Shaw Logo here
To the Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders
for the 1999 fiscal year to be held at the administrative offices of the
Company, 616 East Walnut Avenue, Dalton, Georgia, on Thursday, April 27, 2000,
at 11:00 a.m., local time.
The principal business of the meeting will be to elect directors and
to approve a stock incentive plan for the employees 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 2000.
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
March 31, 2000
<PAGE>
SHAW INDUSTRIES, INC.
616 East Walnut Avenue
Dalton, Georgia 30720
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 27, 2000
The Annual Meeting of Shareholders of Shaw Industries, Inc. for
fiscal year 1999 will be held on Thursday, April 27, 2000, 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 III of the Board of Directors
for a three-year term.
2. To consider and vote upon a proposed stock 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 24,
2000 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
March 31, 2000
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 27, 2000, 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 March 31, 2000.
VOTING RIGHTS AND PRINCIPAL SHAREHOLDERS
March 24, 2000 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 132,676,198 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. Shareholder approval of the
proposed stock incentive plan requires the affirmative vote of the majority of
the shares of Common Stock represented at the meeting and entitled to vote.
Therefore, for purposes of determining whether Proposal 2 is approved by the
shareholders, abstentions will have the same effect as votes against Proposal 2,
but broker non-votes will have no effect.
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 24, 2000. 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) 7,303,188(2) 5.5
J. C. Shaw (3) 6,632,295(4) 5.0
Julian D. Saul (5) 11,666,667(6) 8.8
Linda Saul Schejola (7) 7,777,777(8) 5.9
J. Hicks Lanier 9,600 *
R. Julian McCamy 3,162,394(9) 2.4
Thomas G. Cousins 58,600 *
S. Tucker Grigg 1,800,877(10) 1.4
William C. Lusk, Jr. 603,760(11) *
W. Norris Little 448,250 *
Robert R. Harlin 508 *
Roberto Garza 600 *
Robert J. Lunn 1,600 *
Vance D. Bell 85,484 *
Kenneth G. Jackson 7,000 *
All executive officers and
directors as a group (18 persons) 32,477,300(12) 24.5
</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 64,618 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 address is 1106 West Lakeshore Drive, Dalton, Georgia
30720.
(8) Includes 7,699,808 shares held in the Linda Saul Schejola Family
Trust.
(9) Includes 1,163,169 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 132,200 shares that are subject to options that are currently
exercisable or that become exercisable within 60 days of March 24,
2000, including 31,400 shares for Mr. Bell and 23,500 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 III. The Class I and Class II 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 Roberto Garza, W. Norris Little, William C. Lusk,
Jr., and Robert R. Harlin as Class III directors. All of the Class III nominees
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 III directors.
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 I and Class II, the period during which each
has served as a director of the Company and other directorships held.
Nominees
Nominees for Class III
(Term Expiring 2003)
ROBERTO GARZA Age: 44
Mr. Garza is the President and Chief Executive Officer of Edificio Alestra of
Monterrey,Mexico. Until 1999, he had 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.
W. NORRIS LITTLE
Director since 1979 Age: 68
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: 64
Mr. Lusk is the retired Senior Vice President and Treasurer of the Company.
ROBERT R. HARLIN
Director since 1967 Age: 67
Mr. Harlin is a member of the law firm of Powell, Goldstein, Frazer & Murphy
LLP.
Directors Continuing in Office
Class I
(Term Expiring 2002)
J. C. SHAW
Director since 1967 Age: 70
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: 68
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.
<PAGE>
ROBERTJ. LUNN
Director since 1997 Age: 53
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: 59
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.
Class II
(Term Expiring 2001)
J. HICKS LANIER
Director since 1986 Age: 59
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: 68
Mr. McCamy is President of McCamy Properties, Inc., a real estate development
company.
THOMAS G. COUSINS
Director since 1992 Age: 68
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: 63
Mr. Grigg is self-employed as a manufacturer of advertising and marketing
displays, furniture and bedding.
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 any such
shareholder recommendations if submitted in writing, addressed to the chairman
of the executive committee at the Company's principal offices.
<PAGE>
The audit committee consisted of Messrs. Lanier, Lunn 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
McCamy. 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 1999, 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
$1,000 for each board meeting attended. The Company paid ordinary and necessary
travel expenses for directors to attend board and committee meetings.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers and persons who own beneficially more than 10%
of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
10% shareholders are required by SEC regulations to furnish the Company with
copies of all such forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, its officers, directors and greater than 10% shareholders
complied during fiscal 1999 with all applicable Section 16(a) filing
requirements.
<PAGE>
EXECUTIVE COMPENSATION
This section of the proxy statement discloses the compensation awarded
or paid to, or earned by, the Company's Chief Executive Officer and its four
other most highly compensated executive officers with respect to the fiscal year
ended January 1, 2000 (together, these persons are sometimes referred to as the
"named executives").
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
--------------------------- Options/ All Other
Fiscal Salary Bonus SARs Compensation
<S> <C> <C> <C> <C> <C>
Name and Position Year ($) ($) (1) (#) ($) (2)
Robert E. Shaw 1999 1,000,000 1,681,000 -- 4,800
Chairman and 1998 1,000,000 1,500,000 -- 4,800
Chief Executive Officer 1997 1,000,000 500,000 -- 4,750
W. Norris Little 1999 625,000 787,969 -- 4,800
Vice Chairman 1998 625,000 750,000 -- 4,800
1997 625,000 250,000 -- 4,750
Julian D. Saul(3) 1999 700,000 1,176,700 -- 4,800
President 1998 150,000 200,000 -- 4,800
Vance D. Bell 1999 500,000 504,300 -- 4,800
Exec. Vice President, 1998 450,000 300,000 40,000 4,800
Operations 1997 450,000 200,000 15,000 4,750
Kenneth G. Jackson(4) 1999 450,000 453,870 -- 4,800
Exec. Vice President, 1998 380,000 300,000 70,000 4,800
Chief Financial Officer 1997 380,000 200,000 15,000 4,750
</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 1999 to purchase shares of the Company's Common Stock. The Company has no
outstanding SARs and granted no SARs during fiscal 1999. 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 1999
Individual Grants Potential Realizable
- --------------------------------------------------------------------------------------------------------- Value at Assumed
% of Total Annual Rates of Stock
Options Price Appreciation for
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 0 -- -- -- -- --
Mr. Jackson 0 -- -- -- -- --
</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 1999 and the value of
unexercised options held at January 1, 2000. There were no SARs outstanding
during fiscal 1999.
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND 1999 FISCAL YEAR-END OPTION
VALUE
Number of Value of Unexercised
Unexercised In-the-Money Options
Options at FY- at FY-End
End (#) ($)(1)
Shares Acquired -------------- --------------------
on Exercise Value Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- --------------------- --------------- -------------- -------------- --------------------
<S> <C> <C> <C> <C>
Mr. R.E. Shaw 1,500 12,300 0/0 0/0
Mr. Little 14,000 47,700 0/0 0/0
Mr. Saul 0 0 0/0 0/0
Mr. Bell 0 0 19,000/50,000 139,196/380,181
Mr. Jackson 3,200 35,800 3,300/78,500 43,543/580,371
</TABLE>
(1) Value of Unexercised, In-the-Money Options at 1/1/00 is calculated as
follows: [(Per Share Closing Sale Price on 12/31/99) - (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,
1999 was $15.50. The closing sale price for December 31, 1999 was used in
this calculation because it is the last trading day of the Company's 1999
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 Company's executive compensation program is administered under the
direction of compensation committee of the Board of Directors (the "Committee").
The Committee is comprised of three independent, non-employee directors. The
executive compensation program is designed to promote the following objectives:
[bullet] Attract, retain and motivate executives who can significantly
contribute to the success of the Company.
[bullet] Reward the achievement of business objectives that have been
approved by the Board. Provide a rational, consistent and
competitive executive compensation system that is well
understood by those to whom it applies.
[bullet] Tie a significant portion of executive compensation to the
long-term performance of the Company's common shares.
The Committee believes that if these objectives are consistently
achieved, shareholder value will be enhanced over time.
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.
<PAGE>
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 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 has adopted an incentive plan based on total company
performance against "EVA"goals. (EVARegistration Mark is a registered trademark
of Stern, Stewart and Company and represents "economic value added.")
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 1999 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 1999 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 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 against objectively established
EVA goals 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.
EVA simplifies the management process by avoiding the subjecting of
business activities to a host of different measurements, such as earnings, sales
growth, margins, and budgets. While these other methods of evaluation are not
ignored, the Committee's and management's central focus is EVA.
EVA targets and incentive payments are determined objectively. The
Company has set and the Committee has approved targets for annual
EVAimprovement. The annual EVAimprovement targets have been determined using
principles and methodology developed in conjunction with Stern, Stewart and
Company. The annual EVA targets reflect independent, objective investor
expectations of Company performance over a period of years.
<PAGE>
The incentive payments made to the Company's senior executives are
determined wholly by reference to EVA performance, which provides for both
annual EVAperformance and sustained EVAperformance. Target bonus percentages are
based on position held and the range of incentive payments for similar positions
in publicly held companies. Actual incentive payments may range from zero to a
multiple of the target bonus, depending on actual performance against EVAannual
goals either for the Company or particular business units of the Company.
Certain members of senior management participate in the Executive
Annual Incentive Plan, which was approved by the shareholders at the 1999 Annual
Meeting. Personal award opportunities pursuant to this plan are based upon EVA
performance criteria applicable to the Company and related business unit
performances. An individual performance evaluation factor may reduce, but not
increase, the employee's award.
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 1999, the Committee awarded no stock options to the Chief Executive
Officer or other members of senior management.
As of February 29, 2000, approximately 200,000 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.
1999 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 1999, 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 1999, 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 1999 in rel ation to the
established business plan and in comparison with the performance of peer
organizations. Mr. Shaw's 1999 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 Executive Annual 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. The
Board of Directors is submitted the Executive Annual Incentive Plan, which is to
replace the Senior Management Incentive Plan, to the shareholders for approval
at the 1999 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.
COMPENSATION COMMITTEE
BOARD OF DIRECTORS, SHAW INDUSTRIES, INC.
Thomas G. Cousins - Chairman
S. Tucker Grigg
R. Julian McCamy
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.
[GRAPH GOES HERE]
<TABLE>
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Shaw Industries, Inc. $100.00 $101.12 $ 83.32 $ 83.60 $175.54 $112.82
Standard and Poor's 500 Index $100.00 $137.59 $169.18 $225.64 $290.12 $351.17
Standard and Poor's Household $100.00 $121.86 $112.71 $165.89 $221.33 $201.34
Furnishings and Appliances Index
</TABLE>
*Assumes $100 invested on January 1, 1994 in Shaw Industries common stock, the
Standard and Poor's 500 Index and the Standard and Poor's Household Furnishings
Index.
<PAGE>
PROPOSAL 2. ADOPTION OF THE SHAW INDUSTRIES, INC. 2000 INCENTIVE STOCK
INCENTIVE PLAN
On January 20, 2000, the Board of Directors unanimously adopted,
subject to the approval of the shareholders at the next annual meeting, the SHAW
INDUSTRIES, INC. 2000 INCENTIVE STOCK OPTION PLAN (the "Plan"). A copy of the
Plan is attached hereto as Exhibit A.
This Plan is intended to (a) promote incentive to officers and key
employees of the Company and its affiliates to stimulate their efforts toward
the continued success of the Company and to operate and manage the business in a
manner that will provide for the long-term growth and profitability of the
Company; (b) encourage stock ownership by officers and key employees by
providing them with a means to acquire a proprietary interest in the Company,
acquire shares of Common Stock, or receive compensation which is based upon
appreciation in the value of the Common Stock; and (c) provide a means of
obtaining, rewarding and retaining key personnel and consultants.
SUMMARY OF THE PLAN
The following description of the Plan is qualified in its entirety by
reference to the copy of the Plan attached hereto as Exhibit A. The Plan will be
administered by the Compensation Committee of the Board of Directors of the
Company ("the Committee"). The Committee will determine the persons to whom, and
the times at which, awards will be granted, the type of awards to be granted and
all other related terms and conditions of the awards, subject to the limitations
described below and as set forth in the Plan. The terms and conditions of each
award will be set forth in a written agreement with a participant or a written
program established by the Committee. All officers and key employees of the
Company and its affiliates are eligible to participate in the Plan. It is
currently estimated that approximately 2,000 individuals are eligible to
participate.
A total of 6,000,000 shares of the Company Common Stock is reserved
for issuance pursuant to the Plan. In the event that shares of Common Stock
subject to Stock Awards are forfeited, such shares of Common Stock may again be
subject to a new Stock Award under the Plan. In no event shall any person be
entitled to grants under the Plan in any calendar year in excess of 100,000
shares. The number of shares of the Company Common Stock reserved under the Plan
is subject to adjustment in the event of stock dividends, stock splits,
recapitalization and similar events.
The per share exercise price of any option may not be less than the
fair market value of a share of the Company Common Stock at the time of grant.
Once an option is granted, the exercise price may not be reduced by amendment
and an option may not be exchanged for a new option with a lower exercise price.
No incentive stock option may be granted on or after the tenth anniversary of
the date the Plan was approved by the Board of Directors of the Company.
The Committee shall determine whether stock appreciation rights,
performance unit awards, dividend equivalent rights, performance share awards
and phantom stock awards shall be settled in cash or in shares of the Company
Common Stock valued at fair market value on the date of payment. The Committee
also shall be authorized to accelerate the vesting, exercisability and
settlement of awards and to permit the exercise price of an option to be paid in
cash or by the delivery or withholding of shares.
The Board of Directors of the Company may amend or terminate the Plan
without the approval of shareholders, but may condition any amendment on
shareholder approval if the Board believes it is necessary or advisable to
comply with any applicable tax or regulatory requirement. No termination or
amendment of the Plan without the consent of the holder of an award shall
adversely affect the rights of that participant.
The Committee may provide with respect to any award* that, in the
event of a Change in Control (as defined in the Plan) of the Company, the award
shall be cashed out in an amount based on the fair market value of the Company
Common Stock without regard to the exercisability of the award or any other
conditions or restrictions.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
A participant will not recognize income upon the grant of an option or
at any time prior to the exercise of an option. At the time the participant
exercises a non-qualified option, he or she will recognize compensation taxable
as ordinary income in an amount equal to the excess of the fair market value of
the Company Common Stock on the date the option is exercised over the price paid
for the Company Common Stock, and the Company will then be entitled to a
corresponding deduction.
<PAGE>
A participant who exercises an incentive stock option will not be
taxed at the time he or she exercises his or her option or a portion thereof.
Instead, he or she will be taxed at the time he or she sells the Company Common
Stock purchased pursuant to the option. The participant will be taxed on the
excess of the amount for which he or she sells the stock over the price he or
she had paid for the stock. If the participant does not sell the stock prior to
two years from the date of grant of the option and one year from the date the
stock is transferred to him or her, the gain will be capital gain and the
Company will not get a corresponding deduction. If the participant sells the
stock prior to that time, the difference between the amount the participant paid
for the stock and the lesser of the fair market value on the date of exercise,
or the amount for which the stock is sold, will be taxed as ordinary income and
the Company will be entitled to a corresponding deduction. If the participant
sells the stock for less than the amount he or she paid for the stock prior to
the one or two year periods indicated, no amount will be taxed as ordinary
income and the loss will be taxed as a capital loss. Exercise of an incentive
option may subject a participant to, or increase a participant's liability for,
the federal alternative minimum income tax.
A participant generally will not recognize income upon the grant of
any stock appreciation right, dividend equivalent right, performance unit award,
performance share award or phantom share. At the time a participant receives
payment under any such award, he or she generally will recognize compensation
taxable as ordinary income in an amount equal to the cash or the fair market
value of the Company Common Stock received, and the Company will then be
entitled to a corresponding deduction.
A participant will not be taxed upon the grant of a stock award if
such award is not transferable by the participant and is subject to a
"substantial risk of forfeiture," as defined in the Code. However, when the
shares of the Company Common Stock that are subject to the stock award are
transferable by the participant and are no longer subject to a substantial risk
of forfeiture, the participant will recognize compensation taxable as ordinary
income in an amount equal to the fair market value of the stock subject to the
stock award, less any amount paid for such stock, and the Company will then be
entitled to a corresponding deduction.
The Plan is not qualified under Section 401(a) of the Code.
AWARDS GRANTED
No awards have been granted under the Plan. The Company anticipates
making award grants under the Plan during fiscal 2000.
Shareholder approval of the Plan requires the affirmative vote of the
majority of the shares of the Company's common stock represented at the meeting
and entitled to vote.
The Board of Directors Recommends a Vote FOR Proposal 2.
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 2000. 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 2000 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 10, 2000.
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 2001 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 15, 2001 and certain other conditions of the applicable SEC rules are
satisfied.
<PAGE>
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 1999 is being mailed to the Company's shareholders
with this proxy statement.
/S/ BENNIE M. LAUGHTER
BENNIE M. LAUGHTER
Secretary
Dalton, Georgia
March 31, 2000
<PAGE>
SHAW INDUSTRIES, INC.
2000 STOCK INCENTIVE PLAN
<PAGE>
SHAW INDUSTRIES, INC.
2000 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS..................................................A-3
1.1 Definitions..................................................A-3
SECTION 2 THE STOCK INCENTIVE PLAN.....................................A-4
2.1 Purpose of the Plan..........................................A-4
2.2 Stock Subject to the Plan....................................A-4
2.3 Administration of the Plan...................................A-5
2.4 Eligibility and Limits.......................................A-5
SECTION 3 TERMS OF STOCK INCENTIVES....................................A-5
3.1 Terms and Conditions of All Stock Incentives.................A-5
3.2 Terms and Conditions of Options..............................A-6
(a) Option Price............................................A-6
(b) Option Term.............................................A-6
(c) Payment.................................................A-6
(d) Conditions to the Exercise of an Option.................A-6
(e) Termination of Incentive Stock Option...................A-7
(f) Special Provisions for Certain Substitute Options.......A-7
3.3 Terms and Conditions of Stock Appreciation Rights............A-7
(a) Settlement..............................................A-7
(b) Conditions to Exercise..................................A-7
3.4 Terms and Conditions of Stock Awards.........................A-7
3.5 Terms and Conditions of Dividend Equivalent Rights...........A-7
(a) Payment.................................................A-8
(b) Conditions to Payment...................................A-8
3.6 Terms and Conditions of Phantom Shares.......................A-8
(a) Payment.................................................A-8
(b) Conditions to Payment...................................A-8
3.7 Treatment of Awards Upon Termination of Employment...........A-8
SECTION 4 RESTRICTIONS ON STOCK........................................A-8
4.1 Escrow of Shares.............................................A-8
4.2 Forfeiture of Shares.........................................A-8
4.3 Restrictions on Transfer.....................................A-9
SECTION 5 GENERAL PROVISIONS...........................................A-9
5.1 Withholding..................................................A-9
5.2 Changes in Capitalization; Merger; Liquidation...............A-9
5.3 Cash Awards.................................................A-10
5.4 Compliance with Code........................................A-10
5.5 Right to Terminate Employment...............................A-10
5.6 Non-alienation of Benefits..................................A-10
5.7 Listing and Legal Compliance................................A-10
5.8 Termination and Amendment of the Plan.......................A-10
5.9 Stockholder Approval........................................A-10
5.10 Choice of Law...............................................A-10
5.11 Effective Date of Plan......................................A-10
<PAGE>
SHAW INDUSTRIES, INC.
2000 STOCK INCENTIVE PLAN
SECTION 1 DEFINITIONS
1.1 Definitions. Whenever used herein, the masculine pronoun shall be
deemed to include the feminine, and the singular to include the plural, unless
the context clearly indicates otherwise, and the following capitalized words and
phrases are used herein with the meaning thereafter ascribed:
(a) "Affiliate" means (a) an 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.
(b) "BOARD OF DIRECTORS" means the board of directors of the
Company.
(c) "CHANGE IN CONTROL" means the first to occur of the following
events:
(i) any person (as defined in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d) and 14(d) thereof), excluding the Company, any
Subsidiary and any employee benefit plan sponsored or maintained by the Company
or any Subsidiary (including any trustee of such plan acting as trustee) (the
Company, all Subsidiaries, and such employee benefit plans and trustees acting
as trustees being hereafter referred to as the "Company Group"), but including a
'group' as defined in Section 13(d)(3) of the Exchange Act (a "Person"), becomes
the beneficial owner of shares of the Company having at least thirty percent
(30%) of the total number of votes that may be cast for the election of
directors of the Company (the "Voting Shares"); provided that no Change of
Control will occur as a result of an acquisition of stock by the Company Group
which increases, proportionately, the stock representing the voting power of the
Company beneficially owned by such Person above thirty percent (30%) of the
voting power of the Company, and provided further that if such Person acquires
beneficial ownership of stock representing more than thirty percent (30%) of the
voting power of the Company by reason of share purchases by the Company Group,
and after such share purchases by the Company Group acquires any additional
shares representing voting power of the Company, then a Change of Control shall
occur;
(ii) the shareholders of the Company shall approve any merger
or other business combination of the Company, sale of the Company's assets or
combination of the foregoing transactions (a "Transaction") other than a
Transaction involving only the Company and one or more of its Subsidiaries, or a
Transaction immediately following which the shareholders of the Company
immediately prior to the Transaction continue to have a majority of the voting
power in the resulting entity excluding for this purpose any shareholder owning
directly or indirectly more than ten percent (10%) of the shares of the other
company involved in the merger; or
(iii) within any 24-month period, the persons who were
directors of the Company immediately before the beginning of such period (the
"Incumbent Directors") shall cease (for any reason other than death) to
constitute at least a majority of the Board of Directors or the board of
directors of any successor to the Company, provided that any director who was
not a director as of the effective date of this Plan shall be deemed to be an
Incumbent Director if such director was elected to the Board of Directors by, or
on the recommendation of or with the approval of, at least two-thirds of the
directors who then qualified as Incumbent Directors either actually or by prior
operation of this clause (iii); and provided further that any director elected
to the Board of Directors to avoid or settle a threatened or actual proxy
contest shall in no event be deemed to be an Incumbent Director.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means the Compensation Committee appointed by the
Board of Directors to administer the Plan. The Board of Directors shall consider
the advisability of whether the members of the Committee shall consist solely of
at least two members of the Board of Directors who are both "outside directors"
as defined in Treas. Reg. 1.162-27(e) as promulgated by the Internal Revenue
Service and "non-employee directors" as defined in Rule 16b-3(b)(3) as
promulgated under the Exchange Act.
(f) "COMPANY" means Shaw Industries, Inc., a Georgia corporation.
(g) "DISABILITY" has the same meaning as provided in the long-term
disability plan or policy maintained or, if applicable, most recently
maintained, by the Company or, if applicable, any Affiliate of the Company for
the Participant. If no long-term disability plan or policy was ever maintained
on behalf of the Participant or, if the determination of Disability relates to
an Incentive Stock Option, Disability shall mean that condition described in
Code Section 22(e)(3), as amended from time to time. In the event of a dispute,
the determination of Disability shall be made
<PAGE>
by the Committee and shall be supported by advice of a physician competent in
the area to which such Disability relates.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time.
(i) "FAIR MARKET VALUE" with regard to a date means the closing
price at which Stock shall have been sold on the last trading date prior to that
date as reported by the National Association of Securities Dealers Automated
Quotation System (or, if applicable, as reported by a national securities
exchange selected by the Committee on which the shares of Stock are then
actively traded) and published in The Wall Street Journal; provided that, for
purposes of granting awards other than Incentive Stock Options, Fair Market
Value of the shares of Stock may be determined by the Committee by reference to
the average market value determined over a period certain or as of specified
dates, to a tender offer price for the shares of Stock (if settlement of an
award is triggered by such an event) or to any other reasonable measure of fair
market value.
(j) "OPTION" means a non-qualified stock option or an incentive
stock option.
(k) "OVER 10% OWNER" means an individual who at the time an
Incentive Stock Option is granted owns Stock possessing more than 10% of the
total combined voting power of the Company or one of its Subsidiaries,
determined by applying the attribution rules of Code Section 424(d).
(l) "PARTICIPANT" means an individual who receives a Stock
Incentive hereunder.
(m) "PLAN" means the Shaw Industries, Inc. 2000 Stock Incentive
Plan.
(n) "STOCK" means the Company's common stock.
(o) "STOCK INCENTIVE AGREEMENT" means an agreement between the
Company and a Participant or other documentation evidencing an award of a Stock
Incentive.
(p) "STOCK INCENTIVE PROGRAM" means a written program established
by the Committee, pursuant to which Stock Incentives are awarded under the Plan
under uniform terms, conditions and restrictions set forth in such written
program.
(q) "STOCK INCENTIVES" means, collectively, Dividend Equivalent
Rights, Incentive Stock Options, Non-Qualified Stock Options, Phantom Shares,
Stock Appreciation Rights and Stock Awards.
(r) "SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, with respect to
Incentive Stock Options, at the time of the granting of the Option, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2 THE STOCK INCENTIVE PLAN
2.1 PURPOSE OF THE PLAN. The Plan is intended to (a) provide incentive
to officers and key employees of the Company and its Affiliates to stimulate
their efforts toward the continued success of the Company and to operate and
manage the business in a manner that will provide for the long-term growth and
profitability of the Company; (b) encourage stock ownership by officers and key
employees by providing them with a means to acquire a proprietary interest in
the Company, acquire shares of Stock, or to receive compensation which is based
upon appreciation in the value of Stock; and (c) provide a means of obtaining,
rewarding and retaining key personnel and consultants.
2.2 STOCK SUBJECT TO THE PLAN. Subject to adjustment in accordance
with Section 5.2, 6,000,000 shares of Stock (the "Maximum Plan Shares") are
hereby reserved exclusively for issuance pursuant to Stock Incentives. At no
time shall the Company have outstanding under the Plan, Stock Incentives subject
to Section 16 of the Exchange Act and shares of Stock issued in respect of Stock
Incentives under the Plan in excess of the Maximum Plan Shares. The shares of
Stock attributable to the nonvested, unpaid, unexercised, unconverted or
otherwise unsettled portion of any Stock Incentive that is forfeited or
cancelled or expires or terminates for any reason without becoming vested, paid,
exercised, converted or otherwise settled in full shall again be available for
purposes of the Plan.
2.3 ADMINISTRATION OF THE PLAN. The Plan shall be administered
by the Committee. The Committee shall have full authority in its discretion
to determine the officers and key employees of the Company or its Affiliates
to whom Stock
<PAGE>
Incentives shall be granted and the terms and provisions of Stock Incentives,
subject to the Plan; provided, however, that any award of a Stock Incentive to
any employee who is also a member of the Board of Directors shall be approved by
the majority of the "disinterested persons," as defined in Rule 16b-3 as
promulgated under the Exchange Act, then serving as members of the Board of
Directors, upon the recommendation of the Committee. Subject to the provisions
of the Plan, the Committee shall have full and conclusive authority to interpret
the Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of the respective Stock Incentive
Agreements and to make all other determinations necessary or advisable for the
proper administration of the Plan. The Committee's determinations under the Plan
need not be uniform and may be made by it selectively among persons who receive,
or are eligible to receive, awards under the Plan (whether or not such persons
are similarly situated). The Committee's decisions shall be final and binding on
all Participants.
2.4 ELIGIBILITY AND LIMITS. Stock Incentives may be granted only to
officers and key employees of the Company, or any Affiliate of the Company. In
the case of incentive stock options, the aggregate Fair Market Value (determined
as at the date an incentive stock option is granted) of stock with respect to
which stock options intended to meet the requirements of Code Section 422 become
exercisable for the first time by an individual during any calendar year under
all plans of the Company and its Subsidiaries shall not exceed $100,000;
provided further, that if the limitation is exceeded, the incentive stock
option(s) which cause the limitation to be exceeded shall be treated as
non-qualified stock option(s). In no event shall any person be entitled to
grants under the Plan in any calendar year in excess of 100,000 shares, subject
to adjustment in accordance with Section 5.2, hereof.
SECTION 3 TERMS OF STOCK INCENTIVES
3.1 TERMS AND CONDITIONS OF ALL STOCK INCENTIVES.
(a) The number of shares of Stock as to which a Stock Incentive
shall be granted shall be determined by the Committee in its sole discretion,
subject to the provisions of Section 2.2 as to the total number of shares
available for grants under the Plan.
(b) Each Stock Incentive shall either be evidenced by a Stock
Incentive Agreement in such form and containing such terms, conditions and
restrictions as the Committee may determine to be appropriate, or be made
subject to the terms of a Stock Incentive Program, containing such terms,
conditions and restrictions as the Committee may determine to be appropriate.
Each Stock Incentive Agreement or Stock Incentive Program shall be subject to
the terms of the Plan and any provisions contained in the Stock Incentive
Agreement or Stock Incentive Program that are inconsistent with the Plan shall
be null and void.
(c) The date a Stock Incentive is granted shall be the date on
which the Committee has approved the terms and conditions of the Stock Incentive
and has determined the recipient of the Stock Incentive and the number of shares
covered by the Stock Incentive.
(d) Each Stock Incentive Agreement or Stock Incentive Program may
provide that, in the event of a Change in Control, the Stock Incentive shall be
cashed out on the basis of any price not greater than the highest price paid for
a share of Stock in any transactio n reported by the National Association of
Securities Dealers Automated Quotation System or any national securities
exchange selected by the Committee on which the shares of Stock are then
actively traded during a specified period immediately preceding or ending on the
date of the Change in Control or offered for a share of Stock in any tender
offer occurring during a specified period immediately preceding or ending on the
date the tender offer commences; provided that, in no case shall any such
specified period exceed one (1) year (the "Change in Control Price"). For
purposes of this Subsection, the cash-out of a Stock Incentive shall be
determined as follows:
(i) Options shall be cashed out on the basis of the excess, if
any, of the Change in Control Price (but not more than the Fair Market Value of
the Stock on the date of the cash-out in the case of Incentive Stock Options)
over the Exercise Price with or without regard to whether the Option may
otherwise be exercisable only in part;
(ii) Stock Awards and Phantom Shares shall be cashed out in an
amount equal to the Change in Control Price with or without regard to any
conditions or restrictions otherwise applicable to any such Stock Incentive; and
<PAGE>
(iii) Stock Appreciation Rights, Dividend Equivalent Rights
and Performance Unit Awards shall be cashed out with or without regard to any
conditions or restrictions otherwise applicable to any such Stock Incentive and
the amount of the cash out shall be determined by reference to the number of
shares of Stock that would be required to pay the Participant in kind for the
value of the Stock Incentive as of the date of the Change in Control multiplied
by the Change in Control Price.
(e) Any Stock Incentive may be granted in connection with all or
any portion of a previously or contemporaneously granted Stock Incentive.
Exercise or vesting of a Stock Incentive granted in connection with another
Stock Incentive may result in a pro rata surrender or cancellation of any
related Stock Incentive, as specified in the applicable Stock Incentive
Agreement or Stock Incentive Program.
(f) Stock Incentives shall not be transferable or assignable
except by will or by the laws of descent and distribution and shall be
exercisable, during the Participant's lifetime, only by the Participant, or in
the event of the Disability of the Participant, by the legal representative of
the Participant.
3.2 TERMS AND CONDITIONS OF OPTIONS. Each Option granted under the
Plan shall be evidenced by a Stock Incentive Agreement. At the time any Option
is granted, the Committee shall determine whether the Option is to be an
incentive stock option described in Code Section 422 or a non-qualified stock
option, and the Option shall be clearly identified as to its status as an
incentive stock option or a non-qualified stock option. An incentive stock
option may only be granted within ten (10) years from the earlier of the date
the Plan is adopted or approved by the Company's stockholders.
(a) OPTION PRICE. Subject to adjustment in accordance with Section
5.2 and the other provisions of this Section 3.2, the exercise price (the
"Exercise Price") per share of Stock purchasable under any Option shall be as
set forth in the applicable Stock Incentive Agreement, but in no event shall it
be less than the Fair Market Value on the date the Option is granted. With
respect to each grant of an incentive stock option to a Participant who is an
Over 10% Owner, the Exercise Price shall not be less than 110% of the Fair
Market Value on the date the Option is granted. The Exercise Price of an Option
may not be amended or modified after the grant of the Option, and an Option may
not be surrendered in consideration of or exchanged for a grant of a new Option
having an Exercise Price below that of the Option which was surrendered or
exchanged.
(b) OPTION TERM. Any incentive stock option granted to a
Participant who is not an Over 10% Owner shall not be exercisable after the
expiration of ten (10) years after the date the Option is granted. Any incentive
stock option granted to an Over 10% Owner shall not be exercisable after the
expiration of five (5) years after the date the Option is granted. The term of
any Non-Qualified Stock Option shall be as specified in the applicable Stock
Incentive Agreement.
(c) PAYMENT. Payment for all shares of Stock purchased pursuant to
exercise of an Option shall be made in any form or manner authorized by the
Committee in the Stock Incentive Agreement or by amendment thereto, including,
but not limited to, cash or, if the Stock Incentive Agreement provides, (i) by
delivery to the Company of a number of shares of Stock which have been owned by
the holder for at least six (6) months prior to the date of exercise having an
aggregate Fair Market Value of not less than the product of the Exercise Price
multiplied by the number of shares the Participant intends to purchase upon
exercise of the Option on the date of delivery; (ii) in a cashless exercise
through a broker; or (iii) by having a number of shares of Stock withheld, the
Fair Market Value of which as of the date of exercise is sufficient to satisfy
the Exercise Price. In its discretion, the Committee also may authorize (at the
time an Option is granted or thereafter) Company financing to assist the
Participant as to payment of the Exercise Price on such terms as may be offered
by the Committee in its discretion. Any such financing shall require the payment
by the Participant of interest on the amount financed at a rate not less than
the "applicable federal rate" under the Code. Payment shall be made at the time
that the Option or any part thereof is exercised, and no shares shall be issued
or delivered upon exercise of an option until full payment has been made by the
Participant. The holder of an Option, as such, shall have none of the rights of
a stockholder.
(d) CONDITIONS TO THE EXERCISE OF AN OPTION. Each Option granted
under the Plan shall be exercisable by whom, at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the Stock Incentive Agreement; provided, however, that subsequent to
the grant of an Option, the Committee, at any time before complete termination
of such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part, including, without limitation, upon a Change in
Control and may permit the Participant or any other designated person to
exercise the Option, or any portion thereof, for all or part of the remaining
Option term, notwithstanding any provision of the Stock Incentive Agreement to
the contrary.
<PAGE>
(e) TERMINATION OF INCENTIVE STOCK OPTION. With respect to an
incentive stock option, in the event of termination of employment of a
Participant, the Option or portion thereof held by the Participant which is
unexercised shall expire, terminate, and become unexercisable no later than the
expiration of three (3) months after the date of termination of employment;
provided, however, that in the case of a holder whose termination of employment
is due to death or Disability, one (1) year shall be substituted for such three
(3) month period. For purposes of this Subsection (e), termination of employment
of the Participant shall not be deemed to have occurred if the Participant is
employed by another corporation (or a parent or subsidiary corporation of such
other corporation) which has assumed the incentive stock option of the
Participant in a transaction to which Code Section 424(a) is applicable.
(f) SPECIAL PROVISIONS FOR CERTAIN SUBSTITUTE OPTIONS.
Notwithstanding anything to the contrary in this Section 3.2, any Option issued
in substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such other
terms and conditions as the Committee may prescribe to cause such substitute
Option to contain as nearly as possible the same terms and conditions (including
the applicable vesting and termination provisions) as those contained in the
previously issued option being replaced thereby.
3.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS Each Stock
Appreciation Right granted under the Plan shall be evidenced by a Stock
Incentive Agreement. A Stock Appreciation Right shall entitle the Participant to
receive the excess of (1) the Fair Market Value of a specified or determinable
number of shares of the Stock at the time of payment or exercise over (2) a
specified or determinable price which, in the case of a Stock Appreciation Right
granted in connection with an Option, shall be not less than the Exercise Price
for that number of shares subject to that Option. A Stock Appreciation Right
granted in connection with a Stock Incentive may only be exercised to the extent
that the related Stock Incentive has not been exercised, paid or otherwise
settled.
(a) SETTLEMENT. Upon settlement of a Stock Appreciation Right, the
Company shall pay to the Participant the appreciation in cash or shares of Stock
(valued at the aggregate Fair Market Value on the date of payment or exercise)
as provided in the Stock Incentive Agreement or, in the absence of such
provision, as the Committee may determine.
(b) CONDITIONS TO EXERCISE. Each Stock Appreciation Right granted
under the Plan shall be exercisable or payable at such time or times, or upon
the occurrence of such event or events, and in such amounts, as the Committee
shall specify in the Stock Incentive Agreement; provided, however, that
subsequent to the grant of a Stock Appreciation Right, the Committee, at any
time before complete termination of such Stock Appreciation Right, may
accelerate the time or times at which such Stock Appreciation Right may be
exercised or paid in whole or in part.
3.4 TERMS AND CONDITIONS OF STOCK AWARDS. The number of shares of
Stock subject to a Stock Award and restrictions or conditions on such shares, if
any, shall be as the Committee determines, and the certificate for such shares
shall bear evidence of any restrictions or conditions. Subsequent to the date of
the grant of the Stock Award, the Committee shall have the power to permit, in
its discretion, an acceleration of the expiration of an applicable restriction
period with respect to any part or all of the shares awarded to a Participant.
The Committee may require a cash payment from the Participant in an amount no
greater than the aggregate Fair Market Value of the shares of Stock awarded
determined at the date of grant in exchange for the grant of a Stock Award or
may grant a Stock Award without the requirement of a cash payment. In the event
that shares of Stock subject to Stock Awards are forfeited by a Participant such
shares of Stock may again be subject to a new Stock Award under the Plan.
3.5 TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS. A Dividend
Equivalent Right shall entitle the Participant to receive payments from the
Company in an amount determined by reference to any cash dividends paid on a
specified number of shares of Stock to Company stockholders of record during the
period such rights are effective. The Committee may impose such restrictions and
conditions on any Dividend Equivalent Right as the Committee in its discretion
shall determine, including the date any such right shall terminate and may
reserve the right to terminate, amend or suspend any such right at any time.
(a) PAYMENT. Payment in respect of a Dividend Equivalent Right may
be made by the Company in cash or shares of Stock (valued at Fair Market Value
on the date of payment) as provided in the Stock Incentive Agreement or Stock
Incentive Program, or, in the absence of such provision, as the Committee may
determine.
(b) CONDITIONS TO PAYMENT. Each Dividend Equivalent Right granted
under the Plan shall be payable at such time or times, or upon the occurrence of
such event or events, and in such amounts,as the Committee shall
<PAGE>
specify in the applicable Stock Incentive Agreement or Stock Incentive Program;
provided, however, that subsequent to the grant of a Dividend Equivalent Right,
the Committee, at any time before complete termination of such Dividend
Equivalent Right, may accelerate the time or times at which such Dividend
Equivalent Right may be paid in whole or in part.
3.6 TERMS AND CONDITIONS OF PHANTOM SHARES. Phantom Shares shall
entitle the Participant to receive, at a specified future date, payment of an
amount equal to all or a portion of the Fair Market Value of a specified number
of shares of Stock at the end of a specified period. At the time of the grant,
the Committee shall determine the factors which will govern the portion of the
rights so payable, including, at the discretion of the Committee, any
performance criteria that must be satisfied as a condition to payment. Phantom
Share awards containing performance criteria may be designated as Performance
Share Awards.
(a) PAYMENT. Payment in respect of Phantom Shares may be made by
the Company in cash or shares of Stock (valued at Fair Market Value on the date
of payment) as provided in the applicable Stock Incentive Agreement or Stock
Incentive Program, or, in the absence of such provision, as the Committee may
determine.
(b) CONDITIONS TO PAYMET. Each Phantom Share granted under the
Plan shall be payable at such time or times, or upon the occurrence of such
event or events, and in such amounts, as the Committee shall specify in the
applicable Stock Incentive Agreement or Stock Incentive Program; provided,
however, that subsequent to the grant of a Phantom Share, the Committee, at any
time before complete termination of such Phantom Share, may accelerate the time
or times at which such Phantom Share may be paid in whole or in part.
3.7 TREATMENT OF AWARDS UPON TERMINATION OF EMPLOYMEN T. Except as
otherwise provided by Plan Section 3.2(e), any award under this Plan to a
Participant who has terminated employment may be cancelled, accelerated, paid or
continued, as provided in the applicable Stock Incentive Agreement or Stock
Incentive Program, or, in the absence of such provision, as the Committee may
determine. The portion of any award exercisable in the event of continuation or
the amount of any payment due under a continued award may be adjusted by the
Committee to reflect the Participant's period of service from the date of grant
through the date of the Participant's termination of employment or such other
factors as the Committee determines are relevant to its decision to continue the
award.
SECTION 4 RESTRICTIONS ON STOCK
4.1 ESCROW OF SHARES Any certificates representing the shares of Stock
issued under the Plan shall be issued in the Participant's name, but, if the
applicable Stock Incentive Agreement or Stock Incentive Program so provides, the
shares of Stock shall be held by a custodian designated by the Committee (the
"Custodian"). Each applicable Stock Incentive Agreement or Stock Incentive
Program providing for transfer of shares of Stock to the Custodian shall appoint
the Custodian as the attorney-in-fact for the Participant for the term specified
in the applicable Stock Incentive Agreement or Stock Incentive Program, with
full power and authority in the Participant's name, place and stead to transfer,
assign and convey to the Company any shares of Stock held by the Custodian for
such Participant, if the Participant forfeits the shares under the terms of the
applicable Stock Incentive Agreement or Stock Incentive Program. During the
period that the Custodian holds the shares subject to this Section, the
Participant shall be entitled to all rights, except as provided in the
applicable Stock Incentive Agreement or Stock Incentive Program, applicable to
shares of Stock not so held. Any dividends declared on shares of Stock held by
the Custodian shall, as the Committee may provide in the applicable Stock
Incentive Agreement or Stock Incentive Program, be paid directly to the
Participant or, in the alternative, be retained by the Custodian or by the
Company until the expiration of the term specified in the applicable Stock
Incentive Agreement or Stock Incentive Program and shall then be delivered,
together with any proceeds, with the shares of Stock to the Participant or to
the Company, as applicable.
4.2 FORFEITURE OF SHARES. Notwithstanding any vesting schedule set
forth in any Stock Incentive Agreement or Stock Incentive Program, in the event
that the Committee determines that a Participant violated a noncompetition
agreement as set forth in the Stock Incentive Agreement or Stock Incentive
Program, all Stock Incentives and shares of Stock issued to the holder pursuant
to the Plan shall be forfeited; provided, however, that the Company shall return
to the holder the lesser of any consideration paid by the Participant in
exchange for Stock issued to the Participant pursuant to the Plan or the then
Fair Market Value of the Stock forfeited hereunder.
4.3 RESTRICTIONS ON TRANSFER. The Participant shall not have the right
to make or permit to exist any disposition of the shares of Stock issued
pursuant to the Plan except as provided in the Plan or the applicable Stock
Incentive Agreement or Stock Incentive Program. Any disposition of the shares of
Stock issued under the Plan by the Participant not made in accordance with the
Plan or the applicable Stock Incentive Agreement or Stock Incentive
<PAGE>
Program shall be void. The Company shall not recognize, or have the duty to
recognize, any disposition not made in accordance with the Plan and the
applicable Stock Incentive Agreement or Stock Incentive Program, and the shares
so transferred shall continue to be bound by the Plan and the applicable Stock
Incentive Agreement or Stock Incentive Program.
SECTION 5 GENERAL PROVISIONS
5.1 WITHHOLDING. The Company shall deduct from all cash distributions
under the Plan any taxes required to be withheld by federal, state or local
government. Whenever the Company proposes or is required to issue or transfer
shares of Stock under the Plan or upon the vesting of any Stock Award, the
Company shall have the right to require the recipient to remit to the Company an
amount sufficient to satisfy any federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares or the vesting of such Stock Award. A Participant may pay the withholding
tax in cash, or, if the applicable Stock Incentive Agreement or Stock Incentive
Program provides, a Participant may elect to have the number of shares of Stock
he is to receive reduced by, or with respect to a Stock Award, tender back to
the Company, the smallest number of whole shares of Stock which, when multiplied
by the Fair Market Value of the shares of Stock determined as of the Tax Date
(defined below), is sufficient to satisfy federal, state and local, if any,
withholding taxes arising from exercise or payment of a Stock Incentive (a
"Withholding Election"). A Participant may make a Withholding Election only if
both of the following conditions are met:
(a) The Withholding Election must be made on or prior to the date
on which the amount of tax required to be withheld is determined (the "Tax
Date") by executing and delivering to the Company a properly completed notice of
Withholding Election as prescribed by the Committee; and
(b) Any Withholding Election made will be irrevocable except on
six months advance written notice delivered to the Company; however, the
Committee may in its sole discretion disapprove and give no effect to the
Withholding Election.
5.2 CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION.
(a) The number of shares of Stock reserved for the grant of
Options, Dividend Equivalent Rights, Performance Unit Awards, Phantom Shares,
Stock Appreciation Rights and Stock Awards; the number of shares of Stock
reserved for issuance upon the exercise or payment, as applicable, of each
outstanding Option, Dividend Equivalent Right, Phantom Share and Stock
Appreciation Right and upon vesting or grant, as applicable, of each Stock
Award; the Exercise Price of each outstanding Option and the specified number of
shares of Stock to which each outstanding Dividend Equivalent Right, Phantom
Share and Stock Appreciation Right pertains shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Stock resulting
from a subdivision or combination of shares or the payment of a stock dividend
in shares of Stock to holders of outstanding shares of Stock or any other
increase or decrease in the number of shares of Stock outstanding effected
without receipt of consideration by the Company.
(b) In the event of a merger, consolidation or other
reorganization of the Company or tender offer for shares of Stock, the Committee
may make such adjustments with respect to awards and take such other action as
it deems necessary or appropriate to refl ect such merger, consolidation,
reorganization or tender offer, including, without limitation, the substitution
of new awards, or the adjustment of outstanding awards, the acceleration of
awards or the removal of restrictions on outstanding awards. Any adjustment
pursuant to this Section 5.2 may provide, in the Committee's discretion, for the
elimination without payment therefor of any fractional shares that might
otherwise become subject to any Stock Incentive, but shall not otherwise
diminish the then value of the Stock Incentive.
(c) The existence of the Plan and the Stock Incentives granted
pursuant to the Plan shall not affect in any way the right or power of the
Company to make or authorize any adjustment, reclassification, reorganization or
other change in its capital or business structure, any merger or consolidation
of the Company, any issue of debt or equity securities having preferences or
priorities as to the Stock or the rights thereof, the dissolution or liquidation
of the Company, any sale or transfer of all or any part of its business or
assets, or any other corporate act or proceeding.
5.3 CASH AWARDS. The Committee may, at any time and in its discretion,
grant to any holder of a Stock Incentive the right to receive, at such times and
in such amounts as determined by the Committee in its discretion, a cash amount
which is intended to reimburse such person for all or a portion of the federal,
state and local income taxes imposed upon such person as a consequence of the
receipt of the Stock Incentive or the exercise of rights thereunder.
<PAGE>
5.4 COMPLIANCE WITH CODE All incentive stock options to be granted
hereunder are intended to comply with Code Section 422, and all provisions of
the Plan and all incentive stock options granted hereunder shall be construed in
such manner as to effectuate that intent.
5.5 RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or in any Stock
Incentive shall confer upon any Participant the right to continue as an employee
or officer of the Company or any of its Affiliates or affect the right of the
Company or any of its Affiliates to terminate the Participant 's employment at
any time.
5.6 NON-ALIENATION OF BENEFITS. Other than as specifically provided
with regard to the death of a Participant, no benefit under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge; and any attempt to do so shall be void. No such
benefit shall, prior to receipt by the Participant, be in any manner liable for
or subject to the debts, contracts, liabilities, engagements or torts of the
Participant.
5.7 LISTING AND LEGAL COMPLIANCE. The Committee may suspend the
exercise or payment of any Stock Incentive so long as it determines that
securities exchange listing or registration or qualification under any
securities laws is required in connection therewith and has not been completed
on terms acceptable to the Committee.
5.8 TERMINATION AND AMENDMENT OF THE PLAN. The Board of Directors at
any time may amend or terminate the Plan without stockholder approval; provided,
however, that the Board of Directors may condition any amendment on the approval
of stockholders of the Company if such approval is necessary or advisable with
respect to tax, securities or other applicable laws. No such termination or
amendment without the consent of the holder of a Stock Incentive shall adversely
affect the rights of the Participant under such Stock Incentive.
5.9 STOCKHOLDER APPROVAL. The Plan shall be submitted to the
stockholders of the Company for their approval within twelve (12) months before
or after the adoption of the Plan by the Board of Directors of the Company. If
such approval is not obtained, any Stock Incentive granted hereunder shall be
void.
5.10 CHOICE OF LAW. The laws of the State of Georgia shall
govern the Plan, to the extent not preempted by federal law, without
reference to the principles of conflict of laws.
5.11 EFFECTIVE DATE OF PLAN. The Plan shall become effective
upon the date the Plan is approved by the stockholders of the Company.
SHAW INDUSTRIES, INC.
By:_________________________________
Title:______________________________
ATTEST:
________________________________________________
Title:___________________________________________
[CORPORATE SEAL]
