Shaw Logo Here
To the Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders
for the 1998 fiscal year to be held at the administrative offices of the
Company, 616 East Walnut Avenue, Dalton, Georgia, on Thursday, April 29, 1999,
at 11:00 a.m., local time.
The principal business of the meeting will be to elect directors and
to approve a bonus compensation plan for the executive officers of Shaw
Industries. During the meeting we will review the results of the past year and
report on significant aspects of our operations during the first quarter of
fiscal 1999.
We would appreciate your completing, signing, dating and returning the
enclosed proxy card in the envelope provided at your earliest convenience. If
you choose to attend the meeting, you may, of course, revoke your proxy and
personally cast your votes.
Sincerely yours,
/s/ ROBERT E. SHAW
ROBERT E. SHAW
Chairman of the Board of Directors
and Chief Executive Officer
April 2, 1999
<PAGE>
SHAW INDUSTRIES, INC.
616 East Walnut Avenue
Dalton, Georgia 30720
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 29, 1999
The Annual Meeting of Shareholders of Shaw Industries, Inc. for fiscal
year 1998 will be held on Thursday, April 29, 1999, at 11:00 a.m., at the
principal administrative offices of the Company, 616 East Walnut Avenue, Dalton,
Georgia.
The meeting is called for the following purposes:
1. To elect four directors to Class I of the Board of Directors for a
three-year term and one director to Class III for a one-year term.
2. To act upon a proposal to approve the Executive Annual Incentive Plan.
3. To consider and act upon such other business as may properly come
before the meeting or any adjournment(s).
The Board of Directors has fixed the close of business on March 26, 1999 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting.
By order of the Board of Directors,
/s/BENNIE M. LAUGHTER
BENNIE M. LAUGHTER
Secretary
April 2, 1999
IF YOU ARE UNABLE TO BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO SIGN,
COMPLETE AND RETURN THE ENCLOSED PROXY SO THAT YOUR STOCK WILL BE REPRESENTED.
<PAGE>
PROXY STATEMENT
SHAW INDUSTRIES, INC.
616 East Walnut Avenue
Dalton, Georgia 30720
The enclosed proxy is solicited by the Board of Directors of Shaw
Industries, Inc. (the "Company") for use at the Annual Meeting of Shareholders
to be held on April 29, 1999, at 11:00 a.m., local time, at the administrative
offices of the Company, 616 East Walnut Avenue, Dalton, Georgia. Any shareholder
giving a proxy has the power to revoke it at any time before it is voted by
filing with the Secretary either an instrument revoking the proxy or a duly
executed proxy bearing a later date. Proxies may also be revoked by any
shareholder present at the meeting who expresses a desire to vote his or her
shares in person. Proxies in the accompanying form which are properly executed
by shareholders, duly returned and not revoked will be voted. Such proxies will
be voted in accordance with the directions, if any, given by such shareholders,
and if directions are not given, will be voted in favor of the proposal to elect
as directors the persons specified herein and in favor of the proposal to
approve the Executive Annual Incentive Plan.
This proxy statement and proxy and the accompanying notice were
first mailed to shareholders on or about April 2, 1999.
VOTING RIGHTS AND PRINCIPAL SHAREHOLDERS
March 26, 1999 has been fixed as the record date for the determination
of shareholders entitled to notice of and to vote at the meeting or any
adjournment(s). As of the record date, the Company had outstanding and entitled
to vote at the meeting 141,336,297 shares of Common Stock, each share being
entitled to one vote (the "Common Stock"). The holders of a majority of the
shares entitled to be voted must be present or represented by proxy to
constitute a quorum. Shares as to which authority to vote is withheld,
abstentions and broker non-votes are counted in determining whether a quorum
exists.
Under Georgia law, directors are elected by a plurality of the votes
cast by holders of share entitled to vote in the election at a meeting at which
a quorum is present. Only votes actually cast will be counted for the purpose of
determining whether a particular nominee received more votes than the persons,
if any, nominated for the same seat on the Board of Directors. Accordingly, if
authority to vote for one or more nominees is withheld on a proxy card, no vote
will be cast with respect to the shares repr esented by that proxy card and the
outcome of the election will not be affected. Under Georgia law and regulations
under Section 162(m) of the Internal Revenue Code of 1986, as amended, the
proposed Executive Annual Incentive Plan will be approved if a majority of the
shares of Common Stock voted on the matter are voted in favor of the proposal.
Therefore, abstentions and "broker non-votes"will have no effect on the results
of the voting with respect to Proposal 2.
The following table sets forth information concerning those persons
known by management of the Company to own beneficially more than 5% of the
Common Stock, the directors and director nominees of the Company, the executive
officers named in the Summary Compensation Table included elsewhere herein and
all directors and executive officers as a group. Such information is given as of
March 26, 1999. According to rules adopted by the Securities and Exchange
Commission, a person is the "beneficial owner" of securities if he or she has or
shares the power to vote them or to direct their investment. Except as otherwise
noted, the indicated owners have sole voting and investment power with respect
to shares beneficially owned. An asterisk in the percent of class column
indicates beneficial ownership of less than 1% of the outstanding Common Stock.
<PAGE>
<TABLE>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
<S> <C> <C>
Robert E. Shaw (1) 7,301,688(2) 5.2
J. C. Shaw (3) 7,173,582(4) 5.1
Julian D. Saul (5) 11,666,667(6) 8.3
Linda Saul Schejola (7) 7,777,777(8) 5.5
J. Hicks Lanier 9,000 *
R. Julian McCamy 3,166,019(9) 2.2
Thomas G. Cousins 41,000 *
S. Tucker Grigg 1,800,277(10) 1.3
William C. Lusk, Jr. 603,160(11) *
W. Norris Little 426,355 *
Robert R. Harlin 508 *
Roberto Garza 0 *
Robert J. Lunn 1,000 *
Vance D. Bell 85,484 *
Kenneth G. Jackson 6,500 *
All executive officers and
directors as a group (18 persons) 33,510,223(12) 23.7
</TABLE>
(1) Mr. Shaw's address is 107 South Wildberry Road, Rocky Face, Georgia 30740.
(2) Includes 567,840 shares owned by Mr. Shaw's spouse.
(3) Mr. Shaw's address is 721 West Avenue, Cartersville, Georgia 30120.
(4) Includes 65,672 shares owned by Mr. Shaw's spouse, 43,559 held in trust for
Mr. Shaw's grandchildren, and 3,999,050 shares held in a grantor retained
annuity trust. Mr. Shaw has sole voting power with respect to the shares
held in the annuity trust.
(5) Mr. Saul's address is 702 Mt. Sinai Street, Dalton, Georgia 30720.
(6) Includes 11,160,724 shares held in the Julian Saul Family Trust and 388,989
shares held in the Anita Saul Family Trust.
(7) Ms. Schejola's addess is 1106 West Lakeshore Drive, Dalton, Georgia 30720.
(8) Includes 7,699,808 shares held in the Linda Saul Schejola Family Trust.
(9) Includes 1,369,119 shares owned by Mr. McCamy's spouse and 427,236 shares
held in trust for Mr. McCamy's children. Mr. McCamy disclaims beneficial
ownership of the shares held by his spouse and in trust for his children
(10) Includes 1,148,480 shares owned by the estate of Mr. Grigg's deceased
spouse and 58,520 shares held in trust for his children. Mr. Grigg
disclaims beneficial ownership of the shares held by the estate of his
spouse and in trust for his children.
(11) Includes 8,528 shares owned by Mr. Lusk's spouse, as to which Mr. Lusk
shares voting and investment powers, and 8,400 shares held for Mr. Lusk's
grandchildren.
(12) Includes 98,800 shares that are subject to options that are currently
exercisable or that become exercisable within 60 days of March 26, 1999,
including 12,500 shares for Mr. Little, 30,900 shares for Mr. Bell and
25,200 shares for Mr. Jackson.
<PAGE>
PROPOSAL 1. ELECTION OF CLASS OF DIRECTORS
The Board of Directors of the Company is divided into three classes of
directors with staggered terms of office. Upon the expiration of the term of
office for a class of directors, the nominees for that class are elected for a
term of three years to serve until the election and qualification of their
successors. At the Annual Meeting of Shareholders this year, there are four
nominees in Class I and one nominee to fill a vacancy in Class III created by an
increase in the size of the Board of Directors effective in January 1999. The
Class II and Class III directors have two years and one year, respectively,
remaining on their terms of office.
It is the intention of the persons named as proxies to vote their
proxies for the election of J. C. Shaw, Robert E. Shaw, Robert J. Lunn, and
Julian D. Saul as Class I directors and for Roberto Garza as a Class III
director. All of the Class III nominees, other than Mr. Garza, currently serve
as directors. In the event any of the nominees refuses or is unable to serve as
a director (which is not now anticipated), the persons named as proxies reserve
full discretion to vote for such other person or persons as may be nominated.
The Board of Directors recommends a vote FOR the election of the
nominees named below as Class I directors and for the nominee named below as a
Class IIIdirector.
The following section sets forth the names, ages, occupations and
employment during the last five years of each of the nominees and the continuing
directors in Class II and Class III, the period during which each has served as
a director of the Company and other directorships held.
Nominees Nominees for Class I
(Term Expiring 2002)
J. C. SHAW
Director since 1967 Age: 69
Mr. Shaw has been Chairman Emeritus of the Board of the Company since April 27,
1995, and served as Chairman of the Board of the Company for more than five
years prior thereto.
ROBERT E. SHAW
Director since 1967 Age:67
Mr. Shaw has been Chairman of the Board and Chief Executive Officer of the
Company since April 27, 1995, and served as President and Chief Executive
Officer of the Company for more than five years prior thereto. He is also a
director of Oxford Industries, Inc., an apparel manufacturer.
ROBERTJ. LUNN
Director since 1997 Age: 52
Mr. Lunn is Managing Director of Lunn Partners, LLC, in Chicago, Illinois.
Previously, he had been a Managing Director of Lehman Brothers from 1994 to 1996
and a Managing Director with Morgan Stanley for more than five years previous to
that.
JULIAN D. SAUL
Director since 1998 Age: 58
Mr. Saul joined the Company in October, 1998. On January 24, 1999, he was
elected to the office of President. Prior to October 3, 1998, Mr. Saul was the
Chief Executive Officer and Chairman of the Board of Queen Carpet Corporation.
Pursuant to an employment agreement dated October 6, 1998, between the Company
and Mr. Saul, the Company was required to nominate Mr. Saul for a position on
the Board of Directors.
Nominee for Class III
(Term Expiring 2000)
ROBERTO GARZA Age: 43
Mr. Garza has served as President and Chief Executive Officer of Versax Group, a
subsidiary of Grupo Industrial Alfa S.A. de C.V., of Monterrey, Mexico, since
January, 1993.
<PAGE>
Directors Continuing in Office
Class II
(Term Expiring 2001)
J. HICKS LANIER
Director since 1986 Age: 58
Mr. Lanier is Chairman of the Board, President and Chief Executive Officer of
Oxford Industries, Inc., an apparel manufacturer. Mr. Lanier also serves as a
director of SunTrust Banks of Georgia, Inc., Genuine Parts Company and Crawford
& Company.
R. JULIAN McCAMY
Director since 1986 Age: 67
Mr. McCamy is President of McCamy Properties, Inc., a real estate development
company.
THOMAS G. COUSINS
Director since 1992 Age: 67
Mr. Cousins is Chairman of the Board and Chief Executive Officer of Cousins
Properties Incorporated, a real estate development company.
S. TUCKER GRIGG
Director since 1992 Age: 62
Mr. Grigg is self-employed as a manufacturer of advertising and marketing
displays, furniture and bedding.
Class III
(Term Expiring 2000)
W. NORRIS LITTLE
Director since 1979 Age: 67
Mr. Little has been Vice Chairman of the Company since January 24, 1999, and
served as Senior Vice President, Operations and then as President of the Company
for more than five years prior thereto.
WILLIAM C. LUSK, JR.
Director since 1973 Age: 63
Mr. Lusk is the retired Senior Vice President and Treasurer of the Company.
ROBERT R. HARLIN
Director since 1967 Age: 66
Mr. Harlin is a member of the law firm of Powell, Goldstein, Frazer & Murphy
LLP.
Certain Relationships
Messrs. J. C. Shaw and Robert E. Shaw are brothers. Messrs. McCamy and
Grigg are brothers-in-law of Messrs. J. C. Shaw and Robert E. Shaw.
Mr. Harlin is a member of the law firm of Powell, Goldstein, Frazer &
Murphy LLP, which has served as counsel for the Company since its inception.
Meetings and Committees During the past fiscal year, the Board of Directors
met six times. The executive committee consisted of Messrs. J. C. Shaw, Robert
E. Shaw, Harlin, Little and Lanier and did not meet during the past fiscal year.
The executive committee functions with substantially all of the powers and
duties of the Board of Directors; however, the committee lacks authority to
amend the Articles of Incorporation or Bylaws of the Company, fill vacancies on
the Board of Directors, approve or propose to shareholders action for which
shareholder approval is required by law or approve mergers that do not require
shareholder approval. The executive committee recommends individuals to the
Board of Directors for consideration as nominees to the Board of Directors. No
formal procedure for shareholder recommendations regarding nominees to the Board
of Directors has been adopted. The executive committee would consider
<PAGE>
any such shareholder recommendations if submitted in writing, addressed to the
chairman of the executive committee at the Company's principal offices.
The audit committee consists of Messrs. Lanier, McCamy and Harlin. The
audit committee met three times during the past fiscal year. The audit committee
is responsible for reviewing the financial statements of the Company, for
evaluating the Company's internal control systems and procedures and for
coordinating and approving the activities of the Company's auditors. This
committee also approves services other than normal audit services performed by
the Company's auditors.
The compensation committee consists of Messrs. Cousins, Grigg and Lunn. The
compensation committee met three times during the past fiscal year. This
committee is responsible for setting and reviewing the compensation, including
fringe benefits, of the executive officers and directors of the Company and
administering the Company's stock option plans. Director Compensation During
fiscal 1998, each nonmanagement director received an annual fee of $24,000, half
of which was received in the form of Common Stock of the Company, a fee of
$1,000 for each board meeting attended and a fee of $750 for each committee
meeting attended. Each management director received a fee of $1,000 for each
board meeting attended. The Company paid ordinary and necessary travel expenses
for directors to attend board and committee meetings.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers and persons who own beneficially more than 10% of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission (the "SEC") and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than 10%
shareholders are required by SEC regulations to furnish the Company with copies
of all such forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, its officers, directors and greater than 10% shareholders
complied during fiscal 1998 with all applicable Section 16(a) filing
requirements, except that Mr. Saul's initial beneficial ownership report on Form
3 was filed late.
<PAGE>
EXECUTIVE COMPENSATION
This section of the proxy statement discloses the compensation awarded or
paid to, or earned by, the Company's Chief Executive Officer and its four other
most highly compensated executive officers with respect to the fiscal year ended
January 2, 1999 (together, these persons are sometimes referred to as the "named
executives").
<TABLE>
Summary Compensation Table
Annual Long-Term
Compensation Compensation
------------ ------------
Options/ All Other
Fiscal Salary Bonus SARs Compensation
Name and Position Year ($) ($) (1) (#) ($) (2)
----------------- ---- --- ------- --- -------
<S> <C> <C> <C> <C> <C>
Robert E. Shaw 1998 1,000,000 1,500,000 -- 4,800
Chairman and 1997 1,000,000 500,000 -- 4,750
Chief Executive Officer 1996 1,000,000 1,000,000 8,000 4,750
W. Norris Little 1998 625,000 750,000 -- 4,800
Vice Chairman 1997 625,000 250,000 -- 4,750
1996 588,000 625,000 8,000 4,750
Julian D. Saul(3) 1998 150,000 200,000 -- 4,800
President
Vance D. Bell 1998 450,000 300,000 40,000 4,800
Vice President, 1997 450,000 200,000 15,000 4,750
Marketing 1996 450,000 334,000 8,000 4,750
Kenneth G. Jackson(4) 1998 380,000 300,000 70,000 4,800
Vice President, 1997 380,000 200,000 15,000 4,750
Chief Financial Officer 1996 295,000 150,000 -- --
</TABLE>
(1) Annual bonus compensation is reported with regard to the respective fiscal
year in which the bonus is earned.
(2) The amounts in this column represent the Company's matching contributions
to the retirement savings plan accounts of the named executives.
(3) Mr. Saul joined the Company as a senior executive in October, 1998.
(4) Mr. Jackson joined the Company in February, 1996, as Vice President and
Chief Financial Officer. Previously, he had been a partner with Arthur
Andersen LLP for more than five years.
<PAGE>
This table presents information regarding options granted during fiscal
1998 to purchase shares of the Company's Common Stock. The Company has no
outstanding SARs and granted no SARs during fiscal 1998. In accordance with SEC
rules, the table shows the hypothetical "gains" or "option spreads" that would
exist for the respective options based on assumed rates of annual compound stock
price appreciation of 5% and 10% from the date the options were granted over the
full option term.
<TABLE>
Option Grants in Fiscal 1998
Individual Grants Potential Realizable
- ----------------------------------------------------------------------------------------- Value at Assumed
% of Total Annual Rates of Stock
Options Granted to Exercise Option Term
Granted Employees in Price Expiration 5% 10%
Name ($)(1) Fiscal Year ($/Sh) Date ($) ($)
---- ------ ----------- ------ ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
Mr. R.E. Shaw 0 -- -- -- -- --
Mr. Little 0 -- -- -- -- --
Mr. Saul 0 -- -- -- -- --
Mr. Bell 40,000 1.42 13.225 3/25/08 332,600 843,000
Mr. Jackson 70,000 2.49 13.225 3/25/08 582,050 1,475,250
</TABLE>
- ------------
(1) The options were granted at fair market value as of the date of grant
This table presents information regarding options exercised for shares of
the Company's Common Stock during fiscal 1998 and the value of unexercised
options held at January 2, 1999. There were no SARs outstanding during fiscal
1998.
<TABLE>
Aggregated Option Exercises in Fiscal 1998 and 1998 Fiscal Year-End Option
Value
Number of Value of Unexercised
Unexercised In-the-Money Options
Options at FY- at FY-End
Shares Acquired End (#) ($)(1)
on Exercise Value Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Mr. R.E. Shaw 20,500 87,913 0/1,500 0/17,500
Mr. Little 8,000 47,700 12,500/1,500 149,650/17,500
Mr. Saul 0 0 0/0 0/0
Mr. Bell 8,000 32,200 17,500/51,500 217,775/594,800
Mr. Jackson 0 0 5,000/80,000 68,125/908,000
</TABLE>
(1) Value of Unexercised, In-the-Money Options at 1/2/99 is calculated as
follows: [(Per Share Closing Sale Price on 12/31/98) - (Per Share Exercise
Price)] x Number of Shares Subject to Unexercised Options. The per share
closing sale price reported by The New York Stock Exchange on December 31,
1998 was $24.25. The closing sale price for December 31, 1998 was used in
this calculation because it is the last trading day of the Company's 1998
fiscal year.
Deferred Compensation Plan
The Company maintains a deferred compensation plan to attract and retain
key employees. Key employees selected by the Board of Directors are entitled to
receive upon death, retirement or the onset of total disability an amount of
cash compensation set by the Board. The plan provides that the amount of
deferred compensation will be based upon the average of the three highest years
of income over the last five years prior to death, disability or retirement. The
amount of deferred compensation may not exceed, unless the Board specifically
approves, twice such average amount. Deferred compensation will be paid monthly
over a ten-year period or, as otherwise determined by
<PAGE>
the Compensation Committee of the Board of Directors. All deferred compensation
is forfeitable if the employee should voluntarily resign or be terminated for
cause. Each of the named executives has entered into an agreement providing for
deferred compensation under this plan. Because the amount of deferred
compensation payable to a participant is generally contingent upon future
employment and is based upon future earnings, it is not possible to estimate
future benefits.
Employment Agreement
The Company has entered into an employment agreement with Julian D. Saul,
effective as of October 6, 1998, which provides for his employment as a senior
executive of the Company and for the election of Mr. Saul to the Company's Board
of Directors. The employment agreement has a term of five years, unless earlier
terminated pursuant to the terms thereof, and provides for (i) an annual base
salary of not less than $600,000, subject to annual review by the Compensation
Committee of the Board of Directors and (ii) bonuses, as determined from time to
time, under the senior executive bonus program of the Company.
COMPENSATION COMMITTEE REPORT
The compensation committee of the Board of Directors of the Company has
prepared the following report on executive compensation. This report describes
the Company's current executive compensation program, including the underlying
philosophy of the program and the criteria on which executive compensation was
based. This report also discusses in detail the compensation paid to the
Company's Chairman and Chief Executive Officer, Mr. Robert E. Shaw, during the
most recent fiscal year.
The compensation committee of the Company's Board of Directors (the
"Committee") consists of three directors who are neither employees nor officers
of the Company. The Committee reviews the Company's executive compensation
program and policies each year and determines the compensation of the executive
officers. The Committee's determinations are reviewed with and approved by all
of the Company's non-employee directors, who constitute a majority of the Board.
The senior management compensation program is administered by the
Committee. The Committee consists of non-employee directors who are not eligible
to participate in any of the management compensation programs. The Committee is
responsible for the establishment, review and oversight of all senior management
compensation and benefit policies, plans, programs and agreements. The Committee
meets at least semi-annually to evaluate, review and act on senior management
compensation and benefit matters.
The senior management compensation program consists of base salary, annual
incentive and stock-based awards based on the performance of the Company and the
responsibility, experience, skills and performance of participating individuals.
These plans utilize competitive peer group information, maximum incentive pay
levels, and stock award guidelines are established and administered to reinforce
the alignment of the interests of senior management employees with the
performance of the Company and the interests of its shareholders. The peer
institutions used for comparison are other publicly held companies of similar
size, including but not limited to, household furnishings companies of similar
size, located in the Southeast and elsewhere in the United States, some of which
are included in the S & P Household Furnishings Index used in the performance
graph, below.
The Committee's policy regarding compensation of the Company's officers is
to provide generally competitive salary levels and compensation incentives that
attract and retain individuals of outstanding ability; that recognize individual
performance and the performance of the Company relative to the performance of
other companies of comparable size and quality; and that support the Company's
primary goal, to increase shareholder value.
The executive compensation program includes three components which, taken
together, constitute a flexible and balanced method of establishing total
compensation for management. These components are base salary, short-term
incentive awards in the form of semi-annual cash bonuses and long-term incentive
awards in the form of stock option grants, each of which is discussed in more
detail below.
The Company submitted the Bonus Compensation Plan for Executive Officers
(the "Senior Management Incentive Plan") to the shareholders for approval at the
1995 Annual Meeting of Shareholders and submitted the stock incentive plan to
the shareholders for approval at the 1997 Annual Meeting of Shareholders to
qualify compensation that may be paid to executive officers under such plans as
performance-based incentive compensation for federal income tax purposes and,
therefore, maximize the tax deductibility of compensation to executive officers.
The shareholders approved the Senior Management Incentive Plan and the stock
incentive plan.
<PAGE>
The Committee has determined that the Company's senior management
compensation programs, plans and awards are within conventional standards of
reasonableness and competitive necessity.
A description of each of the major elements of the senior management
compensation program and its specific relationship to corporate performance, and
a summary of the decisions and actions taken by the Committee with regard to
1998 senior management compensation and the Chief Executive Officer's
compensation, are set forth below.
Base Salaries
The Committee reviews various publicly available studies by compensation
consulting firms and public information from other sources regarding
compensation levels for publicly held companies of similar size located in the
Southeast and elsewhere in the United States. The Committee establishes the
salaries of the named executives and, upon a review of the recommendations of
the Company's senior executives, approves the salaries of other executive
officers. Individual salaries are determined by the Committee' s assessment of
the individual's experience level, the scope and complexity of the position held
and the range of salaries for similar positions in publicly held companies of
similar size. While the Committee does not target executive officers' salaries
at any particular point in the range of salaries paid by the companies used for
comparative purposes, the 1998 salary levels for the Company's executive
officers corresponded to the middle of the comparative range. The Committee
believes that publicly held companies of similar size represent the Company's
competitors for executive talent and that a review of the compensation practices
of such companies is more relevant than a review of the compensation practices
of companies of various sizes in the carpet industry, many of which are private,
or of companies of various sizes included in the Standard & Poor's Household
Furnishings Index.
Members of senior management receive base salaries determined by the
responsibilities, skills and experience related to their respective positions.
Other factors considered in salary determination are individual performance, the
success of each business unit in the individual's area of responsibility in
achieving established profit and business plans and the Company's ability to pay
an appropriate and competitive salary. Members of senior management are eligible
for periodic increases in their base salary as a result of individual
performance or significant increases in their duties and responsibilities. The
amount and timing of an increase depends upon the individual's performance,
position of salary within the salary range, and the time interval and any added
responsibilities since the last merit increase. The salary increases during 1998
for certain executives, including the named executives, were based on an
evaluation by the Committee of the above described factors.
Short-Term Incentive Program
The goal of the short-term incentive, or discretionary bonus, program is to
place a portion of officers' total cash compensation at risk to encourage and
reward a continued high level of performance each year and to further encourage
a continued high level of performance in future years. Individual incentive
amounts are determined by the Committee in its discretion based primarily upon
its assessment of the performance of the Company and, to a lesser extent, the
performance of the Company relative to the performance of other companies in the
carpet industry and the individual's organizational responsibility and personal
performance. In evaluating the Company's performance, the Committee considers
sales growth, return on equity, return on assets, stock performance, total
shareholder return and growth in earnings per share. No specific weight is
assigned to any of such performance factors and no specific target levels with
respect to such performance factors must be attained before a bonus is awarded
under the program. Cash bonuses for all executive officers are paid either
annually or semi-annually. The maximum bonus payable to executive officers
participating in this program is 50% of base salary.
Certain members of senior management participate in the Senior Management
Incentive Plan, which was approved by the shareholders at the 1995 Annual
Meeting. Executive officers selected for participation in the Senior Management
Incentive Plan do not participate in the bonus program described above. Personal
award opportunities pursuant to this plan are based upon the performance
criteria applicable to the Company, the individual performance of each
participant and related business unit performances. The resulting individual
performance evaluation factor may reduce, but not increase, the employee's
award.
<PAGE>
Long-Term Incentive Program
Incentive stock options are the basis for the Company's long-term incentive
program. The Committee periodically grants stock options at no less than fair
market value at the date of grant with a vesting period of one to four years.
The option program is designed to link officer compensation to long-term
shareholder value and focus management attention on long-term Company
performance. Stock options are also granted to encourage and facilitate personal
stock ownership by the executive officers and thus strengt hen both their
personal commitment to the Company and their longer term perspective. The size
of the grants is based on individual levels of responsibility and the potential
for the officer to contribute to the future success of the Company. The
Committee initially determines the aggregate number of options to be granted to
all officers and employees of the Company during a particular fiscal year. Of
that total, the Committee grants options of identical size to groups of
executive officers, other officers and other employees having similar levels of
responsibility. Subject to the foregoing parameters, the number of options
granted to individual officers is determined by the Committee without regard to
the number of options previously granted. The Committee believes the total
compensation of officers, including the value of options, if any, at the date of
grant, is competitive with total compensation paid by other major corporations.
The amount of any gain that officers ultimately realize from incentive options
depends solely on the future performance of the Company's Common Stock.
In 1998, the Committee awarded no stock options to the Chief Executive
Officer. Other members of senior management, including certain named executives,
received stock options to purchase 15,000 shares each.
As of February 28, 1999, approximately 3,282,000 shares of Common
Stock were available for issuance under the Company's existing stock plans.
The Committee believes that the three components of compensation described
above provide total compensation that is competitive with the total compensation
paid by other publicly held companies of similar size, effectively link officer
and shareholder interests through equity-based plans and provide incentives that
are consistent with the long-term investment horizons of the Company's business.
1998 Chief Executive Officer Compensation
The Compensation Committee believes that Mr. R.E. Shaw's compensation as
Chief Executive Officer appropriately reflects individual and Company
performance in the short and longer term. The Performance Graph following this
report, which depicts the cumulative total return to the Company's shareholders
as compared to returns of other market indices, illustrates the Company's
performance over the past five fiscal years.
In determining Mr. Shaw's base salary and bonus for fiscal 1997, the
Committee considered both the Company's overall performance and Mr. Shaw's
individual performance using the same criteria as it used for the other named
executive officers as described above. It also considered the compensation
received by chief executive officers of other publicly held companies of similar
size, as well as incentive levels considered appropriate by the Committee, in
establishing Mr. Shaw's total compensation.
The Chief Executive Officer's compensation is determined pursuant to the
same basic factors as described above for other members of senior management. In
establishing the base salary, incentive and stock awards of the Chief Executive
Officer for 1998, the Committee considered the Company's overall performance,
success in meeting strategic objectives and the incumbent's personal leadership
and accomplishments. These factors were considered in conjunction with the
Company's financial results for 1998 in rel ation to the established business
plan and in comparison with the performance of peer organizations. Mr. Shaw's
1998 management incentive plan award was based on the above considerations and
the Company's achieving and surpassing its annual performance goals as described
above in this report.
<PAGE>
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the amount of individual compensation for certain executives
that may be deducted by the employer for federal tax purposes in any one fiscal
year to $1 million unless such compensation is "performance-based." The
determination of whether compensation is performance-based depends upon a number
of factors, including shareholder approval of the plan under which the
compensation is paid, the exercise price at which options or similar awards are
granted, the disclosure to and approval by the shareholders of applicable
performance standards, the composition of the Committee, and certification by
the Committee that performance standards were satisfied. The Company's stock
plans and its Senior Management Incentive Plan have been approved by the
shareholders and it is the Committee's understanding that all executive
officers' compensation paid or awarded by the Company will be deductible. In
addition, the Board of Directors is submitting the proposed Executive Annual
Incentive Plan, which is intended to replace the Senior Management Incentive
Plan, to the shareholders for approval at this Annual Meeting to qualify
compensation that may be paid to executive officers under such plan as
performance-based executive compensation for federal income tax purposes, and,
therefore, to maximize the tax deductibility of executive compensation. While it
is possible for the Company to compensate or make awards under incentive plans
and otherwise that do not qualify as performance-based compensation deductible
under Section 162(m), the Committee, in structuring compensation programs for
its top executive officers, intends to give strong consideration to the
deductibility of awards.
The Board of Directors maintains another bonus program under which the
Committee sets individual performance objectives within the first ninety (90)
days of each fiscal year for each participating executive. If the participating
executive meets the individual performance objectives, the target bonus
established by the Committee will be payable to the participating executive. The
Committee retains the discretion to increase or decrease the amount payable to
the participating executive based on its view of the participating executive's
performance during the fiscal year. The amount payable under this program is
subject to the $1 million limitation contained in Section 162(m) of the Code and
consequently all or part of the amount paid to participating executives may not
be deductible by the Company for federal income tax purposes.
COMPENSATION COMMITTEE
BOARD OF DIRECTORS, SHAW INDUSTRIES, INC.
Thomas G. Cousins - Chairman
S. Tucker Grigg
Robert J. Lunn
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Robert E. Shaw, Chairman and Chief Executive Officer of the Company,
serves on the Stock Option and Compensation Committee of the Board of Directors
of Oxford Industries, Inc., a company whose Chairman, President and Chief
Executive Officer, Mr. J. Hicks Lanier, serves on the Board of Directors of the
Company.
<PAGE>
PERFORMANCE GRAPH
The following graph indicates the Company's cumulative total return to
shareholders over the last five fiscal years, as compared to cumulative total
returns for the Standard and Poor's 500 Index and the Standard and Poor's
Household Furnishings Index.
[COMPARISON GRAPH GOES HERE]
<TABLE>
1993 1994 1995 1996 1997 1998
- --------------------- ------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Shaw Industries, Inc. $100.00 $59.08 $59.74 $49.22 $49.39 $103.71
Standard and Poors 500 Index $100.00 $101.36 $139.45 $171.48 $228.70 $294.06
Standard and Poors Household $100.00 $81.18 $98.92 $91.50 $134.66 $179.67
Furnishings and Appliances Index
</TABLE>
*Assumes $100 invested on January 1, 1993 in Shaw Industries common stock, the
Standard and Poors 500 Index and the Standard and Poors Household Furnishings
Index.
<PAGE>
PROPOSAL 2. TO APPROVE THE EXECUTIVE ANNUAL INCENTIVE PLAN
Introduction
In 1993, the Federal tax law was amended to add a new Section 162(m) to
limit the amount of individual compensation that can be deducted by the Company
for tax purposes in any one year to $1,000,000. The new law provides an
exception to this limitation which provides that to the extent that the
compensation is performance based, as defined, such compensation will continue
to be deductible. The Company's Senior Management Incentive Plan, which provided
for performance-based annual bonuses for the Company's executive officers, was
approved by the shareholders at the 1995 Annual Meeting of Shareholders. The
Board of Directors has adopted a new performance-based bonus compensation plan,
known as the Executive Annual Incentive Plan, for the Company's executive
officers and other key employees to replace the Senior Management Incentive Plan
beginning with fiscal year 1999.
The Executive Annual Incentive Plan is a broad-based bonus plan intended to
link the amount of annual cash bonuses to corporate, division, region and
facility performance based on the relative responsibility of the individual for
whom the bonus is to be awarded. The Board of Directors determined that it is in
the best interest of the Company and its shareholders to seek shareholder
approval of the Executive Annual Incentive Plan in view of the Federal tax
provisions contained in Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). Under Code Section 162(m), the Company may be prohibited
from deducting compensation accrued or paid to any executive officer to the
extent such compensation exceeds $1 million for any taxable year of the Company.
An exception to this deduction limit exists for performance-based compensation,
such as an award under the Executive Annual Incentive Plan, if, among other
things, the specific terms of the performance-based compensation awarded to the
executive officer are disclosed to and approved by the shareholders or
re-approved by the shareholders at least every five years. The shareholders are
being asked to approve the Executive Annual Incentive Plan to enable the Company
to deduct for federal income tax purposes awards made under the Executive Annual
Incentive Plan without regard to the $1 million deductability limitation.
The Compensation Committee, which administers the Executive Annual
Incentive Plan, will establish performance criteria within the first ninety (90)
days of each fiscal year. Such performance criteria may include one or more of
the following: the attainment by a share of Common Stock of the Company of a
specified fair market value for a specified period of time, earnings per share,
return to shareholders (including dividends), return on equity, earnings of the
Company, revenue, EBITDA, operating income, net income, return on assets,
Economic Value Added (EVARegistration Mark), cash flows, market share, cost
reduction goals or any combination of the foregoing. The employees eligible
under the then Executive Annual Incentive Plan are the Chief Executive Officer,
Vice Chairman, President, Executive Vice President/Chief Financial Officer, and
Executive Vice President of Operations. Within the first ninety (90) days of
each fiscal year, the Compensation Committee will establish percentages of an
individual participant's rate of annual salary payable as of the first day of
the fiscal year which shall be payable as an annual incentive bonus if the
actual performance of the Company meets the performance criteria. For actual
performance above or below the performance criteria, the annual incentive bonus
payable to a participant will be adjusted by the same percentage by which the
actual performance of the Company exceeded or fell short of the performance
criteria. The Compensation Committee may reduce, but not increase, a
participant's annual incentive bonus based on the committee's determination of
the individual performance of the participant. No participant may receive an
award in excess of $5,000,000 for any performance period under the Executive
Annual Incentive Plan.
For fiscal 1999, the primary performance goal for most participants in the
Executive Annual Incentive Plan is based on the Company's attainment of
improvement targets in Economic Value Added (EVARegistration Mark). EVA is the
principal financial measurement of the company and is based on earnings after a
capital charge (after tax operating earnings less a cost of capital charge). All
performance objectives, levels, and targeted bonuses are determined by the
Compensation Committee. (EVA is a registered trademark of Stern-Stewart Company,
and is explained in more detail in the Annual Report to Shareholders.)
Payment of the annual incentive awards will be payable in shares of Common
Stock under the Company's 1997 Stock Incentive Plan, or in cash, as determined
by the Compensation Committee. The Compensation Committee may defer the payment
of any annual incentive bonus and/or subject the annual incentive bonus to the
performance by the participant of future services to the Company.
<PAGE>
Payment of Awards
Before any award may be paid pursuant to the plan, the Compensation
Committee will review the achievement of performance goals and whether any other
requirements of the plan have been satisfied and recommend any action to the
Board of Directors for final approval by the Board of Directors. If any
executive officer's employment is terminated before the last day of the fiscal
year because of death, disability or retirement, that executive officer will be
entitled to a prorated bonus for such fiscal year based on the number of months
and partial months elapsed during such fiscal year. If termination of employment
occurs for cause, no award will be paid. In the event of a change in control of
the Company, the performance criteria relating to the payment of any award under
the plan will be deemed satisfied and any such award will be paid out after such
change in control. A change in control includes the acquisition by any person of
greater than 50% of the voting power of the Company's securities, the change in
membership of a majority of the Board of Directors during a two-year period, the
approval by the Company's shareholders of a merger or consolidation of the
Company with any other corporation, or the approval by the Company's
shareholders of a liquidation of the Company or a sale of all or substantially
all of the company's assets.
Administration
The plan will administered by the Compensation Committee as long as the
composition of the Compensation Committee consists solely of two or more
"outside directors" as that term is defined in Section 162(m) of the Internal
Revenue Code. The Compensation Committee has the authority to recommend to the
Board of Directors, for its final approval, performance goals and targets under
the plan and may reduce the amount of, or eliminate entirely, any award if the
Compensation Committee determines it is in the best interests of the Company to
do so.
Amendment and Termination
The Board of Directors may amend or terminate the plan at any time as it
deems appropriate; provided that (i) no amendment or termination of the plan
after the end of a fiscal year may increase the awards for the fiscal year just
ended and (ii) to the extent required to meet the requirements under Section
162(m) of the Internal Revenue Code for performance-based compensation, any
amendment that made a material change to the plan must be approved by the
Company's shareholders. The Board of Directors is specifically authorized to
amend the plan as necessary or appropriate to comply with Section 162(m) of the
Internal Revenue Code and the regulations issued thereunder.
Federal Income Tax Consequences
The executive officers will not incur federal income tax until a payment is
made and will include the amount received in his gross income as compensation
income in the year received.
The Company will usually be entitled to a business expense deduction in the
amount that the executive officers recognize compensation income. As previously
discussed, the plan is intended to satisfy the statutory requirements under
Section 162(m) of the Internal Revenue Code for performance-based compensation.
If for any reason the plan or the administration thereof is determined not to
meet such requirements for any fiscal year, any cash award paid under the plan
for that year will be subject to the limits on deductibility imposed by Section
162(m).
An employee will recognize ordinary income on the amount he or she receives
under the Executive Annual Incentive Plan and the Company will be entitled to a
corresponding deduction. If an employee receives his or her Executive Annual
Incentive Plan payment in Common Stock, the employee will generally recognize
ordinary income when the Common Stock is no longer subject to a substantial risk
of forfeiture. At such time the employee will then recognize ordinary income in
an amount equal to the then fair market value of the Common Stock and the
Company will be entitled to a corresponding deduction. Alternatively, the
employee may elect to include the fair market value of the Common Stock in
income at the time that the employee receives the Common Stock and the Company
will then be entitled to a corresponding deduction.
The Board of Directors recommends a vote FOR this Proposal.
<PAGE>
AUDITORS
The firm of Arthur Andersen LLP has served as the Company's independent
public accountants since its organization and the Board of Directors intends to
reappoint this firm for fiscal 1999. The appointment of auditors is a matter of
determination by the Board of Directors and is not being submitted to the
shareholders for approval or ratification. A representative of this firm is
expected to attend the meeting to respond to questions from shareholders and to
make a statement if he so desires.
SHAREHOLDER PROPOSALS
Any proposals from shareholders to be considered for presentation at the
Annual Meeting of Shareholders for the 1999 fiscal year and inclusion in the
Company's proxy materials must be received at the principal executive offices of
the Company, Mail Drop 061-18, P.O. Drawer 2128, Dalton, Georgia 30722-2128, a
reasonable time before the solicitation of proxies for such meeting is commenced
by the Company, but, in any event, not later than December 3, 1999.
The proxy or proxies designated by the Company will have discretionary
authority to vote on any matter properly presented by a shareholder for
consideration at the 2000 Annual Meeting of Shareholders but not submitted for
inclusion in the Proxy Statement for such meeting unless notice of the matter is
received by the Company at its principal executive office not later than
February 17, 2000 and certain other conditions of the applicable SEC rules are
satisfied.
MISCELLANEOUS
Management does not know of any other matters to be presented at the
meeting for action by shareholders. However, if any other matters requiring a
vote of the shareholders arise at the meeting or any adjournment(s), it is
intended that votes will be cast pursuant to the proxies with respect to such
matters in accordance with the best judgment of the persons acting under the
proxies.
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by use of the mails, certain officers and
regular employees of the Company may solicit the return of proxies by telephone,
telegram or personal interview. The Company may request brokerage houses and
custodians, nominees and fiduciaries to forward soliciting material to their
principals, the beneficial owners of Common Stock, and will reimburse them for
their reasonable out-of-pocket expenses.
ANNUAL REPORT
The Annual Report (which is not part of the proxy soliciting material) of
the Company for fiscal 1998 is being mailed to the Company's shareholders with
this proxy statement.
/s/ BENNIE M. LAUGHTER
BENNIE M. LAUGHTER
Secretary
Dalton, Georgia
April 2, 1999
<PAGE>
APPENDIX A
SHAW INDUSTRIES, INC.
EXECUTIVE ANNUAL INCENTIVE PLAN
I. INTRODUCTION
1.1. Purpose. The purpose of this Plan is to recruit and retain highly
qualified executives and other employees, to provide incentives to such
individuals to attain the goals of Shaw Industries, Inc. (the "Company") and its
Subsidiaries (as defined below) and to provide the employees of the Company with
incentive compensation based on the performance of the Company in order to
enhance shareholder value. The Plan is designed to ensure that the bonuses paid
hereunder to eligible participants, are deductible under Section 162(m) of the
Internal Revenue Code of 1986, as amended, and the regulations and
interpretations promulgated thereunder.
1.2 Description. This Plan is the means by which the Committee shall
determine incentive bonuses and effect and implement awards for participating
employees hereunder.
II. DEFINITIONS
As used in this Plan, the following terms shall have the following
meanings:
"Subsidiary" means (a) any entity that directly or through one or more
intermediaries is controlled by the Company, and (b) any entity in which the
Company has a significant equity interest, as determined by the Company.
"Annual Incentive Bonus" means the bonus payable with respect to a fiscal
year of the Company determined in accordance with Article 5 hereof.
"Base Compensation" means the base rate of salary payable to a Participant
as of the first of January of the plan year as reflected on the books and
records of the Company, exclusive of bonus, commission, fringe benefits,
employee benefits, expense allowances and other nonrecurring forms of
remuneration.
"Board" means the Board of Directors of the Company.
"Cause" means (i) the failure or refusal by the Participant to perform his
or her normal duties (other than any such failure resulting from the
Participant's incapacity due to physical or mental illness), which has not
ceased within ten (10) days after a written demand for substantial performance
is delivered to the participant by the Company, which demand identifies the
manner in which the company believes that the Participant has not performed such
duties, (ii) the engaging by the Participant in willful misconduct or an act of
moral turpitude which is materially injurious to the Company, monetarily or
otherwise or (iii) the conviction of the Participant of, or the entering of a
plea of nolo contendere by, the Participant with respect to, a felony.
<PAGE>
"Change in Control" means:
(1) any "Person" (as defined in Section 3(a)(9) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act)) as modified and used in Section
13(d) and 14(d) of the Exchange Act (other than (1) the Company or any of
its subsidiaries, (2) any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its subsidiaries,
(3) an underwriter temporarily holding securities pursuant to an offering
of such securities, (4) any corporation owned, directly or indirectly, by
the stockholders of the Company is substantially the same proportions as
their ownership of the company's common stock or (5) any of its
subsidiaries and any investment funds managed by it or any of its
subsidiaries is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 50% of the combined voting power of the
Company's then outstanding voting securities;
(2) during any period of not more than two consecutive years, not including any
period prior to the effective date of this Plan, individuals who at the
beginning of such period constituted the Board, and any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (1), (3), or
(4) of this definition) who election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
at least a majority thereof;
(3) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than both (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving or parent entity) 50% or more of the combined voting power of the
voting securities of the Company or such surviving or parent entity
outstanding immediately after such merger or consolidation or (B) a merger
or consolidation in which no person acquires 50% or more of the combined
voting power of the Company" then outstanding securities; or
(4) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets (or any transaction having
a similar effect).
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board of Directors of
the Company, which shall consist of two or more members of
<PAGE>
the Board of Directors of the Company, each of whom shall be an "outside
director" within the meaning of Section 162(m) of the Code.
"Participant" means an employee of the Company or any Subsidiary meeting
the requirements of Article 2 hereof, who is selected to participate in the Plan
by the Committee.
"Performance Measures" means the criteria and objectives, established by
the Committee. The Committee may amend or adjust the Performance Measures or
other terms and conditions of an outstanding award in recognition of unusual or
nonrecurring events affecting the Company or its financial statement or changes
in law or accounting, but only to the extent such adjustment would not cause any
portion of the award, upon payment, to be nondeductible pursuant to Section
162(m) of the Code. Such criteria and objectives may include one or more of the
following, based on the Company as a whole, a subsidiary, division or business
unit: the attainment by a share of Company common stock of a specified fair
market value for a specified period of time, earnings per share, return to
stockholders (including dividends), return on equity, earnings of the Company,
revenues, EBITDA, EBITDAR, operating income, net income, return on assets,
economic value added (EVA), cash flows, market share, cash flow or cost
reduction goals, or any combination of the foregoing. If the Committee desires
that compensation payable pursuant to any award subject to Performance Measures
be "qualified performance-based compensation" within the meaning of Section
162(m) of the Code, the Performance Measures (i) shall be established by the
Committee no later than the end of the first quarter of the applicable period
(or such other time designated by the Internal Revenue Service) and (ii) shall
satisfy all other applicable requirements imposed under Treasury Regulations
promulgated under Section 162(m) of the code, including the requirement that
such Performance Measures be stated in terms of an objective formula or
standard. Before any award is paid to any holder or an award subject to
Performance Measures under this Plan, the Committee shall certify in writing
that the applicable Performance Measures were in fact satisfied.
"Plan" means the Shaw Industries, Inc. Executive Annual Incentive Plan, as
in effect and as amended from time to time.
III. ADMINISTRATION
The administration and operation of the Plan shall be supervised by the
Committee with respect to all matters. The Committee may delegate responsibility
for the day-to-day administration and operation of the Plan to such employees of
the Company as it shall designate from time-to-time. The Committee shall
interpret and construe any and all provisions of the Plan and any determination
made by the Committee under the Plan shall be final and conclusive. Neither the
Board of Directors nor the Committee, nor any member of the Board of Directors,
nor any employee of the Company shall be liable for any act, omission,
interpretation, construction or determination made in connection with the Plan
(other than acts of willful misconduct) and the members of the Board of
Directors and the Committee and the
<PAGE>
employees of the Company shall be entitled to indemnification and reimbursement
by the Company to the maximum extent permitted at law in respect of any claim,
loss, damage or expense (including counsel's fees) arising from their acts,
omissions and conduct in their official capacity with respect to the Plan. The
Plan shall be interpreted in view of the intention that any grant of
compensation pursuant to the Plan is intended to qualify as performance-based
compensation with the meaning of Code Section 162(m) and the regulations and
interpretations promulgated thereunder.
IV. PARTICIPATION
Each employee of the Company holding a position of Chief Executive Officer,
Vice Chairman, President, Executive Vice President/Chief Financial Officer,
Executive Vice President Operations, divisional Presidents or any other employee
of the Company or its Subsidiaries who the Committee selects for participation
in the Plan, shall be eligible to receive awards under the Plan.
V. ANNUAL INCENTIVE PROGRAM
5.1 Establishment of Performance Goals. Within the first ninety (90) days
of each fiscal year of the Company, the Committee shall establish the
Performance Measures for the payment of Annual Incentive Bonuses under the Plan.
5.2 Annual Incentive Bonus. Within the first ninety- (90) days of each
fiscal year, the Committee may establish percentages of each eligible
Participant's Base Compensation to be paid as an Annual Incentive Bonus under
this Article 5 upon the attainment of the Performance Measures. After
establishing the percentages of Base Compensation to be paid as an Annual
Incentive Bonus under this Article 5 for a fiscal year, the Committee may
reduce, but not increase, the Annual Incentive Bonus payable to a Participant
based upon the committee's determination of the individual performance of such
Participant for such fiscal year. The percentage of Base Compensation payable as
an Annual Incentive Bonus will be adjusted by the same percentage by which
actual performance exceeds or falls short of the Performance Measures. In no
event shall the Annual Incentive Bonus payable to any Participant with respect
to any fiscal year exceed $5 million.
5.3 Determination of Achievement of Performance Measures. The Committee
shall certify the level of achievement of the Performance Measures as soon as
practical after the end of the fiscal year for which the determination is being
made.
5.4 Payment of Annual Incentive Bonus.
(a) As soon as practical after the expiration of each fiscal year of the
Company, Participants who remained employed until the last day of the
fiscal year, shall be entitled to receive the Annual Incentive Bonus
determined in accordance with this Article 5 except to the extent a
Participant elects to defer the receipt of a portion of his or her
Annual
<PAGE>
Incentive bonus in accordance with the procedures adopted by the
Committee pursuant to Subsection 5.4(b). A Participant who during the
year died, became disabled or retired shall be entitled to a prorated
Annual Incentive Bonus based on the number of months and partial
months elapsed during such fiscal year. Payment of Annual Incentive
Bonuses shall be made in cash or in shares of Restricted Stock issued
pursuant to the Company's 1997 Stock Incentive Plan, or a combination
thereof, as determined by the Committee.
Notwithstanding any provision in this Plan, in the event of a Change in Control,
all Performance Measures relating to any Annual Incentive Bonus will be deemed
satisfied and any such award shall be paid out as soon as practicable after such
Change in Control.
(b) The Committee may, in its discretion, institute a program allowing
Participants to defer the receipt of all or a portion of their Annual
Incentive Bonus otherwise payable under Subsection (a) of this Section. Any
such deferred Annual Incentive Bonus shall be credited with interest until
paid. Such interest shall accrue at the prime rate as reported in the Wall
Street Journal as of the date any election to defer a portion of the Annual
Incentive Bonus is made. (c) The Committee may condition the payment of any
or all payments of a Participant's Annual Incentive Bonus based on the
Participant's providing of future services to the Company or its
Subsidiaries.
5.5 Participants' Rights Unsecured. The right of any Participant to receive
Annual Incentive Bonus under the Plan shall constitute an unsecured claim
against the general assets of the Company.
5.6 Withholding Taxes. The Company shall have the right to deduct from each
bonus payment any federal, state and local taxes required by such laws to be
withheld with respect to the payment.
5.7 Nonalienation of Benefits. Except as expressly provided herein, no
Participant or his beneficiaries shall have the power or right to transfer,
anticipate, or otherwise encumber the Participant's interest under the Plan. The
Company's obligations under this Plan are not assignable or transferable except
to a corporation which acquires all or substantially all of the assets of the
Company or any corporation into which the Company may be merged or consolidated.
The provisions of the Plan shall inure to the benefit of each Participant and
his beneficiaries, heirs, executors, administrators or successors in interest.
5.8 Severability. If any provision of this Plan is held unenforceable, the
remainder of the Plan shall continue in full force and effect without regard to
such unenforceable provision and shall be applied as though the unenforceable
provision were not contained in the Plan.
<PAGE>
5.9 Governing Law. The Plan shall construed in accordance with and governed
by the laws of the State of Georgia, without reference to the principles of
conflict of laws.
5.95 Headings. Headings are inserted in this Plan for convenience of
reference only and are to be ignored in a construction of the provisions of the
Plan.
Dated: _______________________ By: _______________________
Title: _______________________
Attest: -----------------------
Title: _______________________
<PAGE>
[ATTACHMENT -- PROXY CARD]
[front side of card]
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
SHAW LOGO HERE
With- For All
For hold Except
1. Election of four Class I Directors and one Class III [ ] [ ] [ ]
Director:
J. C. Shaw, Robert E. Shaw,
Robert J. Lunn, Julian D. Saul, Roberto Garza
(Instruction: To withhold authority to vote for any nominee, mark the "For All
Except" box and strike a line through the nominee's name in the list provided
above.)
2. Proposal to approve the Executive Annual For Against Abstain
Incentive Plan: [ ] [ ] [ ]
3. In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting or any adjournment(s). This
Proxy may be revoked at any time prior to the voting thereof.
Mark box at right if address change has been noted on the [ ]
reverse side of this card.
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date: April , 1999
Shareholder sign here Co-owner sign here
DETACH CARD
SHAW INDUSTRIES, INC.
Dear Shareholder:
Please take note of the important information enclosed with this Proxy Card.
There are a number of issues related to the management and operation of your
Company that require your immediateattention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares should be
voted. Then sign and date the card, detach it and return your proxy vote in
the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders, April
29, 1999.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
/s/ ROBERT E. SHAW
Robert E. Shaw
Chairman of the Board of Directors and Chief Executive Officer
[back side of card]
PROXY PROXY
SHAW INDUSTRIES, INC.
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Shareholders and Proxy Statement for the 1998 fiscal year and does
hereby appoint Robert E. Shaw and J.C. Shaw, and either of them, with full
power of substitution, as proxy or proxies of the undersigned to represent
the undersigned and to vote all shares of Shaw Industries, Inc. Common Stock
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Shareholders of Shaw Industries, Inc., to be held at the
administrative offices of the Company, 616 East Walnut Avenue, Dalton,
Georgia at 11:00 o'clock a.m., on April 29, 1999 and at any adjournment(s)
thereof.
This Proxy, when properly executed, duly returned and not revoked will be
voted. It will be voted in accordance with the directors given by the
undersigned shareholder. If no direction is made, it will be voted in favor
of the nominees listed in Proposal 1 and in favor of Proposal 2.
Important:Please sign this Proxy exactly as your name(s) appear thereon, and
when signing as attorney, executor, administrator, trustee or guardian, give
your full title as such. If the signatory is a corporation, sign the full
corporate name by a duly authorized officer.
HAS YOUR ADDRESS CHANGED?
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