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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
Date of Report (Date of earliest event reported): February 19, 1999
MOHAWK INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 01-19826 52-1604305
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
160 South Industrial Blvd., Calhoun, Georgia 30701
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(Address, including zip code, of principal executive offices)
(706) 629-7721
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(Registrant's telephone number, including area code)
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Item 5. Other Events
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On October 22, 1998, Mohawk Industries, Inc. ("Mohawk") entered a
Stock Restriction and Registration Rights Agreement ("Agreement") with
the shareholders of World Carpets, Inc. ("World"). The Agreement was
entered in connection with the Agreement and Plan of Merger by and
among Mohawk, WC Acquisition Corp., World and the Shareholders of
World. The Agreement is filed as Exhibit 99.1 hereto and incorporated
herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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C. Exhibits
99.1 Stock Restriction and Registration Rights Agreement by and among
Mohawk and the Shareholders of World dated October 22, 1998.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Mohawk Industries, Inc.
Date: February 19, 1999 By: /s/ Frank H. Boykin
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Frank H. Boykin
Corporate Controller
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INDEX TO EXHIBITS
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Exhibit
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99.1 Stock Restriction and Registration Rights Agreement by and among
Mohawk and the Shareholders of World dated October 22, 1998.
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STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT
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THIS STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT (this "Agreement")
is made and entered into as of October 22, 1998, by and among Mohawk Industries,
Inc., a Delaware corporation ("Acquiror"), and those shareholders of World
Carpets, Inc., a Georgia corporation ("Company"), appearing as signatories
hereto (each, a "Shareholder" and collectively, the "Shareholders").
Preamble:
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WHEREAS, pursuant to the terms of an Agreement and Plan of Merger, dated as
of October 22, 1998 (the "Merger Agreement"), by and among Acquiror, WC
Acquisition Corp., a Georgia corporation ("Sub"), Company and the Shareholders,
Sub shall be merged with and into Company (the "Merger"), with the result that
each of the outstanding shares of capital stock of Company will be converted
into the right to receive shares of the $.01 par value common stock of Acquiror
(the "Common Stock"); and
WHEREAS, in connection with the execution and delivery of the Merger
Agreement, Acquiror has agreed to grant the Shareholders certain registration
rights with respect to the shares of Common Stock to be issued to the
Shareholders; and
WHEREAS, Acquiror and the Shareholders desire to define such registration
rights on the terms and subject to the conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the parties hereby agree as follows:
1. DEFINITIONS
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As used in this Agreement, the following terms have the respective meanings
set forth below:
"COMMISSION" shall mean the Securities and Exchange Commission or any other
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federal agency at the time administering the Securities Act.
"ESCROW SHARES" shall mean the shares of Common Stock to be issued to David
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Shaheen and John A. Shaheen, as Trustee of the Revocable Trust Agreement of
John A. Shaheen, dated July 12, 1996, pursuant to Section 3.1(c) of the Merger
Agreement and subject to the terms and provisions of the Escrow Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
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"HOLDER" shall mean any holder of Registrable Securities.
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"PERSON" shall mean an individual, partnership, joint stock company,
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corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof.
"REGISTER", "REGISTERED" AND "REGISTRATION" shall mean a registration
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effected by preparing and filing a registration statement in compliance with the
Securities Act (and any post-effective amendments filed or required to be filed)
and the declaration or ordering of effectiveness of such registration statement.
"REGISTRABLE SECURITIES" shall mean (A) the aggregate number of shares of
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Common Stock to be issued to the Shareholders pursuant to the Merger Agreement
(including any Escrow Shares until such time, if ever, as such shares are
returned to Acquiror pursuant to the terms of the Escrow Agreement), and (B) any
securities of Acquiror issued as a dividend or other distribution with respect
to, or in exchange for or in replacement of, the shares of Common Stock referred
to in clause (A); provided, that Registrable Securities shall not include (i)
securities with respect to which a registration statement with respect to the
sale of such securities has become effective under the Securities Act and all
such securities have been disposed of in accordance with such registration
statement, (ii) such securities as are actually sold pursuant to Rule 144 (or
any successor provision thereto) under the Securities Act ("Rule 144"), or (iii)
such securities as are acquired by Acquiror or any of its subsidiaries.
"REGISTRATION EXPENSES" shall mean all expenses incurred by Acquiror in
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complying with its obligations under Section 3 hereof, including, without
limitation, all registration, qualification and filing fees, listing fees,
printing expenses, reasonable messenger and delivery expenses, fees and
disbursements of independent certified public accountants, fees and
disbursements of counsel for, and other persons retained by, Acquiror, fees and
expenses of one counsel for all the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of Acquiror, which shall be
paid in any event by Acquiror).
"SECURITY, SECURITIES" shall have the meaning set forth in Section 2(1) of
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the Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
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"SELLING EXPENSES" shall mean all selling commissions and discounts
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applicable to the sale of Registrable Securities and all fees and disbursements
of counsel for each of the Holders other than fees and expenses of one counsel
for all the Holders.
Capitalized terms not otherwise defined herein shall have the meanings set
forth in the Merger Agreement.
2. RESTRICTIONS ON TRANSFER
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(a) Prior to any proposed transfer of any Registrable Securities (other
than under the circumstances described in Section 3 hereof), the Holder thereof
shall give written notice to
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Acquiror of its intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by Acquiror,
shall be accompanied by an opinion of counsel reasonably satisfactory to
Acquiror to the effect that the proposed transfer may be effected without
registration under the Securities Act (provided, however, that if Acquiror does
not express any objection to such opinion of counsel within five (5) business
days after Acquiror's receipt of such opinion of counsel, Acquiror shall be
deemed to have determined that such opinion of counsel is satisfactory to
Acquiror), whereupon such Holder shall be entitled to transfer the Registrable
Securities in accordance with the terms of its notice. Each certificate or
instrument transferred as above provided shall bear the legend set forth in
Section 2(b), except that such certificate or instrument shall not bear such
legend if (i) such transfer is in accordance with the provisions of Rule 144 (or
any other rule permitting public sale without registration under the Securities
Act) or (ii) the opinion of counsel referred to above is to the further effect
that the transferee and any subsequent transferee would be entitled to transfer
such Registrable Securities in a public sale without registration under the
Securities Act.
(b) Each certificate evidencing Registrable Securities to be issued to
any Holder in connection with the Merger ("Restricted Shares") shall bear a
legend in substantially the following form:
"The shares represented by this certificate were issued pursuant
to a business combination which is accounted for as a "pooling of
interests" and may not be sold, nor may the owner thereof reduce
his risks relative thereto in any way, until such time as Mohawk
Industries, Inc. ("Mohawk") has published the financial results
covering at least 30 days of combined operations after the
effective date of the merger through which the business
combination was effected. In addition, the shares represented by
this certificate may not be sold, transferred or otherwise
disposed of except or unless (1) covered by an effective
registration statement under the Securities Act of 1933, as
amended, (2) in accordance with (i) Rule 145(d) (in the case of
shares issued to an individual who is not an affiliate of Mohawk)
or (ii) Rule 144 (in the case of shares issued to an individual
who is an affiliate of Mohawk) of the Rules and Regulations of
such Act, or (3) in accordance with a legal opinion satisfactory
to counsel for Mohawk that such sale or transfer is otherwise
exempt from the registration requirements of such Act."
(c) In the event that any Restricted Shares shall cease to be subject to
the restrictions on transfer set forth in this Agreement, Acquiror shall, upon
the written request of the Holder thereof, issue to such Holder a new
certificate evidencing such Restricted Shares without the legend or legends, as
applicable, required by Section 2(b) hereof endorsed thereon.
3. SHELF REGISTRATION RIGHTS
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(a) SHELF REGISTRATION.
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(i) As soon as reasonably practicable after the date hereof, Acquiror
shall file a "shelf" registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf
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Registration") with respect to all of the Registrable Securities. Acquiror
shall, subject to Section 3(f) hereof, use its reasonable efforts to cause the
Shelf Registration to become effective no later than at or immediately following
the Effective Time and shall use its reasonable efforts to keep the Shelf
Registration continuously effective from the date such Shelf Registration is
effective until the earlier of (A) the date on which all Registrable Securities
may be sold pursuant to Rule 144(k) or (B) the second anniversary of the date of
the Effective Time, in order to permit the prospectus forming a part thereof to
be usable by the Holders during such period. The Shelf Registration shall
provide for the offering and sale of the Registrable Securities to or through
brokers or dealers, acting as principal or agent, in transactions (which may
involve block transactions) on the New York Stock Exchange, in ordinary
brokerage transactions, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices or otherwise (including without limitation
sales in transactions that comply with the provisions of Rule 144 or Rule 145,
as applicable), or directly or indirectly through brokers or agents in private
sales at negotiated prices, or through a combination of any such methods of
sale, including but not limited to a bulk sale to a brokerage firm. In addition,
subject to the provisions of Section 3(h), Acquiror shall be required to amend
or supplement the Shelf Registration to provide for an underwritten public
offering, whether on a firm commitment or best efforts basis or otherwise (an
"Underwritten Takedown"), within a reasonable period of time after receipt by
Acquiror of written notice from the Holders holding a majority of the then
outstanding Registrable Securities requesting an Underwritten Takedown;
provided, however, that, subject to the provisions of Section 3(f), Acquiror
must receive such written notice within 180 days after the Effective Time (the
"Underwritten Takedown Notice Period"). Acquiror shall not be required to amend
or supplement the Shelf Registration to effect more than one (1) Underwritten
Takedown, regardless of whether all, some or none of the Registrable Securities
are sold pursuant to the Underwritten Takedown.
(ii) Acquiror shall supplement or amend the Shelf Registration, (A)
as required by the registration form utilized by Acquiror or by the instructions
applicable to such registration form or by the Securities Act or the rules and
regulations promulgated thereunder, and (B) to include in such Shelf
Registration any additional unregistered securities that become Registrable
Securities by operation of the definition thereof and which are issued in
respect to, or in exchange for or in replacement of, the Registrable Securities
included in such Shelf Registration, unless such securities are otherwise
registered under the Securities Act or (C) if and to the extent reasonably
requested by the Holders of the Registrable Securities, provided, however, that
such request and any required supplement or amendment shall relate only to
material information about such Holder and included in or omitted from such
Shelf Registration. Acquiror shall furnish to the Holders of the Registrable
Securities to which the Shelf Registration relates copies of any such supplement
or amendment sufficiently in advance (but in no event less than three business
days in advance) of its use and/or filing with the Commission to allow the
Holders a meaningful opportunity to comment thereon.
(iii) The Shelf Registration may include other Securities of Acquiror
which are held by Persons who, by virtue of agreements with Acquiror, are
entitled to include their Securities in such registration statement.
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(b) EXPENSES OF REGISTRATION.
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(i) Except as provided in Section 3(b)(ii) below, all Registration
Expenses (including all Registration Expenses incurred in connection with the
Shelf Registration and any supplements or amendments thereto, whether or not it
becomes effective, and whether all, none or some of the Registrable Securities
are sold pursuant to the Shelf Registration) shall be borne by Acquiror, and all
Selling Expenses shall be borne by the Holders of the Registrable Securities so
registered pro rata on the basis of the number of their shares so registered.
(ii) All Registration Expenses (which term for purpose of this
Section 3(b)(ii) shall include all expenses relating to a "roadshow") and all
Selling Expenses incurred in connection with an Underwritten Takedown, whether
all, some or none of the Registrable Securities are sold pursuant to the
Underwritten Takedown, shall be borne jointly and severally by the Holders of
the Registrable Securities included in the Underwritten Takedown.
(c) OTHER REGISTRATION PROCEDURES. At its expense, Acquiror will:
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(i) use its reasonable efforts (x) to register or qualify all
Registrable Securities and other Securities covered by such Shelf
Registration under such other securities or blue sky laws of such States of
the United States of America where an exemption is not available and as the
Holders of Registrable Securities covered by such Shelf Registration shall
reasonably request, (y) to keep each such registration or qualification in
effect for so long as the Shelf Registration remains in effect, and (z) to
take any other action which may be reasonably necessary or advisable to
enable such Holders to consummate the disposition in such jurisdictions of
the Registrable Securities to be sold by such Holders, except that Acquiror
shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction where it is not so
qualified, or to subject itself to taxation in any such jurisdiction, or to
execute a general consent to service of process in effecting such
registration, qualification or compliance, unless Acquiror is already
subject to service in such jurisdiction and except as may be required by
the Securities Act or applicable rules or regulations thereunder;
(ii) use its reasonable efforts to cause all Registrable Securities
covered by such Shelf Registration to be registered with or approved by
such other federal or state governmental agencies or authorities as may be
necessary to enable the Holders thereof to consummate the disposition of
such Registrable Securities;
(iii) promptly notify each Holder of Registrable Securities covered
by the Shelf Registration (A) upon discovery that, or upon the happening of
any event as a result of which, the prospectus forming a part of such Shelf
Registration, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, (B) of the issuance by the
Commission of any stop order suspending the effectiveness of such Shelf
Registration or the initiation of proceedings for that purpose, (C) of any
request by the Commission for (1) amendments to
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such Shelf Registration or any document incorporated or deemed to be
incorporated by reference in such Shelf Registration, (2) supplements to
the prospectus forming a part of such Shelf Registration or (3) additional
information, or (D) of the receipt by Acquiror of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose, and at
the request of any such Holder, promptly prepare and furnish to it a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary;
(iv) use its reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of the Shelf Registration, or the
lifting of any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction;
(v) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement for Acquiror covering the period of at least 12 months, but not
more than 18 months, beginning with the first full calendar month after the
effective date of such Shelf Registration, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder;
(vi) provide promptly to the Holders upon request any document
filed by Acquiror with the Commission pursuant to the requirements of
Section 13 or Section 15 of the Exchange Act;
(vii) use its reasonable efforts to cause all Registrable Securities
included in the Shelf Registration to be listed on the New York Stock
Exchange, or if not then listed on the New York Stock Exchange, on any
other securities exchange on which Securities of the same class are then
listed, or, if not then listed on any securities exchange, to be eligible
for trading in any over-the-counter market or trading system in which
Securities of the same class are then traded; and
(viii) promptly after the Shelf Registration, or any amendment
thereto, if applicable, is declared effective by the Commission, deliver to
the Holders and, to each of the underwriters in the event of an Underwritten
Takedown, if any, as many copies of the prospectus forming part of the Shelf
Registration, and any amendment or supplement thereto, as such Persons may
reasonably request.
(d) INDEMNIFICATION; CONTRIBUTION.
(i) Acquiror shall indemnify, to the fullest extent permitted by
law, each Holder of Registrable Securities, and if applicable, its officers,
directors, employees and agents, and if applicable, each Person who controls
such Holder (within the meaning of the Securities Act), against all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation and legal expenses) arising out of or based upon any untrue or
alleged untrue
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statement of a material fact contained in the Shelf Registration, any related
prospectus, or any amendment thereof or supplement thereto, or any omission or
alleged omission to state in any thereof a material fact required to be stated
therein or necessary to make the statements therein (in the case of a prospectus
or prospectus supplement, in light of the circumstances under which they were
made) not misleading, except in each case insofar as and to the extent that the
same arises out of or is based upon (i) an untrue statement or alleged untrue
statement of a material fact or an omission or alleged omission to state a
material fact in such Shelf Registration, prospectus, amendment or supplement,
as the case may be, made or omitted, as the case may be, in reliance upon and in
conformity with information furnished to Acquiror by such Holder expressly for
use therein, or (ii) a Holder's failure to send or give a copy of the final
prospectus to the Persons asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus, and such final
prospectus was delivered by Acquiror to the Holder sufficiently in time for the
Holder to deliver it to the asserting Person prior to such written confirmation
of sale.
(ii) In connection with the Shelf Registration, each Holder shall
furnish to Acquiror in writing such information and affidavits with respect to
such Holder as Acquiror reasonably requests for use in connection with such
Shelf Registration, any related prospectus, or any amendment or supplement
thereto, and shall indemnify, to the fullest extent permitted by law, Acquiror,
Acquiror's directors, officers, employees and agents and each Person who
controls Acquiror (within the meaning of the Securities Act), against all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation and legal expenses) arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in the Shelf Registration,
any related prospectus, or any amendment or supplement thereto, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a prospectus
or prospectus supplement, in light of the circumstances under which they were
made) not misleading, in each case to the extent, but only to the extent, that
the same arises out of or is based upon an untrue statement or alleged untrue
statement of a material fact or an omission or alleged omission to state a
material fact in such registration statement or in such related prospectus,
amendment or supplement, as the case may be, made or omitted, as the case may
be, in reasonable reliance upon and in reasonable conformity with written
information furnished to Acquiror by such Holder expressly for use in the Shelf
Registration.
(iii) Any Person entitled to indemnification under this Section 3(d)
agrees to give prompt written notice to the indemnifying party after the receipt
by such Person of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which such
Person will claim indemnification or contribution pursuant to this Agreement
and, unless in the reasonable judgment of such indemnified party a conflict of
interest may exist between such indemnified party and the indemnifying party
with respect to such claim, permit the indemnifying party to assume the defense
of such claim with counsel selected by the indemnifying party and reasonably
satisfactory to such indemnified party. If the indemnifying party is not
entitled to, or elects not to, assume the defense of a claim, it shall not be
obligated to pay the reasonable fees and expenses of more than one counsel with
respect to such claim, unless
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in the reasonable judgment of counsel to such indemnified party, expressed in a
writing delivered to the indemnifying party, a conflict of interest may exist
between such indemnified party and any other indemnified party with respect to
such claim, in which event the indemnifying party shall be obligated to pay the
reasonable fees and expenses of such additional counsel or counsels (which shall
be limited to one counsel per indemnified party). The indemnifying party shall
not be subject to any liability for any settlement made without its consent,
which consent shall not be unreasonably withheld.
(iv) Contribution.
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(A) If the indemnification provided for in this Section 3(d)
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
by the indemnified parties, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 3(d)(iii) hereof, any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
(B) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 3(d)(iv) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(C) If indemnification is available under this Section 3(d),
the indemnifying parties shall indemnify each indemnified party to the fullest
extent provided in Sections 3(d)(i) and 3(d)(ii) hereof without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 3(d)(iv).
(e) INFORMATION BY THE HOLDERS. Each of the Holders holding Registrable
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Securities included in the Shelf Registration shall furnish to Acquiror such
information regarding such Holder and the distribution proposed by such Holder
as Acquiror may reasonably request and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Section 3.
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(f) HOLDBACK AGREEMENT; POSTPONEMENT. Notwithstanding the provisions of
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Section 3(a), if, during the period commencing on the ninety-first (91/st/) day
following the publication by Acquiror of the financial results covering at least
thirty (30) days of combined operations of Company and Acquiror after the
Effective Time, the Board of Directors of Acquiror determines, in good faith and
in reliance upon advice of outside counsel that disclosure would be required by
or would violate contractual obligations or that disclosure would be advisable
under applicable law, that it is in the best interests of Acquiror (A) not to
disclose the existence of facts surrounding any proposed or pending acquisition,
disposition, strategic alliance or financing transaction involving Acquiror or
(B) for any purpose relating to: (aa) a registration of equity securities of
Acquiror, (bb) a registration of convertible securities of Acquiror (including
any underlying equity securities), (cc) a sale of any securities in a Rule 144A
transaction, or (dd) a registration of any securities relating to a transaction
described in Rule 145(a), to suspend the registration rights set forth herein,
Acquiror may, by notice to the Holders in accordance with Section 7(a), suspend
the rights of the Holders to make sales pursuant to the Shelf Registration for
such a period of time as the Board of Directors may reasonably determine,
provided, however, that such suspension shall be terminated by Acquiror as soon
as is reasonably practicable but in no event later than ninety (90) days after
the notice of suspension is delivered to the Holders and provided, further, that
Acquiror shall not be entitled to exercise its suspension rights under this
Section 3(f) more than one time in any 365-day period. In the event that any
such suspension occurs during the Underwritten Takedown Notice Period, the
Underwritten Takedown Notice Period shall be extended by that number of days
equal to the number of days of such suspension.
(g) ASSIGNMENT. The registration rights set forth in this Section 3
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hereof may be assigned, in whole or in part, to any transferee of Registrable
Securities (who shall be considered thereafter to be a Holder (provided that any
transferee who is not an affiliate of Shareholder shall be a Holder only with
respect to such Registrable Securities so acquired and any stock of Acquiror
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of, such Registrable Securities) and shall be bound by all
obligations and limitations of this Agreement).
(h) UNDERWRITTEN TAKEDOWN. In the case of an Underwritten Takedown, the
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managing underwriter and any other underwriter or underwriters with respect to
such offering shall be selected by the participating Holders, provided such
underwriters are of recognized national standing and are reasonably acceptable
to Acquiror. Such underwriter or underwriters will be instructed to effect as
broad a distribution of the Registrable Securities to be sold by them as is
reasonably practicable. Acquiror agrees to make available, for inspection by the
Holders and any underwriter participating in an Underwritten Takedown (and any
attorney, accountant or other representative retained by such participating
Holders or by any such underwriter), all financial and other records, corporate
documents and properties of Acquiror, as Acquiror, with advice of counsel,
reasonably determines is appropriate, and cause Acquiror's officers, directors
and employees to supply all information reasonably requested by any such
participating Holder, underwriter, attorney, accountant or other representative
in connection with such Underwritten Takedown. Acquiror and the participating
Holders shall enter into an underwriting agreement in
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customary form with such underwriter or underwriters, which shall include, among
other provisions, indemnities to the effect and to the extent provided in
Section 3(d) hereof.
4. INTERPRETATION OF THIS AGREEMENT
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(a) Directly or Indirectly. Where any provision in this Agreement refers
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to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
(b) Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Georgia.
(c) Section Headings. The headings of the sections and subsections of
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this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
5. TERMINATION
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This Agreement shall automatically terminate, and shall cease to be of any
further force or effect, upon termination of the Merger Agreement in accordance
with its terms.
6. MISCELLANEOUS
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(a) NOTICES.
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All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered by hand, by facsimile
transmission (with confirmation received by the sender), by registered or
certified mail, postage pre-paid, or by courier or overnight carrier, to the
persons at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date
so delivered:
(A) if to Acquiror, to 1600 South Industrial Boulevard, Calhoun,
Georgia 30701, 706/602-0278 (telecopy), Attention: Chief Executive Officer;
(B) if to the Shareholders, at the address listed on Schedule I
hereto.
(b) THIRD PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS. Each of the
-------------------------------------------------
Shareholders as of the Effective Time is an intended beneficiary of this
Agreement and shall be entitled to the benefits of this Agreement, subject to
compliance with the obligations of this Agreement as applied to Shareholders
hereunder. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties, so long as any such successor or
assignee agrees to be bound by the terms of this Agreement.
(c) ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement and Section
--------------------------------------
8.3 of the Merger Agreement constitute the entire understanding of the parties
hereto in respect
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of the subject matter contained herein and supersede all prior understanding
among such parties in respect of the subject matter contained herein. This
Agreement may be amended, and the observance of any term of this Agreement may
be waived, with the written consent of Acquiror and the Holders of at least a
majority of the then outstanding Registrable Securities.
(d) COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
(e) REMEDIES. Each of the Holders and Acquiror agrees that irreparable
--------
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that each of the Holders and Acquiror shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to the remedies
set forth in Section 6(i) hereof.
(f) SEVERABILITY. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended and understood that all of the rights and privileges
of each of the Holders shall be enforceable to the fullest extent permitted by
law.
(g) IRREVOCABLE APPOINTMENT OF AGENT. By the execution and delivery of
--------------------------------
this Agreement, including counterparts hereof, each of the Shareholders hereby
irrevocably constitutes and appoints David M. Shaheen as the true and lawful
agent and attorney-in-fact of each such Shareholder in the various capacities
provided for herein (such individual, or such other individual as the
Shareholders shall designate in writing to Acquiror from time to time, is herein
referred to as the "Agent"), and to do or refrain from doing all such further
acts and things, and to execute all such documents, as the Agent shall deem
necessary or appropriate in connection with this Agreement. Unless there is no
existing person who has been designated to act as Agent by the Shareholders, all
rights of the Holders under this Agreement shall be exercised by the Holders
only through or by the Agent in his or her capacity as agent of the Holders
hereunder, and Acquiror shall not be required to take directions from any other
Holder for so long as such Agent continues to serve and has not otherwise been
removed as Agent pursuant to notice to Acquiror from the Shareholders. If at any
time no person is serving as Agent, Acquiror shall not be required to take
action except upon the direction of the Shareholders. Each Shareholder hereby
agrees to indemnify and to save and hold harmless the Agent from any Liability
incurred by the Agent based upon or arising out of any act, whether of omission
or commission, of the Agent pursuant to the authority herein granted, other than
acts, whether of omission or commission, of the Agent that constitute gross
negligence or willful misconduct in the exercise by the Agent of the authority
herein granted.
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(h) OTHER RIGHTS. Nothing in this Agreement shall prohibit Acquiror from
------------
granting registration rights to other parties, regardless of whether such
registration rights are more or less favorable than the ones granted hereunder.
(i) ARBITRATION. Any dispute, claim or controversy relating in any way
-----------
to this Agreement, or the transactions contemplated hereby, whether in contract,
in tort or otherwise, except a request for equitable, injunctive or restraining
relief (as described in Section 6(e)) or to enforce an arbitration award, shall
be resolved by arbitration in Atlanta, Georgia, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("AAA"),
subject to the limitations of this Section 6(i). This agreement to arbitrate
will be specifically enforceable under the prevailing law of any court having
jurisdiction. Notice of a demand for arbitration will be filed in writing with
the applicable other signatory hereto and with AAA. The demand for arbitration
shall be made within a reasonable time after the claim, dispute or other matter
in question has arisen, and in no event shall any such demand be made after the
date when institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable statute of
limitations. The signatories hereto agree that three (3) arbitrators experienced
in the matters at issue shall arbitrate all disputes. The arbitrators shall be
selected by the joint agreement of the signatories hereto, but if they do not so
agree within twenty (20) days after the date of the notice of a demand for
arbitration referred to above, the selection shall be made pursuant to the
Commercial Arbitration Rules of AAA from the panels of arbitrators maintained by
AAA. The award rendered by the arbitrators will be final, judgment may be
entered upon it in any court having jurisdiction thereof, and the award will not
be subject to vacation, modification or appeal, except to the extent permitted
by Sections 10 and 11 of the Federal Arbitration Act, the terms of which
Sections the signatories hereto agree shall apply. Each participant in the
arbitration shall pay its own expenses of arbitration, and the expenses of the
arbitrators shall be equally shared; provided, however, that if in the opinion
of the arbitrators any claim, or any defense or objection thereto, was
unreasonable, the arbitrators may assess, as part of their award, all or any
part of the arbitration expenses against the participant(s) raising such
unreasonable claim, defense or objection.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first set forth above.
MOHAWK INDUSTRIES, INC.
By: /s/ David L. Kolb
----------------------------------
Name: /s/ David L. Kolb
----------------------------------
Title: Chairman and CEO
----------------------------------
THE SHAREHOLDERS:
/s/ S Shaheen
---------------------------------------
Shaheen A. Shaheen
/s/ Piera B. Shaheen
---------------------------------------
Piera B. Shaheen
/s/ David M. Shaheen
---------------------------------------
David M. Shaheen
Revocable Trust of John A. Shaheen, dated July 12, 1996
By: /s/ John A. Shaheen
---------------------------------------
Trustee
David M. Shaheen and John A. Shaheen, as Co-Trustees
pursuant to that certain Voting Trust Agreement dated
April 30, 1992
By: /s/ David M. Shaheen
---------------------------------------
Trustee
By: /s/ John A. Shaheen
---------------------------------------
Trustee
Piera B. Shaheen Trust, dated 12/8/76
By: /s/ John C. Stophel
---------------------------------------
Trustee
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<PAGE>
Shaheen A. Shaheen Trust, dated 12/15/72
By: /s/ John C. Stophel
--------------------------------------
Trustee
Shaheen A. and Piera B. Shaheen Trust, dated 12/10/74
By: /s/ John C. Stophel
--------------------------------------
Trustee
Shaheen A. and Piera B. Shaheen Trust, dated 12/8/76
By: /s/ John C. Stophel
--------------------------------------
Trustee
John A. Shaheen Trust (J-1), dated 12/8/76
By: /s/ John C. Stophel
--------------------------------------
Trustee
John A. Shaheen Trust (J-2), dated 12/8/76
By: /s/ John C. Stophel
--------------------------------------
Trustee
John A. Shaheen Family Trust, dated 12/30/80
By: /s/ John C. Stophel
--------------------------------------
Trustee
Irrevocable Trust of John A. Shaheen (J-6), dated 12/27/82
By: /s/ John C. Stophel
-----------------------------------------
Trustee
Irrevocable Trust of John A. Shaheen (J-7), dated 12/27/82
By: /s/ John C. Stophel
-----------------------------------------
Trustee
Irrevocable Trust of John A. Shaheen (J-8), dated 3/24/83
By: /s/ John C. Stophel
-----------------------------------------
Trustee
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Irrevocable Trust of John A. Shaheen (J-9), dated 3/24/83
By: /s/ John C. Stophel
-----------------------------------------
Trustee
Irrevocable Trust of John A. Shaheen (J-10), dated 12/7/87
By: /s/ John C. Stophel
-----------------------------------------
Trustee
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SCHEDULE I
David M. Shaheen
23940 Malibu Road
Malibu, California 90265
