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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 [X]
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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(2) Aggregate number 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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[_] 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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To the Stockholders of Mohawk Industries, Inc.:
You are cordially invited to attend the annual meeting of stockholders to be
held on Thursday, May 20, 1999, 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 1999. 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 1999.
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,
DAVID L. KOLB
Chairman and
Chief Executive Officer
Atlanta, Georgia
March 30, 1999
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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 20, 1999
The annual meeting of stockholders of Mohawk Industries, Inc. (the
"Company") will be held on Thursday, May 20, 1999, 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 I directors
for a three-year term beginning in 1999; and
2. 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 22, 1999 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,
BARBARA B. LANCE,
Secretary
Atlanta, Georgia
March 30, 1999
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MOHAWK INDUSTRIES, INC.
160 South Industrial Boulevard
P. O. Box 12069
Calhoun, Georgia 30703
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PROXY STATEMENT
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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 20, 1999, 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 30, 1999, to the
stockholders of record of the Company (the "Stockholders") on March 22, 1999
(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. A Stockholder's submission of 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 (i) filing a written revocation with the Secretary of the Company, (ii)
executing a proxy bearing a later date or (iii) 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. 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.
Pursuant to the Company's Restated Certificate of Incorporation, as amended
(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 22, 1999 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 60,580,417
shares of Common Stock issued and outstanding held by approximately 445
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 I directors, Jeffrey S. Lorberbaum and Robert N. Pokelwaldt, have
been nominated for re-election at the Annual Meeting. The Class II and Class
III 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 eleven 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. Jeffrey Lorberbaum's and Mr. Pokelwaldt's election as a Class I
director of the Company, unless the Stockholders direct otherwise in their
proxies. Each of Mr. Jeffrey Lorberbaum and Mr. Pokelwaldt has consented to
continue to serve as a director of the Company if re-elected. In the
unanticipated event that either of Mr. Jeffrey Lorberbaum or Mr. Pokelwaldt
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. Jeffrey
Lorberbaum and Mr. Pokelwaldt 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
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 I directors and the
directors in Classes II and III 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 1998 with the Company, and his
directorships in other publicly held companies.
Nominees for Director
Class I Nominees For Director (Current Terms Expiring 1999)
Jeffrey S. Lorberbaum--Mr. Lorberbaum (age 45) 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 62) 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. 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
Carpenter Technologies Corporation, a manufacturer of specialty steel, and
A.O. Smith Corporation, a manufacturer of electric motors and water heaters.
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Continuing Directors
Class II Directors Continuing in Office (Terms Expire 2000)
Bruce C. Bruckmann--Mr. Bruckmann (age 45) 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, Anvil Knitwear,
Inc., an activewear manufacturer, Penhall International, Inc., a renter of
operator-assisted construction equipment, and Mediq, Inc., a renter of movable
critical care and life-support medical equipment.
Alan S. Lorberbaum--Mr. Lorberbaum (age 74) 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 63) 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. In July 1998 Echlin was merged with Dana Corporation, a global
leader in the engineering, manufacturing and distribution of components and
systems for worldwide vehicular and industrial manufacturers. At that time
Mr. McCurdy became President of the Dana Automotive Aftermarket Group. Mr.
McCurdy also serves on the boards of directors of Lear Corporation, an
international manufacturer for original equipment vehicles, and Breed
Technologies, Inc., an equipment supplier of air bag sensing devices and air
bag components.
Class III Directors Continuing in Office (Terms Expire 2001)
Leo Benatar--Mr. Benatar (age 69) has been a director of the Company since
the consummation of the Company's 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.
David L. Kolb--Mr. Kolb (age 60) 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
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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.
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 1998, the Board of Directors held six meetings. All
members of the Board of Directors, except for Mr. Alan Lorberbaum, attended at
least 75% of the total number of Board of Directors and Committee meetings
that they were eligible to attend. Mr. Alan Lorberbaum attended 67% 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 1998. 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 four times during 1998. 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 incentive compensation 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.
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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 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 59) 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 57) 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 48) 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.
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 1998.
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.
2. Create a strong link between the executive's compensation and the
Company's annual and long-term financial performance.
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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 1998 Executive Incentive Program (the "Plan") was designed to provide
incentive bonus opportunities for approximately 30 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 1998 a threshold level of earnings per share
("EPS") established by the Committee. For those executives who were classified
as Residential Business Participants, Karastan Business Participants,
Commercial Business Participants or American Rug Craftsmen Participants, to be
eligible for any bonus their business unit must have attained in 1998 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
EPS for the total corporation and EPS contribution by each business unit. If
the threshold is attained, then the bonus calculation is based on the
attainment of increasing levels of improvement of (i) 1998 EPS over 1997 EPS
and (ii) 1998 Earnings After Capital Charge ("EAC") (after tax operating
earnings less a cost of capital charge) over EAC targets established by the
Committee using 1997 results as a base. 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 1998
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.
A portion of each award ranging from 20% to 25% is paid as follows: one-half
is used to purchase in the market shares of the Common Stock to be issued to
the participant as restricted shares under the Mohawk Industries, Inc. 1997
Long-Term Incentive Plan and one-half is used to pay withholding tax on the
award. One-half of the shares granted will be restricted for one year and the
other half for two years. The number of restricted shares to be granted is
calculated using the average monthly closing stock price of the Common Stock
during 1998. The balance of the award is paid in cash to the participant in
1999.
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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. No stock options were granted to executive officers in 1998.
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 1998 at $525,000, 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 1998 Executive Incentive Program. Under the Plan, he earns no bonus
unless 1998 EPS exceeds the threshold level established in the Plan. In 1998,
Mr. Kolb earned the maximum bonus of 120% of his Base Compensation which
required an improvement in EPS for the total corporation of at least 20
percent over 1997 EPS and an improvement in EAC for the total corporation of
at least 38 percent over 1997 EAC. This bonus will be paid in cash and
restricted shares 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
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<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, 1993 and ending
on December 31, 1998.
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
Mohawk $100.00 $ 37.23 $ 45.62 $ 64.24 $ 96.08 $184.22
S&P 500 100.00 101.32 139.40 171.40 228.59 293.91
Peer Group 100.00 69.10 76.99 76.20 96.73 113.94
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. 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, 1993 was $100 and that all dividends
were reinvested. The Company is not included in the peer group because
management believes that, by excluding the Company, investors will have a more
accurate view of the Company's performance relative to certain other carpet and
textile companies.
- 8 -
<PAGE>
Summary of Cash and Certain Other Compensation
The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities during the fiscal years ended December 31, 1996, 1997, and 1998 for
(i) the Chairman and Chief Executive Officer of the Company and (ii) each of
the four other most highly compensated executive officers of the Company
(determined as of December 31, 1998) (collectively, the "Named Executive
Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------------- -----------------------
Other Annual Restricted Securities All Other
Salary Bonus Compensation Stock Underlying Compensation
Name and Position Year ($) ($) ($)(1)(2) Awards($)(3) Options(#) ($)(4)
- ------------------------ ---- -------- -------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David L. Kolb........... 1998 $525,000 $551,250 $ 439,827 $ 89,077 -- $3,200
Chairman and Chief 1997 495,000 519,750 2,126,318 111,825 -- 3,200
Executive Officer 1996 440,000 528,000 325,297 -- -- 9,110
Jeffrey S. Lorberbaum... 1998 $465,000 $406,875 -- $58,125 -- $3,200
President and 1997 443,000 387,625 -- 83,370 -- 4,888
Chief Operating Officer 1996 416,693 416,693 -- -- -- 5,118
Frank A. Procopio....... 1998 $250,000 $187,500 $ 95,258 $ 28,311 -- $3,200
Senior Vice 1997 241,500 181,125 897,010 36,383 -- 3,200
President; President- 1996 241,500 -- 154,319 -- -- 7,162
Commercial Business
John D. Swift........... 1998 $247,000 $185,250 $ 21,660 $ 27,960 -- $3,200
Vice President- 1997 220,833 165,623 222,676 33,233 -- 3,200
Finance and Chief 1996 200,000 170,000 41,395 -- -- 5,283
Financial Officer
William B. Kilbride..... 1998 $235,000 $184,290 -- $26,555 -- $4,105
President--American 1997 225,000 168,750 -- 33,863 -- 3,146
Rug Craftsmen 1996 200,000 328,334(5) -- -- 11,250(6) 4,059
</TABLE>
- --------
(1) Amounts in 1998 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 amounts of $239,263,
$51,819 and $11,783, respectively, and (ii) $200,564, $43,439 and $9,877
paid by the Company in 1998 to Messrs. Kolb, Procopio and Swift,
respectively, so that each can pay the tax liability on imputed income
arising from such interest free loans. 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 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 to Mr. Kolb, $698,328 to Mr. Procopio, and $170,849
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
- 9 -
<PAGE>
(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. An 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 1998 include 2,536, 1,872, 806, 796 and 756 shares for Messrs.
Kolb, Lorberbaum, Procopio, Swift and Kilbride, respectively. These shares
were granted on February 19, 1999, in connection with the executives annual
incentive bonus for 1998 and have been valued at $35.125 per share. The
restrictions lapse on February 19, 2000 for 50% of the shares and will
lapse on February 19, 2001 for the remaining 50%. 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 lapsed
on February 28, 1999 for 50% of the shares and the remaining 50% will lapse
on February 28, 2000. See "Executive Compensation and Other Information--
Report of the Compensation Committee of the Board of Directors of Mohawk
Industries, Inc."
(4) Except with respect to Mr. Kilbride and Mr. Jeffrey Lorberbaum in 1997 and
1996, represents matching contributions pursuant to the Company's
Retirement Savings Plan. In 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. In 1998, amounts for Mr. Kilbride
represent contributions pursuant to the American Rug Craftsmen 401(k)
Savings and Retirement Plan.
(5) Includes a special bonus of $158,333 payable in connection with the
purchase of American Rug Craftsmen by the Company in April 1993.
(6) 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 1998.
- 10 -
<PAGE>
Option Exercises and Holdings
The following table sets forth certain information regarding the number of
shares covered by both exercisable and non-exercisable stock options held by
the Named Executive Officers as of December 31, 1998. 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 $42.0625). No stock options were
exercised by the Named Executive Officers during fiscal 1998.
Aggregated December 31, 1998
Year End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at FY-End (#) Options at FY-End(5)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David L. Kolb............... 30,000 7,500 926,874 231,718
Jeffrey S. Lorberbaum....... 45,000 30,000 1,424,061 949,374
Frank A. Procopio........... 6,000 3,000 185,375 92,687
John D. Swift............... 3,600 3,600 111,225 111,225
William B. Kilbride......... 27,749 9,750 677,327 301,234
</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>
- 11 -
<PAGE>
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
1,400,000................................ 700,000 700,000 700,000 700,000
</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 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, 1998, Mr. Kolb had an average five-year compensation of
$811,261 and 18 years of creditable service; Mr. Procopio had an average five-
year compensation of $343,238 and 16 years of creditable service; and Mr.
Swift had an average five year compensation of $328,484 and 14 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
- 12 -
<PAGE>
aggregate dollar amount paid by the Company to this related party in 1998 was
$60,982. 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 1998, Mr. Alan Lorberbaum earned approximately $379,800 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 1998.
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 interest free loans give rise to tax liability for the executive
based on imputed interest for which the executive is indemnified by the
Company. 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. 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. In addition, the individual is
reimbursed for the tax liability incurred by reason of the payment described
in the previous sentence. See also "Executive Compensation and Other
Information--Summary of Cash and Certain Other Compensation."
Since January 1, 1996, 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 in their income tax liability calculated using the statutory
withholding rate used to determine the original principal amounts of the Loans
and that calculated using 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
22, 1999 was $4,089,960, $885,801 and $201,426, respectively.
On March 5, 1999, the Board of Directors authorized the Company to enter
into agreements with Mr. Kolb, Mr. Procopio and Mr. Swift terminating the
Option Agreements and providing for the settlement of all amounts due to the
executives from the Company and all amounts due to the Company from the
executives. Under the proposed agreements, the executives will repay the
outstanding loans aggregating approximately $5,177,000 and
- 13 -
<PAGE>
the Company will make deductible tax indemnification payments to the
executives aggregating approximately $4,055,000. The net cash benefit to the
Company will be approximately $2,722,000 and all future obligations under the
Option Agreements will be eliminated.
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 22, 1999, 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 22.8%
Aladdin Partners, L.P.(2).......................... 9,900,000 16.3
The Equitable Companies Incorporated, et al.(3).... 6,955,192 11.5
399 Venture Partners, Inc., et al.(4).............. 5,564,318 9.2
David L. Kolb(5)................................... 1,009,662 1.7
Jeffrey S. Lorberbaum(6)........................... 682,174 1.1
Frank A. Procopio(7)............................... 251,468 *
Bruce C. Bruckmann(8).............................. 272,668 *
John D. Swift(9)................................... 70,002 *
Leo Benatar(8)..................................... 27,998 *
William B. Kilbride(10)............................ 30,021 *
Larry W. McCurdy(8)................................ 22,615 *
Robert N. Pokelwaldt(8)............................ 22,615 *
All directors and executive officers as a group(10
persons).......................................... 16,182,222 26.6
</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 3,500 shares owned of record by Mr. Hoffman in
his individual capacity. The business address of Mr. Hoffman is Joseph
Decosimo & Company, 1100 Tallan Building, Two 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 10, 1999 jointly filed with the
Commission by The Equitable Companies Incorporated; AXA Assurances
I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, AXA Conseil Vie Assurance
Mutuelle (formerly Alpha Assurances Vie Mutuelle), AXA Courtage Assurance
- 14 -
<PAGE>
Mutuelle (the "Mutuelles AXA"); and AXA (formerly AXA-UAP). The address of
The Equitable Companies Incorporated is 1290 Avenue of the Americas, New
York, New York 10104. Each of the Mutuelles AXA and AXA disclaim beneficial
ownership of these shares.
(4) Based upon a Schedule 13G dated February 3, 1999 jointly filed with the
Commission by 399 Venture Partners, Inc., Citibank, N.A., Citicorp and
Citigroup, Inc. The address of 399 Venture Partners, Inc. is 399 Park
Avenue, New York, New York 10043.
(5) Includes 30,000 shares issuable upon the exercise of currently vested
options, 6,796 shares issued pursuant to the Company's Executive Incentive
Program, of which 4,666 are restricted shares, and 141 shares owned
pursuant to the Company's 401(k) plan.
(6) Includes 45,000 shares issuable upon the exercise of currently vested
options and 5,048 shares issued pursuant to the Company's Executive
Incentive Program, of which 3,460 are restricted shares. 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 the shares held by Aladdin Partners, L.P.
(7) Includes 6,000 shares issuable upon the exercise of currently vested
options, 2,192 shares issued pursuant to the Company's Executive Incentive
Program, of which 1,499 are restricted shares, and 14,814 shares owned
pursuant to the Company's 401(k) plan.
(8) Includes 18,000 shares issuable upon the exercise of currently vested
options.
(9) Includes 3,600 shares issuable upon the exercise of currently vested
options, 2,062 shares issued pursuant to the Company's Executive Incentive
Program, of which 1,429 are restricted shares, and 13,485 shares owned
pursuant to the Company's 401(k) plan.
(10) Includes 27,750 shares issuable upon the exercise of currently vested
options and 2,046 shares issued pursuant to the Company's Executive
Incentive Program, of which 1,401 are restricted shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company.
Directors, executive officers and greater than ten percent stockholders are
required by SEC regulation to furnish the Company copies of all Section 16(a)
reports they file. To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and written representations
that no other reports were required, during the fiscal year ended December 31,
1998, all Section 16(a) filing requirements applicable to directors, executive
officers and greater than ten percent beneficial owners were complied with by
such persons, except that Aladdin Partners, L.P., Mr. Alan S. Lorberbaum and
Mr. Jeffrey S. Lorberbaum made one late filing on Form 5 with respect to one
sale transaction.
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 LLP as auditors of the Company for
1999. KPMG LLP also audited the Company's financial statements for 1998.
Representatives of KPMG 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 &
- 15 -
<PAGE>
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 2000 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 1, 1999. Stockholders may intend to present a proposal from the floor
of the 2000 Annual Meeting, and they may commence their own proxy
solicitation, rather than having the proposal included in the Company's 2000
annual proxy statement. Under the Company's Bylaws, the Company must receive
notice of any such Stockholder proposal prior to December 1, 1999 in order for
the notice to be timely. If the Company does not receive notice of the
Stockholder proposal prior to December 1, 1999, the Company will retain
discretionary voting authority over the proxies returned by Stockholders for
the 2000 Annual Meeting with respect to such Stockholder proposal.
Discretionary voting authority is the ability to vote proxies that
stockholders have executed and returned to the Company, on matters not
specifically reflected on the proxy card, and on which stockholders have not
had an opportunity to vote by proxy.
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 7, 1999, 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.
BARBARA B. LANCE
Secretary
Atlanta, Georgia
March 30, 1999
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<PAGE>
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 1999 Annual Meeting of Stockholders (the "Annual Meeting") of Mohawk
Industries, Inc. to be held on Thursday, May 20, 1999 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.
(1) The election of two Directors, Jeffrey S. Lorberbaum and Robert N.
Pokelwaldt, for a term of three years and until their successors are
elected and qualified:
[_] FOR [_] WITHHOLD AUTHORITY
For, except vote withheld from the following nominee:
---------------------------
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.
<PAGE>
please detach and return signed card
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: _______________ ,1999
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.
