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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Mohawk Industries
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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Notes:
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[MOHAWK INDUSTRIES LOGO]
To the Stockholders of Mohawk Industries, Inc.:
You are cordially invited to attend the annual meeting of stockholders to be
held on Thursday, May 21, 1998, at 10:00 a.m. local time, at the corporate
headquarters of the Company, 160 South Industrial Boulevard, Calhoun, Georgia
30703.
The principal business of the meeting will be to elect a class of directors to
serve a three-year term beginning in 1998 and to amend the Company's Restated
Certificate of Incorporation to increase the number of authorized shares of
common stock, par value $0.01 per share, from seventy-five million (75,000,000)
shares to one hundred fifty million (150,000,000) shares. During the meeting,
we also will review the results of the past year and report on significant
aspects of our operations during the first quarter of 1998.
Whether or not you plan to attend the annual meeting, please complete, sign,
date and return the enclosed proxy card in the enclosed, postage-prepaid
envelope at your earliest convenience so that your shares will be represented at
the meeting. If you choose to attend the meeting, you may revoke your proxy and
personally cast your votes. To receive a copy of a map and driving directions
to the corporate headquarters, please call Barbara B. Lance at (706) 624-2253.
Sincerely yours,
[SIGNATURE]
DAVID L. KOLB
Chairman and
Chief Executive Officer
Atlanta, Georgia
March 31, 1998
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MOHAWK INDUSTRIES, INC.
160 SOUTH INDUSTRIAL BOULEVARD
P. O. BOX 12069
CALHOUN, GEORGIA 30703
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1998
The annual meeting of stockholders of Mohawk Industries, Inc. (the
"Company") will be held on Thursday, May 21, 1998, at 10:00 a.m. local time,
at the corporate headquarters of the Company, 160 South Industrial Boulevard,
Calhoun, Georgia 30703.
The meeting is called for the following purposes:
1. To elect two persons who will serve as the Company's Class III directors
for a three-year term beginning in 1998;
2. To consider and vote upon an amendment to the Company's Restated
Certificate of Incorporation to increase the number of authorized shares
of common stock, par value $0.01 per share, from seventy-five million
(75,000,000) shares to one hundred fifty million (150,000,000) shares; and
3. To consider and act upon such other business as may properly come before
the meeting or any adjournments thereof.
The Board of Directors has fixed March 23, 1998 as the record date for the
determination of stockholders entitled to notice of and to vote at the meeting.
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY SO THAT
YOUR SHARES WILL BE REPRESENTED. IF YOU CHOOSE TO ATTEND THE
MEETING, YOU MAY REVOKE YOUR PROXY AND
PERSONALLY CAST YOUR VOTES.
By Order of the Board of Directors,
[SIGNATURE]
BARBARA B. LANCE,
Secretary
Atlanta, Georgia
March 31, 1998
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MOHAWK INDUSTRIES, INC.
160 SOUTH INDUSTRIAL BOULEVARD
P. O. BOX 12069
CALHOUN, GEORGIA 30703
____________________
PROXY STATEMENT
____________________
This Proxy Statement is furnished by and on behalf of the Board of Directors
of Mohawk Industries, Inc. ("Mohawk" or the "Company") in connection with the
solicitation of proxies for use at the annual meeting of stockholders of the
Company to be held on Thursday, May 21, 1998, and at any and all adjournments or
postponements thereof (the "Annual Meeting"). This Proxy Statement and the
enclosed proxy card will be first mailed on or about March 31, 1998, to the
stockholders of record of the Company (the "Stockholders") on March 23, 1998
(the "Record Date").
Proxies will be voted as specified by Stockholders. Unless contrary
instructions are specified, if the enclosed proxy card is executed and returned
(and not revoked) prior to the Annual Meeting, the shares of the common stock of
the Company (the "Common Stock") represented thereby will be voted FOR election
of the nominees listed in this Proxy Statement as directors of the Company and
FOR the approval of the amendment to the Company's Restated Certificate of
Incorporation (the "Certificate of Incorporation") to increase the number of
shares of Common Stock which the Company is authorized to issue from seventy-
five million (75,000,000) shares to one hundred fifty million (150,000,000)
shares (the "Proposed Amendment"). A Stockholder who submits a signed proxy will
not affect his or her right to attend and to vote in person at the Annual
Meeting. Stockholders who execute a proxy may revoke it at any time before it is
voted by filing a written revocation with the Secretary of the Company, by
executing a proxy bearing a later date or by attending and voting in person at
the Annual Meeting.
The presence of a majority of the outstanding shares of Common Stock entitled
to vote at the Annual Meeting, present in person or by proxy, will constitute a
quorum. Shares represented by proxies that are marked "withhold authority" or
"abstain" will be counted as shares present for purposes of establishing a
quorum. Shares represented by proxies, which include broker nonvotes, will also
be counted as shares present for purposes of establishing a quorum. A broker
nonvote occurs when a broker or nominee holding shares for a beneficial owner
votes on one proposal, but does not vote on another proposal because the broker
or nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. Once a quorum is established, the
election of directors will require the affirmative vote of a plurality of the
shares of Common Stock represented and entitled to vote in the election at the
Annual Meeting and the approval of the Proposed Amendment will require the
affirmative vote of a majority of the shares of Common Stock outstanding and
entitled to vote at the Annual Meeting. Neither withholding authority to vote
with respect to one or more nominees nor a broker nonvote will have an effect on
the outcome of the election of directors. Abstentions and broker nonvotes will
have the same effect as a vote against approval of the Proposed Amendment.
Pursuant to the Certificate of Incorporation, holders of Common Stock will be
entitled to one vote for each share of Common Stock held. Pursuant to the
provisions of the Delaware General Corporation Law, March 23, 1998 has been
fixed as the Record Date for determination of Stockholders entitled to notice of
and to vote at the Annual Meeting, and, accordingly, only holders of Common
Stock of record at the close of business on that day will be entitled to notice
of and to vote at the Annual Meeting. On the Record Date, there were 52,270,108
shares of Common Stock issued and outstanding held by approximately 420
Stockholders.
THE BOARD OF DIRECTORS URGES YOU TO SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
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PROPOSAL 1 - ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the Board of Directors
of the Company to consist of three classes of directors serving staggered terms
of office. Upon the expiration of the term of office for a class of directors,
the nominees for that class will be elected for a term of three years to serve
until the election and qualification of their successors. The Class III
directors, Leo Benatar and David L. Kolb, have been nominated for re-election at
the Annual Meeting. The Class I and Class II directors have one year and two
years, respectively, remaining on their terms of office and will not be voted
upon at the Annual Meeting.
The Company's Certificate of Incorporation provides that the Company shall
have at least two and no more than 11 directors, with the Board of Directors to
determine the exact number. In addition, the Certificate of Incorporation
divides the Board of Directors into three classes, with each to consist, as
nearly as possible, of one-third of the total number of directors constituting
the entire Board of Directors. The Board of Directors has by resolution set the
number of directors at seven.
It is the intention of the persons named as proxies to vote the proxies for
each of Mr. Benatar's and Mr. Kolb's election as a Class III director of the
Company, unless the Stockholders direct otherwise in their proxies. Each of Mr.
Benatar and Mr. Kolb has consented to continue to serve as a director of the
Company if re-elected. In the unanticipated event that either of Mr. Benatar or
Mr. Kolb refuses or is unable to serve as a director, the persons named as
proxies reserve full discretion to vote for such other person or persons as may
be nominated. The Board of Directors has no reason to believe that Mr. Benatar
and Mr. Kolb will be unable or will decline to serve as a director.
The affirmative vote of a plurality of the shares represented and entitled to
vote in the election at the Annual Meeting at which a quorum is present is
required for the election of the nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ELECTION OF THE NOMINEES LISTED BELOW
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DIRECTOR, DIRECTOR NOMINEE AND EXECUTIVE OFFICER INFORMATION
Based on information supplied by them, set forth below is certain information
concerning the nominees for election as Class III directors and the directors in
Classes I and II whose terms of office will continue after the Annual Meeting,
including the name and age of each, his current principal occupation (which has
continued for five years unless otherwise indicated), the name and principal
business of the organization in which his occupation is carried on, the year
each was elected to the Board of Directors of the Company, all positions and
offices held during 1997 with the Company, and his directorships in other
publicly held companies.
NOMINEES FOR DIRECTOR
Class III Nominees For Director (Current Terms Expiring 1998)
Leo Benatar--Mr. Benatar (age 68) has been a director of the Company since the
consummation of the Company's initial public offering in April 1992 (the
"Initial Public Offering"). Mr. Benatar has been an Associated Consultant with
A. T. Kearney since May 1996. From June 1995 until May 1996, Mr. Benatar was
Chairman of the Board of Engraph, Inc., a manufacturer of packaging and product
identification materials. Before June 1995, Mr. Benatar served as Chairman of
the Board, President and Chief Executive Officer of Engraph, Inc. for more than
five years. Engraph, Inc. was acquired by Sonoco Products Company, a
manufacturer of packaging and product identification materials, in October 1993,
and Mr. Benatar served as Senior Vice President and a director of Sonoco
Products Company from October 1993 until May 1996. Mr. Benatar is also a
director of Interstate Bakeries Corporation, a manufacturer and distributor of
food products, Aaron Rents, Inc., a furniture and appliance retailer, Paxar
Corporation, an apparel labels manufacturer, and Johns Manville Corporation, an
insulation and building products manufacturer. From January 1, 1994 until
December 31, 1995, Mr. Benatar also served as Chairman of the Federal Reserve
Bank of Atlanta.
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David L. Kolb--Mr. Kolb (age 59) served as President of Mohawk Carpet
Corporation (now the Company's principal operating subsidiary and renamed
Aladdin Manufacturing Corporation) until Mohawk Carpet Corporation was acquired
by the Company in December 1988, at which time he became Chairman of the Board
of Directors and Chief Executive Officer of the Company. Prior to joining Mohawk
Carpet Corporation, Mr. Kolb served in various executive positions with Allied-
Signal Corporation for 19 years, most recently as Vice President and General
Manager of Home Furnishings. In 1988 and 1989, he served as Chairman of The
Carpet and Rug Institute and is currently a member of its board of directors.
Mr. Kolb is also a director of Chromcraft Revington Corporation, a furniture
manufacturer, First Union National Bank of Georgia, and Polyfibron Technologies,
Inc., a manufacturer of printing plates and printing blankets.
CONTINUING DIRECTORS
Class I Directors Continuing In Office (Terms Expire 1999)
Jeffrey S. Lorberbaum--Mr. Lorberbaum (age 43) has been a director of the
Company since March 28, 1994 and has served as President and Chief Operating
Officer of the Company since January 24, 1995. Mr. Lorberbaum joined Aladdin
Mills ("Aladdin"), currently a division and formerly a wholly-owned subsidiary
of the Company, in 1976 and served as Vice President--Operations from 1986 until
February 25, 1994 when he became President and Chief Executive Officer of
Aladdin. Mr. Alan Lorberbaum, a director of the Company, is his father. See
"Executive Compensation and Other Information--Principal Stockholders of the
Company."
Robert N. Pokelwaldt--Mr. Pokelwaldt (age 61) has been a director of the
Company since consummation of the Initial Public Offering. Mr. Pokelwaldt has
served as Chairman and Chief Executive Officer of York International
Corporation, a manufacturer of air conditioning and cooling systems, since
January 1993. He also served York International from June 1991 until January
1993 as President, Chief Executive Officer and a director and, from January 1990
until June 1991, as President and Chief Operating Officer. Mr. Pokelwaldt is
also a director of Polyfibron Technologies, Inc., a manufacturer of printing
plates and printing blankets.
Class II Directors Continuing in Office (Terms Expire 2000)
Bruce C. Bruckmann--Mr. Bruckmann (age 44) has been a director of the Company
since October 1992. Mr. Bruckmann has been a Managing Director of Bruckmann,
Rosser, Sherrill & Co., Inc., a venture capital firm, since January 1995. From
March 1994 to January 1995, Mr. Bruckmann served as Managing Director of
Citicorp Venture Capital, Ltd. ("CVC, Ltd.") and as an executive officer of 399
Venture Partners, Inc. (formerly Citicorp Investments, Inc.). From 1983 until
March 1994, Mr. Bruckmann served as Vice President of CVC, Ltd. Mr. Bruckmann is
also a director of AmeriSource Distribution Corporation, a distributor of
pharmaceuticals, Jitney-Jungle Stores of America, Inc., a grocery retailer, Town
Sports International, Inc., a fitness club operator, Cort Furniture Rental
Corp., a lessor of office and residential furniture, Chromcraft Revington
Corporation, a furniture manufacturer, and Anvil Knitwear, Inc., an activewear
manufacturer.
Alan S. Lorberbaum--Mr. Lorberbaum (age 73) has been a director of the Company
since March 28, 1994. Mr. Lorberbaum founded Aladdin in 1958 and served as
President, Chief Executive Officer and a director of Aladdin from its inception
until February 25, 1994, the date the Company acquired Aladdin. Mr. Lorberbaum
currently serves as a consultant to Aladdin. See "Executive Compensation and
Other Information--Principal Stockholders of the Company." For a discussion of
certain arrangements with the Company relating to Mr. Lorberbaum and Mr. Jeffrey
Lorberbaum being named to the Board of Directors, see the discussion below.
Larry W. McCurdy--Mr. McCurdy (age 62) has been a director of the Company
since the consummation of the Initial Public Offering. Mr. McCurdy was President
and Chief Executive Officer of Moog Automotive, Inc., a privately held
manufacturer of automotive aftermarket products, from November 1985 until April
1994. Moog Automotive, Inc. was acquired by Cooper Industries, Inc., a
manufacturer of electrical and automotive products, tools and hardware, in
October 1992, and Mr. McCurdy became Executive Vice President, Operations of
Cooper Industries, Inc. in April 1994. Mr. McCurdy held that position until
March 7, 1997, when he became President, Chief Executive Officer and a director
of Echlin Inc., a worldwide manufacturer of motor vehicle parts. On December 17,
1997, Mr. McCurdy was elected Chairman of the board of directors of Echlin, Inc.
Mr. McCurdy
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also serves on the boards of directors of Lear Seating Corporation, an
international manufacturer for original equipment vehicles, and Breed
Technologies, Inc., an equipment supplier of air bag sensing devices and air bag
components.
In connection with the merger of Aladdin with a wholly owned subsidiary of
the Company in February 1994 (the "Aladdin Merger"), the Company agreed to
appoint to its Board of Directors up to two persons designated by the former
shareholders of Aladdin, and Messrs. Alan Lorberbaum and Jeffrey Lorberbaum are
such designees. The Company is required to nominate up to two persons designated
by such holders for election or re-election, as the case may be, to the Board of
Directors of the Company and to use its best efforts to cause such nominees to
be elected to the Board of Directors. At such time as the former shareholders of
Aladdin have disposed of 50% or more of the Common Stock issued to them in the
Aladdin Merger, the Company will be required to nominate only one such person
to the Board of Directors, and at such time as the former shareholders of
Aladdin have disposed of 75% or more of the Common Stock issued to them in the
Aladdin Merger, the Company will no longer be required to nominate any of such
persons to the Board of Directors.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
General. During fiscal 1997, the Board of Directors held five meetings. All
members of the Board of Directors, except for Mr. Bruckmann, attended at least
75% of the total number of Board of Directors and Committee meetings that they
were eligible to attend. Mr. Bruckmann attended 57% of the total meetings he was
eligible to attend.
The Audit Committee consists of Mr. Bruckmann and Mr. McCurdy. The Audit
Committee met two times during 1997. The Audit Committee is responsible for
reviewing and making recommendations regarding the Company's employment of
independent auditors, the annual audit of the Company's financial statements and
the Company's internal accounting practices and policies.
The Compensation Committee consists of Mr. Benatar and Mr. Pokelwaldt. The
Compensation Committee met two times during 1997. The Compensation Committee is
responsible for deciding, recommending and reviewing the compensation, including
benefits, of the executive officers and directors of the Company and for
administering the Company's stock option plans. See also "Executive Compensation
and Other Information-Report of the Compensation Committee of the Board of
Directors of Mohawk Industries, Inc."
The Company has no nominating committee.
Director Compensation. Employees of the Company or its subsidiaries who are
also directors do not receive any fee or remuneration for services as members of
the Board of Directors or any Committee of the Board of Directors. The Company
pays non-employee directors an annual retainer of $20,000 and a fee of $1,000
for each Board meeting and $800 for each Committee meeting attended. Committee
Chairmen also receive an annual retainer of $2,000. Pursuant to the Company's
1993 Stock Option Plan and the 1997 Long-Term Incentive Plan, directors who are
not employees of the Company are initially granted a non-qualified stock option
to purchase 11,250 shares of Common Stock as of the date they commence service
as a director. On January 1 of each year, eligible directors who are directors
on such date receive an option to purchase 2,250 shares of Common Stock. The
exercise prices for all such option grants are based on a formula that with
respect to initial grants relates to the closing sale price of the underlying
Common Stock on the business day immediately preceding the date of grant and
with respect to subsequent grants is the average of the closing sale prices of
the underlying Common Stock on the last business day of each of the Company's
four fiscal quarters during the preceding fiscal year. The Company reimburses
all directors for expenses the directors incur in connection with attendance at
meetings of the Board of Directors or Committees.
In December 1996, the Board of Directors adopted the Mohawk Industries, Inc.
1997 Non-Employee Director Stock Compensation Plan (the "Director Stock
Compensation Plan") to promote the long-term growth of the Company by providing
a vehicle for its non-employee directors to increase their proprietary interest
in the Company and to attract and retain highly qualified and capable non-
employee directors. Under the Director Stock Compensation Plan, non-employee
directors may elect to receive their annual cash retainer fees (excluding any
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meeting fees) in shares of Common Stock of the Company, based on the fair market
value of the Common Stock on the quarterly payment date. The maximum number of
shares of Common Stock which may be granted under the plan is 37,500 shares,
which shares may not be original issue shares. In 1997, the Director Stock
Compensation Plan was amended by the Board of Directors to include an optional
income deferral feature using a book entry (phantom stock) account that would
fluctuate in value based on the performance of the Common Stock of the Company
over the deferral period. The Board of Directors may suspend or terminate the
Director Stock Compensation Plan at any time.
EXECUTIVE OFFICERS
The executive officers of the Company serve at the discretion of the Board of
Directors and are comprised of Mr. Kolb and Mr. Jeffrey Lorberbaum (each of whom
is identified above), Frank A. Procopio, John D. Swift and William B. Kilbride.
Frank A. Procopio--Mr. Procopio (age 58) joined Mohawk Carpet Corporation in
January 1982 and presently serves as Senior Vice President of the Company and
President--Commercial Business. Prior to joining Mohawk Carpet Corporation, Mr.
Procopio served as the Vice President of Manufacturing and Staff Services with
Salem Carpet for three years and in various management positions with Armstrong
World Industries for 18 years.
John D. Swift--Mr. Swift (age 56) served as Vice President--Finance of Mohawk
Carpet Corporation from September 1984 to December 1988 and since that time has
served as Vice President--Finance and Chief Financial Officer of the Company.
Mr. Swift served as Treasurer of the Company from December 1988 to February 1994
and served as Secretary of the Company from December 1988 to May 23, 1996. Prior
to joining Mohawk Carpet Corporation, he worked for General Electric Company for
18 years in various positions of accounting, auditing and financial management.
William B. Kilbride--Mr. Kilbride (age 47) joined American Rug Craftsmen
("American Rug Craftsmen"), currently a division and formerly a wholly owned
subsidiary of the Company, as its President and Chief Operating Officer in June
1992 and has served as its President since that time. Before joining American
Rug Craftsmen, Mr. Kilbride served as First Vice President--Planning of Dean
Witter Discover, which he joined in February 1983.
PROPOSAL 2 - APPROVAL OF AMENDMENT
AUTHORIZING ADDITIONAL SHARES OF COMMON STOCK
INTRODUCTION
The Board of Directors of the Company recommends that the Stockholders approve
an amendment to the Certificate of Incorporation to increase the number of
authorized shares of Common Stock from seventy-five million (75,000,000) to one
hundred fifty million (150,000,000) shares (the "Proposed Amendment"). Of the
75,000,000 shares of Common Stock presently authorized by the Certificate of
Incorporation, as of the Record Date, 52,270,108 shares were outstanding and
4,589,091 shares were reserved for issuance under the Company's various stock
option plans, leaving only 18,140,801 shares available for issuance for other
purposes.
If the Proposed Amendment is adopted, a total of up to 93,140,801 shares of
Common Stock would be available for future issuance or sale without further
stockholder approval. However, stockholder approval of particular transactions
may at the time be required by law or by the rules or policies of any exchange
or market on which shares of the Company's Common Stock may be traded or quoted
or may be deemed desirable or advisable by the Board of Directors. The Company's
Common Stock is presently listed for trading on the New York Stock Exchange.
The Board of Directors has no present plans to issue additional shares of
Common Stock, except for issuances for which shares have already been reserved.
Upon approval by the Stockholders of the Proposed Amendment, the additional
shares of Common Stock that would be authorized but unissued and not reserved
for issuance could be issued for various general corporate purposes including
without limitation stock splits, stock dividends, employee
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benefit plans, financing transactions or acquisitions. The Board of Directors
believes that the additional authorized Common Stock would give the Company
greater flexibility by allowing the Company to issue shares of Common Stock
without the expense and delay of a stockholders' meeting to authorize additional
shares if and when the need arises.
The Certificate of Incorporation presently authorizes the issuance of 60,000
shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"), but
none of such shares is outstanding and the Company presently has no plans to
issue Preferred Stock.
PROPOSED RESOLUTION
A resolution in substantially the following form will be submitted to the
Stockholders at the Annual Meeting:
"RESOLVED, that the Restated Certificate of Incorporation of Mohawk
Industries, Inc., as in force and effect on the date hereof, be amended by
deleting the introductory paragraph of Article 4 in its entirety and by
substituting in lieu thereof the following:
4. Authorized Capital. The aggregate number of shares of stock which
the Corporation shall have authority to issue is 150,060,000 shares,
divided into two (2) classes consisting of 150,000,000 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")."
In all other respects, the terms and provisions of Article 4 and the other
Articles of the Certificate of Incorporation shall remain unaltered.
VOTE REQUIRED; ABSENCE OF DISSENTERS' RIGHTS
Approval of the Proposed Amendment will require the affirmative vote of a
majority of the shares of Common Stock outstanding and entitled to vote at the
Annual Meeting. If the Proposed Amendment is approved by the Stockholders, the
amendment to the Certificate of Incorporation would become effective upon the
filing of a Certificate of Amendment to the Certificate of Incorporation with
the Secretary of State of Delaware, which would occur as soon as practicable
following the approval of the Proposed Amendment by the Stockholders.
Stockholders of the Company have no dissenters' rights with respect to the
Proposed Amendment and will have no preemptive rights in connection with the
issuance of any new shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
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THE APPROVAL OF THE PROPOSED AMENDMENT
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Decisions and recommendations regarding the compensation of the Company's
executives are made by a two member Compensation Committee composed entirely of
directors who have never served as officers or employees of the Company.
Following is a report of the Compensation Committee concerning the Company's
executive compensation policies for 1997.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF MOHAWK
INDUSTRIES, INC.
Executive Compensation Philosophy. The Committee believes that a compensation
program that enables the Company to attract and retain outstanding executives
will assist the Company in meeting its long range objectives, thereby serving
the interest of the Company's Stockholders. The compensation program of the
Company is designed to achieve the following objectives:
1. Provide compensation opportunities that are competitive with those of
companies of a similar size.
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2. Create a strong link between the executive's compensation and the
Company's annual and long-term financial performance.
3. Include above average elements of financial risk through performance-
based incentive compensation which offers an opportunity for above
average financial reward to the executives.
The Company's executive compensation program has three components: base
salaries, annual incentives and long-term incentives.
Base Salaries. The Company's executive officers receive base salaries as
compensation for the skills, knowledge and experience that they bring to their
positions. Base salaries paid to the Company's executive officers are intended
to be maintained at a competitive level with companies of a similar size. In
order to assess competitive rates, the Committee uses compensation surveys,
produced by nationally recognized consulting firms, of executives with similar
job functions and responsibilities in public companies engaged in nondurable
goods manufacturing in the same net sales range. The group of companies included
in the surveys used has typically been broader than the peer group used in the
Performance Graph following this report because the competitive marketplace for
executive talent has been viewed by the Committee as national in scope and not
restricted to the carpet and textile industries. With respect to base salaries,
the Committee has tried to achieve competitive rates by targeting the
approximate midpoint of the range of base salaries for comparable positions.
Within this overall policy, the Committee has preserved the flexibility to make
exceptions where performance over several years dictates a higher base salary.
Annual Incentive Bonuses. Annual incentive bonuses under the executive
incentive program are provided in addition to base salaries to create total
annual compensation. Using the compensation surveys discussed above, the
Committee has targeted the upper quartile of total annual compensation for
similarly situated executives in companies of similar size. By placing a
significant portion of an executive's annual pay "at risk," the Committee
believes that compensation is more directly related to performance and will more
closely link the financial interests of the executives and those of the
Stockholders. Given the Company's aggressive business objectives, the Committee
believes this policy to be appropriate and fair for both the executives and the
Stockholders.
The 1997 Executive Incentive Plan (the "Plan") was designed to provide
incentive bonus opportunities for approximately 40 key executives of the
Company, including the executive officers named in the Summary Compensation
Table. For those executives who were classified as Corporate Participants,
including the Chief Executive Officer ("CEO"), the Chief Operating Officer and
the Chief Financial Officer, to be eligible for any bonus the total corporation
must have attained in 1997 a threshold level of earnings per share ("EPS")
established by the Committee. For those executives who were classified as
Residential Business Participants, Karastan Participants, Commercial Business
Participants or American Rug Craftsmen Participants, to be eligible for any
bonus their business unit must have attained in 1997 a threshold level of EPS
contribution established by the Committee. The factors considered in
establishing the thresholds in the Plan were the previous year's earnings per
share and a baseline expectation for earnings growth adopted by the Committee.
If the threshold is attained, then the bonus calculation is based on the
attainment of increasing levels of percentage improvement of (i) 1997 EPS over
the EPS threshold and (ii) Earnings After Capital Charge ("EAC") (after tax
operating earnings less a cost of capital charge) over EAC targets established
by the Plan. The bonus calculation is weighted 75% to the EPS level attained and
25% to the EAC level attained. The bonus attainable at various levels in the
Plan is calculated as a percentage of 1997 compensation payments excluding all
bonus, deferred bonus and other nonsalary amounts ("Base Compensation"). The
percentages of Base Compensation for which individual participants become
eligible at the various levels vary and were set for the CEO by the Committee
and for the other executives by the CEO (subject to the approval of the
Committee) in order to relate performance goals to a targeted level of total
annual compensation.
All bonus awards will be paid in 1998 with a portion of the award ranging from
7.9% to 10.4% to be paid in shares of the Common Stock issued as restricted
shares under the Mohawk Industries, Inc. 1997 Long-Term Incentive Plan. One half
of the shares granted will be restricted for one year and the other half for two
years. The
-7-
<PAGE>
number of restricted shares to be granted will be calculated using the average
monthly closing stock price of the Common Stock during 1997.
The Committee has the authority to interpret the Plan or make changes therein
as it determines appropriate.
Long-Term Incentives. The Company provides long-term incentives to its
executives through stock option programs designed to encourage executives to
acquire and hold shares of Common Stock. The stock option plans are designed to
retain executives and motivate them to improve the market value of the Common
Stock over a number of years. The Committee believes that equity ownership by
executives furthers the Committee's compensation policy objective of aligning
long-term financial interests of executives with those of the Stockholders. The
Committee considers the amount and terms of options previously awarded to and
held by executive officers in determining the size of option grants. In 1997,
the Board of Directors adopted the Mohawk Industries, Inc. 1997 Long-Term
Incentive Plan, which was approved by the Stockholders at the 1997 Annual
Meeting. No stock options were granted to executive officers in 1997.
Other Compensation Plans. The Company maintains several broadly-based
employee benefit plans in which the executive officers are permitted to
participate on the same terms as other employees. These include the retirement
savings plan (designed to qualify under section 401(k) of the Internal Revenue
Code), a supplemental executive retirement plan which provides certain
supplemental retirement and other benefits to certain executives who have
completed an aggregate of 60 months employment with the Company, and a
nonqualified deferred compensation plan for highly compensated employees which
permits deferral of income on a portion of the employee's compensation.
To the extent readily determinable and as one of the factors in its
consideration of the various components of executive compensation, the Committee
considers the anticipated tax treatment to the Company and to the executives of
various payments and benefits. Some types of compensation payments and their
deductibility (e.g., the spread on exercise of non-qualified options) depend
upon the timing of an executive's vesting or exercise of previously granted
rights. Further, interpretations of and changes in the tax laws and other
factors beyond the Committee's control also affect the deductibility of
compensation. For these and other reasons, the Committee will not necessarily
and in all circumstances limit executive compensation to that deductible under
Section 162(m) of the Internal Revenue Code. The Committee will consider various
alternatives for preserving the deductibility of compensation payments and
benefits to the extent reasonably practicable and to the extent consistent with
its other compensation objectives.
Chief Executive Officer Compensation. In accordance with the compensation
philosophy and process described above, the Committee set Mr. Kolb's base salary
for 1997 at $495,000, which was below the midpoint for CEO's of similar sized
companies in the surveys used by the Committee. Mr. Kolb's total annual cash
compensation is linked to the Company's performance by his participation in the
1997 Executive Incentive Plan. Under the Plan, he earns no bonus unless 1997 EPS
exceeds the threshold level established in the Plan, but he earns a bonus of 60%
of his Base Compensation if the weighted calculation of EPS and EAC improvement
for the Company is at least 115% of the threshold and a maximum bonus of 120% of
his Base Compensation if the improvement in these factors is at least 125% of
the threshold. The bonus payable for amounts between these levels is determined
by pro rata interpolation. Mr. Kolb earned the maximum bonus under the Company's
1997 Executive Incentive Plan. This bonus will be paid in 1998 with 9.9% of the
total award to be paid in restricted Common Stock as described above.
The Committee's objectives in setting Mr. Kolb's compensation are to be
competitive with other companies in the carpet industry and with other public
companies of a similar size and to provide Mr. Kolb with appropriate incentives
to achieve the Company's short-term and long-term objectives.
COMPENSATION COMMITTEE
Leo Benatar
Robert N. Pokelwaldt
-8-
<PAGE>
PERFORMANCE GRAPH
The following is a line graph comparing the yearly percentage change in the
Company's cumulative total stockholder returns to those of the Standard & Poors
500 Index and a group of peer issuers beginning on December 31, 1992 and ending
on December 31, 1997.
COMPARISON OF TOTAL CUMULATIVE RETURNS AMONG MOHAWK INDUSTRIES, INC.,
THE S&P 500 INDEX AND A PEER GROUP
[CHART APPEARS HERE]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-----------------------------------------------------------------
Mohawk $ 100 $ 241.77 $ 90.00 $ 110.30 $ 155.30 $ 232.29
- --------------------------------------------------------------------------------
S&P 500 100 110.08 111.53 153.45 188.68 251.63
- --------------------------------------------------------------------------------
Peer Group 100 132.25 91.39 101.83 100.77 127.92
- --------------------------------------------------------------------------------
</TABLE>
The peer group includes the following companies: Burlington Industries
Equity, Inc., Cone Mills Corporation, Crown Crafts, Inc., Guildford Mills, Inc.,
Interface, Inc., Shaw Industries, Inc., Springs Industries, Inc. and West Point
Stevens, Inc. (prior to December 1993, West Point Stevens, Inc. did business
under the name West Point Pepperell, Inc.). Total return values were calculated
based on cumulative total return, assuming the value of the investment in the
Company's Common Stock and in each index on December 31, 1992 was $100 and that
all dividends were reinvested. The Company is not included in the peer group
because management believes that, by excluding the Company, investors will have
a more accurate view of the Company's performance relative to certain other
carpet and textile companies.
-9-
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities during the fiscal years ended December 31, 1995, 1996 and 1997, for
(i) the Chairman and Chief Executive Officer of the Company and (ii) each of the
four other most highly compensated executive officers of the Company (determined
as of December 31, 1997) (collectively, the ''Named Executive Officers'').
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------- ---------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
SALARY BONUS COMPENSATION STOCK UNDERLYING COMPENSATION
NAME AND POSITION YEAR ($) ($) ($)(1)(2) AWARDS($)(3) OPTIONS(#) ($)(5)
----------------- ---- -------- --------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
David L. Kolb............................... 1997 $495,000 $ 519,750 $ 2,126,318 $ 111,825 -- $ 3,200
Chairman and Chief Executive Officer 1996 440,000 528,000 325,297 -- -- 9,110
1995 426,000 -- 2,363,004 -- -- 10,500
Jeffrey S. Lorberbaum....................... 1997 $443,000 $ 387,625 -- $ 83,370 -- $ 4,888
President and Chief Operating Officer 1996 416,693 416,693 -- -- -- 5,118
1995 336,134 150,000 -- -- 75,000(4) 4,849
Frank A. Procopio........................... 1997 $241,500 $ 181,125 $ 897,010 $ 36,383 -- $ 3,200
Senior Vice President; 1996 241,500 -- 154,319 -- -- 7,162
President-Commercial Business 1995 241,500 -- 1,012,422 -- -- 8,568
John D. Swift............................... 1997 $220,833 $ 165,623 $ 222,676 $ 33,233 -- $ 3,200
Vice President-Finance and Chief 1996 200,000 170,000 41,395 -- -- 5,283
Financial Officer 1995 191,000 -- 247,816 -- -- 7,889
William B. Kilbride......................... 1997 $225,000 $ 168,750 -- $ 33,863 -- $ 3,146
President - American Rug Craftsmen 1996 200,000 328,334(6) -- -- 11,250(7) 4,059
1995 175,000 183,750 -- -- -- 928
</TABLE>
_______________
(1) Amounts in 1997 include (i) imputed interest on the outstanding balance of
the interest free loans made by the Company to Messrs. Kolb, Procopio and
Swift upon exercise of certain stock options in the amount of $276,013,
$110,467 and $28,816, respectively, and (ii) $220,413, $88,215 and $23,011
paid by the Company in 1997 to Messrs. Kolb, Procopio and Swift,
respectively, so that each could pay the 1997 tax liability on imputed
income arising from such interest free loans. Amounts in 1996 include (i)
imputed interest on such loans made by the Company to Messrs. Kolb,
Procopio and Swift of $180,865, $85,801 and $23,016, respectively, and (ii)
$144,432, $68,518 and $18,379 paid by the Company to Messrs. Kolb, Procopio
and Swift, respectively, so that each could pay the 1996 tax liability on
such imputed income. See footnote (2) below and "Executive Compensation and
Other Information--Certain Relationships and Related Transactions."
(2) Amounts in 1997 and 1995 include amounts accrued by the Company for
reimbursements for tax payments in connection with stock option exercises
payable in the amounts of $1,629,892 and $2,363,004 to Mr. Kolb, $698,328
and $1,012,422 to Mr. Procopio, and $170,849 and $247,816 to Mr. Swift,
respectively. In connection with the leveraged buyout of the Company in
1988 and in lieu of purchasing shares of the Company's Common Stock, each
of Messrs. Kolb, Procopio and Swift obtained an equity interest in the
Company by entering into a stock option agreement (the "Option Agreement")
with the Company that differed only with respect to the number and exercise
price of the shares subject to the option. This arrangement allows the
Company to receive a tax benefit on its tax return in the amount of the tax
effect of the taxable compensation provided to the individual under the
Option Agreements; however, upon exercise of the options, the individual is
subject to taxation at ordinary income rates. Pursuant to the Option
Agreements, which were amended in 1992, when one of the individuals
exercises an option, receives shares of the Company's Common Stock which
were subject to the option (the "Optioned Stock") and does not sell the
shares of Optioned Stock, he is entitled to borrow from the Company on an
interest free basis an amount necessary to pay his income tax liability.
See "Executive Compensation and Other Information--Certain Relationships
and Related Transactions." When the individual sells the shares of Optioned
Stock, he must repay the loan. At the time of the sale of the shares of
Optioned Stock, the individual is reimbursed for the amount of tax incurred
by the individual upon the exercise of the option and the sale of the
Optioned Stock in excess of the amount of tax the individual would have
incurred, using the capital gains rate in effect at the time of the sale,
had the individual held the stock from the option grant until the sale. The
amounts accrued in 1995 were
-10-
<PAGE>
calculated based upon the capital gains rate of 28% in effect at that time.
An additional accrual was recorded in 1997 when the capital gains rate was
reduced to 20%. In addition, the individual is reimbursed for the tax
liability incurred by reason of the payment described in the previous
sentence. The Company would record a tax benefit in its tax return
concurrent with these payments. Messrs. Kolb, Procopio and Swift have not
elected to sell all of the Optioned Stock, but the Company, nonetheless,
treats the reimbursement payment payable upon sale of the Optioned Stock as
earned at the time the option is exercised.
(3) Amounts in 1997 include 4,260, 3,176, 1,386, 1,266 and 1,290 shares for
Messrs. Kolb, Lorberbaum, Procopio, Swift and Kilbride, respectively. These
shares were granted on February 27, 1998 in connection with the executive's
annual incentive bonus for 1997 and have been valued at $26.25 per share.
The restrictions lapse on February 28, 1999 for 50% of the shares and on
February 28, 2000 for the remaining 50%. See "Executive Compensation and
Other Information--Report of the Compensation Committee of the Board of
Directors of Mohawk Industries, Inc."
(4) Amount represents options granted in 1995 pursuant to the 1992 Mohawk-
Horizon Stock Option Plan.
(5) Represents matching contributions pursuant to the Company's Retirement
Savings Plan. In 1995 and 1996, amounts for Mr. Jeffrey Lorberbaum
represent contributions pursuant to the Aladdin Profit Sharing Plan. In
1997, contributions for Mr. Jeffrey Lorberbaum pursuant to the Company
Retirement Savings Plan were $2,385 and contributions pursuant to the
Aladdin Profit Sharing Plan were $2,503.
(6) Includes a special bonus of $158,333 payable in connection with the
purchase of American Rug Craftsmen by the Company in April 1993.
(7) Amount represents options granted in 1996 pursuant to the 1992 Stock Option
Plan.
OPTION GRANTS
No options were granted to the Named Executive Officers in fiscal 1997.
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information regarding the exercise
of stock options by the Named Executive Officers during fiscal 1997 and the
number of shares covered by both exercisable and non-exercisable stock options
held by the Named Executive Officers as of December 31, 1997. Also reported are
the values for ''in-the-money'' options which represent the positive spread
between the exercise price of any such existing stock options and the fiscal
year-end price of the Common Stock (which was $21.9375).
-11-
<PAGE>
AGGREGATED DECEMBER 31, 1997
YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY
SHARES ACQUIRED ON VALUE AT FY-END (#) OPTIONS AT FY-END($)
------------------------------ --------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David L. Kolb 56,250 $664,188 22,500 15,000 $242,343 $161,562
Jeffrey S. Lorberbaum -- -- 30,000 45,000 $345,624 $518,436
Frank A. Procopio 11,250 $116,250 3,000 6,000 $ 32,312 $ 64,625
John D. Swift 55,800 $612,180 0 7,200 -- $ 77,550
William B. Kilbride 11,251 $ 98,159 18,000 19,499 $ 49,874 $172,521
</TABLE>
PENSION PLANS
The following table shows estimated annual retirement benefits payable to a
Named Executive Officer (other than Mr. Kolb or Mr. Jeffrey Lorberbaum) at age
65 under the Supplemental Executive Retirement Plan (the "SERP") as described
below.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------
REMUNERATION 15 20 25 30 OR MORE
- ------------ -------- -------- -------- ----------
<S> <C> <C> <C> <C>
$ 200,000................................ $ 80,000 $ 80,000 $ 80,000 $ 80,000
300,000................................ 120,000 120,000 120,000 120,000
400,000................................ 160,000 160,000 160,000 160,000
500,000................................ 200,000 200,000 200,000 200,000
600,000................................ 240,000 240,000 240,000 240,000
700,000................................ 280,000 280,000 280,000 280,000
800,000................................ 320,000 320,000 320,000 320,000
900,000................................ 360,000 360,000 360,000 360,000
1,000,000................................ 400,000 400,000 400,000 400,000
1,100,000................................ 440,000 440,000 440,000 440,000
1,200,000................................ 480,000 480,000 480,000 480,000
1,300,000................................ 520,000 520,000 520,000 520,000
</TABLE>
The following table shows estimated annual retirement benefits payable to
Mr. Kolb, the Company's Chairman and Chief Executive Officer, at age 65 under
the SERP.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------
REMUNERATION 15 20 25 30 OR MORE
- ------------ -------- -------- -------- ----------
<S> <C> <C> <C> <C>
$ 500,000................................ $250,000 $250,000 $250,000 $250,000
600,000................................ 300,000 300,000 300,000 300,000
700,000................................ 350,000 350,000 350,000 350,000
800,000................................ 400,000 400,000 400,000 400,000
900,000................................ 450,000 450,000 450,000 450,000
1,000,000................................ 500,000 500,000 500,000 500,000
1,100,000................................ 550,000 550,000 550,000 550,000
1,200,000................................ 600,000 600,000 600,000 600,000
1,300,000................................ 650,000 650,000 650,000 650,000
</TABLE>
The Company has established a Retirement Savings Plan (the "Retirement
Savings Plan"), which is a combination 401(k)/profit-sharing plan that provides
for employee pre-tax contributions under Section 401(k) of the Internal Revenue
Code, Company matching contributions, and, if profits are sufficient, a Company
profit
-12-
<PAGE>
sharing contribution. The Company has also established the SERP, a non-qualified
plan designed to supplement the benefits payable under the Retirement Savings
Plan and certain other plans. The SERP provides such benefits to certain key
employees of the Company and its subsidiaries as designated by the Board of
Directors of the Company.
Benefits under the SERP generally vest after the participant has sixty (60)
months of employment with the Company and generally can begin once the
participant attains age 60. The retirement benefit payable at age 65 to Mr.
Kolb (and prior to reduction as described below) is 50% of Mr. Kolb's average
annual compensation (meaning salary, bonuses, and certain pre-tax deferrals to
Company benefit plans, but does not include reimbursements for tax payments in
connection with stock option exercises) over the final sixty (60) months prior
to termination of employment. The retirement benefit payable at age 65 to
participants other than Mr. Kolb (and prior to reduction as described below), is
40% of the participant's average annual compensation (as determined in
accordance with the preceding sentence). Benefits under the SERP are reduced (i)
if at retirement the participant has fewer than 15 years of employment with the
Company for participants other than Mr. Kolb or 14 years of employment with the
Company for Mr. Kolb, and (ii) if the participant begins to receive SERP
benefits prior to age 65.
Benefits payable under the SERP as shown in the foregoing tables are
reduced by (i) the annuity value of the contributions (and earnings thereon)
made by the Company to the participant's account in the Retirement Savings Plan;
(ii) one-half of the participant's Social Security benefits; (iii) certain other
Company benefit plans; and (iv) the annuity benefit to the participant from a
subsequent employer's pension plan. Upon retirement, the normal form of SERP
benefit is a life annuity for the life of the participant, but the Board and the
participant may approve payment in an alternate form. There are also certain
death benefits and medical benefits that are payable under the SERP.
As of December 31, 1997, Mr. Kolb had an average five-year compensation of
$764,410 and 17 years of creditable service; Mr. Procopio had an average five-
year compensation of $337,108 and 15 years of creditable service; and Mr. Swift
had an average five year compensation of $311,306 and 13 years of creditable
service. Neither Mr. Jeffrey Lorberbaum nor Mr. Kilbride participates in these
plans.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Alan Lorberbaum and Jeffrey Lorberbaum and members of their
immediate families are shareholders of, and one of them is a director of, an
entity which transacts business with the Company. The aggregate dollar amount
paid by the Company to this related party in 1997 was $811,210. Management of
the Company believes that such transactions were and are on terms no less
favorable to the Company than could have been obtained from unaffiliated third
parties in similar transactions.
In 1997, Mr. Alan Lorberbaum earned approximately $382,200 in base
compensation and $550,000 in bonuses from Aladdin in his capacity as a
consultant to Aladdin based upon the performance of Aladdin in 1997.
In connection with the leveraged buyout of the Company in 1988 and in lieu
of purchasing shares of the Company's Common Stock, certain of the Company's
executive officers obtained an equity interest in the Company by entering into
the Option Agreements with the Company that differed only with respect to the
number and exercise price of the shares subject to the options. This arrangement
allows the Company to receive a tax benefit in the amount of the taxable
compensation provided to the individual under the Option Agreements; however,
upon exercise of the options, the individual is subject to taxation at ordinary
income tax rates. Pursuant to these Option Agreements, which were amended in
1992, when one of the individuals exercises his option and receives the Optioned
Stock, he is entitled to borrow from the Company on an interest free basis (the
"Loan") an amount equal to his income tax liability as a result of the exercise
of the option less the amount of the proceeds from his sale of any shares of
Optioned Stock which are sold prior to the date of the Loan. The principal
amount of the Loan is due when the individual transfers beneficial ownership of
all of the shares of Optioned Stock. The individual must prepay the Loan with
any proceeds of any sale of less than all of the shares of Optioned Stock and
with all dividends paid by the Company with respect to such shares while the
Loan remains outstanding. The shares of the Optioned Stock are pledged by the
individual to the Company and held by the Company to secure the Loan. See also
"Executive Compensation and Other Information--Summary of Cash and Certain Other
Compensation."
-13-
<PAGE>
Since January 1, 1995, various executive officers of the Company have
exercised their options under the Option Agreements, elected not to resell their
shares of Optioned Stock and borrowed money from the Company pursuant to the
Option Agreements in order to pay their income tax liability. Mr. Kolb has
exercised options to acquire 1,200,075 shares of Optioned Stock and has received
a Loan from the Company in the original principal amount of $3,928,956. Mr.
Procopio has exercised options to acquire 538,462 shares of Optioned Stock and
has received a Loan from the Company in the original principal amount of
$1,684,987. Mr. Swift has exercised options to acquire 127,125 shares of
Optioned Stock and has received a Loan from the Company in the original
principal amount of $415,929. In March 1997, each of the executives named above
entered into a supplement to the Loan (the "Supplemental Loan") for the purpose
of providing to such executives the difference between the statutory withholding
rate used to determine the original principal amounts of the Loans and their
actual tax rate. Mr. Kolb received a Supplemental Loan in the original
principal amount of $1,152,570. Mr. Procopio received a Supplemental Loan in
the original principal amount of $493,015. Mr. Swift received a Supplemental
Loan in the original principal amount of $120,358. During 1997, Mr. Kolb, Mr.
Procopio and Mr. Swift sold certain of these shares and made the required
repayments of both the Loan and the Supplemental Loan. The combined outstanding
principal balance of the Loan and Supplemental Loan for each of Mr. Kolb, Mr.
Procopio and Mr. Swift as of March 23, 1998 was $4,700,993, $1,552,746 and
$418,876, respectively.
-14-
<PAGE>
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of March 23, 1998, by (i) each
person who is known by the Company beneficially to own more than five percent of
the outstanding shares of the Common Stock, (ii) each of the Company's directors
and nominees, (iii) each of the Named Executive Officers, and (iv) all of the
Company's directors and executive officers as a group. Unless otherwise
indicated, the holders listed below have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT
COMMON STOCK OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- ------------------------- ------------------- --------
<S> <C> <C>
Alan S. Lorberbaum/(1)/....................................... 13,792,979 26.4%
Aladdin Partners, L.P./(2)/................................... 9,900,000 18.9
399 Venture Partners, Inc./(3)/............................... 7,305,293 14.0
The Equitable Companies Incorporated, et al./(4)/............. 6,974,974 13.3
David L. Kolb/(5)/............................................ 1,135,471 2.2
Jeffrey S. Lorberbaum/(6)/.................................... . 647,126 1.2
Frank A. Procopio/(7)/........................................ 391,462 *
Bruce C. Bruckmann/(8)/....................................... 270,871 *
John D. Swift/(9)/............................................ 108,875 *
Leo Benatar/(10)/............................................. 25,975 *
William B. Kilbride/(11)/..................................... 18,225 *
Larry W. McCurdy/(10)/........................................ 19,431 *
Robert N. Pokelwaldt/(10)/.................................... 19,431 *
All directors and executive officers as a group (10 persons).. 16,429,846 31.4
</TABLE>
_________________
* Less than one percent.
(1) The address of Mr. Alan Lorberbaum is 2001 Antioch Road, Dalton, Georgia
30721. Includes 9,900,000 shares held by Aladdin Partners, L.P., with
respect to which Mr. Lorberbaum may be deemed to share voting and investment
power. Mr. Lorberbaum is a director and owner of 71.5% of ASL Management
Corp., the majority general partner of Aladdin Partners, L.P. Mr. Lorberbaum
disclaims beneficial ownership of the shares held by Aladdin Partners, L.P.
(2) The address of Aladdin Partners, L.P. is 822 Atkinson Drive, Dalton, Georgia
30720. ASL Management Corp. is the majority general partner of Aladdin
Partners, L.P. and shares voting and investment power with respect to these
shares. The address of ASL Management Corp. is 822 Atkinson Drive, Dalton,
Georgia 30720. Mrs. Shirley Lorberbaum is a director and owner of 28.5% of
ASL Management Corp. and, as a result of such positions, may be deemed to
share voting and investment power with respect to these shares. Mrs.
Lorberbaum is the wife of Mr. Alan Lorberbaum. The address of Mrs.
Lorberbaum is 2001 Antioch Road, Dalton, Georgia 30721. Mr. Barry L. Hoffman
is a director of ASL Management Corp. and, as a result of such position, may
be deemed to share voting and investment power with respect to these shares.
Excludes 4,500 shares owned of record by Mr. Hoffman in his individual
capacity. The business address of Mr. Hoffman is Joseph Decosimo & Company,
1100 Tallman Building, The Union Square, Chattanooga, Tennessee 37402. Each
of ASL Management Corp., Mrs. Lorberbaum and Mr. Hoffman disclaim beneficial
ownership of the shares held by Aladdin Partners, L.P.
(3) Based upon a Schedule 13G dated February 13, 1998 filed with the Commission
by 399 Venture Partners, Inc. The address of 399 Venture Partners, Inc. is
399 Park Avenue, New York, New York 10043.
(4) Based upon a Schedule 13G dated February 10, 1998 jointly filed with the
Commission by The Equitable Companies Incorporated; AXA Assurances I.A.R.D.
Mutuelle, AXA Assurances Vie Mutuelle, Alpha Assurances Vie Mutuelle, AXA
Courtage Assurance Mutuelle, as a group (the "Mutuelles AXA"); and AXA-UAP.
The address of The Equitable Companies Incorporated is 787 Seventh Avenue,
New York, New York 10019. Each of the Mutuelles AXA, as a group, and AXA-
UAP disclaim beneficial ownership of these shares.
(5) Includes 22,500 shares issuable upon the exercise of currently vested
options and 168 shares owned pursuant to the Company's 401(k) plan.
(6) Includes 30,000 shares issuable upon the exercise of currently vested
options. Excludes 9,900,000 shares held by Aladdin Partners, L.P., of which
Mr. Jeffrey Lorberbaum is a minority general partner. Mr. Lorberbaum
disclaims beneficial ownership of these shares held by Aladdin Partners,
L.P.
(7) Includes 3,000 shares issuable upon the exercise of currently vested options
and 25,298 shares owned pursuant to the Company's 401(k) plan.
(8) Includes 11,700 shares issuable upon the exercise of currently vested
options.
(9) Includes 14,406 shares owned pursuant to the Company's 401(k) plan.
(10)Includes 13,950 shares issuable upon the exercise of currently vested
options.
(11)Includes 18,000 shares issuable upon the exercise of currently vested
options.
-15-
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. However, if any other matters are properly brought before the
Annual Meeting or are incidental to the conduct of the Annual Meeting, the
persons appointed in the accompanying proxy intend to vote the shares
represented thereby in accordance with their best judgment.
The Board of Directors has appointed KPMG Peat Marwick LLP as auditors of the
Company for 1998. KPMG Peat Marwick LLP also audited the Company's financial
statements for 1997. Representatives of KPMG Peat Marwick LLP will be present
at the Annual Meeting and will be given an opportunity to make a statement, if
they desire, and to respond to appropriate questions.
The Company will bear the cost of the solicitation of proxies on behalf of the
Company. Directors, officers and other employees of the Company may, without
additional compensation except for reimbursement for actual expenses, solicit
proxies by mail, in person or by telecommunication. The Company has retained
Georgeson & Company Inc. to assist in the solicitation of proxies for a fee of
$3,500 plus expenses. The Company will reimburse brokers, fiduciaries,
custodians and other nominees for out-of-pocket expenses incurred in sending the
Company's proxy materials to, and obtaining instructions relating to such
materials from, beneficial owners.
Any proposal a Stockholder may desire to have included in the Company's proxy
material for presentation at the 1999 Annual Meeting must be received by the
Company at Mohawk Industries, Inc., P.O. Box 12069, 160 South Industrial
Boulevard, Calhoun, Georgia 30703, Attention: Secretary, on or prior to December
2, 1998.
If your shares are held in the name of a brokerage firm, bank nominee or other
institution, only it can sign a proxy card with respect to your shares.
Accordingly, please contact the person responsible for your account and give
instructions for a proxy card to be signed representing your shares.
A list of Stockholders entitled to be present and vote at the Annual Meeting
will be available at the offices of the Company, P.O. Box 12069, 160 South
Industrial Boulevard, Calhoun, Georgia 30703, for inspection by the
Stockholders during regular business hours from May 8, 1998, to the date of the
Annual Meeting. The list also will be available during the Annual Meeting for
inspection by Stockholders who are present.
If you cannot be present in person, you are requested to complete, sign, date
and return the enclosed proxy promptly. An envelope has been provided for that
purpose. No postage is required if mailed in the United States.
[SIGNATURE]
BARBARA B. LANCE
Secretary
Atlanta, Georgia
March 31, 1998
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PROXY
MOHAWK INDUSTRIES, INC.
CALHOUN, GEORGIA
ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Mohawk Industries, Inc., a Delaware
corporation ("Mohawk"), hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, and hereby appoints David L. Kolb
and John D. Swift, and each of them, proxies, with full power of substitution,
for and in the name of the undersigned, to vote all shares of Mohawk Common
Stock which the undersigned is entitled to vote on all matters which may come
before the 1998 Annual Meeting of Stockholders (the "Annual Meeting") of Mohawk
Industries, Inc. to be held on Thursday, May 21, 1998 at 10:00 a.m. local time,
at 160 South Industrial Boulevard, Calhoun, Georgia, and at any adjournment or
adjournments thereof, unless otherwise specified herein. The proxies, in their
discretion, are further authorized to vote for the election of a person to the
Board of Directors if any nominee named herein becomes unable to serve or for
good cause will not serve, are further authorized to vote on matters which the
Board of Directors does not know a reasonable time before making the proxy
solicitation will be presented at the Annual Meeting, and are further authorized
to vote on other matters which may properly come before the Annual Meeting and
any adjournments thereof. The Board of Directors recommends a vote for Proposal
1 and Proposal 2.
(1) The election of two Directors, Leo Benatar and David L. Kolb, for a term of
three years and until their successors are elected and qualified:
[_] FOR [_] WITHHOLD AUTHORITY
For, except vote withheld from the following nominees:
______________________________
(2) The approval of the amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of common stock,
par value $0.01 per share, from seventy-five million (75,000,000) shares to
one hundred fifty million (150,000,000) shares:
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS. THE PROXIES
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS PROXY.
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Please sign exactly as your name appears on your stock certificate and date.
Where shares are held jointly, each stockholder should sign. When signing as
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
______________________________________________
Signature of Stockholder
______________________________________________
Signature of Stockholder (If held jointly)
Dated: ____________________________,1998
Month Day
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MOHAWK
INDUSTRIES, INC. AND MAY BE REVOKED BY THE STOCKHOLDER PRIOR TO ITS EXERCISE.
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