,971
State and local..................................... 2,102 1,602 3,704
------- ------- ------
$33,215 460 33,675
======= ======= ======
1995:
U.S. federal........................................ $11,422 (8,311) 3,111
State and local..................................... 2,962 (2,024) 938
------- ------- ------
$14,384 (10,335) 4,049
======= ======= ======
1994:
U.S. federal........................................ $16,939 4,451 21,390
State and local..................................... 2,896 873 3,769
------- ------- ------
$19,835 5,324 25,159
======= ======= ======

<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

Income tax expense attributable to earnings before income taxes differs
from the amounts computed by applying the U.S. federal income tax rate of 35
percent to earnings before income taxes as follows:

</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
------ ----- ------
<S> <C> <C> <C>
Computed "expected" tax expense ............................ $28,954 3,661 20,358
State and local income taxes, net of federal................
income tax benefit........................................ 1,868 610 2,450
Acquisition costs - Aladdin pooling......................... - - 3,472
Stock offering.............................................. - (987) -
Amortization of goodwill.................................... 519 524 527
Adjustment to deferred tax assets and liabilities
for changes in tax rates and tax status................... - - (1,950)
Other, net.................................................. 2,334 241 302
------- ----- ------
$33,675 4,049 25,159
======= ===== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1996 and 1995 are presented below:
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Deferred tax assets:
Accounts receivable.................................... $ 11,789 10,252
Accrued expenses....................................... 7,885 5,508
Purchased net operating loss carryforwards............. 5,712 7,096
Other.................................................. 1,315 1,411
------- -------
Gross deferred tax assets...................... 26,701 24,267
------- -------
Deferred tax liabilities:
Plant and equipment.................................... (28,963) (28,147)
Inventories............................................ (2,224) (3,762)
Other.................................................. (4,858) (1,242)
------- -------
Gross deferred tax liabilities................. (36,045) (33,151)
------- -------
Net deferred tax liability..................... $ (9,344) (8,884)
======== =======
</TABLE>
At December 31, 1996, as a result of the Galaxy acquisition, the
Company had net operating loss carryforwards for income tax purposes of $14,647.
These net operating loss carryforwards are available to offset future taxable
income, if any, and expire in 2009. Utilization of the net operating loss
carryforwards is subject to certain limitations under the Internal Revenue Code.

(14) Commitments and Contingencies

The Company is obligated under various operating leases for office
space, machinery and equipment.

Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) at December 31, 1996
are:

Years Ending
December 31,
------------
1997............................ $14,609
1998............................ 11,930
1999............................ 8,485
2000............................ 6,450
2001............................ 3,785
Thereafter...................... 3,092
-------
Total minimum lease payments.. $48,351
=======

Rental expense under operating leases was $17,240, $18,249 and $16,096
in 1996, 1995 and 1994, respectively.

26
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

In June 1994, the Company and several other carpet manufacturers
received subpoenas to produce documents from a grand jury of the United States
District Court in Atlanta. The subpoenas were requested by the Antitrust
Division of the U.S. Department of Justice in connection with an investigation
of the industry. The Company believes that the results of this investigation
will not have a material adverse impact on the financial condition of the
Company.

In December 1995, the Company and four other carpet manufacturers were
added as defendants in a purported class action lawsuit, In re Carpet Antitrust
Litigation, pending in the United States District Court for the Northern
District of Georgia, Rome Division. The amended complaint alleges price fixing
regarding polypropylene products in violation of Section One of the Sherman Act.
The Company is a party to two consolidation lawsuits captioned Gaehwiler v.
Sunrise Carpet Industries, Inc. et. al. and Patco Enterprises, Inc. v. Sunrise
Carpet Industries, Inc. et. al.; both of which were filed in the Superior Court
of the State of California, City and County of San Francisco in early 1996. Both
complaints were brought on behalf of a purported class of indirect purchasers of
carpet in the State of California and seek damages for alleged violations of
California antitrust and unfair competition laws. The Company believes both of
these lawsuits are without merit and intends to vigorously defend against them.

(15) Consolidated Statements of Cash Flows Information

Supplemental disclosures of cash flow information are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net cash paid during the year for:
Interest................................................ $32,268 36,309 28,257
======= ====== ======
Income taxes............................................ $23,049 3,058 25,565
======= ====== ======
</TABLE>
(16) Quarterly Financial Data (Unaudited)

The supplemental quarterly financial data are as follows:
<TABLE>
<CAPTION>
Quarters Ended
----------------------------------------------------------------------------
March 30, June 29, Sept. 28, Dec. 31,
1996 1996 1996 1996
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net sales.............................. $383,667 474,552 471,199 465,638
Gross profit........................... 87,184 117,114 109,329 113,050
Net earnings........................... 5,338 16,395 14,800 12,517
Earnings per share..................... 0.16 0.48 0.43 0.36

Quarters Ended
----------------------------------------------------------------------------
April 1, July 1, Sept.308, Dec. 31,
1995 1995 1995 1995
-------- -------- --------- ---------
Net sales.............................. $378,761 429,241 425,594 414,921
Gross profit........................... 81,918 94,097 94,911 95,704
Net earnings (loss).................... 4,307 5,619 6,629 (10,143)
Earnings (loss) per share................ 0.13 0.17 0.20 (0.31)

</TABLE>

27
<PAGE>

Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 1997 Annual
Meeting of Stockholders under the following headings: "Election of Directors--
Director, Director Nominee and Executive Officer Information"; "--Nominees for
Director"; "--Continuing Directors"; and "--Executive Officers."

Item 11. Executive Compensation

The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 1997 Annual
Meeting of Stockholders under the following headings: "Executive Compensation
and Other Information--Summary of Cash and Certain Other Compensation"; "--
Option Grants"; "--Option Exercises and Holdings"; "--Pension Plans"; "--
Employment and Consulting Contracts"; and "Election of Directors--Meetings and
Committees of the Board of Directors."

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

28
<PAGE>

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) 1. Consolidated Financial Statements

The Consolidated Financial Statements of Mohawk Industries, Inc. and
subsidiaries listed in Item 8 of Part II are incorporated by reference into this
item.

2. Consolidated Financial Statement Schedules

Schedule I-Condensed Financial Information of Registrant........... 40
Schedule II-Consolidated Valuation and Qualifying Accounts......... 43

Schedules not listed above have been omitted because they are not applicable
or the required information is included in the consolidated financial statements
or notes thereto.

3. Exhibits

The exhibit number for the exhibit as originally filed is included in
parentheses at the end of the description.

Mohawk
Exhibit
Number Description

*2.1 Amended and Restated Agreement and Plan of Merger,
including exhibits thereto, by and among Mohawk, Horizon
Acquisition Corp. and Horizon dated as of July 29, 1992 and
amended as of September 29, 1992. (Incorporated herein by
reference to Exhibit 2 in Mohawk's Registration Statement on
Form S-4, Registration No. 33-52542.)

*2.2 Stock Purchase Agreement dated as of March 8, 1993 among
Mohawk, John C. Thornton, William Robert Fowler, Dave M.
Reynolds and American Rug Craftsmen, Inc. (Incorporated herein
by reference to Exhibit 5 in Mohawk's Current Report on Form 8-
K dated March 8, 1993.)

*2.3 Asset Purchase Agreement dated as of June 3, 1993
between Fieldcrest Cannon, Inc. and Mohawk (Incorporated
herein by reference to Exhibit 5 in Mohawk's Current
Report on Form 8-K dated June 3, 1993.)

*2.4 Agreement and Plan of Merger dated as of December 3,
1993 and amended as of January 17, 1994 among Mohawk,
AMI Acquisition Corp., Aladdin and certain Shareholders
of Aladdin. (Incorporated herein by reference to Exhibit
2(i)(a) in Mohawk's Registration Statement on Form S-4,
Registration No. 33-74220.)

*2.5 Stock Purchase Agreement by and among Mohawk, Galaxy and
the Stockholder of Galaxy dated December 1, 1994.
(Incorporated herein by reference to Exhibit 2 in
Mohawk's Current Report on Form 8-K dated January 13, 1995.)

3.1 Restated Certificate of Incorporation of Mohawk.

3.2 Amended and Restated Bylaws of Mohawk.

4.1 See Article 4 of the Restated Certificate of
Incorporation of Mohawk. (Incorporated herein by
reference to Exhibit 3.1 in Mohawk's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996.)

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4.2 See Articles 2, 6, and 9 of the Amended and Restated
Bylaws of Mohawk. (Incorporated herein by reference to
Exhibit 3.2 in Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996.)

*10.1 Leases dated February 25, 1993 between Mohawk and
Forsyth/Airport Partners & Petula Associates, Ltd.
concerning Greensboro, North Carolina offices.
(Incorporated herein by reference to Exhibit 10.9 of
Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)

*10.2 Lease dated April 18, 1984 between Horizon and William
Norris Little, James D. Miller, Jr., and Dean Cassidy
d/b/a Cassidy & Associates concerning Dyenamics Plant at
South Industrial Boulevard in Calhoun, Georgia.
(Incorporated herein by reference to Exhibit 10.3 of
Horizon's Annual Report on Form 10-K for the fiscal year
ended September 28, 1985 (SEC File No. 0-11492).)

*10.3 Lease dated August 1, 1985 between Horizon and Kay D.
Owens concerning Coater I and General Administration
Offices and Plant at South Industrial Boulevard in
Calhoun, Georgia. (Incorporated herein by reference to
Exhibit 10.3 of Horizon's Annual Report on Form 10-K for
the fiscal year ended September 28, 1985 (SEC File No.
0-11492).)

*10.4 Lease dated April 1, 1988 between Horizon and Kay D.
Owens concerning the addition between the Tufting and
Coater Buildings on South Industrial Boulevard in
Calhoun, Georgia. (Incorporated herein by reference to
Exhibit 10.24 in Mohawk's Registration Statement on Form
S-1, Registration No. 33-53932.)

*10.5 Lease dated March 22, 1978 between Horizon and John
Wayne Hall and James S. Owens concerning the Printing
Plant at South Industrial Boulevard in Calhoun, Georgia.
(Incorporated herein by reference to Exhibit 10.9 of
Registration Statement No. 2-84128 and to Exhibit 10.13
of Registration Statement No. 2-87625.)

*10.6 Lease dated December 12, 1983 between Horizon and James
S. Owens concerning the expanded Tufting Plant at South
Industrial Boulevard in Calhoun, Georgia. (Incorporated
herein by reference to Exhibit 10.12.1 of Horizon's
Annual Report on Form 10-K for the fiscal year ended
October 1, 1983 (SEC File No. 0-11492).)

*10.7 Lease dated June 1, 1991 between Horizon and Don R. Owens
concerning the Maintenance Plant at South Industrial Boulevard
in Calhoun, Georgia. (Incorporated herein by reference to
Exhibit 10.27 in the Registrant's Form S-1 Registration No. 33-
53932.)

*10.8 Lease dated September 1, 1991 between Horizon and Don R. Owens
concerning the Roll Storage Plant at South Industrial Boulevard
in Calhoun, Georgia. (Incorporated herein by reference to
Exhibit 10.28 in Mohawk's Registration Statement on Form S-1,
Registration No. 33-53932.)

*10.9 Lease dated June 1, 1992 between Horizon and Don R. Owens
concerning the Roll Storage Plant at South Industrial Boulevard
in Calhoun, Georgia. (Incorporated herein by reference to
Exhibit 10.29 in Mohawk's Registration Statement on Form S-1,
Registration No. 33-53932.)

*10.10 Lease dated October 1, 1992 between Horizon and Don R. Owens
concerning two additions to the Maintenance Plant at South
Industrial Boulevard in Calhoun, Georgia. (Incorporated herein
by reference to Exhibit 10.30 in Mohawk's Registration
Statement on Form S-1, Registration No. 33-53932.)

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*10.11 Lease dated August 15, 1989 between Joan Jones Webb and
assigns and Aladdin related to a finished goods distribution
warehouse in Miami, Florida. (Incorporated herein by reference
to Exhibit 10.27 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.)

*10.12 Lease dated October 15, 1990 between NBD Trust Company
of Illinois and Aladdin related to a finished goods
distribution warehouse in Romeoville, Illinois.
(Incorporated herein by reference to Exhibit 10.28 of
Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)

*10.13 Lease dated June 21, 1994 between Ventura County
Employees' Retirement Association and Aladdin related to
a finished goods distribution warehouse in Fullerton,
California. (Incorporated herein by reference to Exhibit
10.28 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.)

*10.14 Lease dated October 3, 1994 between Almoda and Aladdin
related to a finished goods distribution warehouse in
Columbus, Ohio. (Incorporated herein by reference to
Exhibit 10.29 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994.)

*10.15 Lease dated March 31, 1994 between Alfred Sanzari and
Aladdin related to a finished goods distribution warehouse in
Elmwood Park, New Jersey. (Incorporated herein by reference to
Exhibit 10.30 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.)

*10.16 Lease dated May 1, 1994 between Columbware Associates
and Aladdin related to a finished goods distribution
warehouse in Jessup, Maryland. (Incorporated herein by
reference to Exhibit 10.31 of Mohawk's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.)

*10.17 Lease dated January 7, 1994, as amended January 18, 1994,
between Principal Mutual Life Insurance Company and Aladdin
related to a finished goods distribution warehouse in Grand
Prairie, Texas. (Incorporated herein by reference to Exhibit
10.32 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994.)

*10.18 Lease dated November 21, 1994 between Roundup Co. and
Aladdin related to a finished goods distribution
warehouse in Kent, Washington. (Incorporated herein by
reference to Exhibit 10.33 of Mohawk's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.)

*10.19 Lease dated October 17, 1994 between Ventura County
Employees' Retirement Association and Aladdin related to
a finished goods distribution warehouse in Kent,
Washington. (Incorporated herein by reference to Exhibit
10.34 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.)

*10.20 Lease dated March 1, 1994 between Design Leasing and Holding
Company, Inc. and American Rug Craftsmen, Inc. related to a
manufacturing facility and warehouse in Calhoun, Georgia.
(Incorporated herein by reference to Exhibit 10.35 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1994.)

*10.21 Consolidated Amended and Restated Note Agreement dated
as of September 3, 1993 for $70 million of senior notes,
including $20 million uncommitted shelf facility, among
Mohawk, Mohawk Carpet and The Prudential Insurance
Company of America. (Incorporated herein by reference to
Exhibit 10.2 in Mohawk's quarterly report on Form 10-Q
for the quarter ended October 2, 1993.)

*10.22 Letter dated February 24, 1994 amending the Consolidated,
Amended and Restated Note Agreement dated September 3, 1993
among Mohawk, Mohawk Carpet and The Prudential Insurance
Company of America. (Incorporated herein by reference to
Exhibit 10.2 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.)

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<PAGE>

*10.23 Letter dated as of September 16, 1994 of the Second
Modification to the Consolidated, Amended and Restated Note
Agreement dated September 3, 1993 among Mohawk, Mohawk Carpet
Corporation and The Prudential Insurance Company of America.
(Incorporated herein by reference to Exhibit 10.2 of Mohawk's
Quarterly Report on Form 10-Q for the quarter ended October 1,
1994.)

*10.24 Letter dated as of July 19, 1995 of the Third
Modification to the Consolidated, Amended and Restated
Note Agreement dated as of September 3, 1993 among
Mohawk, Mohawk Carpet Corporation and The Prudential
Insurance Company of America. (Incorporated herein by
reference to Exhibit 10.6 of Mohawk's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995.)

*10.25 Letter dated as of September 29, 1995 of the Fourth
Modification to the Consolidated, Amended and Restated
Note Agreement dated as of September 3, 1993 among
Mohawk, Mohawk Manufacturing Corporation (f/k/a Mohawk
Carpet Corporation) and The Prudential Insurance Company
of America. (Incorporated herein by reference to Exhibit
10.10 of Mohawk's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995.)

*10.26 Letter dated as of March 12, 1996 of the Fifth
Modification to the Consolidated, Amended and Restated
Note Agreement dated September 3, 1993 among Mohawk,
Mohawk Manufacturing Corporation (f/k/a Mohawk Carpet
Corporation) and The Prudential Insurance Company of
America. (Incorporated herein by reference to Exhibit
10.26 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.)

*10.27 Second Amended and Restated Credit Agreement dated as of
January 13, 1995 among Mohawk Carpet, Mohawk, Wachovia
Bank of Georgia, N.A. and First Union National Bank of
Georgia. (Incorporated herein by reference to Exhibit
10.3 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.)

*10.28 First Amendatory Agreement dated as of June 23, 1995 to
the Second Amended and Restated Credit Agreement dated
as of January 13, 1995 among Mohawk Carpet Corporation,
Mohawk, Wachovia Bank of Georgia, N.A. and First Union
National Bank of Georgia. (Incorporated herein by
reference to Exhibit 10.1 of Mohawk's Quarterly Report
on Form 10-Q for the quarter ended July 1, 1995.)

*10.29 Second Amendatory Agreement and Waiver dated as of July
19, 1995 to the Second Amended and Restated Credit
Agreement dated as of January 13, 1995 among Mohawk
Carpet Corporation, Mohawk, Wachovia Bank of Georgia,
N.A. and First Union National Bank of Georgia.
(Incorporated herein by reference to Exhibit 10.1 of
Mohawk's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.)

*10.30 Third Amendatory Agreement dated as of September 28,
1995 to the Second Amended and Restated Credit Agreement
dated as of January 13, 1995 among Mohawk Manufacturing
Corporation (f/k/a Mohawk Carpet Corporation), Mohawk,
Wachovia Bank of Georgia, N.A. and First Union National
Bank of Georgia. (Incorporated herein by reference to
Exhibit 10.2 of Mohawk's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.)

*10.31 Fourth Amendatory Agreement dated as of December 22,
1995 to the Second Amended and Restated Credit Agreement
dated as of January 13, 1995 among Mohawk Manufacturing
Corporation (f/k/a Mohawk Carpet Corporation), Mohawk,
Wachovia Bank of Georgia, N.A. and First Union National
Bank of Georgia. (Incorporated herein by reference to
Exhibit 10.31 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.)

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<PAGE>

*10.32 Fifth Amendatory Agreement dated as of December 31, 1995
to the Second Amended and Restated Credit Agreement
dated as of January 13, 1995 among Mohawk Manufacturing
Corporation (f/k/a Mohawk Carpet Corporation), Mohawk,
Wachovia Bank of Georgia, N.A. and First Union National
Bank of Georgia. (Incorporated herein by reference to
Exhibit 10.32 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.)

10.33 Sixth Amendatory Agreement dated as of December 31, 1996 to the
Second Amended and Restated Credit Agreement dated as of
January 13, 1995 among Aladdin Manufacturing Corporation (f/k/a
Mohawk Manufacturing Corporation and prior to that known as
Mohawk Carpet Corporation), Mohawk, Wachovia Bank of Georgia,
N.A. and First Union National Bank of Georgia.

*10.34 Note Purchase Agreement dated as of August 15, 1993 for 9.5%
Senior Notes due April 1, 1998 among Mohawk Carpet, Mohawk,
Horizon, American Rug Craftsmen, Burton Carpets & Rugs, Inc.
and The Harbinger Company, Inc., and Alexander Hamilton Life
Insurance Company of America, Connecticut Mutual Life Insurance
Company, The Franklin Life Insurance Company and Principal
Mutual Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.5 of Mohawk's Annual Report on Form 10-
K for the fiscal year ended December 31, 1993.)

*10.35 First Amendment and Waiver Agreement dated as of February 25,
1994 of the Note Purchase Agreement dated as of August 15, 1993
for 9.5% Senior Notes due April 1, 1998 among Mohawk Carpet,
Mohawk, American Rug Craftsmen, Inc., Burton Carpets & Rugs,
Inc., Aladdin, Mohawk Marketing, Inc., Alexander Hamilton Life
Insurance Company of America, Connecticut Mutual Life Insurance
Company, Principal Mutual Life Insurance Company and The
Franklin Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.6 of Mohawk's Annual Report on Form 10-
K for the fiscal year ended December 31, 1993.)

*10.36 Second and Third Amendment Agreements dated as of
September 16, 1994 of the Note Purchase Agreement dated as of
August 15, 1993 for 9.5% Senior Notes due April 1, 1998 among
the Company, Mohawk Carpet Corporation, American Rug Craftsmen,
Aladdin, Mohawk Marketing, Inc., Alexander Hamilton Life
Insurance Company of America, Connecticut Mutual Life Insurance
Company, The Franklin Life Insurance Company and Principal
Mutual Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.3 of Mohawk's Quarterly Report on Form
10-Q for the quarter ended October 1, 1994.)

*10.37 Fourth Amendment and Waiver Agreement dated as of July 19, 1995
of the Note Purchase Agreement dated as of August 15, 1993 for
9.5% Senior Notes due April 1, 1998 among Mohawk Carpet
Corporation, Mohawk, Aladdin Mills, Inc., Mohawk Marketing,
Inc., Galaxy Carpet Mills, Inc., Mohawk Mills, Inc., Mohawk
Manufacturing Corporation, Alexander Hamilton Life Insurance
Company of America, Connecticut Mutual Life Insurance Company,
The Franklin Life Insurance Company and Principal Mutual Life
Insurance Company. (Incorporated herein by reference to Exhibit
10.3 of Mohawk's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.)

*10.38 Fifth Amendment Agreement dated as of September 29, 1995 of the
Note Purchase Agreement dated as of August 15, 1993 for 9.5%
Senior Notes due April 1, 1998 among Mohawk Manufacturing
Corporation (f/k/a Mohawk Carpet Corporation), Mohawk, Aladdin
Mills, Inc., Mohawk Marketing, Inc., Galaxy Carpet Mills, Inc.,
Mohawk Mills, Inc., Mohawk Carpet Corporation, Alexander
Hamilton Life Insurance Company of America, Connecticut Mutual
Life Insurance Company, American General Life Insurance Company
and Principal Mutual Life Insurance Company. (Incorporated
herein by reference to Exhibit 10.7 of Mohawk's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995.)

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<PAGE>

*10.39 Sixth Amendment Agreements dated as of March 12, 1996 of the
Note Purchase Agreement dated as of August 15, 1993 for 9.5%
Senior Notes due April 1, 1998 among the Company, Mohawk
Manufacturing Corporation (f/k/a Mohawk Carpet Corporation),
Aladdin, Mohawk Marketing, Inc., Galaxy Carpet Mills, Inc.,
Mohawk Mills, Inc., Mohawk Carpet Corporation, Alexander
Hamilton Life Insurance Company of America, Connecticut Mutual
Life Insurance Company, The Franklin Life Insurance Company and
Principal Mutual Life Insurance Company. (Incorporated herein
by reference to Exhibit 10.38 of Mohawk's Annual Report on Form
10-K for the fiscal year ended December 31, 1995.)

*10.40 Note Purchase Agreement dated as of August 15, 1993 for $85
million of Senior Notes due September 1, 2005 among Mohawk
Carpet, Mohawk, Horizon, American Rug Craftsmen, Burton Carpets
& Rugs, Inc. and The Harbinger Company, Inc., and John Hancock
Mutual Life Insurance Company, John Hancock Variable Life
Insurance Company, John Hancock Life Insurance Company of
America, Principal Mutual Life Insurance Company, Principal
National Life Insurance Company, UNUM Life Insurance Company of
America and The Franklin Life Insurance Company. (Incorporated
herein by reference to Exhibit 10.7 of Mohawk's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.)

*10.41 First Amendment and Waiver Agreement dated as of February 25,
1994 of the Note Purchase Agreement dated as of August 15, 1993
for $85 million Senior Notes due September 1, 2005 among Mohawk
Carpet, Mohawk, American Rug Craftsmen, Inc., Burton Carpets &
Rugs, Inc., Aladdin, Mohawk Marketing, Inc., John Hancock
Mutual Life Insurance Company, John Hancock Variable Life
Insurance Company, John Hancock Life Insurance Company of
America, Principal Mutual Life Insurance Company, Principal
National Life Insurance Company, UNUM Life Insurance Company
and The Franklin Life Insurance Company. (Incorporated herein
by reference to Exhibit 10.8 of Mohawk's Annual Report on Form
10-K for the fiscal year ended December 31, 1993.)

*10.42 Second and Third Amendment Agreements dated as of September 16,
1994 of the Note Purchase Agreement dated as of August 15, 1993
for $85 million Senior Notes due September 1, 2005 among the
Company, Mohawk Carpet Corporation, American Rug Craftsmen,
Aladdin, Mohawk Marketing, Inc., John Hancock Mutual Life
Insurance Company, John Hancock Variable Life Insurance
Company, John Hancock Life Insurance Company of America,
Principal Mutual Life Insurance Company, Principal National
Life Insurance Company, UNUM Life Insurance Company and The
Franklin Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.4 of Mohawk's Quarterly Report on Form
10-Q for the quarter ended October 1, 1994.)

*10.43 Fourth Amendment and Waiver Agreement dated as of July 19, 1995
of the Note Purchase Agreement dated as of August 15, 1993 for
$85 million of Senior Notes due September 1, 2005 among Mohawk
Carpet Corporation, Mohawk, Aladdin Mills, Inc., Mohawk
Marketing, Inc., Galaxy Carpet Mills, Inc., Mohawk Mills, Inc.,
Mohawk Manufacturing Corporation, John Hancock Mutual Life
Insurance Company, John Hancock Variable Life Insurance
Company, John Hancock Life Insurance Company of America,
Principal Mutual Life Insurance Company, UNUM Life Insurance
Company of America and The Franklin Life Insurance Company.
(Incorporated herein by reference to Exhibit 10.4 of Mohawk's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1995.)

*10.44 Fifth Amendment Agreement dated as of September 29, 1995 of the
Note Purchase Agreement dated as of August 15, 1993 for $85
million of Senior Notes due September 1, 2005 among Mohawk
Manufacturing Corporation (f/k/a Mohawk Carpet Corporation),
Mohawk, Aladdin Mills, Inc., Mohawk Marketing, Inc., Galaxy
Carpet Mills, Inc., Mohawk Mills, Inc., Mohawk Carpet
Corporation, John Hancock Mutual Life Insurance Company, John
Hancock Variable Life Insurance Company, John Hancock Life
Insurance Company of America, Principal Mutual Life Insurance
Company, UNUM Life Insurance Company of America and American

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<PAGE>

General Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.8 of Mohawk's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.)

*10.45 Sixth Amendment Agreement dated as of March 12, 1996 of the
Note Purchase Agreement dated as of August 15, 1993 for $85
million Senior Notes due September 1, 2005 among the Company,
Mohawk Manufacturing Corporation (f/k/a Mohawk Carpet
Corporation), Aladdin, Mohawk Marketing, Inc.,Galaxy Carpet
Mills, Inc., Mohawk Mills, Inc., Mohawk Carpet Corporation,
John Hancock Mutual Life Insurance Company, John Hancock
Variable Life Insurance Company, John Hancock Life Insurance
Company of America, Principal Mutual Life Insurance Company,
Principal National Life Insurance Company, UNUM Life Insurance
Company and The Franklin Life Insurance Company. (Incorporated
herein by reference to Exhibit 10.44 of Mohawk's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.)

*10.46 Note Purchase Agreement dated as of September 16, 1994 for $100
million of Senior Notes due September 16, 2004 among the
Company, Mohawk Carpet Corporation, American Rug Craftsmen,
Aladdin, Mohawk Marketing, Inc., The Prudential Insurance
Company of America, Principal Mutual Life Insurance Company,
John Hancock Mutual Life Insurance Company, Connecticut Mutual
Life Insurance Company, Alexander Hamilton Life Insurance
Company of America and The Franklin Life Insurance Company.
(Incorporated herein by reference to Exhibit 4.1 of Mohawk's
Quarterly Report on Form 10-Q for the quarter ended October 1,
1994.)

*10.47 Letter dated as of July 19, 1995 of the First Modification to
the Note Purchase Agreement dated as of September 16, 1994 for
$100 million of Senior Notes due September 16, 2004 among
Mohawk, Mohawk Carpet Corporation, The Prudential Insurance
Company of America, Principal Mutual Life Insurance Company,
John Hancock Mutual Life Insurance Company, Connecticut Mutual
Life Insurance Company, Alexander Hamilton Life Insurance
Company of America and The Franklin Life Insurance Company.
(Incorporated herein by reference to Exhibit 10.5 of Mohawk's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1995.)

*10.48 Letter dated as of September 29, 1995 of the Second
Modification to the Note Purchase Agreement dated as of
September 16, 1994 for $100 million of Senior Notes due
September 16, 2004 among Mohawk, Mohawk Manufacturing
Corporation (f/k/a Mohawk Carpet Corporation), The Prudential
Insurance Company of America, Principal Mutual Life Insurance
Company, John Hancock Mutual Life Insurance Company,
Connecticut Mutual Life Insurance Company, Alexander Hamilton
Life Insurance Company of America and American General
Insurance Company. (Incorporated herein by reference to Exhibit
10.9 of Mohawk's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.)

*10.49 Letter dated as of March 12, 1996 of the Third Modification to
the Note Purchase Agreement dated as of September 16, 1994 for
$100 million of Senior Notes due September 16, 2004 among
Mohawk, Mohawk Manufacturing Corporation (f/k/a Mohawk Carpet
Corporation), The Prudential Insurance Company of America,
Principal Mutual Life Insurance Company, John Hancock Mutual
Life Insurance Company, Connecticut Mutual Life Insurance
Company, Alexander Hamilton Life Insurance Company of America
and American General Insurance Company. (Incorporated herein by
reference to Exhibit 10.48 of Mohawk's Annual Report on Form
10-K for the fiscal year ended December 31, 1995.)

*10.50 Second Amended and Restated Intercreditor Agreement among the
Collateral Agent, First Union National Bank of Georgia,
Wachovia Bank of Georgia, N.A., The Prudential Insurance
Company of America, John Hancock Mutual Life Insurance Company,
John Hancock Variable Life Insurance Company, John Hancock Life
Insurance Company of America, Principal Mutual Life Insurance
Company, Principal National Life Insurance Company, UNUM Life

35
<PAGE>

Insurance Company, The Franklin Life Insurance Company,
Alexander Hamilton Life Insurance Company of America and
Connecticut Mutual Life Insurance Company, and the related
Amended and Restated Security Agreements dated as of September
16, 1994 between the Collateral Agent for the benefit of the
parties to that Intercreditor Agreement and the Company and
Mohawk Carpet Corporation. (Incorporated herein by reference to
Exhibit 10.5 of Mohawk's Quarterly Report on Form 10-Q for the
quarter ended October 1, 1994.)

*10.51 Registration Rights Agreement by and among Mohawk, Citicorp
Investments, Inc., ML-Lee Acquisition Fund, L.P. and Certain
Management Investors. (Incorporated herein by reference to
Exhibit 10.14 of Mohawk's Registration Statement on Form S-1,
Registration No. 33-45418.)

*10.52 Voting Agreement, Consent of Stockholders and Amendment to 1992
Registration Rights Agreement dated December 3, 1993 by and
among Aladdin, Mohawk, Citicorp Investments, Inc., ML-Lee
Acquisition Fund, L.P., David L. Kolb, Donald G. Mercer, Frank
A. Procopio and John D. Swift. (Incorporated herein by
reference to Exhibit 10(b) of Mohawk's Registration Statement
on Form S-4, Registration No. 33-74220.)

*10.53 Registration Rights Agreement by and among Mohawk and the
former shareholders of Aladdin. (Incorporated herein by
reference to Exhibit 10.32 of Mohawk's Annual Report on Form
10-K for the fiscal year ended December 31, 1993.)

*10.54 Waiver Agreement between Alan S. Lorberbaum and Mohawk dated as
of March 23, 1994 to the Registration Rights Agreement dated as
of February 25, 1994 between Mohawk and those other persons who
are signatories thereto. (Incorporated herein by reference to
Exhibit 10.3 of Mohawk's Quarterly Report on Form 10-Q for the
quarter ended July 2, 1994.)

Exhibits Related to Executive Compensation Plans, Contracts and other
Arrangements:

*10.55 Mohawk Carpet Corporation Retirement Savings Plan, as amended.
(Incorporated herein by reference to Exhibit 10.1 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)

*10.56 Mohawk Carpet Corporation Supplemental Executive Retirement
Plan, as amended. (Incorporated herein by reference to Exhibit
10.2 of Mohawk's Registration Statement on Form S-1,
Registration No. 33-45418.)

*10.57 Mohawk Industries, Inc. Employee Stock Purchase Plan together
with forms of related Management Investment Agreement, Non-
Qualified Stock Option Agreement, and amendments thereto.
(Incorporated herein by reference to Exhibit 10.3 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)

*10.58 Stock Purchase Agreement dated as of December 30, 1988 between
Mohawk and Mohasco as supplemented by Supplement to Stock
Purchase Agreement dated December 30, 1988. (Incorporated
herein by reference to Exhibit 10.4 of Mohawk's Registration
Statement on Form S-1, Registration No. 33-45418.)

*10.59 Securities Purchase and Holders Agreement dated as of December
31, 1988, as amended and restated March 30, 1989, together with
amendments thereto and forms of related Non-Qualified Stock
Option Agreement and amendments thereto. (Incorporated herein
by reference to Exhibit 10.5 of Mohawk's Registration Statement
on Form S-1, Registration No. 33-45418.)

*10.60 Investment Agreement dated as of March 31, 1989 among Mohawk,
Mohawk Carpet, Citicorp Capital Investors Ltd., Citicorp
Venture Capital Ltd. and ML-Lee Acquisition Fund, L.P.

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<PAGE>

(Incorporated herein by reference to Exhibit 10.6 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)

*10.61 Equity Securities Agreement dated March 31, 1989 among Mohawk,
ML-Lee Acquisition Fund, L.P. and Citicorp Venture Capital Ltd.
(Incorporated herein by reference to Exhibit 10.7 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)

*10.62 Securities Holders Agreement among Mohawk and Certain
Management Investors dated as of March 6, 1992. (Incorporated
herein by reference to Exhibit 10.40 of Mohawk's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.)

*10.63 Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated
herein by reference to Exhibit 10.8 of Mohawk's Registration
Statement on Form S-1, Registration No. 33-45418.)

*10.64 Amendment dated July 22, 1993 to the Mohawk Industries, Inc.
1992 Stock Option Plan. (Incorporated herein by reference to
Exhibit 10.2 in Mohawk's quarterly report on Form 10-Q for the
quarter ended July 3, 1993.)

*10.65 Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.15 of Mohawk's
Registration Statement on Form S-1, Registration Number 33-
53932.)

*10.66 Amendment dated July 22, 1993 to the Mohawk Industries, Inc.
1992 Mohawk-Horizon Stock Option Plan. (Incorporated herein by
reference to Exhibit 10.1 of Mohawk's quarterly report on Form
10-Q for the quarter ended July 3, 1993.)

*10.67 Mohawk Industries, Inc. 1993 Stock Option Plan. (Incorporated
herein by reference to Exhibit 10.39 of Mohawk's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.)

*10.68 Executive Employment Agreement by and between Mohawk and David
L. Kolb. (Incorporated herein by reference to Exhibit 10.46 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.)

*10.69 Executive Employment Agreement by and between Mohawk and
William B. Kilbride. (Incorporated herein by reference to
Exhibit 10.68 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.)

*10.70 Executive Employment Agreement by and between Mohawk and Frank
A. Procopio. (Incorporated herein by reference to Exhibit 10.48
of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)

*10.71 Executive Employment Agreement by and between Mohawk and John
D. Swift. (Incorporated herein by reference to Exhibit 10.49 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.)

*10.72 Executive Employment Agreement by and between Mohawk and Donald
G. Mercer. (Incorporated herein by reference to Exhibit 10.47
of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)

*10.73 Employment Agreement among Mohawk, Aladdin and S. H. Sharpe.
(Incorporated herein by reference to Exhibit 10.50 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1993.)

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<PAGE>

*10.74 Employment Agreement among Mohawk, Aladdin and Jeffrey
Lorberbaum. (Incorporated herein by reference to Exhibit 10.51
of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)

*10.75 Consulting Agreement among Mohawk, Aladdin and Alan S.
Lorberbaum. (Incorporated herein by reference to Exhibit 10.51
of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)

*10.76 Form of Promissory Note between Mohawk and each of the
following; David L. Kolb, John D. Swift and Frank A. Procopio.
(Incorporated herein by reference to Exhibit 10.75 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1995.)

*10.77 The Mohawk Industries, Inc. Executive Deferred Compensation
Plan. (Incorporated herein by reference to Exhibit 10.65 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.)

*10.78 The Mohawk Industries, Inc. Management Deferred Compensation
Plan. (Incorporated herein by reference to Exhibit 10.66 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.

10.79 1997 Non-Employee Director Stock Compensation Plan.

10.80 1997 Long-Term Incentive Plan.

11 Statement re: Computation of Per Share Earnings.

21 Subsidiaries of the Registrant.

23.1 Independent Auditors' Consent - KPMG Peat Marwick LLP.

27 Financial Data Schedule.

- --------
* Indicates exhibit incorporated by reference.

(b) Reports on Form 8-K.

None.

38
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Mohawk Industries, Inc.

Dated: March 4, 1997

By: /s/ David L. Kolb
----------------------------------------
David L. Kolb,

Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

Dated: March 4, 1997 /s/ David L. Kolb
----------------------------------------
David L. Kolb,

Chairman of the Board and Chief Executive
Officer (principal executive officer)

Dated: March 4, 1997 /s/ John D. Swift
----------------------------------------
John D. Swift,

Chief Financial Officer,
Vice President-Finance, and
Assistant Secretary
(principal financial and accounting officer)

Dated: March 4, 1997 /s/ Leo Benatar
----------------------------------------
Leo Benatar,
Director

Dated: March 4, 1997 /s/ Bruce C. Bruckmann
----------------------------------------
Bruce C. Bruckmann,
Director

Dated: March 4, 1997 /s/ Alan S. Lorberbaum
----------------------------------------
Alan S. Lorberbaum,
Director

Dated: March 4, 1997 /s/ Jeffrey S. Lorberbaum
----------------------------------------
Jeffrey S. Lorberbaum,
Director

Dated: March 4, 1997 /s/ Larry W. McCurdy
----------------------------------------
Larry W. McCurdy,
Director

Dated: March 4, 1997 /s/ Robert N. Pokelwaldt
----------------------------------------
Robert N. Pokelwaldt,
Director

39
<PAGE>
SCHEDULE I

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

MOHAWK INDUSTRIES, INC.

BALANCE SHEETS

DECEMBER 31, 1996 AND 1995

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
ASSETS
Current assets - intercompany receivable................... $ 34,079 24,833
Investment in subsidiaries................................. 299,120 250,070
-------- -------
$333,199 274,903
======== =======
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 60,000 shares authorized;
no shares issued......................................... $ - -
Common stock, $.01 par value; 75,000 shares authorized;
34,471 and 34,394 shares issued in 1996 and 1995,
respectively............................................. 345 344
Additional paid-in capital................................. 131,560 122,747
Retained earnings.......................................... 201,294 152,244
-------- -------
333,199 275,335

Less:
Treasury stock, at cost; 1,302 shares in 1995............ - 115
Deferred compensation from stock options................. - 317
-------- -------
$333,199 274,903
======== =======
</TABLE>

40
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Financial Information Of Registrant
Mohawk Industries, Inc.

Statements of Earnings

Years Ended December 31, 1996, 1995 and 1994

(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Equity in earnings of subsidiaries...................... $ 49,050 6,412 33,007
-------- ------ ------
Net earnings .................................... $ 49,050 6,412 33,007
======== ====== ======

</TABLE>

<PAGE>

SCHEDULE I
(continued)

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
MOHAWK INDUSTRIES, INC.
Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994

(In thousands)
<TABLE>
<CAPTION>

1996 1995 1994
----------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................................................... $ 49,050 6,412 33,007
Adjustments to reconcile net earnings to net cash used in
operating activities:
Equity in earnings of subsidiaries................................. (49,050) (6,412) (33,007)
Increase in intercompany receivable................................ (9,246) (4,473) (1,019)
----------- --------- ---------
Net cash used in operating activities............................ (9,246) (4,473) (1,019)
----------- --------- ---------
Cash flows from financing activities:
Stock options exercised................................................... 1,323 792 113
Tax benefit from exercise of stock options................................ 7,606 3,355 579
Other..................................................................... 317 326 327
----------- --------- ---------
Net cash provided by financing activities....................... 9,246 4,473 1,019
----------- --------- ---------
Net change in cash.............................................. - - -
Cash, beginning of year......................................................... - - -
----------- --------- ---------
Cash, end of year............................................................... $ - - -
=========== ========= =========
</TABLE>

<PAGE>
SCHEDULE II

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

(IN THOUSANDS)

<TABLE>
<CAPTION>
Additions
-----------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of year expenses accounts Deductions of year
---------- ---------- --------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful accounts - trade....... $ 9,353 6,047 - 7,794(2) 7,606
Provision for cash discounts.................. 4,104 42,857 - 42,960(2) 4,001
Provision for claims and allowances........... 8,914 77,164 - 75,069(2) 11,009
------- ------- ----- ------- ------
Total.................................... $22,371 126,068 - 125,823 22,616
======= ======= ===== ======= ======
Year ended December 31, 1995:
Allowance for doubtful accounts - trade....... $ 7,606 9,649 3,196(1) 2,495(2) 17,956
Provision for cash discounts.................. 4,001 48,304 442(1) 48,250(2) 4,497
Provision for claims and allowances........... 11,009 95,498 1,953(1) 98,768(2) 9,692
------- ------- ----- ------- ------
Total.................................... $22,616 153,451 5,591 149,513 32,145
======= ======= ===== ======= ======
Year ended December 31, 1996:
Allowance for doubtful accounts - trade....... $17,956 13,213 - 11,634(2) 19,535
Provision for cash discounts.................. 4,497 48,577 - 48,146(2) 4,928
Provision for claims and allowances........... 9,692 89,845 - 89,156(2) 10,381
------- ------- ----- ------- ------
Total.................................... $32,145 151,635 - 148,936 34,844
======= ======= ===== ======= ======
</TABLE>
_______________
(1) Purchase price allocated to valuation accounts in connection with
acquisitions.
(2) Represents charge offs, net of recoveries, to the reserves.

43
<PAGE>

EXHIBIT INDEX

Mohawk
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation of Mohawk.

3.2 Amended and Restated Bylaws of Mohawk.

4.1 See Article 4 of the Restated Certificate of Incorporation of Mohawk.
(Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.)

4.2 See Articles 2, 6, and 9 of the Amended and Restated Bylaws of Mohawk.
(Incorporated herein by reference to Exhibit 3.2 in Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.)

10.33 Sixth Amendatory Agreement dated as of December 31, 1996 to the Second
Amended and Restated Credit Agreement dated as of January 13, 1995
among Aladdin Manufacturing Corporation (f/k/a Mohawk Manufacturing
Corporation and prior to that known as Mohawk Carpet Corporation),
Mohawk, Wachovia Bank of Georgia, N.A. and First Union National Bank
of Georgia

10.79 1997 Non-Employee Director Stock Compensation Plan.

10.80 1997 Long-Term Incentive Plan.

11 Statement re: Computation of Per Share Earnings.

21 Subsidiaries of the Registrant.

23.1 Independent Auditors' Consent - KPMG Peat Marwick LLP.

27 Financial Data Schedule.

<PAGE>
EXHIBIT 3.1

RESTATED

CERTIFICATE OF INCORPORATION

OF
MOHAWK INDUSTRIES, INC.

MOHAWK INDUSTRIES, INC. (the "Corporation") is a corporation duly organized
and existing under the General Corporation Law of the State of Delaware. Its
original Certificate of Incorporation was filed with the Secretary of State of
Delaware on December 22, 1988.

This Restated Certificate of Incorporation was duly adopted by the Board of
Directors of the Corporation in accordance with the provisions of Section 245 of
the General Corporation Law of the State of Delaware.

This Restated Certificate of Incorporation merely restates and integrates the
provisions of the Corporation's Certificate of Incorporation as heretofore
amended and supplemented, does not further amend such provisions and contains no
discrepancy between such provisions and the provisions hereof.

1. Name. The name of the Corporation is Mohawk Industries, Inc.

2. Registered Office and Agent. The address of its registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.

3. Purpose. The purposes for which the Corporation is formed are to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware and to possess and exercise all
of the powers and privileges granted by such law and other law of Delaware.

4. Authorized Capital. The aggregate number of shares of stock which the
Corporation shall have authority to issue is 75,060,000 shares, divided into two
(2) classes consisting of 75,000,000 shares of common stock, par value $.01 per
share ("Common Stock"), and 60,000 shares of preferred stock, par value $.01 per
share ("Preferred Stock").

The following is a statement of the designations, preferences,
qualifications, limitations, restrictions and the special or relative rights
granted to or imposed upon the shares of each such class.

1
<PAGE>

(a) Common Stock

(i) Dividends. Holders of Common Stock will be entitled to
receive such dividends as may be declared by the Board of Directors.

(ii) Distribution of Assets. In the event of the voluntary or
involuntary liquidation, dissolution or winding-up of the
Corporation, holders of Common Stock will be entitled to receive pro
rata all of the remaining assets of the Corporation available for
distribution to its stockholders after all amounts to which the
holders of Preferred Stock are entitled have been paid or set aside
in cash for payment.

(iii) Voting Rights. The holders of Common Stock shall have the
general right to vote for all purposes, including the election of
directors, as provided by law. Each holder of Common Stock shall be
entitled to one vote for each share thereof held.

(b) Preferred Stock

(i) Issue in Series. Preferred Stock may be issued from time to
time in one or more series, each such series to have the terms
stated herein and in the resolution of the Board of Directors of the
Corporation providing for its issue. All shares of any one series of
Preferred Stock will be identical, but shares of different series of
Preferred Stock need not be identical or rank equally except insofar
as provided by law or herein.

(ii) Creation of Series. The Board of Directors shall have
authority by resolution to cause to be created one or more series of
Preferred Stock, and to determine and fix with respect to each
series prior to the issuance of any shares of the series to which
such resolution relates:

(A) The distinctive designation of the series and the
number of shares which will constitute the series, which number
may be increased or decreased (but not below the number of
shares then outstanding) from time to time by action of the
Board of Directors;

(B) The dividend rate and the times of payment of
dividends on the shares of the series, whether dividends will
be cumulative, and if so, from what date or dates;

(C) Whether or not the shares of the series will be
redeemable and, if redeemable, the price or prices at which,
and the terms and conditions on which, the shares of the series
may be redeemed at the option of the Corporation;

(D) Whether or not the shares of the series will be
entitled to the benefit of a retirement or sinking fund to be
applied to the purchase or redemption of such shares and, if so
entitled, the amount of such fund and the terms and provisions
relative to the operation thereof;

(E) Whether or not the shares of the series will be
convertible into, or exchangeable for, any other shares of

2
<PAGE>

stock of the Corporation or other securities, and if so
convertible or exchangeable, the conversion price or prices, or
the rates of exchange, and any adjustments thereof, at which
such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;

(F) The rights of the shares of the series in the event of
voluntary or involuntary liquidation, dissolution or winding-up
of the Corporation;

(G) Whether or not the shares of the series will have
priority over or be on a parity with or be junior to the shares
of any other series or class in any respect or will be entitled
to the benefit of limitations restricting the issuance of
shares of any other series or class having priority over or
being on a parity with the shares of such series in any
respect, or restricting the payments of dividends on or the
making of other distributions in respect of shares of any other
series or class ranking junior to the shares of the series as
to dividends or assets, or restricting the purchase or
redemption of the shares of any such junior series or class,
and the terms of any such restriction;

(H) Whether the series will have voting rights, in
addition to any voting rights provided by law, and, if so, the
terms of such voting rights; and

(I) Any other preferences, qualifications, privileges,
options and other relative or special rights and limitations of
that series.

(iii) Dividends. Holders of Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of
funds legally available for the payment thereof, dividends at the
rates fixed by the Board of Directors for the respective series, and
no more, before any dividends shall be declared and paid, or set
apart for payment, on Common Stock with respect to the same dividend
period.

(iv) Preference on Liquidation. In the event of the voluntary
or involuntary liquidation, dissolution or winding-up of the
Corporation, holders of each series of Preferred Stock will be
entitled to receive the amount fixed for such series plus, in the
case of any series on which dividends will have been determined by
the Board of Directors to be cumulative, an amount equal to all
dividends accumulated and unpaid thereon to the date of final
distribution whether or not earned or declared before any
distribution shall be paid, or set aside for payment, to holders of
Common Stock. If the assets of the Corporation are not sufficient to
pay such amounts in full, holders of all shares of Preferred Stock
will participate in the distribution of assets ratably in proportion
to the full amounts to which they are entitled or in such order of
priority, if any, as will have been fixed in the resolution or
resolutions providing for the issue of the series of Preferred
Stock. Neither the merger nor consolidation of the Corporation into
or with any other corporation, nor a sale, transfer or lease of all
part of its assets, will be deemed a liquidation, dissolution or
winding-up of the Corporation within the meaning of this paragraph
except to the extent specifically provided for in the resolution or
resolutions providing for the issue of the series of Preferred
Stock.

3
<PAGE>

(v) Redemption. The Corporation, at the option of the Board of
Directors, may, if so provided for in the resolutions providing for
its issue, redeem all or part of the shares of any series of
Preferred Stock on the terms and conditions fixed for such series.

(vi) Voting Rights. Except as otherwise required by law, as
otherwise provided herein or as otherwise determined by the Board of
Directors as to the shares of any series of Preferred Stock prior to
the issuance of any such shares, the holders of Preferred Stock
shall have no voting rights and shall not be entitled to any notice
of meeting of stockholders.

5. Term. The Corporation shall have perpetual existence.

6. By-laws. The Board of Directors of the Corporation is expressly
authorized to adopt, alter, amend or repeal the By-laws of the Corporation,
except as otherwise specifically provided therein.

7. Elections of Directors. Election of directors need not be by written
ballot unless the By-laws of the Corporation shall so provide.

8. Number of Directors.

(a) The business and affairs of the Corporation shall be managed by,
or under the direction of, a Board of Directors comprised as follows:

(i) The number of directors of the Corporation shall be not
less than two (2) and not more than eleven (11), the exact number
within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the Board of
Directors.

(ii) The Board of Directors shall be divided into three classes
consisting, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. The
first class of directors shall be elected for a year term expiring
upon the next following Annual Meeting of Stockholders and the
election and qualification of their respective successors, the
second class of directors shall be elected for a term expiring upon
the second next Annual Meeting of Stockholders and the election and
qualification of their respective successors, and the third class of
directors shall be elected for a term expiring upon the third next
Annual Meeting of Stockholders and the election and qualification of
their respective successors. At each succeeding Annual Meeting of
Stockholders, successors to the class of directors whose term
expires at that Annual Meeting of Stockholders shall be elected for
a three-year term. If the number of directors has changed, any
increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to fill a
vacancy resulting from an increase in such a class shall hold office
for a term that shall coincide with the remaining term of that
class, unless otherwise required by law, but in no case shall a
decrease in the number of directors for a class shorten the term of
an incumbent director.

(iii) A director shall hold office until the Annual Meeting of
Stockholders upon which his term expires and until his successor
shall be elected and qualified, subject, however, to prior death,
resignation or removal from office.

4
<PAGE>

(iv) Any vacancy on the Board of Directors that results from an
increase in the number of directors or from the death, resignation
or removal from office of a director shall be filled by a majority
of the Board of Directors then in office, though less than a quorum,
or by the sole remaining director, and any director so chosen shall
have the same remaining term as that of his predecessor.

(v) Notwithstanding the foregoing, whenever the holders of any
one or more classes or series of Preferred Stock issued by the
Corporation shall have the right, voting separately by class or
series, to elect directors at an Annual or Special Meeting of
Stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms
of this Certificate of Incorporation and the resolution of the Board
of Directors creating such class or series, to the extent applicable
thereto, and such directors so elected shall not be divided into
classes pursuant to this Section (a) of Article 8 unless expressly
provided by such terms.

(b) Notwithstanding any other provision of this Certificate of
Incorporation or the By-laws of the Corporation (and notwithstanding the
fact that a lesser percentage for separate class vote for certain actions
may be permitted by law, by this Certificate of Incorporation or by the
By-laws of the Corporation), the affirmative vote of the holders of not
less than 80% of the votes entitled to be cast by the holders of all then
outstanding shares of capital stock, voting together as a single class,
shall be required to make, alter, amend, change, add to or repeal any
provision of this Article 8 or any other provision of this Certificate of
Incorporation or the By-laws of the Corporation in a manner inconsistent
with this Article 8.

(c) The invalidity or unenforceability of this Article 8 or any
portion hereof, or of any action taken pursuant to this Article 8, shall
not affect the validity or enforceability of any other provision of this
Certificate of Incorporation, any action taken pursuant to such other
provision, or any action taken pursuant to this Article 8.

9. Written Consent. Action required to be taken or which may be taken at any
Annual Meeting or Special Meeting of the Stockholders may be taken without a
meeting, without prior notice and without a vote if a consent in writing,
setting forth the action so taken, shall be signed by all the holders of
outstanding shares of stock entitled to vote on such action.

10. Right to Amend. The Corporation reserves the right to amend the provisions
in this Certificate, as the same may from time to time be in effect, in the
manner now or hereafter provided by law, and all rights conferred on
stockholders or others hereunder or thereunder are granted subject to such
reservation.

11. Limited Liability. No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law ("DGCL"), or (iv) for any transaction from which the director derived an
improper personal benefit. If the DCGL is amended hereafter to authorize the
further elimination or limitation of the personal liability of directors, or to
authorize the elimination or limitation of the personal liability of officers or
other agents of the Corporation, then the liability of such person or persons
shall be eliminated or limited to the fullest extent permitted by the DGCL, as
so amended. Any repeal or modification of this Article 11 shall be prospective
only, and shall not affect to the detriment of any director, or officer or other
agent if applicable thereto, of the Corporation any limitation on the personal
liability of such person existing at the time of such repeal or modification.

5
<PAGE>

12. Indemnification. The Corporation shall indemnify any person who is or was
a director or officer of the Corporation, or any other person who is serving or
did serve at the request of the Corporation in any such capacity with another
corporation, partnership, joint venture, trust or other enterprise to the
fullest extent permitted by the laws of the State of Delaware as in effect on
the date hereof or as may hereafter be amended.

IN WITNESS WHEREOF, the Company has caused its corporate seal to be hereunto
affixed and this Certificate to be executed by David L. Kolb, its Chairman and
Chief Executive Officer and by Barbara B. Lance its Secretary, this the 13th day
of February, 1997.

MOHAWK INDUSTRIES, INC.

/s/ DAVID L. KOLB
--------------------------------------
David L. Kolb
Chairman and Chief Executive Officer

Attest:

/s/ BARBARA B. LANCE
- ------------------------
Barbara B. Lance
Secretary

[CORPORATE SEAL]

<PAGE>

Exhibit 3.2

Last Amended 2/13/97

MOHAWK INDUSTRIES, INC.
AMENDED AND RESTATED

BY-LAWS

ARTICLE I

Offices

The Corporation shall at all times maintain a registered office in the State
of Delaware and a registered agent at that address but may have other
offices located in or outside of the State of Delaware as the Board of
Directors may from time to time determine.

ARTICLE II

Stockholders' Meetings

2.1 Places of Meetings. All meetings of stockholders shall be held at
such place or places in or outside of the State of Delaware as the Board of
Directors may from time to time determine or as may be designated in the
notice of meeting or waiver of notice thereof, subject to any provisions of
the laws of the State of Delaware.

2.2 Annual Meetings. The annual meeting of stockholders for the
election of directors and the transaction of such other business as may
properly come before the meeting shall be held on such date and at such time
as may be designated from time to time by the Board of Directors. If the
annual meeting is not held on the date designated, it may be held as soon
thereafter as convenient and shall be called the annual meeting. Written
notice of the time and place of the annual meeting shall be given by mail to
each stockholder entitled to vote thereat at his address as it appears on
the records of the Corporation not less than ten (10) nor more than sixty
(60) days prior to the scheduled date thereof, unless such notice is waived
as provided by Article IX of these By-laws.

2.3 Special Meetings. Special meetings of stockholders may be called at
any time only by the Board of Directors or the Chairman of the Board of
Directors stating the specific purpose or purposes thereof. Written notice
of the time, place and specific purposes of such meeting shall be given by
mail to each stockholder entitled to vote thereat at his address as it
appears on the records of the Corporation not less than ten (10) nor more
than sixty (60) days prior to the scheduled date thereof, unless such notice
is waived as provided in Article IX of these By-laws. The only business
which may be conducted at a special meeting, other than procedural matters
and matters relating to the conduct of the meeting, shall be the matter or
matters described in the notice of the meeting.

2.4 Voting. Unless otherwise provided in a resolution or resolutions
providing for any class or series of Preferred Stock pursuant to Article 4
of the Certificate of Incorporation or by the Delaware General Corporation
Law, at all meetings of stockholders, each stockholder entitled to vote on
the record date as determined under Article VI, Section 6.3 of these By-laws
or, if not so determined, as prescribed under the laws of the State of
Delaware, shall be entitled to one vote in person or by written proxy, for
each share of stock standing of record in his name, subject to any
restrictions or qualifications set forth in the Certificate of Incorporation
or any amendment thereto. All elections for the Board of Directors shall be
decided by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of

1
<PAGE>

directors and all other questions shall be decided by the affirmative vote
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter, in each case except as
otherwise required by the Delaware General Corporation Law or as provided
for in the Certificate of Incorporation or these By-laws.

2.5 Quorum. At any meeting of stockholders, a majority of the number of
shares of stock outstanding and entitled to vote thereat, present in person
or by proxy, shall constitute a quorum, but a smaller interest may adjourn
any meeting from time to time, and the meeting may be held as adjourned
without further notice, subject to such limitation as may be imposed under
the laws of the State of Delaware.

2.6 List of Stockholders. At least ten (10) days before every meeting,
a complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order and showing the address of and the number of
shares registered in the name of each stockholder, shall be prepared by the
Secretary or the transfer agent in charge of the stock ledger of the
Corporation. Such list shall be open for examination by any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. The stock ledger shall be the
only evidence as to who are the stockholders entitled to examine such list
or the books of the Corporation or to vote in person or by proxy at such
meeting.

2.7 Organization and Procedure. (a) The Chairman of the Board, or, in
the absence of the Chairman of the Board, the Vice Chairman, or, in the
absence of the Vice Chairman, any other person designated by the Board of
Directors, shall preside at meetings of stockholders. The Secretary of the
Corporation shall act as secretary, but in the absence of the Secretary, the
presiding officer may appoint a secretary.

(b) At each meeting of stockholders, the chairman of the meeting shall
fix and announce the date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at the meeting
and shall determine the order of business and all other matters of
procedure. Except to the extent inconsistent with any such rules and
regulations as adopted by the Board of Directors, the chairman of the
meeting may establish rules, which need not be in writing, to maintain order
for the conduct of the meeting, including, without limitation, restricting
attendance to bona fide stockholders of record and their proxies and other
persons in attendance at the invitation of the chairman and making rules
governing speeches and debates. The chairman of the meeting acts in his or
her absolute discretion and his or her rulings are not subject to appeal.

2.8 Stockholder Proposals and Nominations. (a) No proposal for a
stockholder vote (other than a proposal that appears in the Corporation's
proxy statement after compliance with the procedures set forth in Securities
and Exchange Commission Rule 14a-8 or any successor provision) shall be
submitted by a stockholder (a "Stockholder Proposal") to the Corporation's
stockholders unless the stockholder submitting such proposal (the
"Proponent") shall have filed a written notice setting forth with
particularity (i) the names and business addresses of the Proponent and all
natural persons, corporations, partnerships, trusts or any other type of
legal entity or recognized ownership vehicle (collectively, a "Person")
acting in concern with the Proponent; (ii) the name and address of the
Proponent and the Persons identified in clause (i), as they appear on the
Corporation's books (if they so appear); (iii) the class and number of
shares of the Corporation beneficially owned by the Proponent and by each
Person identified in clause (i); (iv) a description of the Stockholder
Proposal containing all material information relating thereto; and (v) such
other information as the Board of Directors reasonably determines is
necessary or appropriate to enable the Board of Directors and stockholders
of the Corporation to consider the Stockholder Proposal. The presiding

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officer at any stockholders' meeting may determine that any Stockholder
Proposal was not made in accordance with the procedures prescribed in these
Bylaws or is otherwise not in accordance with law, and if it is so
determined, such officer shall so declare at the meeting and the Stockholder
Proposal shall be disregarded.

(b) Only persons who are selected and recommended by the Board of
Directors or the committee of the Board of Directors designated to make
nominations, or who are nominated by stockholders in accordance with the
procedures set forth in this Section 2.8, shall be eligible for election, or
qualified to serve, as directors. Nominations of individuals for election to
the Board of Directors of the Corporation at any annual meeting or any
special meeting of stockholders at which directors are to be elected may be
made by any stockholder of the Corporation entitled to vote for the election
of directors at that meeting by compliance with the procedures set forth in
this Section 2.8. Nominations by stockholders shall be made by written
notice (a "Nomination Notice"), which shall set forth (i) as to each
individual nominated, (A) the name, date of birth, business address and
residence address of such individual; (B) the business experience during the
past five years of such nominee, including his or her principal occupations
and employment during such period, the name and principal business of any
corporation or other organization in which such occupations and employment
were carried on, and such other information as to the nature of his or her
responsibilities and level of professional competence as may be sufficient
to permit assessment of his or her prior business experience; (C) whether
the nominee is or has ever been at any time a director, officer or owner of
five percent or more of any class of capital stock, partnership interests or
other equity interest of any corporation, partnership or other entity; (D)
any directorships held by such nominee in any company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended, or subject to the requirements of Section 15(d) of such
Act or any company registered as an investment company under the Investment
Company Act of l940, as amended; and (E) whether, in the last five years,
such nominee has been convicted in a criminal proceeding or has been subject
to a judgment, order, finding or decree of any federal, state or other
governmental entity, concerning any violation of federal, state or other
law, or any proceeding in bankruptcy, which conviction, order, finding,
decree or proceeding may be material to an evaluation of the ability or
integrity of the nominee; and (ii) as to the Person submitting the
Nomination Notice and any Person acting in concert with such Person, (x) the
name and business address of such Person, (y) the name and address of such
Person as they appear on the Corporation's books (if they so appear), and
(z) the class and number of shares of the Corporation that are beneficially
owned by such Person. A written consent to being named in a proxy statement
as a nominee, and to serve as a director if elected, signed by the nominee,
shall be filed with any Nomination Notice. If the presiding officer at any
stockholders' meeting determines that a nomination was not made in
accordance with the procedures prescribed by these By-laws, he shall so
declare to the meeting and the defective nomination shall be disregarded.

(c) If a Stockholder Proposal or Nomination Notice is to be submitted
at an annual stockholders' meeting, it shall be delivered to the Secretary
of the Corporation at the principal executive office of the Corporation
within the time period specified in Securities and Exchange Commission Rule
14a-8(a)(3)(i) or any successor provision. Subject to Section 2.3 as to
matters that may be acted upon at a special meeting of the stockholders, if
a Stockholder Proposal or Nomination Notice is to be submitted at a special
meeting of the stockholders, it shall be delivered to the Secretary of the
Corporation at the principal executive office of the Corporation no later
than the close of business on the earlier of (i) the 30th day following the
public announcement that a matter will be submitted to a vote of the
stockholders at a special meeting, or (ii) the 15th day following the day on
which notice of the special meeting was given.

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ARTICLE III

Board of Directors

3.1 Powers. The business and affairs of the Corporation shall be
carried on by or under the direction of the Board of Directors, which shall
have all the powers authorized by the laws of the State of Delaware, subject
to such limitations as may be provided by the Certificate of Incorporation
or these By-laws.

3.2 Number and Qualification. The number of directors shall be
determined in the manner set forth in the Certificate of Incorporation. The
members of the Board of Directors shall be divided into classes if and as
provided in the Certificate of Incorporation. Each director shall serve
until the election and qualification of his successor or until his earlier
death, resignation or removal as provided in the Certificate of
Incorporation or these By-laws. In case of an increase in the number of
directors between elections by the stockholders, the additional
directorships shall be considered vacancies and shall be filled in the
manner prescribed in the Certificate of Incorporation. Directors need not be
stockholders.

3.3 Compensation. The Board of Directors, or a committee thereof, may
from time to time by resolution authorize the payment of fees or other
compensation to the directors for services as such to the Corporation,
including, but not limited to, fees for attendance at all meetings of the
Board of Directors or any committee thereof, and determine the amount of
such fees and compensation.

3.4 Meetings and Quorum. Meetings of the Board of Directors may be held
either in or outside of the State of Delaware. A quorum shall be one-third
(1/3) of the then authorized number of directors. The vote of the majority
of the directors present at a meeting at which a quorum is present shall be
the act of the Board of Directors.

The Board of Directors shall, at the close of each annual meeting of
stockholders and without further notice other than these By-laws, if a
quorum of directors is then present or as soon thereafter as may be
convenient, hold a regular meeting for the election of officers and the
transaction of any other business.

The Board of Directors may from time to time provide for the holding of
regular meetings with or without notice and may fix the times and places at
which such meetings are to be held. Meetings other than regular meetings may
be called at any time by the Chairman of the Board of Directors or the
President and must be called by the Secretary or an Assistant Secretary upon
the request of a majority of the members of the Board of Directors.

Notice of each meeting, other than a regular meeting (unless required
by the Board of Directors), shall be given to each director (i) by mailing
the same to each director at his residence or business address at least five
(5) business days before the meeting; (ii) by sending the same by overnight
courier to each director at his residence or business address at least three
(3) business days before the meeting; (iii) by facsimile transmission at his
business facsimile number and telephonic confirmation of receipt at least
two (2) business days before the meeting; or (iv) by delivering the same to
him personally or by telephone or telegraph at least two (2) business days
before the meeting. In case of exigency, the Chairman of the Board of
Directors, the President or the Secretary shall prescribe a shorter notice
to be given personally or by telephone, telegraph, cable, facsimile
transmission or wireless to all or any one or more of the directors at their
respective residences or places of business.

Notice of any meeting shall state the time and place of such meeting,
but need not state the purposes thereof unless otherwise required by the
laws of the State of Delaware, the Certificate of Incorporation or the Board
of Directors.

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3.5 Committees. The Board of Directors may, by resolution adopted by a
majority of the whole Board of Directors, provide for committees of two or
more directors and shall elect the members thereof to serve at the pleasure
of the Board of Directors and may designate one of such members to act as
chairman. The Board of Directors may at any time change the membership of
each committee, fill vacancies in it, authorize the committee to fill
vacancies in such committee, designate alternate members to replace any
absent or disqualified members at any meeting of such committee, or dissolve
it. Each such committee shall have the powers and perform such duties, not
inconsistent with law, as may be assigned to it by the Board of Directors.
Each committee may determine its rules of procedure and the notice to be
given of its meeting. A majority of the members of each committee shall
constitute a quorum.

3.6 Conference Telephone Meetings. Any one or more members of the Board
of Directors or any committee thereof may participate in a meeting by means
of a conference telephone or similar communication equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such
meeting.

3.7 Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board of
Directors or committee.

ARTICLE IV

Officers

4.1 Titles and Election. The officers of the Corporation shall be the
President, one or more Vice Presidents, the Secretary and the Treasurer. The
officers of the Corporation shall be elected at the first meeting of the
Board of Directors following each annual meeting of stockholders. Each
officer shall hold office at the pleasure of the Board of Directors except
as may otherwise be approved by the Board of Directors, or until his earlier
resignation, removal under these By-laws or other termination of his
employment. Any person may hold more than one office if the duties can be
consistently performed by the same person.

The Board of Directors, in its discretion, may also at any time elect
or appoint a Chairman of the Board of Directors, and one or more Senior Vice
Presidents, Executive Vice Presidents, Assistant Vice Presidents, Assistant
Secretaries and Assistant Treasurers and such other officers as it may deem
advisable, each of whom shall hold office at the pleasure of the Board of
Directors, except as may otherwise be approved by the Board of Directors, or
until his earlier resignation, removal or other termination of employment,
and shall have such authority and shall perform such duties as may be
prescribed or determined from time to time by the Board of Directors or, in
case of officers other than the Chairman of the Board of Directors, if not
prescribed or determined by the Board of Directors, as the President or the
then senior executive officer may prescribe or determine.

4.2 Duties. Subject to such extension, limitations, and other
provisions as the Board of Directors may from time to time prescribe or
determine, the following officers shall have the following powers and
duties:

(a) Chairman of the Board of Directors. The Chairman of the Board
of Directors, if one is elected, shall be a director and, when present,
shall preside at all meetings of the stockholders and of the Board of
Directors and shall be charged with general supervision of the management
and policy of the Corporation and shall have such other powers and perform
such other duties as the Board of Directors may prescribe from time to time.

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(b) President. The President shall exercise the powers and
authority and perform all of the duties commonly incident to his office,
shall in the absence of the Chairman of the Board of Directors preside at
all meetings of the stockholders and of the Board of Directors if he is a
director, and shall perform such other duties as the Board of Directors
shall specify from time to time. The President or a Vice President, or any
officer specifically authorized by the Board of Directors, shall sign all
certificates for shares, bonds, debentures, promissory notes, deeds and
contracts of the Corporation.

(c) Chief Executive Officer. The Chief Executive Officer shall
have general and active management power and authority over the business of
the Corporation, shall see that all orders and resolutions of the Board of
Directors are carried into effect and shall perform any and all other duties
prescribed by the Board of Directors. Either the President or the Chairman
of the Board of Directors may be Chief Executive Officer. In the absence of
a resolution by the Board of Directors that the Chairman of the Board of
Directors shall be the Chief Executive Officer, the President shall be the
Chief Executive Officer.

(d) Senior Vice Presidents. The Senior Vice Presidents shall
perform such duties as may be assigned to them from time to time by the
Board of Directors or by the President if the Board of Directors does not do
so. In the absence or disability of the President, the Senior Vice
Presidents, in order of seniority unless otherwise determined by the Board
of Directors, may exercise the powers and perform the duties pertaining to
the office of President.

(e) Vice Presidents. The Vice Presidents shall perform such duties
as may be assigned to them from time to time by the Board of Directors or by
the President if the Board of Directors does not do so. In the absence or
disability of any Senior Vice President, the Vice Presidents may, in order
of seniority unless otherwise determined by the Board of Directors, exercise
the powers and perform the duties pertaining to the office of Senior Vice
President.

(f) Secretary. The Secretary, or in his absence an Assistant
Secretary, shall keep the minutes of all meetings of stockholders and of the
Board of Directors and any committee thereof, give and serve all notices,
attend to such correspondence as may be assigned to him, keep in safe
custody the seal of the Corporation, and affix such seal to all such
instruments properly executed as may require it, and shall perform all of
the duties commonly incident to his office and shall have such other duties
and powers as may be prescribed or determined from time to time by the Board
of Directors or by the President if the Board of Directors does not do so.

(g) Treasurer. The Treasurer, subject to the order of the Board of
Directors, shall have the care and custody of the monies, funds, and
securities of the Corporation (other than his own bond, if any, which shall
be in the custody of the President), shall maintain the general accounting
books/accounting records and forms of the Corporation and shall have, under
the supervision of the Board of Directors, all the powers and duties
commonly incident to his office. In addition to the foregoing, the Treasurer
shall have such duties as may be prescribed or determined from time to time
by the Board of Directors or by the President if the Board of Directors does
not do so.

4.3 Delegation of Authority. The Board of Directors may at any time
delegate the powers and duties of any officer for the time being to any
other officer, director or employee.

4.4 Compensation. The compensation of the officers of the Corporation
shall be fixed by the Board of Directors or a committee thereof, and the
fact that any officer is a director shall not preclude him from receiving
compensation or from voting upon the resolution providing the same.

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ARTICLE V

Resignations, Vacancies and Removals

5.1 Resignations. Any director or officer may resign at any time by
giving written notice thereof to the Board of Directors, the President or
the Secretary. Any such resignation shall take effect at the time specified
therein or, if the time be not specified, upon receipt thereof, and unless
otherwise specified therein, the acceptance of any resignation shall not be
necessary to make it effective.

5.2 Vacancies.

(a) Directors. Any vacancy in the Board of Directors shall be
filled in the manner prescribed in the Certificate of Incorporation.

(b) Officers. The Board of Directors may at any time or from
time to time fill any vacancy among the officers of the Corporation.

5.3 Removals.

(a) Directors. The entire Board of Directors, or any individual
member thereof, may be removed only as provided by the laws of the State of
Delaware.

(b) Officers. Subject to the provisions of any validly existing
agreement, the Board of Directors may at any meeting remove from office any
officer, with or without cause, and may appoint a successor.

ARTICLE VI

Capital Stock

6.1 Certificates of Stock. Every stockholder shall be entitled to a
certificate or certificates for shares of the capital stock of the
Corporation in such form as may be prescribed or authorized by the Board of
Directors, duly numbered and setting forth the number and kind of shares
represented thereby. Such certificates shall be signed by the Chairman of
the Board of Directors, or by the President or a Vice President and by the
Treasurer or an Assistant Treasurer or by the Secretary or an Assistant
Secretary. Any or all of such signatures may be in facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed on a certificate has ceased to be such officer,
transfer agent or registrar before the certificate has been issued, such
certificate may nevertheless be issued and delivered by the Corporation with
the same effect as if he were such officer, transfer agent or registrar at
the date of issue.

6.2 Transfer of Stock. Shares of the capital stock of the Corporation
shall be transferable only upon the books of the Corporation upon the
surrender of the certificate or certificates properly assigned and endorsed
for transfer. If the Corporation has a transfer agent or registrar acting on
its behalf, the signature of any officer or representative thereof may be in
facsimile.

The Board of Directors may appoint a transfer agent and one or more
co-transfer agents and a registrar and one or more co-registrars and may
make or authorize such agents to make all such rules and regulations deemed
expedient concerning the issuance, transfer and registration of shares of
stock.

6.3 Record Dates. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in

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writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix in
advance a record date which, in the case of a meeting, shall not be less
than ten (10) nor more than sixty (60) days prior to the scheduled date of
such meeting and which, in the case of any other action, shall be not more
than sixty (60) days prior to any such action permitted by the laws of the
State of Delaware. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.

6.4 Lost Certificates. In case of loss or mutilation or destruction of
a stock certificate, a duplicate certificate may be issued upon such terms
as may be determined or authorized by the Board of Directors or by the
chairman of the Board of Directors, the President or the Chief Executive
Officer if the Board of Directors does not do so.

ARTICLE VII
Fiscal Year, Bank Deposits, Checks, Etc.

7.1 Fiscal Year. The fiscal year of the Corporation shall be the
calendar year unless otherwise fixed by resolution of the Board of
Directors.

7.2 Bank Deposit, Checks, Etc. The funds of the Corporation shall be
deposited in the name of the Corporation or of any division thereof in such
banks or trust companies in the United States or elsewhere as may be
designated from time to time by the Board of Directors, or by such officer
or officers as the Board of Directors may authorize to make such
designations.

All checks, drafts or other orders for the withdrawal of funds from any
bank account shall be signed by such person or persons as may be designated
from time to time by the Board of Directors. The signatures on checks,
drafts or other orders for the withdrawal of funds may be in facsimile if
authorized in the designation.

ARTICLE VIII

Books and Records

8.1 Place of Keeping Books. The books and records of the Corporation
may be kept outside of the State of Delaware.

8.2 Examination of Books. Except as may otherwise be provided by the
laws of the State of Delaware, the Certificate of Incorporation or these
By-laws, the Board of Directors shall have the power to determine from time
to time whether and to what extent and at what times and places and under
what conditions any of the accounts, records and books of the Corporation
are to be open to the inspection of any stockholder. No stockholder shall
have any right to inspect any account or book or document of the Corporation
except as prescribed by law or authorized by express resolution of the
stockholders or of the Board of Directors.

ARTICLE IX

Notices

9.1 Requirements of Notice. Whenever notice is required to be given by
statute, the Certificate of Incorporation or these By-laws, it shall not
mean personal notice unless so specified, but such notice may be given in
writing by depositing the same in a post office, letter box, or mail chute
postage prepaid and addressed to the person to whom such notice is directed

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at the address of such person on the records of the Corporation, and such
notice shall be deemed given at the time when the same shall be thus mailed.

9.2 Waivers. Any stockholder, director or officer may, in writing or by
telegram or cable, at any time waive any notice or other formality required
by statute, the Certificate of Incorporation or these By-laws. Such waiver
of notice, whether given before or after any meeting or action, shall be
deemed equivalent to notice. Presence of a stockholder either in person or
by proxy at any meeting of stockholders and presence of any director at any
meeting of the Board of Directors shall constitute a waiver of such notice
as may be required by any statute, the Certificate of incorporation or these
By-laws unless such presence is solely for the purpose of objecting to the
lack of notice and such objection is stated at the commencement of the
meeting.

ARTICLE X

Seal

The corporate seal of the Corporation shall be in such form as the
Board of Directors shall determine from time to time and may consist of a
facsimile thereof or the words "Corporate Seal" or "Seal" enclosed in
parentheses or brackets.

ARTICLE XI

Powers of Attorney

The Board of Directors may authorize one or more of the officers of the
Corporation to execute powers of attorney delegating to named
representatives or agents power to represent or act on behalf of the
Corporation, with or without power of substitution.

In the absence of any action by the Board of Directors, any officer of
the Corporation may execute for and on behalf of the Corporation waivers of
notice of meetings of stockholders and proxies for such meetings of any
company in which the Corporation may hold voting securities.

ARTICLE XII

Indemnification

12.1 Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, and whether formal
or informal (hereinafter a "proceeding"), by reason of the fact:

(i) that he or she is or was a director or an officer of the
Corporation, or

(ii) that he or she is or was serving at the request of the
Corporation as a director or officer of another corporation or of a
partnership, limited liability company, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(collectively, "another enterprise" or "other enterprise"),

whether either in case (i) or in case (ii), the basis of such proceeding is
alleged action or inaction:

(x) in an official capacity as a director or officer of the
Corporation, or as a director, trustee, officer, employee or agent of
such other enterprise, or

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(y) in any other capacity related to the Corporation or such other
enterprise while so serving as a director, trustee, officer, employee
or agent,

shall be indemnified and held harmless by the Corporation to the fullest
extent permitted by Section 145 (or any successor provision or provisions)
of the General Corporation Law of the State of Delaware ("DGCL") as the same
exists or may hereafter be amended (but, in the case of any such amendment,
with respect to alleged action or inaction occurring prior to such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than permitted prior thereto),
against all expense, liability and loss (including without limitation
attorneys' fees and expenses, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) actually and reasonably incurred
by such person in connection therewith. The persons indemnified by this
Article XII are hereinafter referred to as "indemnitees."

Such indemnification as to such alleged action or inaction shall
continue as to an indemnitee who has after such alleged action or inaction
ceased to be a director or officer of the Corporation, or director, trustee,
officer, employee or agent of such other enterprise; and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.

Notwithstanding the foregoing, except as may be provided by the Board
of Directors, the Corporation shall not indemnify any such indemnitee in
connection with a proceeding (or portion thereof) initiated by such
indemnitee unless such proceeding (or portion thereof) was authorized by the
Board of Directors (but this prohibition shall not apply to a counterclaim,
cross-claim or third-party claim brought by the indemnitee in any
proceeding).

The right to indemnification conferred in this Article XII: (i) shall
be a contract right; (ii) shall not be affected adversely to any indemnitee
by any amendment of these Bylaws with respect to any alleged action or
inaction occurring prior to such amendment; and (iii) shall, subject to any
requirements imposed by law and these Bylaws, include the right to be paid
by the Corporation the expenses (including attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition.

12.2 Undertakings for Advances of Expenses. If and to the extent the
DGCL requires, an advancement by the Corporation of expenses incurred by an
indemnitee pursuant to clause (iii) of the last sentence of Section 12.1
hereof (hereinafter an "advancement of expenses") shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision
from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this Article XII or otherwise.

12.3 Claims for Indemnification. If a claim for indemnification under
Section 12.1 is not paid in full by the Corporation within 60 days after it
has been received in writing by the Corporation, except in the case of a
claim for an advancement of expenses, in which case the applicable period
shall be 20 days, the indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If the
indemnitee is successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the indemnitee shall be entitled to be paid
also the expense of prosecuting or defending such suit. In any suit brought
by the indemnitee to enforce a right to indemnification hereunder (but not
in a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and in any suit by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking
the Corporation shall be entitled to recover such expenses only upon a final
adjudication that, the indemnitee has not met the applicable standard of
conduct set forth in Section 145 of the DGCL (or any successor provision or
provisions). Neither the failure of the Corporation (including the Board of
Directors, independent legal counsel, or its stockholders) to have made a

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determination prior to the commencement of such suit that indemnification of
the indemnitee is proper in the circumstances because the indemnitee has met
the applicable standard of conduct set forth in Section 145 of the DGCL (or
any successor provision or provisions), nor an actual determination by the
Corporation (including the Board of Directors, independent legal counsel, or
its stockholders) that the indemnitee has not met such applicable standard
of conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee
to enforce a right to indemnification or to an advancement of expenses
hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to have or retain such
advancement of expenses, under this Article XII or otherwise, shall be on
the Corporation.

12.4 Relationship to Other Rights and Provisions Concerning
Indemnification. The rights to indemnification and to the advancement of
expenses conferred in this Article XII shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, the
Amended and Restated Certificate of Incorporation of the Company, any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.

12.5 Other Employees and Agents. The Corporation may, to the extent
authorized from time to time by the Board of Directors, grant rights to
indemnification, and to the advancement of expenses, to any other employee
or agent of the Corporation (or any person serving at the Corporation's
request as a trustee, employee or agent of another enterprise) or to any
person who is or was a director, officer, employee or agent of any of the
Corporation's affiliates, predecessor or subsidiary corporations or of a
constituent corporation absorbed by the Corporation in a consolidation or
merger or who is or was serving at the request of such affiliate,
predecessor or subsidiary corporation or of such constituent corporation as
a director, officer, employee or agent of another enterprise, in each case
as determined by the Board of Directors to the fullest extent of the
provisions of this Article XII in cases of the indemnification and
advancement of expenses of directors and officers of the Corporation, or to
any lesser extent (or greater extent, if permitted by law) determined by the
Board of Directors. If so indemnified, such person shall be included in the
term "indemnitee" or "indemnitees" as used in this Article XII.

12.6 Insurance. The Corporation may maintain insurance, at its expense,
to protect itself and any director, trustee, officer, employee or agent of
the Corporation or another enterprise against any expense, liability or
loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the DGCL.

12.7 Severability. In the event that any of the provisions of this
Article XII (including any provision within a single section, paragraph or
sentence) is held by a court of competent jurisdiction to be invalid, void
or otherwise unenforceable, the remaining provisions are severable and shall
remain enforceable to the full extent permitted by law.

12.8 Indemnity Fund. Upon resolution adopted by the Board of Directors,
the Corporation may establish a trust or other designated account, grant a
security interest or use other means (including, without limitation, a
letter of credit), to ensure the payment of certain of its obligations
arising under this Article XII and/or agreements which may be entered into
between the Corporation and its officers, directors or agents from time to
time.

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ARTICLE XIII

Amendments

These By-laws may be amended or repealed either:

(a) at any meeting of stockholders at which a quorum is present by vote
of a majority of the number of shares of stock entitled to vote present in
person or by proxy at such meeting as provided in Article II, Sections 2.4
and 2.5 of these By-laws, or

(b) at any meeting of the Board of Directors by a majority vote of the
directors then in office;

provided that the notice of such meeting of stockholders or directors or
waiver of notice thereof contains a statement of the substance of the
proposed amendment or repeal.

<PAGE>

EXHIBIT 4.1

See Article 4 of the Restated Certificate of Incorporation of Mohawk.
(Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996.)

<PAGE>

EXHIBIT 4.2

See Articles II, VI, and IX of the Amended and Restated Bylaws of Mohawk.
(Incorporated herein by reference to Exhibit 3.2 in Mohawk's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996.)

<PAGE>

EXHIBIT 10.33

SIXTH AMENDATORY AGREEMENT

THIS SIXTH AMENDATORY AGREEMENT (this "Sixth Amendment") dated
effective as of the 31st day of December, 1996, among ALADDIN MANUFACTURING
CORPORATION, a Delaware corporation, formerly known as Mohawk Manufacturing
Corporation ("Mohawk"), MOHAWK INDUSTRIES, INC., a Delaware corporation
("Industries"; Mohawk and Industries, collectively, the "Obligors"),
WACHOVIA BANK OF GEORGIA, N.A., a national banking association ("Wachovia")
and FIRST UNION NATIONAL BANK OF GEORGIA, a national banking association
("First Union"; Wachovia and First Union, collectively, the "Banks").

W I T N E S S E T H:

WHEREAS, the Obligors and the Banks have executed and delivered that certain
Second Amended and Restated Credit Agreement dated as of the 13th day of
January, 1995 (as amended by the First Amendatory Agreement dated as of June
23, 1995, the Second Amendatory Agreement dated as of July 19, 1995, the
Third Amendatory Agreement dated as of September 28, 1995, the Fourth
Amendatory Agreement dated as of December 22, 1995, and the Fifth Amendatory
Agreement dated as of December 31, 1995, collectively, the "Credit
Agreement");

WHEREAS, the Obligors have requested and the Banks have agreed to adopt
certain amendments to the Credit Agreement, all subject to the terms and
conditions hereof;

NOW, THEREFORE, for and in consideration of the above premises and other
good and valuable consideration, the receipt and sufficiency of which hereby
are acknowledged by the parties hereto, the Obligors and the Banks hereby
agree as follows:

1. Use of Terms. Unless otherwise specifically defined herein, each
term used which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in
the Credit Agreement shall from and after the date hereof refer to the
Credit Agreement as amended hereby.

<PAGE>

2. Extension and Reinstatement of Tranche B Commitment; Ratification of
Tranche B Notes. Notwithstanding the termination of the Tranche B Commitment
on December 26, 1996, the Tranche B Commitment shall be reinstated on
December 31, 1996 through and including December 26, 1997. All references in
the Credit Agreement and the other Loan Documents to the "Tranche B
Termination Date" shall mean December 26, 1997. All references in the Credit
Agreement and the other Loan Documents to the Tranche B Loan Notes shall
mean the Tranche B Notes issued by Mohawk dated as of December 28, 1995,
payable to the order of each respective Bank.

3. Restatement of Representations and Warranties. Each of the Obligors
hereby restates and renews each and every representation and warranty
heretofore made by it in the Credit Agreement and the other Loan Documents
as fully as if made on the date hereof and with specific reference to this
Sixth Amendment and all other loan documents executed and/or delivered in
connection herewith.

4. Effects of Amendment. Except as set forth expressly hereinabove, all
terms of the Credit Agreement and the other Loan Documents shall be and
remain in full force and effect, and shall constitute the legal, valid,
binding and enforceable obligations of the Obligors. The amendments
contained herein shall be deemed to have prospective application only,
unless otherwise specifically stated herein.

5. Financing Statements. Promptly upon receipt thereof from the Banks,
the Obligors and each Guarantor shall execute and deliver financing
statements and amendments to existing financing statements as necessary to
reflect the name change of Mohawk Manufacturing Corporation to Aladdin
Manufacturing Corporation.

6. Conditions. This Sixth Amendment shall not become effective
unless all of the following conditions shall have been satisfied:

(a) The Company, the Parent, and each Guarantor shall have
executed and delivered to each of the Banks a counterpart of this Sixth
Amendment.

(b) All proceedings taken in connection with this Sixth Amendment
shall be satisfactory to the Banks and their special counsel. The Banks
and their special counsel shall have received copies of any documents
related to such proceedings, which documents shall be satisfactory to
them.

7. Ratification. Each of the Obligors hereby restates, ratifies and
reaffirms each and every term, covenant and condition set forth in the
Credit Agreement and the other Loan Documents effective as of the date
hereof.

8. Counterparts. This Sixth Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each

2
<PAGE>

of which when so executed and delivered shall be deemed to be an original
and all of which counterparts, taken together shall constitute but one and
the same instrument.

9. Section References. Section titles and references used in this
Sixth Amendment shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto
evidenced hereby.

10. No Default. To induce the Banks to enter into this Sixth Amendment
and to continue to make advances pursuant to the Credit Agreement, each of
the Obligors hereby acknowledges and agrees that, as of the date hereof, and
after giving effect to the terms hereof, there exists (1) no Default or
Event of Default and (2) no right of offset, defense, counterclaim, claim or
objection in favor of the Obligors, or any of them, arising out of or with
respect to any of the Loans and other obligations arising from the Credit
Agreement or the other Loan Documents.

11. Governing Law. This Sixth Amendment shall be governed by and
construed and interpreted in accordance with, the laws of the State of
Georgia.

IN WITNESS WHEREOF, each of the Obligors and the Banks has caused this Sixth
Amendment to be duly executed, under seal, by its duly authorized officer as
of the day and year first above written.

ALADDIN MANUFACTURING

CORPORATION
(SEAL)

By:
-------------------------------
Title:
----------------------------

MOHAWK INDUSTRIES, INC.

(SEAL)

By:
-------------------------------
Title:
----------------------------

3
<PAGE>

WACHOVIA BANK OF GEORGIA, N.A.

(SEAL)

By:
-------------------------------
Title:
----------------------------

FIRST UNION NATIONAL BANK OF
GEORGIA
(SEAL)

By:
-------------------------------
Title:
----------------------------

<PAGE>

EXHIBIT 10.79

MOHAWK INDUSTRIES, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN

ARTICLE 1

Purpose of the Plan

Section 1.1. Purpose. The purpose of the Mohawk Industries, Inc.
1997 Non-Employee Director Stock Compensation Plan is to promote the long-
term growth of Mohawk Industries, Inc. by providing a vehicle for Non-
Employee Directors to increase their proprietary interest in Mohawk
Industries, Inc. and to attract and retain highly qualified and capable Non-
Employee Directors.

ARTICLE 2

Definitions

Unless the context clearly indicates otherwise, the following terms
shall have the following meanings:

Section 2.1. "Annual Retainer" means the annual cash retainer fee
(excluding any meeting fees) payable by the Corporation to a Non-Employee
Director for services as a director (and, if applicable, as the chairman of
a committee of the Board) of the Corporation, as such amount may be changed
from time to time.

Section 2.2. "Board" means the Board of Directors of the Corporation.

Section 2.3. "Business Day" shall mean a day on which the Nasdaq
National Market or any national securities exchange or over-the-counter
market on which the Shares are traded is open for business.

Section 2.4. "Cash Election" has the meaning assigned such term in
Section 6.3.

Section 2.5. "Committee" means the Compensation Committee of the
Board.

Section 2.6. "Corporation" means Mohawk Industries, Inc.

Section 2.7. "Election Period" has the meaning assigned such term
in Section 6.1.

Section 2.8. "Fair Market Value per Share" as of a particular date
means the closing sales price of one Share on such date as reported on the
Nasdaq National Market or, in the absence of reported sales on such date,
the closing sales price on the immediately preceding date on which sales
were reported.

Section 2.9. "Non-Employee Director" means a director of the
Corporation who is not an employee of the Corporation or any subsidiary of
the Corporation.

Section 2.10. "Plan" means the Mohawk Industries, Inc. 1997 Non-
Employee Director Stock Compensation Plan.

Section 2.11. "Shares" means shares of the common stock, par value
$0.01 per share, of the Corporation.

Section 2.12. "Shares Election" has the meaning assigned such term
in Section 6.2.

<PAGE>

ARTICLE 3

Administration of the Plan

Section 3.1. Administrator of the Plan. The Plan shall be
administered by the Committee.

Section 3.2. Authority of Committee. The Committee shall have full
power and authority to: (i) interpret and construe the Plan and adopt such
rules and regulations as it shall deem necessary and advisable to implement
and administer the Plan, and (ii) designate persons other than members of
the Committee or the Board to carry out its responsibilities, subject to
such limitations, restrictions and conditions as it may prescribe, such
determinations to be made in accordance with the Committee's best business
judgment as to the best interests of the Corporation and its stockholders
and in accordance with the purposes of the Plan. The Committee may delegate
administrative duties under the Plan to one or more agents as it shall deem
necessary or advisable.

Section 3.3. Effect of Committee Determinations. No member of the
Committee or the Board shall be personally liable for any action or
determination made in good faith with respect to the Plan or as to any
settlement of any dispute between a Non-Employee Director and the
Corporation. Any decision or action taken by the Committee or the Board with
respect to the administration or interpretation of the Plan shall be
conclusive and binding upon all persons.

ARTICLE 4

Eligibility

Section 4.1. Eligibility. Non-Employee Directors of the Corporation
shall be eligible to participate in the Plan in accordance with Article 6.

ARTICLE 5

Shares Subject to the Plan

Section 5.1. Shares Subject to the Plan. Subject to adjustment as
provided in Article 8, the maximum number of Shares which may be granted
under the Plan is 25,000 Shares. The Shares distributable under the Plan
must be previously issued and repurchased Shares and may not be original
issue Shares.

ARTICLE 6

Elective Receipt of Shares

Each Non-Employee Director shall be granted Shares subject to the
following terms and conditions:

Section 6.1. Election Period. The Election Period shall be the period
designated by the Compensation Committee each year during which Non-Employee
Directors may elect to receive Shares in lieu of their Annual Retainer, or
elect to receive cash in a subsequent year, provided however, that such
period (the "Election Period") shall end on or before December 31 of each
year.

Section 6.2. Election to Receive Shares. On the first Business Day of
each fiscal quarter of each year, Shares shall be granted to each
Non-Employee Director who either (i) during the Election Period for such
year, filed with the Committee or its designee a written irrevocable
election to receive Shares in lieu of all (but not less than all) of such
Non-Employee Director's Annual Retainer payable with respect to such year (a
"Shares Election"), or (ii) filed a Shares Election for any prior year and
did not file a Cash Election (as described in Section 6.3 below) with
respect to the current year.

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<PAGE>

Section 6.3. Subsequent Elections to Receive Cash. Once a Non-Employee
Director files a Shares Election for any year, that election will carry
forward into subsequent years unless, within the Election Period for any
subsequent year, the Non-Employee Director files an election to receive his
Annual Retainer for such subsequent year in cash (a "Cash Election"). A Cash
Election shall be valid for one year only. A new Cash Election will be
required to be filed for any year in which the Non-Employee Director desires
to receive his or her Annual Retainer in cash. Once a Non-Employee Director
files a Shares Election for any year, then thereafter for any year for which
a Cash Election is not timely filed, the election will automatically revert
to an election to receive Shares.

Section 6.4. Number of Shares. The number of Shares to be granted
pursuant to this Article 6 on each quarterly grant date shall be the number
of whole Shares equal to (i) one quarter (1/4) of the Annual Retainer
amount which the Non-Employee Director has elected to be payable in Shares,
divided by (ii) the Fair Market Value per Share on the date the Shares are
awarded. In determining the number of Shares to be granted, any fraction of
a share will be disregarded and the remaining amount of such quarterly
installment of the Annual Retainer shall be paid in cash.

ARTICLE 7

Holding Period

Section 7.3. Holding Period. To the extent necessary to qualify for
the exemptions provided by Rule 16b-3 under the Securities Exchange Act of
1934, as the same may be amended from time to time, Shares acquired under
the Plan cannot be sold or otherwise transferred for a period of six-months
from the date of grant.

ARTICLE 8

Amendment and Termination

Section 8.1. Amendment, Suspension or Early Termination. The Board
may suspend or terminate the Plan at any time; provided, however, that the
Board may condition any amendment or modification on the approval of
stockholders of the Corporation if such approval is necessary or deemed
advisable with respect to tax, securities or other applicable laws, policies
or regulations.

ARTICLE 9

Miscellaneous

Section 9.1. Right to Service. Except as provided in the Plan, no
Non-Employee Director shall have any claim or right to be granted Shares
under the Plan. Neither the Plan nor any action pursuant thereto shall be
construed as giving any Non-Employee Director a right to be retained in the
service of the Corporation. The adoption of this Plan shall not affect any
other compensation, retirement or other benefit plan or program in effect
for the Corporation.

Section 9.2. Validity. In the event that any provision of the Plan is
held to be invalid, void or unenforceable, the same shall not affect, in any
respect whatsoever, the validity of any other provision of the Plan.

Section 9.3. Inurement of Rights and Obligations. The rights and
obligations under the Plan and any related agreements shall inure to the
benefit of, and shall be binding upon the Corporation, its successors and
assigns, and the Non-Employee Directors and their beneficiaries.

Section 9.4. Titles. Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of
the Plan.

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<PAGE>

Section 9.5. Governing Law. The Plan shall be construed, governed
and enforced in accordance with the law of Georgia, except as such laws are
preempted by applicable federal law.

<PAGE>

Exhibit 10.80
Adopted by Board 2/13/97

MOHAWK INDUSTRIES, INC.
1997 LONG-TERM INCENTIVE PLAN

ARTICLE I

PURPOSE

1.1 GENERAL. The purpose of the Mohawk Industries, Inc. 1997 Long-Term
Incentive Plan (the "Plan") is to promote the success, and enhance the
value, of Mohawk Industries, Inc. (the "Corporation"), by linking the
personal interests of its employees, officers and directors to those of
Corporation stockholders and by providing its employees, officers and
directors with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Corporation in its ability to
motivate, attract, and retain the services of employees, officers and
directors upon whose judgment, interest, and special effort the successful
conduct of the Corporation's operation is largely dependent. Accordingly,
the Plan permits the grant of incentive awards from time to time to selected
employees, officers and directors.

ARTICLE 2

EFFECTIVE DATE

2.1 EFFECTIVE DATE. The Plan shall be effective as of the date upon
which it shall be approved by the Board. However, the Plan shall be
submitted to the stockholders of the Corporation for approval within 12
months of the Board's approval thereof. No Incentive Stock Options granted
under the Plan may be exercised prior to approval of the Plan by the
stockholders and if the stockholders fail to approve the Plan within 12
months of the Board's approval thereof, any Incentive Stock Options
previously granted hereunder shall be automatically converted to
Non-Qualified Stock Options without any further act. In the discretion of
the Committee, Awards may be made to Covered Employees which are intended to
constitute qualified performance-based compensation under Code Section
162(m). Any such Awards shall be contingent upon the stockholders having
approved the Plan.

ARTICLE 3
DEFINITIONS

3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a
sentence, the word or phrase shall generally be given the meaning ascribed
to it in this Section or in Section 1.1 unless a clearly different meaning
is required by the context. The following words and phrases shall have the
following meanings:

(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Share Award, Dividend Equivalent Award, or
Other Stock-Based Award, or any other right or interest relating to
Stock or cash, granted to a Participant under the Plan.

(b) "Award Agreement" means any written agreement, contract, or
other instrument or document evidencing an Award.

1
<PAGE>

(d) "Change in Control" means and includes each of the following:

(1) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934
Act) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the 1934 Act) of 25% or more of the
combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (1), the following
acquisitions shall not constitute a Change of Control: (i) any
acquisition by a Person who is on the Effective Date the
beneficial owner of 25% or more of the Outstanding Company Voting
Securities, (ii) any acquisition directly from the Company, (iii)
any acquisition by the Company, (iv) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, or
(v) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (3)
of this definition; or

(2) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

(3) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company
Voting Securities, and (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 25% or more of the combined voting power
of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination.

(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.

2
<PAGE>

(f) "Committee" means the committee of the Board described in
Article 4.

(g) "Corporation" means Mohawk Industries, Inc., a Delaware
corporation.

(h) "Covered Employee" means a covered employee as defined in
Code Section 162(m)(3).

(i) "Disability" shall mean any illness or other physical or
mental condition of a Participant that renders the Participant
incapable of performing his customary and usual duties for the
Corporation, or any medically determinable illness or other physical or
mental condition resulting from a bodily injury, disease or mental
disorder which, in the judgment of the Committee, is permanent and
continuous in nature. The Committee may require such medical or other
evidence as it deems necessary to judge the nature and permanency of
the Participant's condition.

(j) "Dividend Equivalent" means a right granted to a Participant
under Article 11.

(k) "Effective Date" has the meaning assigned such term in
Section 2.1.

(l) "Fair Market Value", on any date, means (i) if the Stock is
listed on a securities exchange or is traded over the Nasdaq National
Market, the closing sales price on such exchange or over such system on
such date or, in the absence of reported sales on such date, the
closing sales price on the immediately preceding date on which sales
were reported, or (ii) if the Stock is not listed on a securities
exchange or traded over the Nasdaq National Market, the mean between
the bid and offered prices as quoted by Nasdaq for such date, provided
that if it is determined that the fair market value is not properly
reflected by such Nasdaq quotations, Fair Market Value will be
determined by such other method as the Committee determines in good
faith to be reasonable.

(m) "Incentive Stock Option" means an Option that is intended to
meet the requirements of Section 422 of the Code or any successor
provision thereto.

(n) "Non-Qualified Stock Option" means an Option that is not an
Incentive Stock Option.

(o) "Option" means a right granted to a Participant under Article
7 of the Plan to purchase Stock at a specified price during specified
time periods. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option.

(p) "Other Stock-Based Award" means a right, granted to a
Participant under Article 12, that relates to or is valued by reference
to Stock or other Awards relating to Stock.

(r) "Parent" means a corporation which beneficially owns a
majority of the outstanding voting stock or voting power of the
Corporation. For Incentive Stock Options, the term shall have the same
meaning as set forth in Code Section 424(e).

(q) "Participant" means a person who, as an employee, officer or
director of the Corporation or any Parent or Subsidiary, has been
granted an Award under the Plan.

(o) "Performance Share" means a right granted to a Participant
under Article 9, to receive cash, Stock, or other Awards, the payment
of which is contingent upon achieving certain performance goals
established by the Committee.

(p) "Plan" means the Mohawk Industries, Inc. 1997 Long-Term
Incentive Plan, as amended from time to time.

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<PAGE>

(q) "Restricted Stock Award" means Stock granted to a Participant
under Article 10 that is subject to certain restrictions and to risk of
forfeiture.

(r) "Retirement" means a Participant's termination of employment
with the Corporation, Parent or Subsidiary after attaining any normal
or early retirement age specified in any pension, profit sharing or
other retirement program sponsored by the Corporation, or, in the event
of the inapplicability thereof with respect to the person in question,
as determined by the Committee in its reasonable judgment.

(s) "Stock" means the $.01 par value common stock of the
Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Article 14.

(t) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 8 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as of the
date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 8.

(u) "Subsidiary" means any corporation, limited liability company,
partnership or other entity of which a majority of the outstanding
voting stock or voting power is beneficially owned directly or
indirectly by the Corporation. For Incentive Stock Options, the term
shall have the meaning set forth in Code Section 424(f).

(v) "1933 Act" means the Securities Act of 1933, as amended from
time to time.

(w) "1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.

ARTICLE 4
ADMINISTRATION

4.1 COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board or, at the discretion of the Board from time to time,
by the Board. The Committee shall consist of two or more members of the
Board who are (i) "outside directors" as that term is used in Section 162(m)
of the Code and the regulations promulgated thereunder, and (ii)
"non-employee directors" as such term is defined in Rule 16b-3 promulgated
under Section 16 of the 1934 Act or any successor provision. During any time
that the Board is acting as administrator of the Plan, it shall have all the
powers of the Committee hereunder, and any reference herein to the Committee
(other than in this Section 4.1) shall include the Board.

4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan,
the following rules of procedure shall govern the Committee. A majority of
the Committee shall constitute a quorum. The acts of a majority of the
members present at any meeting at which a quorum is present, and acts
approved unanimously in writing by the members of the Committee in lieu of a
meeting, shall be deemed the acts of the Committee. Each member of the
Committee is entitled to, in good faith, rely or act upon any report or
other information furnished to that member by any officer or other employee
of the Corporation or any Parent or Subsidiary, the Corporation's
independent certified public accountants, or any executive compensation
consultant or other professional retained by the Corporation to assist in
the administration of the Plan.

4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:

(a) Designate Participants;

(b) Determine the type or types of Awards to be granted to each
Participant;

4
<PAGE>

(d) Determine the terms and conditions of any Award granted under
the Plan, including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the Award,
any schedule for lapse of forfeiture restrictions or restrictions on
the exercisability of an Award, and accelerations or waivers thereof,
based in each case on such considerations as the Committee in its sole
discretion determines;

(e) Accelerate the vesting or lapse of restrictions of any
outstanding Award, based in each case on such considerations as the
Committee in its sole discretion determines;

(f) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Stock, other Awards, or other property, or
an Award may be canceled, forfeited, or surrendered;

(g) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;

(h) Decide all other matters that must be determined in
connection with an Award;

(i) Establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Plan;

(j) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan; and

(k) Amend the Plan or any Award Agreement as provided herein.

4.4. DECISIONS BINDING. The Committee's interpretation of the Plan,
any Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding,
and conclusive on all parties.

ARTICLE 5

SHARES SUBJECT TO THE PLAN

5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
14.1, the aggregate number of shares of Stock reserved and available for
Awards or which may be used to provide a basis of measurement for or to
determine the value of an Award (such as with a Stock Appreciation Right or
Performance Share Award) shall be 1,700,000.

5.2. LAPSED AWARDS. To the extent that an Award is canceled,
terminates, expires or lapses for any reason, any shares of Stock subject to
the Award will again be available for the grant of an Award under the Plan
and shares subject to SARs or other Awards settled in cash will be available
for the grant of an Award under the Plan.

5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury
Stock or Stock purchased on the open market.

5.4. LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to
the contrary, the maximum number of shares of Stock with respect to one or
more Options and/or SARs that may be granted during any one calendar year
under the Plan to any one Covered Employee shall be 100,000. The maximum
fair market value of any Awards (other than Options and SARs) that may be
received by a Covered Employee (less any consideration paid by the
Participant for such Award) during any one calendar year under the Plan
shall be $3,000,000.

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<PAGE>

ARTICLE 6
ELIGIBILITY

6.1. GENERAL. Awards may be granted only to individuals who are
employees, officers or directors of the Corporation or a Parent or
Subsidiary.

ARTICLE 7

STOCK OPTIONS

7.1. GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:

(a) EXERCISE PRICE. The exercise price per share of Stock under
an Option shall be determined by the Committee.

(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine
the time or times at which an Option may be exercised in whole or in
part. The Committee also shall determine the performance or other
conditions, if any, that must be satisfied before all or part of an
Option may be exercised. The Committee may waive any exercise
provisions at any time in whole or in part based upon factors as the
Committee may determine in its sole discretion so that the Option
becomes exerciseable at an earlier date.

(c) PAYMENT. The Committee shall determine the methods by which
the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including "cashless exercise" arrangements), and the methods by which
shares of Stock shall be delivered or deemed to be delivered to
Participants. Without limiting the power and discretion conferred on
the Committee pursuant to the preceding sentence, the Committee may, in
the exercise of its discretion, but need not, allow a Participant to
pay the Option price by directing the Corporation to withhold from the
shares of Stock that would otherwise be issued upon exercise of the
Option that number of shares having a Fair Market Value on the exercise
date equal to the Option price, all as determined pursuant to rules and
procedures established by the Committee.

(d) EVIDENCE OF GRANT. All Options shall be evidenced by a
written Award Agreement between the Corporation and the Participant.
The Award Agreement shall include

such provisions as may be specified by the Committee.

7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:

(a) EXERCISE PRICE. The exercise price per share of Stock shall be
set by the Committee, provided that the exercise price for any
Incentive Stock Option shall not be less than the Fair Market Value as
of the date of the grant.

(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.

(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under
the earliest of the following circumstances; provided, however, that
the Committee may, prior to the lapse of the Incentive Stock Option
under the circumstances described in paragraphs (3), (4) and (5) below,
provide in writing that the Option will extend until a later date, but
if the Option is exercised after the dates specified in paragraphs (3),
(4) and (5) above, it will automatically become a Non-Qualified Stock
Option:

(1) The Incentive Stock Option shall lapse as of the option
expiration date set forth in the Award Agreement.

6
<PAGE>

(2) The Incentive Stock Option shall lapse ten years after it
is granted, unless an earlier time is set in the Award Agreement.

(3) If the Participant terminates employment for any reason
other than as provided in paragraph (4) or (5) below, the
Incentive Stock Option shall lapse, unless it is previously
exercised, three months after the Participant's termination of
employment; provided, however, that if the Participant's
employment is terminated by the Company for cause or by the
Participant without the consent of the Company, the Incentive
Stock Option shall (to the extent not previously exercised) lapse
immediately.

(4) If the Participant terminates employment by reason of his
Disability, the Incentive Stock Option shall lapse, unless it is
previously exercised, one year after the Participant's termination
of employment.

(5) If the Participant dies while employed, or during the
three-month period described in paragraph (3) or during the
one-year period described in paragraph (4) and before the Option
otherwise lapses, the Option shall lapse one year after the
Participant's death. Upon the Participant's death, any exercisable
Incentive Stock Options may be exercised by the Participant's
beneficiary.

Unless the exercisability of the Incentive Stock Option is
accelerated as provided in Article 13, if a Participant exercises an
Option after termination of employment, the Option may be exercised
only with respect to the shares that were otherwise vested on the
Participant's termination of employment.

(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of Stock
with respect to which Incentive Stock Options are first exercisable by
a Participant in any calendar year may not exceed $100,000.00.

(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted
to any individual who, at the date of grant, owns stock possessing more
than ten percent of the total combined voting power of all classes of
stock of the Corporation or any Parent or Subsidiary unless the
exercise price per share of such Option is at least 110% of the Fair
Market Value per share of Stock at the date of grant and the Option
expires no later than five years after the date of grant.

(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an

Incentive Stock Option may be made pursuant to the Plan after the day
immediately prior to the tenth anniversary of the Effective Date.

(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant or, in
the case of the Participant's Disability, by the Participant's guardian
or legal representative.

(h) DIRECTORS. The Committee may not grant an Incentive Stock
Option to a non-employee director. The Committee may grant an Incentive
Stock Option to a director who is also an employee of the Corporation
or Parent or Subsidiary, but only in that individual's position as an
employee and not as a director.

ARTICLE 8

STOCK APPRECIATION RIGHTS

8.1. GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:

7
<PAGE>

(a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation
Right, the Participant to whom it is granted has the right to receive
the excess, if any, of:

(1) The Fair Market Value of one share of Stock on the date
of exercise; over

(2) The grant price of the Stock Appreciation Right as
determined by the Committee, which shall not be less than the Fair
Market Value of one share of Stock on the date of grant in the case of
any SAR related to an Incentive Stock Option.

(b) OTHER TERMS. All awards of Stock Appreciation Rights shall be
evidenced by an Award Agreement. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and
any other terms and conditions of any Stock Appreciation Right shall be
determined by the Committee at the time of the grant of the Award and
shall be reflected in the Award Agreement.

ARTICLE 9

PERFORMANCE SHARES

9.1. GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant

Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion
to determine the number of Performance Shares granted to each Participant.
All Awards of Performance Shares shall be evidenced by an Award Agreement.

9.2. RIGHT TO PAYMENT. A grant of Performance Shares gives the
Participant rights, valued as determined by the Committee, and payable to,
or exercisable by, the Participant to whom the Performance Shares are
granted, in whole or in part, as the Committee shall establish at grant or
thereafter. The Committee shall set performance goals and other terms or
conditions to payment of the Performance Shares in its discretion which,
depending on the extent to which they are met, will determine the number and
value of Performance Shares that will be paid to the Participant.

9.3. OTHER TERMS. Performance Shares may be payable in cash, Stock, or
other property, and have such other terms and conditions as determined by
the Committee and reflected in the Award Agreement.

ARTICLE 10

RESTRICTED STOCK AWARDS

10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to
such terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.

10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as the Committee
may impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times,
under such circumstances, in such installments, upon the satisfaction of
performance goals or otherwise, as the Committee determines at the time of
the grant of the Award or thereafter.

10.3. FORFEITURE. Except as otherwise determined by the Committee at
the time of the grant of the Award or thereafter, upon termination of
employment during the applicable restriction period or upon failure to
satisfy a performance goal during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Corporation; provided, however, that the
Committee may provide in any Award Agreement that restrictions or forfeiture
conditions relating to Restricted Stock will be waived in whole or in part

8
<PAGE>

in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part restrictions or
forfeiture conditions relating to Restricted Stock.

10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing shares of Restricted Stock are registered in
the name of the Participant, certificates must bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Stock.

ARTICLE 11 DIVIDEND EQUIVALENTS

11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to
grant Dividend Equivalents to Participants subject to such terms and
conditions as may be selected by the Committee. Dividend Equivalents shall
entitle the Participant to receive payments equal to dividends with respect
to all or a portion of the number of shares of Stock subject to an Option
Award or SAR Award, as determined by the Committee. The Committee may
provide that Dividend Equivalents be paid or distributed when accrued or be
deemed to have been reinvested in additional shares of Stock, or otherwise
reinvested.

ARTICLE 12

OTHER STOCK-BASED AWARDS

12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is
authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that are payable in, valued in whole or in
part by reference to, or otherwise based on or related to shares of Stock,
as deemed by the Committee to be consistent with the purposes of the Plan,
including without limitation shares of Stock awarded purely as a "bonus" and
not subject to any restrictions or conditions, convertible or exchangeable
debt securities, other rights convertible or exchangeable into shares of
Stock, and Awards valued by reference to book value of shares of Stock or
the value of securities of or the performance of specified Parents or
Subsidiaries. The Committee shall determine the terms and conditions of such
Awards.

12.2. FORMULA GRANTS TO DIRECTORS. Each person who becomes a non
employee director of the Corporation after April 1, 1992 shall be granted a
non-Qualified Stock Option as of the date he or she first commences service
as a director to acquire 7,500 shares of Stock at an exercise price equal to
the Fair Market Value of a share of the Stock. Each non employee director
eligible to receive an Option pursuant to this Section 12.2 shall also be
granted a Non-Qualified Stock Option on January 1 of each year commencing
January 1, 1994, to acquire 1,500 shares of Stock at an exercise price equal
to the "Fair Market Value on a Quarterly Basis" of the Stock, provided such
individual is a director of the Corporation on such date. Options granted
under this Section 12.2 shall be subject to such additional terms as set
forth in the Award approved by the Committee. Notwithstanding any other
provision of this Plan, the provisions of this Section 12.2 and of the Award
Agreement entered into pursuant hereto may not be amended more than once
every six months, other than to conform it with changes in the Code, the
Employee Retirement Income Security Act of 1974, or any rules under either
of the foregoing. For the purposes of this Section 12.2, the term "Fair
Market Value on a Quarterly Basis" shall mean the Fair Market Value per
share of the Stock on the last business day of each of the Corporation's
four fiscal quarters for the preceding fiscal year.

ARTICLE 13

PROVISIONS APPLICABLE TO AWARDS

13.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or
in addition to, in tandem with, or in substitution for, any other Award
granted under the Plan. If an Award is granted in substitution for another
Award, the Committee may require the surrender of such other Award in
consideration of the grant of the new Award. Awards granted in addition to

9
<PAGE>

or in tandem with other Awards may be granted either at the same time as or
at a different time from the grant of such other Awards.

13.2. EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash,
Stock, or another Award (subject to Section 14.1), based on the terms and
conditions the Committee determines and communicates to the Participant at
the time the offer is made.

13.3. TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with
the Incentive Stock Option exceed a period of ten years from the date of its
grant (or, if Section 7.2(e) applies, five years from the date of its
grant).

13.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by
the Corporation or a Parent or Subsidiary on the grant or exercise of an
Award may be made in such form as the Committee determines at or after the
time of grant, including without limitation, cash, Stock, other Awards, or
other property, or any combination, and may be made in a single payment or
transfer, in installments, or on a deferred basis, in each case determined
in accordance with rules adopted by, and at the discretion of, the
Committee.

13.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated
to or in favor of any party other than the Corporation or a Parent or
Subsidiary, or shall be subject to any lien, obligation, or liability of
such Participant to any other party other than the Corporation or a Parent
or Subsidiary. No unexercised or restricted Award shall be assignable or
transferable by a Participant other than by will or the laws of descent and
distribution or, except in the case of an Incentive Stock Option, pursuant
to a domestic relations order that would satisfy Section 414(p)(1)(A) of the
Code if such Section applied to an Award under the Plan; provided, however,
that the Committee may (but need not) permit other transfers where the
Committee concludes that such transferability (i) does not result in
accelerated taxation, (ii) does not cause any Option intended to be an
incentive stock option to fail to be described in Code Section 422(b), and
(iii) is otherwise appropriate and desirable, taking into account any state
or federal tax or securities laws applicable to transferable Awards.

13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant may, in
the manner determined by the Committee, designate a beneficiary to exercise
the rights of the Participant and to receive any distribution with respect
to any Award upon the Participant's death. A beneficiary, legal guardian,
legal representative, or other person claiming any rights under the Plan is
subject to all terms and conditions of the Plan and any Award Agreement
applicable to the Participant, except to the extent the Plan and Award
Agreement otherwise provide, and to any additional restrictions deemed
necessary or appropriate by the Committee. If no beneficiary has been
designated or survives the Participant, payment shall be made to the
Participant's estate. Subject to the foregoing, a beneficiary designation
may be changed or revoked by a Participant at any time provided the change
or revocation is filed with the Committee.

13.7. STOCK CERTIFICATES. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national
securities exchange or automated quotation system on which the Stock is
listed, quoted, or traded. The Committee may place legends on any Stock
certificate to reference restrictions applicable to the Stock.

13.8 ACCELERATION UPON DEATH OR DISABILITY. Notwithstanding any other
provision in the Plan or any Participant's Award Agreement to the contrary,
upon the Participant's death or Disability during his employment or service
as a director, all outstanding Options, Stock Appreciation Rights, and other
Awards in the nature of rights that may be exercised shall become fully
exercisable and all restrictions on outstanding Awards shall lapse. Any
Option or Stock Appreciation Rights Awards shall thereafter continue or
lapse in accordance with the other provisions of the Plan and the Award

10
<PAGE>

Agreement. To the extent that this provision causes Incentive Stock Options
to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.

13.9. ACCELERATION UPON A CHANGE IN CONTROL. Except as otherwise
provided in the Award Agreement, upon the occurrence of a Change in Control,
all outstanding Options, Stock Appreciation Rights, and other Awards in the
nature of rights that may be exercised shall become fully exercisable and
all restrictions on outstanding Awards shall lapse; provided, however that
such acceleration will not occur if, in the opinion of the Company's
accountants, such acceleration would preclude the use of "pooling of
interest" accounting treatment for a Change in Control transaction that (a)
would otherwise qualify for such accounting treatment, and (b) is contingent
upon qualifying for such accounting treatment. To the extent that this
provision causes Incentive Stock Options to exceed the dollar limitation set
forth in Section 7.2(d), the excess Options shall be deemed to be
Non-Qualified Stock Options.

13.10. ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE IN
CONTROL. In the event of the occurrence of any circumstance, transaction or
event not constituting a Change in Control (as defined in Section 3.1) but
which the Board of Directors deems to be, or to be reasonably likely to lead
to, an effective change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of the 1934
Act, the Committee may in its sole discretion declare all outstanding
Options, Stock Appreciation Rights, and other Awards in the nature of rights
that may be exercised to be fully exercisable, and/or all restrictions on
all outstanding Awards to have lapsed, in each case as of such date as the
Committee may, in its sole discretion, declare, which may be on or before
the consummation of such transaction or event. To the extent that this
provision causes Incentive Stock Options to exceed the dollar limitation set
forth in Section 7.2(d), the excess Options shall be deemed to be
Non-Qualified Stock Options.

13.11. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an
event has occurred as described in Section 13.9 or 13.10 above, the
Committee may in its sole discretion at any time determine that all or a
portion of a Participant's Options, Stock Appreciation Rights, and other
Awards in the nature of rights that may be exercised shall become fully or
partially exercisable, and/or that all or a part of the restrictions on all
or a portion of the outstanding Awards shall lapse, in each case as of such
date as the Committee may, in its sole discretion, declare. The Committee
may discriminate among Participants and among Awards granted to a
Participant in exercising its discretion pursuant to this Section 13.11.

13.12 EFFECT OF ACCELERATION. If an Award is accelerated under Section
13.9 or 13.10, the Committee may, in its sole discretion, provide (i) that
the Award will expire after a designated period of time after such
acceleration to the extent not then exercised, (ii) that the Award will be
settled in cash rather than Stock, (iii) that the Award will be assumed by
another party to the transaction giving rise to the acceleration or
otherwise be equitably converted in connection with such transaction, or
(iv) any combination of the foregoing. The Committee's determination need
not be uniform and may be different for different Participants whether or
not such Participants are similarly situated.

13.13. PERFORMANCE GOALS. The Committee may determine that any Award
granted pursuant to this Plan to a Participant (including, but not limited
to, Participants who are Covered Employees) shall be determined solely on
the basis of (a) the achievement by the Corporation or a Parent or
Subsidiary of a specified target return, or target growth in return, on
equity or assets, (b) the Corporation's, Parent's or Subsidiary's stock
price, (c) the achievement by a business unit of the Corporation, Parent or
Subsidiary of a specified target, or target growth in, net income or
earnings per share, or (d) any combination of the goals set forth in (a)
through (c) above. Furthermore, the Committee reserves the right for any
reason to reduce (but not increase) any Award, notwithstanding the
achievement of a specified goal. If an Award is made on such basis, the
Committee shall establish goals prior to the beginning of the period for
which such performance goal relates (or such later date as may be permitted
under Code Section 162(m) or the regulations thereunder). Any payment of an

11
<PAGE>

Award granted with performance goals shall be conditioned on the written
certification of the Committee in each case that the performance goals and
any other material conditions were satisfied.

13.14. TERMINATION OF EMPLOYMENT. Whether military, government or
other service or other leave of absence shall constitute a termination of
employment shall be determined in each case by the Committee at its
discretion, and any determination by the Committee shall be final and
conclusive. A termination of employment shall not occur in a circumstance in
which a Participant transfers from the Corporation to one of its Parents or
Subsidiaries, transfers from a Parent or Subsidiary to the Corporation, or
transfers from one Parent or Subsidiary to another Parent or Subsidiary.

13.15. LOAN PROVISIONS. With the consent of the Committee, the
Corporation may make, guarantee or arrange for a loan or loans to a
Participant with respect to the exercise of any Option granted under this
Plan and/or with respect to the payment of the purchase price, if any, of
any Award granted hereunder and/or with respect to the payment by the
Participant of any or all federal and/or state income taxes due on account
of the granting or exercise of any Award hereunder. The Committee shall have
full authority to decide whether to make a loan or loans hereunder and to
determine the amount, terms and provisions of any such loan or loans,
including the interest rate to be charged in respect of any such loan or
loans, whether the loan or loans are to be made with or without recourse
against the borrower, the terms on which the loan is to be repaid and the
conditions, if any, under which the loan or loans may be forgiven.

ARTICLE 14

CHANGES IN CAPITAL STRUCTURE

14.1. GENERAL. In the event a stock dividend is declared upon the
Stock, the shares of Stock then subject to each Award shall be increased
proportionately without any change in the aggregate purchase price therefor.
In the event the Stock shall be changed into or exchanged for a different
number or class of shares of stock or securities of the Corporation or of
another corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, there shall be
substituted for each such share of Stock then subject to each Award the
number and class of shares into which each outstanding share of Stock shall
be so exchanged, all without any change in the aggregate purchase price for
the shares then subject to each Award.

ARTICLE 15

AMENDMENT, MODIFICATION AND TERMINATION

15.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the
Committee may, at any time and from time to time, amend, modify or terminate
the Plan without stockholder approval; provided, however, that the Board or
Committee may condition any amendment or modification on the approval of
stockholders of the Company if such approval is necessary or deemed
advisable with respect to tax, securities or other applicable laws, policies
or regulations.

15.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
Committee may amend, modify or terminate any outstanding Award without
approval of the Participant; provided, however, that such amendment,
modification or termination shall not, without the Participant's consent,
reduce or diminish the value of such Award determined as if the Award had
been exercised, vested, cashed in or otherwise settled on the date of such
amendment or termination. No termination, amendment, or modification of the
Plan shall adversely affect any Award previously granted under the Plan,
without the written consent of the Participant.

ARTICLE 16

GENERAL PROVISIONS

16.1. NO RIGHTS TO AWARDS. No Participant or employee, officer or
director shall have any claim to be granted any Award under the Plan, and
neither the Corporation nor the Committee is obligated to treat Participants
and employees, officers or directors uniformly.

12
<PAGE>

16.2. NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Corporation unless and until shares of Stock
are in fact issued to such person in connection with such Award.

16.3. WITHHOLDING. The Corporation or any Parent or Subsidiary shall
have the authority and the right to deduct or withhold, or require a
Participant to remit to the Corporation, an amount sufficient to satisfy
federal, state, and local taxes (including the Participant's FICA
obligation) required by law to be withheld with respect to any taxable event
arising as a result of the Plan. With respect to withholding required upon
any taxable event under the Plan, the Committee may, at the time the Award
is granted or thereafter, require that any such withholding requirement be
satisfied, in whole or in part, by withholding shares of Stock having a Fair
Market Value on the date of withholding equal to the amount to be withheld
for tax purposes, all in accordance with such procedures as the Committee
establishes.

16.4. NO RIGHT TO EMPLOYMENT OR DIRECTORSHIP. Nothing in the Plan or
any Award Agreement shall interfere with or limit in any way the right of
the Corporation or any Parent or Subsidiary to terminate any Participant's
employment or status as a director or consultant at any time, nor confer
upon any Participant any right to continue as an employee, director or
consultant of the Corporation or any Parent or Subsidiary.

l6.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing
contained in the Plan or any Award Agreement shall give the Participant any
rights that are greater than those of a general creditor of the Corporation
or any Parent or Subsidiary.

16.6. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall
be taken into account in determining any benefits under any pension,
retirement, savings, profit sharing, group insurance, welfare or benefit
plan of the Corporation or any Parent or Subsidiary unless provided
otherwise in such other plan.

16.7. EXPENSES. The expenses of administering the Plan shall be borne
by the Corporation and its Parents or Subsidiaries.

16.8. TITLES AND HEADINGS. The titles and headings of the Sections
in the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.

16.9. GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.

16.10. FRACTIONAL SHARES. No fractional shares of Stock shall be
issued and the Committee shall determine, in its discretion, whether cash
shall be given in lieu of fractional shares or whether such fractional
shares shall be eliminated by rounding up.

16.11. GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Corporation to make payment of awards in Stock or otherwise shall be subject
to all applicable laws, rules, and regulations, and to such approvals by
government agencies as may be required. The Corporation shall be under no
obligation to register under the 1933 Act, any of the shares of Stock paid
under the Plan. If the shares paid under the Plan may in certain
circumstances be exempt from registration under the 1933 Act, the
Corporation may restrict the transfer of such shares in such manner as it
deems advisable to ensure the availability of any such exemption.

16.12. GOVERNING LAW. To the extent not governed by federal law, the
Plan and all Award Agreements shall be construed in accordance with and
governed by the laws of the State of Georgia.

13
<PAGE>

16.13 ADDITIONAL PROVISIONS. Each Award Agreement may contain such
other terms and conditions as the Committee may determine; provided that
such other terms and conditions are not inconsistent with the provisions of
this Plan.

The foregoing is hereby acknowledged as being the Mohawk Industries,
Inc. 1997 Long-Term Incentive Plan as adopted by the Board of Directors of
the Company on February ___, 1997.

MOHAWK INDUSTRIES, INC.

By: /s/ David L. Kolb
-------------------------------------
David L. Kolb
Chairman and Chief Executive Officer

<PAGE>
EXHIBIT 11

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Statement Re: Computation Of Per Share Earnings
(In thousands, except per share data)

NOTE: Earnings per share presented in the first table is in accordance with
Regulation S-K, Item 601(b)(11), while earnings per share on the Company's
consolidated statements of earnings presented in the second table is in
accordance with APB Opinion No. 15. Common equivalent shares outstanding
for the fourth quarter of 1995 (912 equivalent shares) and the first
quarter of 1994 (1,358 equivalent shares) are excluded from the earnings
per share computation on the Company's consolidated statements of earnings
for 1995 and 1994 as the effect on loss per share for such quarters would
have been anti-dilutive.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Regulation S-K:

Net earnings............................................................. $49,050 6,412 33,007
======= ====== ======

Weighted average common and common equivalent shares outstanding:

Weighted average common shares outstanding......................... 34,173 32,790 32,445

Add weighted average common equivalent shares - options to purchase
common shares, net............................................... 393 1,061 1,269
------- ------ ------

Weighted average common and common equivalent shares outstanding......... 34,566 33,851 33,714
======= ====== ======

Earnings per common and common equivalent share.......................... $ 1.42 0.19 0.98
======= ====== ======

APB Opinion No. 15:

Net earnings............................................................ $49,050 6,412 33,007 $
======= ====== ======

Weighted average common and common equivalent shares outstanding:

Weighted average common shares outstanding......................... 34,173 32,790 32,445

Add weighted average common equivalent shares - options to purchase
common shares, net............................................... 393 833 929
------- ------ ------

Weighted average common and common equivalent shares outstanding......... 34,566 33,623 33,374
======= ====== ======

Earnings per common and common equivalent share.......................... $ 1.42 0.19 0.99
======= ====== ======

</TABLE>

<PAGE>

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

Mohawk Carpet Corporation................................. Delaware
Horizon Europe, Inc. ..................................... Georgia
Rainbow International, Inc................................ U.S. Virgin Islands
Mohawk Marketing, Inc. ................................... Georgia
Aladdin Manufacturing Corporation. ....................... Delaware
Mohawk Mills, Inc. ....................................... Delaware
Horizon & Owens Properties(1). ........................... Georgia
Delaware Valley Wool Scouring, Inc........................ Pennsylvania
Galaxy Carpet Mills, Inc.(2) ............................. Delaware

(1) A consolidated 50% joint venture which leases property to Mohawk Industries,
Inc.
(2) Galaxy Carpet Mills, Inc. was dissolved as a corporation effective
February 1, 1997.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Mohawk Industries, Inc.:

We consent to the incorporation by reference in the registration statement on
Form S-8 of Mohawk Industries, Inc. of our report dated February 7, 1997,
relating to the consolidated balance sheets of Mohawk Industries, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1996, and related schedules,
which report appears in the December 31, 1996 annual report on Form 10-K of
Mohawk Industries, Inc. Our report refers to a change of accounting for
impairment of long-lived assets and for long-lived assets to be disposed of in
1995.

KPMG PEAT MARWICK LLP

Atlanta, Georgia
March 3, 1997

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MOHAWK
INDUSTRIES, INC.'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 249,955
<ALLOWANCES> 34,844
<INVENTORY> 302,723
<CURRENT-ASSETS> 556,241
<PP&E> 529,961
<DEPRECIATION> 205,263
<TOTAL-ASSETS> 955,775
<CURRENT-LIABILITIES> 244,573
<BONDS> 345,748
0
0
<COMMON> 345
<OTHER-SE> 332,854
<TOTAL-LIABILITY-AND-EQUITY> 955,775
<SALES> 1,795,056
<TOTAL-REVENUES> 1,795,056
<CGS> 1,368,379
<TOTAL-COSTS> 1,368,379
<OTHER-EXPENSES> 3,760<F1>
<LOSS-PROVISION> 13,213
<INTEREST-EXPENSE> 31,899
<INCOME-PRETAX> 82,725
<INCOME-TAX> 33,675
<INCOME-CONTINUING> 49,050
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,050
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.42
<FN>
<F1>NONRECURRING CHARGES FOR CARRYING VALUE REDUCTION OF PROPERTY, PLANT AND
EQUIPMENT PURSUANT TO FAS NO. 121 AND RESTRUCTURING COSTS RELATED TO MILL
CLOSINGS.
</FN>

</TABLE>