-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AnrzFfvWaqsrREMi/664YTBhcLJmM+AfaTEBTptU62RaoG7fsXrfvuoVbsTHIcjc 3zRDRVt0XvMJ3QGYcOrIHA== /in/edgar/work/20001103/0000931763-00-002367/0000931763-00-002367.txt : 20001106 0000931763-00-002367.hdr.sgml : 20001106 ACCESSION NUMBER: 0000931763-00-002367 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOHAWK INDUSTRIES INC CENTRAL INDEX KEY: 0000851968 STANDARD INDUSTRIAL CLASSIFICATION: [2273 ] IRS NUMBER: 521604305 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13697 FILM NUMBER: 752331 BUSINESS ADDRESS: STREET 1: 160 S INDUSTRIAL BLVD STREET 2: PO BOX 12069 CITY: CALHOUN STATE: GA ZIP: 30701 BUSINESS PHONE: 7066297721 MAIL ADDRESS: STREET 1: P O BOX 12069 CITY: CALHOUN STATE: GA ZIP: 30703 10-Q 1 0001.txt FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [Mark One] [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 01-19826 MOHAWK INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware 52-1604305 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) P.O. Box 12069, 160 S. Industrial Blvd., Calhoun, Georgia 30701 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (706) 629-7721 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[_] The number of shares outstanding of the issuer's classes of capital stock as of November 3, 2000, the latest practicable date, is as follows: 52,624,516. shares of Common Stock, $.01 par value. - -------------------------------------------------------------------------------- MOHAWK INDUSTRIES, INC. INDEX
Page No. ------- Part I. Financial Information: Item 1. Financial Statements Condensed Consolidated Balance Sheets - September 30, 2000 and December 31, 1999 3 Condensed Consolidated Statements of Earnings - Three months ended September 30, 2000 and October 2, 1999 5 Condensed Consolidated Statements of Earnings - Nine months ended September 30, 2000 and October 2, 1999 6 Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 2000 and October 2, 1999 7 Notes to Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risks 14 Part II. Other Information 14
PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (In thousands)
September 30, 2000 December 31, 1999 --------------------------- -------------------------- (Unaudited) Current assets: Receivables $ 394,896 337,824 Inventories 592,828 494,774 Prepaid expenses 16,091 25,184 Deferred income taxes 76,628 76,628 --------------------------- -------------------------- Total current assets 1,080,443 934,410 --------------------------- -------------------------- Property, plant and equipment, at cost 1,192,149 1,139,660 Less accumulated depreciation and amortization 569,277 514,846 --------------------------- -------------------------- Net property, plant and equipment 622,872 624,814 --------------------------- -------------------------- Other assets 119,544 123,649 --------------------------- -------------------------- Total assets $ 1,822,859 1,682,873 =========================== ==========================
See accompanying notes to condensed consolidated financial statements. 3 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (In thousands)
September 30, 2000 December 31, 1999 --------------------------- -------------------------- (Unaudited) Current liabilities: Current portion of long-term debt $ 33,874 33,961 Accounts payable and accrued expenses 411,540 340,392 --------------------------- -------------------------- Total current liabilities 445,414 374,353 Deferred income taxes 53,783 53,783 Long-term debt, less current portion 592,747 562,104 Other long-term liabilities 592 87 --------------------------- -------------------------- Total liabilities 1,092,536 990,327 --------------------------- -------------------------- Stockholders' equity: Preferred stock, $.01 par value; 60 shares authorized; no shares issued - - Common stock, $.01 par value; 150,000 shares authorized; 60,772 and 60,657 shares issued in 2000 and 1999, respectively 608 607 Additional paid-in capital 182,250 179,993 Retained earnings 719,269 595,932 --------------------------- -------------------------- 902,127 776,532 Less treasury stock at cost; 7,764 in shares in 2000 and 3,952 in 1999 171,804 83,986 --------------------------- -------------------------- Total stockholders' equity 730,323 692,546 --------------------------- -------------------------- Total liabilities and stockholders' equity $ 1,822,859 1,682,873 =========================== ==========================
See accompanying notes to condensed consolidated financial statements. 4 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) (Unaudited)
Three Months Ended ----------------------------------------------------------- September 30, 2000 October 2, 1999 --------------------------- -------------------------- Net sales $ 838,514 809,933 Cost of sales 624,294 606,687 --------------------------- -------------------------- Gross profit 214,220 203,246 Selling, general and administrative expenses 127,151 119,258 Class action legal settlement 7,000 - --------------------------- -------------------------- Operating income 80,069 83,988 --------------------------- -------------------------- Other expense: Interest expense 10,173 8,335 Other expense, net 846 1,142 --------------------------- -------------------------- 11,019 9,477 --------------------------- -------------------------- Earnings before income taxes 69,050 74,511 Income taxes 26,913 29,432 --------------------------- -------------------------- Net earnings $ 42,137 45,079 =========================== ========================== Basic earnings per share $ 0.79 0.74 =========================== ========================== Weighted-average common shares outstanding 53,097 60,600 =========================== ========================== Diluted earnings per share $ 0.79 0.74 =========================== ========================== Weighted-average common and dilutive potential common shares outstanding 53,634 61,114 =========================== ==========================
See accompanying notes to condensed consolidated financial statements. 5 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) (Unaudited)
Nine Months Ended ----------------------------------------------------------- September 30, 2000 October 2, 1999 --------------------------- -------------------------- Net sales $ 2,456,405 2,307,717 Cost of sales 1,835,740 1,725,231 --------------------------- -------------------------- Gross profit 620,665 582,486 Selling, general and administrative expenses 378,979 361,920 Class action legal settlement 7,000 - --------------------------- -------------------------- Operating income 234,686 220,566 --------------------------- -------------------------- Other expense: Interest expense 28,587 23,942 Other expense, net 2,834 3,130 --------------------------- -------------------------- 31,421 27,072 --------------------------- -------------------------- Earnings before income taxes 203,265 193,494 Income taxes 79,928 76,430 --------------------------- -------------------------- Net earnings $ 123,337 117,064 =========================== ========================== Basic earnings per share $ 2.28 1.93 =========================== ========================== Weighted-average common shares outstanding 54,181 60,586 =========================== ========================== Diluted earnings per share $ 2.26 1.91 =========================== ========================== Weighted-average common and dilutive potential common shares outstanding 54,689 61,218 =========================== ==========================
See accompanying notes to condensed consolidated financial statements. 6 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended ------------------------------------------------------------ September 30, 2000 October 2, 1999 --------------------------- -------------------------- Cash flows from operating activities: Net earnings $ 123,337 117,064 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 61,411 76,099 Provision for doubtful accounts 12,175 11,599 Loss on sale of property, plant and equipment 100 2,184 Changes in operating assets and liabilities, net of effects of acquisition: Receivables (69,247) (40,411) Inventories (98,054) (75,242) Accounts payable and accrued expenses 78,591 (21,775) Other assets and prepaid expenses 7,167 15,939 Other liabilities 505 (4,516) --------------------------- -------------------------- Net cash provided by operating activities 115,985 80,941 --------------------------- -------------------------- Cash flows from investing activities: Additions to property, plant and equipment, net (53,538) (115,216) Acquisitions - (162,463) --------------------------- -------------------------- Net cash used in investing activities (53,538) (277,679) --------------------------- -------------------------- Cash flows from financing activities: Net change in revolving line of credit 53,758 214,282 Payments on term loans (26,502) (26,503) Redemption of acquisition indebtedness - (20,917) Proceeds (redemption) of IRBs and other, net of proceeds 3,300 (8,057) Change in outstanding checks in excess of cash (7,443) 41,457 Acquisition of treasury stock (87,818) (13,862) Common stock transactions 2,258 7,954 --------------------------- -------------------------- Net cash (used in) provided by financing activities (62,447) 194,354 --------------------------- -------------------------- Net change in cash - (2,384) Cash, beginning of period - 2,384 --------------------------- -------------------------- Cash, end of period $ - - =========================== ========================== Net cash paid during the period for: Interest $ 28,258 29,529 =========================== ========================== Income taxes $ 71,899 92,558 =========================== ==========================
See accompanying notes to condensed consolidated financial statements. 7 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands) (Unaudited) 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the financial statements and notes thereto included in the Company's 1999 Annual Report filed on Form 10-K, as filed with the Securities and Exchange Commission, which includes consolidated financial statements for the fiscal year ended December 31, 1999. The Company's basic earnings per share are computed by dividing net earnings by the weighted-average common shares outstanding, and diluted earnings per share are computed by dividing net earnings by the weighted-average common and dilutive potential common shares outstanding. Dilutive common stock options are included in the diluted earnings per share calculation using the treasury stock method. 2. Acquisitions On October 10, 2000, the Company signed a definitive agreement with Crown Crafts, Inc. to acquire certain assets of its Woven Division. Under the agreement, the Company will pay approximately $40,000 in cash for substantially all of the fixed assets and inventory of the division. The acquisition is expected to close by the end of the fourth quarter of 2000. 3. Receivables Receivables are as follows:
September 30, 2000 December 31, 1999 --------------------------- -------------------------- Customers, trade $ 472,500 405,477 Other 2,359 2,826 --------------------------- -------------------------- 474,859 408,303 Less allowance for discounts, returns, claims and doubtful accounts 79,963 70,479 --------------------------- -------------------------- Net receivables $ 394,896 337,824 =========================== ==========================
3. Inventories The components of inventories are as follows:
September 30, 2000 December 31, 1999 --------------------------- -------------------------- Finished goods $ 295,793 254,179 Work in process 83,104 65,456 Raw materials 213,961 175,139 --------------------------- -------------------------- Total inventories $ 592,858 494,774 =========================== ==========================
8 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands) (Unaudited) 5. Other assets Other assets are as follows:
September 30, 2000 December 31, 1999 --------------------------- -------------------------- Goodwill, net of accumulated amortization of $15,546 and $13,171, respectively $ 113,185 113,560 Other assets 6,359 10,089 --------------------------- -------------------------- Total other assets $ 119,544 123,649 =========================== ========================== 6. Accounts payable and accrued expenses Accounts payable and accrued expenses are as follows: September 30, 2000 December 31, 1999 --------------------------- -------------------------- Outstanding checks in excess of cash $ 34,930 42,373 Accounts payable, trade 195,989 159,812 Accrued expenses 107,150 83,253 Accrued compensation 73,471 54,954 --------------------------- -------------------------- Total accounts payable and accrued expenses $ 411,540 340,392 =========================== ==========================
7. Property, Plant and Equipment Effective January 1, 2000, the Company changed the estimated useful lives of buildings (25 years to 35 years), tufting equipment (7 years to 10 years), extrusion equipment (7 years to 15 years) and furniture and fixtures (5 years to 7 years). Management believes the change more accurately reflects the actual lives of these assets and is more consistent with industry practice. The prospective change is estimated to reduce annual depreciation expense by approximately $20,000 in 2000. 8. Nonrecurring costs In the third quarter of 2000, the Company reached an agreement in principle to settle two antitrust class actions. The Company will contribute $13,500 to a settlement fund to resolve price fixing claims. The settlement is subject to preliminary approval of the court, notice to members of the settlement classes, certification of the proposed settlement classes and final approval by the court. During the quarter, the Company recorded a charge of $7,000 in connection with the settlement. The after tax effect of the charge for the three and nine months ended September 30, 2000, was $4,271, or $0.08 per share. 9. Subsequent events In October 2000, the Company entered into a one-year receivables purchase agreement enabling the Company to sell up to $250,000 of an undivided interest in a defined pool of trade accounts receivable and the securitization agreement may be extended for one-year terms. The Company received approximately $195,000 in proceeds from the initial sale of receivables. The proceeds were used to reduce borrowings under the revolving credit facility and will be accounted for as a short-term financing. The Company is generally at risk for losses associated with the sold receivables and will provide for these losses within the financial statements. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Effective January 1, 2000, the Company changed the estimated useful lives of certain property, plant and equipment. Management believes this change more accurately reflects the actual lives of these assets and is more consistent with industry practice. The prospective change is estimated to reduce annual depreciation expense by approximately $20 million in 2000. Effective November 1, 2000, the Company entered into an agreement with Congoleum Corporation, Inc. to become a national distributor of their vinyl products. This will give the Company a complete line of soft and hard floor covering products to supply to customers throughout the United States. In conjunction with this program and the other hard surface floor coverings, the Company anticipates significant start up costs with the rolling out of these product lines into all sales regions during the remainder of 2000 and 2001. The Company anticipates that the growth in sales will lag the increase in costs during the start up period. On October 10, 2000, the Company signed a definitive agreement with Crown Crafts, Inc. to acquire certain assets of its Woven Division. Under the agreement, the Company will pay approximately $40 million in cash for substantially all of the fixed assets and inventory of the division. The acquisition is expected to close by the end of the fourth quarter of 2000. In 1999, Staff Accounting Bulletin 101 ("SAB 101") "Revenue Recognition" was issued requiring that revenue be recognized when certain criteria are met. In conjunction, the Emerging Issues Task Force ("EITF") reached a consensus on issue EITF 00-10 in September 2000, "Accounting for Shipping and Handling Fees and Costs". The Company is currently analyzing the implications of both SAB101 and EITF 00-10. The Company believes that these will not have a material impact on the Company's consolidated financial statements. In 1998, the Financial Accounting Standards Board ("FASB") issued FAS No. 133 "Accounting for Derivative Instruments and Hedging Activities". In 2000, the Financial Accounting Standards Board ("FASB") issued FAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities". The Company is currently analyzing the implications of both FAS No. 131 and FAS No. 138. The Company believes that these will not have a material impact on the Company's consolidated financial statements. Results of Operations Quarter Ended September 30, 2000 as Compared with Quarter Ended October 2, 1999 - ------------------------------------------------------------------------------- Net sales for the quarter ended September 30, 2000 were $838.5 million, reflecting an increase of $28.6 million, or approximately 4%, over the $809.9 million reported in the quarter ended October 2, 1999. All major product categories achieved sales increases for the third quarter of 2000 as compared to 1999. The Company believes that the third quarter of 2000 net sales increase was attributable to internal growth. Gross profit for the third quarter of the current year was $214.2 million (25.5% of net sales) and represented an increase over the gross profit of $203.2 million (25.1% of net sales) for the prior year's quarter. Gross profit as a percentage of sales was favorably impacted by productivity improvements and an increase in the estimated useful lives of property, plant and equipment, which was effective January 1, 2000. These increases were offset by raw material price increases, resulting from rising oil and gas prices. The Company continues to experience increased oil-related costs that have been difficult to recover or offset on a timely basis. The Company believes that these higher costs and higher interest rates are also having a dampening effect on the economy and the flooring industry. Selling, general and administrative expenses for the current quarter were $127.2 million (15.2% of net sales) compared to $119.3 million (14.7% of net sales) for the prior year's third quarter. The increase was primarily due to start up expenses associated with the expansion of the Company's hard surfaces product lines throughout the United States. In the third quarter of 2000, the Company reached an agreement in principle to settle two antitrust class actions. The Company will contribute $13,500 to a settlement fund to resolve price fixing claims. The settlement is subject to 10 preliminary approval of the court, notice to members of the settlement classes, certification of the proposed settlement classes and final approval by the court. During the quarter, the Company recorded a charge of $7,000 in connection with the settlement. Interest expense for the current quarter was $10.2 million compared to $8.3 million in the third quarter of 1999. The primary factors contributing to the increase was an increase in debt levels, which was attributable to the stock repurchase program and an increase in the weighted average borrowing rate compared to the third quarter of 1999. Income tax expense was $26.9 million, or 39% of earnings before income taxes in the current quarter compared to $29.4 million, or 39.5% of earnings before income taxes for the prior year's third quarter. Nine months Ended September 30, 2000 as Compared with Nine Months Ended October - ------------------------------------------------------------------------------- 2, 1999 - ------- Net sales for the first nine months ended September 30, 2000 were $2,456.4 million, reflecting an increase of $148.7 million, or approximately 6%, over the $2,307.7 million reported in the first nine month period ended October 2, 1999. All major product categories achieved sales increases for the nine months of 2000 as compared to 1999. Gross profit for the first nine months of the current year was $620.7 million (25.3% of net sales) and represented an increase over the gross profit of $582.5 million (25.2% of net sales) for the first nine months of 1999. Gross profit as a percentage of sales was impacted by favourable manufacturing efficiencies, product mix and an increase in the estimated useful lives of property, plant and equipment, which was effective January 1, 2000. These increases were offset by raw material price increases, resulting from rising oil and gas prices. The Company continues to experience increased oil-related costs that have been difficult to recover or offset on a timely basis. The Company believes that these higher costs and higher interest rates are also having a dampening effect on the economy and the flooring industry. Selling, general and administrative expenses for the current period were $379.0 million (15.4% of net sales) compared to $361.9 million (15.7% of net sales) for the prior year's first nine months. The decrease was primarily due to improved cost controls and better leveraging of these expenses against higher sales volume over the nine month period. In the third quarter of 2000, the Company reached an agreement in principle to settle two antitrust class actions. The Company will contribute $13,500 to a settlement fund to resolve price fixing claims. The settlement is subject to preliminary approval of the court, notice to members of the settlement classes, certification of the proposed settlement classes and final approval by the court. During the quarter, the Company recorded a charge of $7,000 in connection with the settlement. Interest expense for the current period was $28.6 million compared to $23.9 million in the prior year's first nine months. The primary factor contributing to the increase was an increase in debt levels, which was attributable to the stock repurchase program and an increase in the weighted average borrowing rate compared to the first nine months of 1999. Income tax expense was $79.9 million, or 39.3% of earnings before income taxes in the current period compared to $76.4 million, or 39.5% of earnings before income taxes for the prior year's first nine months. Liquidity and Capital Resources The Company's primary capital requirements are for working capital, capital expenditures, acquisitions and stock repurchases. The Company's capital needs are met through a combination of internally generated funds, bank credit lines and credit terms from suppliers. The level of accounts receivable increased from $337.8 million at the beginning of 2000 to $394.9 million at September 30, 2000. The $57.1 million increase was attributable to strong sales growth. Inventories increased from $494.8 million at the beginning of 2000 to $592.8 million at September 30, 2000, due primarily to the need for a higher level of inventory to meet the increased sales volume and seasonal demand. 11 Capital expenditures totaled $53.5 million for the first nine months of 2000, and were incurred primarily to modernize and expand manufacturing facilities and equipment. The Company's capital projects are primarily focused on increasing capacity, improving productivity and reducing costs. Capital spending for the remainder of 2000 is expected to range from $21 million to $31 million, the majority of which will be used to purchase equipment to increase production capacity and productivity. During 1999, the Company's Board of Directors authorized the repurchase of up to 10 million shares of its outstanding common shares. During the quarter ended July 1, 2000, the Board of Directors authorized an additional repurchase of 5 million outstanding shares bringing the total authorized repurchase to 15 million. During the quarter ended September 30, 2000, a total of approximately .2 million shares of the Company's common stock was purchased at an aggregate cost of approximately $4.4 million. Since the inception of the program, a total of approximately 7.8 million shares have been purchased at an aggregate cost of approximately $172.0 million. All of these repurchases have been financed through the Company's operations and revolving line of credit. In October 2000, the Company entered into a one-year receivables purchase agreement enabling the Company to sell up to $250 million of an undivided interest in a defined pool of trade accounts receivable and the securitization agreement may be extended for one-year terms. The Company received approximately $195 million in proceeds from the initial sale of receivables. The proceeds were used to reduce borrowings under the revolving credit facility and will be accounted for as a short-term financing. The Company is generally at risk for losses associated with the sold receivables and will provide for these losses within the financial statements. Impact of Inflation Inflation affects the Company's manufacturing costs and operating expenses. The carpet industry has experienced significant inflation in the prices of raw materials and fuel-related costs, beginning in the third quarter of 1999. For the period from 1997, through the end of the second quarter of 1999, the carpet industry has experienced moderate inflation in the prices of raw materials and fuel-related costs. The Company has generally passed along nylon fiber price increases to its customers. Seasonality The carpet business is seasonal, with the Company's second, third and fourth quarters typically producing higher net sales and operating income. By comparison, results for the first quarter tend to be the weakest. This seasonality is primarily attributable to consumer residential spending patterns and higher installation levels during the spring and summer months. Certain factors affecting the Company's performance In addition to the other information provided in this Form 10-Q, the following risk factors should be considered when evaluating an investment in shares of Mohawk common stock. A failure by Mohawk to complete acquisitions and successfully integrate acquired - -------------------------------------------------------------------------------- operations could materially and adversely affect its business. - -------------------------------------------------------------- Management intends to pursue acquisitions of complementary businesses as part of its business and growth strategies. Although management regularly evaluates acquisition opportunities, it cannot offer assurance that it will be able to: . successfully identify suitable acquisition candidates; . obtain sufficient financing on acceptable terms to fund acquisitions; . complete acquisitions; . integrate acquired operations into Mohawk's existing operations;or . profitably manage acquired businesses. Acquired operations may not achieve levels of sales, operating income or productivity comparable to those of Mohawk's existing operations, or otherwise perform as expected. Acquisitions may also involve a number of special risks, some or all of which could have a material adverse effect on Mohawk's business, results of operations and 12 financial condition, including, among others: . possible adverse effects on Mohawk's operating results; . diversion of Mohawk management's attention and its resources; and . dependence on retaining and training acquired key personnel. The carpet industry is cyclical and a downturn in the overall economy could - --------------------------------------------------------------------------- lessen the demand for Mohawk's products and impair growth and profitability. - ---------------------------------------------------------------------------- The carpet industry is cyclical and is influenced by a number of general economic factors. Prevailing interest rates, consumer confidence, spending for durable goods, disposable income, turnover in housing and the condition of the residential and commercial construction industries (including the number of new housing starts and the level of new commercial construction) all have an impact on Mohawk's growth and profitability. In addition, sales of Mohawk's principal products are related to construction and renovation of commercial and residential buildings. Any adverse cycle could lessen the overall demand for Mohawk's products and could, in turn, impair Mohawk's growth and profitability. The carpet business is seasonal and this seasonality causes Mohawk's results of - ------------------------------------------------------------------------------- operations to fluctuate on a quarterly basis. - --------------------------------------------- Mohawk is a calendar year end company and its results of operations for the first quarter tend to be the weakest. Mohawk's second, third and fourth quarters typically produce higher net sales and operating income. These results are primarily due to consumer residential spending patterns and more carpet being installed in the spring and summer months. Mohawk's business is competitive and a failure by Mohawk to compete effectively - ------------------------------------------------------------------------------- could have a material and adverse impact on Mohawk's results of operations. - --------------------------------------------------------------------------- Mohawk operates in a highly competitive industry. Mohawk and other manufacturers in the carpet industry compete on the basis of price, style, quality and service. Some of Mohawk's competitors may have greater financial resources at their disposal. Mohawk has one competitor whose size could allow it certain manufacturing cost advantages compared to other industry participants. If competitors substantially increase production and marketing of competing products, then Mohawk might be required to lower its prices or spend more on product development, marketing and sales, which could adversely affect Mohawk's profitability. An increase in the cost of raw materials could negatively impact Mohawk's - ------------------------------------------------------------------------- profitability. - -------------- The cost of raw materials has a significant impact on the profitability of Mohawk. In particular, Mohawk's business requires it to purchase large volumes of nylon fiber and polypropylene resin, which is used to manufacture fiber. The cost of these raw materials is related to oil prices. Mohawk does not have any long-term supply contracts for any of these products. While Mohawk generally attempts to match cost increases with price increases, large increases in the cost of such raw materials could adversely affect its business, results of operations and financial condition if it is unable to pass these costs through to its customers. Mohawk may be responsible for environmental cleanup, which could negatively - --------------------------------------------------------------------------- impact profitability. - --------------------- Various federal, state and local environmental laws govern the use of Mohawk's facilities. Such laws govern: . discharges to air and water; . handling and disposal of solid and hazardous substances and waste; and . remediation of contamination from releases of hazardous substances in Mohawk's facilities and off-site disposal locations. Mohawk's operations are also governed by the laws relating to workplace safety and worker health, which, among other things, establish asbestos and noise standards and regulate the use of hazardous chemicals in the workplace. Mohawk has taken and will continue to take steps to comply with these laws. Based upon current available information, Mohawk believes that complying with environmental and safety and health requirements will not require material capital expenditures in the foreseeable future. However, Mohawk cannot provide assurance that complying with these environmental or health and safety laws and requirements will not adversely affect its business, results of 13 operations and financial condition. Future laws, ordinances or regulations could give rise to additional compliance or remediation costs, which could have a material adverse effect on its business, results of operations and financial condition. Forward-Looking Information Certain of the matters discussed in the preceding pages, particularly regarding anticipating future financial performance, business prospects, growth and operating strategies, proposed acquisitions, new products and similar matters, and those preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "estimates" or similar expressions constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended. For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward- looking statements involve a number of risks and uncertainties. The following important factors, in addition to those discussed elsewhere in this document, affect the future results of Mohawk and could cause those results to differ materially from those expressed in the forward-looking statements: materially adverse changes in economic conditions generally in the carpet, rug and floorcovering markets served by Mohawk; competition from other carpet, rug and floorcovering manufacturers; oil price increases; raw material prices; timing and level of capital expenditures; the successful integration of acquisitions, including the challenges inherent in diverting Mohawk management's attention and resources from other strategic matters and from operational matters for an extended period of time; the successful introduction of new products; the successful rationalization of existing operations; and other risks identified from time to time in the Company's SEC reports and public announcements. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company's market risk-sensitive instruments do not subject the Company to material market risk exposures. PART II. OTHER INFORMATION Item 1. Legal Procedings The Company is involved in routine litigation from time to time in the regular course of its business. Except as noted below, there are no material legal proceedings pending or known to be contemplated to which the Company is a party or to which any of its property is subject. In December 1995, the Company and four other carpet manufacturers were added as defendants in a purported class action lawsuit, In re Carpet Antitrust Litigation, pending in the United States District Court for the Northern District of Georgia, Rome Division. The amended complaint alleges price-fixing regarding polypropylene products in violation of Section One of the Sherman Act. In September 1997, the Court granted the plaintiffs' motion to certify the class. In October 1998, two plaintiffs, on behalf of an alleged class of purchasers of nylon carpet products, filed a complaint in the United States District Court for the Northern District of Georgia against the Company and two of its subsidiaries, as well as certain competitors. The complaint alleges that the Company acted in concert with other carpet manufacturers to restrain competition in the sale of certain nylon carpet products. The Company has filed an answer, denied the allegations in the complaint and set forth its defenses. On August 11, 2000, the Company presented to the Court the terms of an agreement in principle to settle these two cases. Under the terms of the settlement agreement, Mohawk will contribute $13.5 million to a settlement fund to resolve price-fixing claims brought by a class of purchasers of polypropylene carpet and a proposed settlement class of purchasers of nylon carpet. Mohawk denies all liability and wrongdoing and has agreed to settle these claims in order to avoid the costs of further litigation. The settlement is subject to the Court's preliminary approval, notice to the members of the two classes, certification of the proposed settlement class, and final approval of the settlement by the Court after a hearing. The one-time payment will only be made after these conditions have occurred. The Company is a party to two consolidated lawsuits captioned Gaehwiler v. Sunrise Carpet Industries, Inc. et al. and Patco Enterprises, Inc. v. Sunrise Carpet Industries, Inc. et al., both of which were filed in the Superior Court of the State of California, City and County of San Francisco, in 1996. Both complaints were brought on behalf of a purported class of indirect purchasers of polypropylene carpet in the State of California and seek damages for alleged violations of California antitrust and unfair competition laws. In February 1999, a similar complaint was filed in the Superior Court 14 of the State of California, City and County of San Francisco, on behalf of a purported class based on indirect purchasers of nylon carpet in the State of California and alleges violations of California antitrust and unfair competition laws. The complaints described above do not specify any specific amount of damages but do request injunctive relief and treble damages plus reimbursement for fees and costs. The Company believes it has meritorious defenses and intends to vigorously defend against these actions. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K No. Description - --- --------------- (a) Exhibits 3.2 Amended and restated by-laws. 10 Consulting agreement between Mohawk Industries, Inc. and David L. Kolb dated August 1, 2000. 11 Statement re: Computation of Per Share Earnings. 27 Financial Data Schedule (b) Reports on Form 8-K Current Report on Form 8-K: Second quarter earnings press release, dated July 20, 2000. Current Report on Form 8-K: Retirement of David Kolb press release, dated August 1, 2000. Current Report on Form 8-K: Legal Class Action Settlement press release, dated August 11, 2000. Current Report on Form 8-K: National distributor for Congoleum Corporation press release, dated September 25, 2000. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MOHAWK INDUSTRIES, INC. Dated: November 3, 2000 By: /s/ David L. Kolb ----------------- DAVID L. KOLB, Chairman of the Board and Chief Executive Officer (principal executive officer) Dated: November 3, 2000 By: /s/ John D. Swift ----------------- JOHN D. SWIFT, Chief Financial Officer, Vice President-Finance and Assistant Secretary (principal financial and accounting officer) 16 EXHIBIT INDEX No. Description - --- ----------- (a) Exhibits 3.2 Amended and restated by-laws. 10 Consulting agreement between Mohawk Industries, Inc. and David L. Kolb dated August 1,2000. 11 Statement re: Computation of Per Share Earnings 27 Financial Data Schedule 17 EX-3.2 2 0002.txt AMENDED AND RESTATED BYLAWS EXHIBIT 3.2 Last amended 8/1/00 MOHAWK INDUSTRIES, INC. AMENDED AND RESTATED BY-LAWS ARTICLE I --------- Offices ------- The Corporation shall at all times maintain a registered office in the State of Delaware and a registered agent at that address but may have other offices located in or outside of the State of Delaware as the Board of Directors may from time to time determine. ARTICLE II ---------- Stockholders' Meetings ---------------------- 2.1 Places of Meetings. All meetings of stockholders shall be held at such ------------------ place or places in or outside of the State of Delaware as the Board of Directors may from time to time determine or as may be designated in the notice of meeting or waiver of notice thereof, subject to any provisions of the laws of the State of Delaware. 2.2 Annual Meetings. The annual meeting of stockholders for the election --------------- of directors and the transaction of such other business as may properly come before the meeting shall be held on such date and at such time as may be designated from time to time by the Board of Directors. If the annual meeting is not held on the date designated, it may be held as soon thereafter as convenient and shall be called the annual meeting. Written notice of the time and place of the annual meeting shall be given by mail to each stockholder entitled to vote thereat at his address as it appears on the records of the Corporation not less than ten (10) nor more than sixty (60) days prior to the scheduled date thereof, unless such notice is waived as provided by Article IX of these By-laws. 2.3 Special Meetings. Special meetings of stockholders may be called at ---------------- any time only by the Board of Directors or the Chairman of the Board of Directors stating the specific purpose or purposes thereof. Written notice of the time, place and specific purposes of such meeting shall be given by mail to each stockholder entitled to vote thereat at his address as it appears on the records of the Corporation not less than ten (10) nor more than sixty (60) days prior to the scheduled date thereof, unless such notice is waived as provided in Article IX of these By-laws. The only business which may be conducted at a special meeting, other than procedural matters and matters relating to the conduct of the meeting, shall be the matter or matters described in the notice of the meeting. 2.4 Voting. Unless otherwise provided in a resolution or resolutions ------ providing for any class or series of Preferred Stock pursuant to Article 4 of the Certificate of Incorporation or by the Delaware General Corporation Law, at all meetings of stockholders, each stockholder entitled to vote on the record date as determined under Article VI, Section 6.3 of these By-laws or, if not so determined, as prescribed under the laws of the State of Delaware, shall be entitled to one vote in person or by written proxy, for each share of stock standing of record in his name, subject to any restrictions or qualifications set forth in the Certificate of Incorporation or any amendment thereto. All elections for the Board of Directors shall be decided by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors and all other questions shall be decided by the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter, in each case except as otherwise required by the Delaware General Corporation Law or as provided for in the Certificate of Incorporation or these By-laws. 2.5 Quorum. At any meeting of stockholders, a majority of the number of ------ shares of stock outstanding and entitled to vote thereat, present in person or by proxy, shall constitute a quorum, but a smaller interest may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice, subject to such limitation as may be imposed under the laws of the State of Delaware. 2.6 List of Stockholders. At least ten (10) days before every meeting, a -------------------- complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary or the transfer agent in charge of the stock ledger of the Corporation. Such list shall be open for examination by any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine such list or the books of the Corporation or to vote in person or by proxy at such meeting. 2.7 Organization and Procedure. (a) The Chairman of the Board, or, in the -------------------------- absence of the Chairman of the Board, the Vice Chairman, or, in the absence of the Vice Chairman, any other person designated by the Board of Directors, shall preside at meetings of stockholders. The Secretary of the Corporation shall act as secretary, but in the absence of the Secretary, the presiding officer may appoint a secretary. -2- (b) At each meeting of stockholders, the chairman of the meeting shall fix and announce the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at the meeting and shall determine the order of business and all other matters of procedure. Except to the extent inconsistent with any such rules and regulations as adopted by the Board of Directors, the chairman of the meeting may establish rules, which need not be in writing, to maintain order for the conduct of the meeting, including, without limitation, restricting attendance to bona fide stockholders of record and their proxies and other persons in attendance at the invitation of the chairman and making rules governing speeches and debates. The chairman of the meeting acts in his or her absolute discretion and his or her rulings are not subject to appeal. 2.8 Stockholder Proposals and Nominations. (a) No proposal for a ------------------------------------- stockholder vote (other than a proposal that appears in the Corporation's proxy statement after compliance with the procedures set forth in Securities and Exchange Commission Rule 14a-8 or any successor provision) shall be submitted by a stockholder (a "Stockholder Proposal") to the Corporation's stockholders unless the stockholder submitting such proposal (the "Proponent") shall have filed a written notice setting forth with particularity (i) the names and business addresses of the Proponent and all natural persons, corporations, partnerships, trusts or any other type of legal entity or recognized ownership vehicle (collectively, a "Person") acting in concern with the Proponent; (ii) the name and address of the Proponent and the Persons identified in clause (i), as they appear on the Corporation's books (if they so appear); (iii) the class and number of shares of the Corporation beneficially owned by the Proponent and by each Person identified in clause (i); (iv) a description of the Stockholder Proposal containing all material information relating thereto; and (v) such other information as the Board of Directors reasonably determines is necessary or appropriate to enable the Board of Directors and stockholders of the Corporation to consider the Stockholder Proposal. The presiding officer at any stockholders' meeting may determine that any Stockholder Proposal was not made in accordance with the procedures prescribed in these Bylaws or is otherwise not in accordance with law, and if it is so determined, such officer shall so declare at the meeting and the Stockholder Proposal shall be disregarded. (b) Only persons who are selected and recommended by the Board of Directors or the committee of the Board of Directors designated to make nominations, or who are nominated by stockholders in accordance with the procedures set forth in this Section 2.8, shall be eligible for election, or qualified to serve, as directors. Nominations of individuals for election to the Board of Directors of the Corporation at any annual meeting or any special meeting of stockholders at which directors are to be elected may be made by any stockholder of the Corporation entitled to vote for the election of directors at that meeting by compliance with the procedures set forth in this Section 2.8. Nominations by stockholders shall be made by written notice (a "Nomination Notice"), which shall set forth (i) as to each individual nominated, (A) the name, date of birth, business address and residence address of such individual; (B) the business experience during the past five years of such nominee, including his or her principal occupations and -3- employment during such period, the name and principal business of any corporation or other organization in which such occupations and employment were carried on, and such other information as to the nature of his or her responsibilities and level of professional competence as may be sufficient to permit assessment of his or her prior business experience; (C) whether the nominee is or has ever been at any time a director, officer or owner of five percent or more of any class of capital stock, partnership interests or other equity interest of any corporation, partnership or other entity; (D) any directorships held by such nominee in any company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or subject to the requirements of Section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of l940, as amended; and (E) whether, in the last five years, such nominee has been convicted in a criminal proceeding or has been subject to a judgment, order, finding or decree of any federal, state or other governmental entity, concerning any violation of federal, state or other law, or any proceeding in bankruptcy, which conviction, order, finding, decree or proceeding may be material to an evaluation of the ability or integrity of the nominee; and (ii) as to the Person submitting the Nomination Notice and any Person acting in concert with such Person, (x) the name and business address of such Person, (y) the name and address of such Person as they appear on the Corporation's books (if they so appear), and (z) the class and number of shares of the Corporation that are beneficially owned by such Person. A written consent to being named in a proxy statement as a nominee, and to serve as a director if elected, signed by the nominee, shall be filed with any Nomination Notice. If the presiding officer at any stockholders' meeting determines that a nomination was not made in accordance with the procedures prescribed by these By-laws, he shall so declare to the meeting and the defective nomination shall be disregarded. (c) If a Stockholder Proposal or Nomination Notice is to be submitted at an annual stockholders' meeting, it shall be delivered to the Secretary of the Corporation at the principal executive office of the Corporation within the time period specified in Securities and Exchange Commission Rule 14a-8(a)(3)(i) or any successor provision. Subject to Section 2.3 as to matters that may be acted upon at a special meeting of the stockholders, if a Stockholder Proposal or Nomination Notice is to be submitted at a special meeting of the stockholders, it shall be delivered to the Secretary of the Corporation at the principal executive office of the Corporation no later than the close of business on the earlier of (i) the 30th day following the public announcement that a matter will be submitted to a vote of the stockholders at a special meeting, or (ii) the 15th day following the day on which notice of the special meeting was given. ARTICLE III ----------- Board of Directors ------------------ 3.1 Powers. The business and affairs of the Corporation shall be carried ------ on by or under the direction of the Board of Directors, which shall have all the powers -4- authorized by the laws of the State of Delaware, subject to such limitations as may be provided by the Certificate of Incorporation or these By-laws. 3.2 Number and Qualification. The number of directors shall be determined ------------------------ in the manner set forth in the Certificate of Incorporation. The members of the Board of Directors shall be divided into classes if and as provided in the Certificate of Incorporation. Each director shall serve until the election and qualification of his successor or until his earlier death, resignation or removal as provided in the Certificate of Incorporation or these By-laws. In case of an increase in the number of directors between elections by the stockholders, the additional directorships shall be considered vacancies and shall be filled in the manner prescribed in the Certificate of Incorporation. Directors need not be stockholders. 3.3 Compensation. The Board of Directors, or a committee thereof, may from ------------ time to time by resolution authorize the payment of fees or other compensation to the directors for services as such to the Corporation, including, but not limited to, fees for attendance at all meetings of the Board of Directors or any committee thereof, and determine the amount of such fees and compensation. 3.4 Meetings and Quorum. Meetings of the Board of Directors may be held ------------------- either in or outside of the State of Delaware. A quorum shall be one-third (1/3) of the then authorized number of directors. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. The Board of Directors shall, at the close of each annual meeting of stockholders and without further notice other than these By-laws, if a quorum of directors is then present or as soon thereafter as may be convenient, hold a regular meeting for the election of officers and the transaction of any other business. The Board of Directors may from time to time provide for the holding of regular meetings with or without notice and may fix the times and places at which such meetings are to be held. Meetings other than regular meetings may be called at any time by the Chairman of the Board of Directors or the President and must be called by the Secretary or an Assistant Secretary upon the request of a majority of the members of the Board of Directors. Notice of each meeting, other than a regular meeting (unless required by the Board of Directors), shall be given to each director (i) by mailing the same to each director at his residence or business address at least five (5) business days before the meeting; (ii) by sending the same by overnight courier to each director at his residence or business address at least three (3) business days before the meeting; (iii) by facsimile transmission at his business facsimile number and telephonic confirmation of receipt at least two (2) business days before the meeting; or (iv) by delivering the same to him personally or by telephone or telegraph at least two (2) business days before the meeting. In case of exigency, the Chairman of the Board of Directors, the President or the -5- Secretary shall prescribe a shorter notice to be given personally or by telephone, telegraph, cable, facsimile transmission or wireless to all or any one or more of the directors at their respective residences or places of business. Notice of any meeting shall state the time and place of such meeting, but need not state the purposes thereof unless otherwise required by the laws of the State of Delaware, the Certificate of Incorporation or the Board of Directors. 3.5 Committees. The Board of Directors may, by resolution adopted by a ---------- majority of the whole Board of Directors, provide for committees of two or more directors and shall elect the members thereof to serve at the pleasure of the Board of Directors and may designate one of such members to act as chairman. The Board of Directors may at any time change the membership of each committee, fill vacancies in it, authorize the committee to fill vacancies in such committee, designate alternate members to replace any absent or disqualified members at any meeting of such committee, or dissolve it. Each such committee shall have the powers and perform such duties, not inconsistent with law, as may be assigned to it by the Board of Directors. Each committee may determine its rules of procedure and the notice to be given of its meeting. A majority of the members of each committee shall constitute a quorum. 3.6 Conference Telephone Meetings. Any one or more members of the Board ----------------------------- of Directors or any committee thereof may participate in a meeting by means of a conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. 3.7 Action Without Meeting. Any action required or permitted to be taken ---------------------- at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. ARTICLE IV ---------- Officers -------- 4.1 Titles and Election. The officers of the Corporation shall be the ------------------- President, one or more Vice Presidents, the Secretary and the Treasurer. The officers of the Corporation shall be elected at the first meeting of the Board of Directors following each annual meeting of stockholders. Each officer shall hold office at the pleasure of the Board of Directors except as may otherwise be approved by the Board of Directors, or until his earlier resignation, removal under these By-Laws or other termination of his employment. Any person may hold more than one office if the duties can be consistently performed by the same person. -6- The Board of Directors, in its discretion, may also at any time elect or appoint a Chairman of the Board of Directors, who shall be a director but need not be an employee of the Corporation and shall be an officer of the Corporation only if so designated by the Board of Directors, and one or more Senior Vice Presidents, Executive Vice Presidents, Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers and such other officers as it may deem advisable, each of whom shall hold office at the pleasure of the Board of Directors, except as may otherwise be approved by the Board of Directors, or until his earlier resignation, removal or other termination of employment, and shall have such authority and shall perform such duties as may be prescribed or determined from time to time by the Board of Directors or, in case of officers other than the Chairman of the Board of Directors, if not prescribed or determined by the Board of Directors, as the President or the then senior executive officer may prescribe or determine. 4.2 Duties. Subject to such extension, limitations, and other provisions ------ as the Board of Directors may from time to time prescribe or determine, the following officers shall have the following powers and duties: (a) Chairman of the Board of Directors. The Chairman of the Board of ---------------------------------- Directors, if one is elected, shall be a director and, when present, shall preside at all meetings of the stockholders and of the Board of Directors and shall have such powers and perform such duties as the Board of Directors may prescribe from time to time. (b) President. The President shall exercise the powers and authority --------- and perform all of the duties commonly incident to his office, shall in the absence of the Chairman of the Board of Directors preside at all meetings of the stockholders and of the Board of Directors if he is a director, and shall perform such other duties as the Board of Directors shall specify from time to time. The President or a Vice President, or any officer specifically authorized by the Board of Directors, shall sign all certificates for shares, bonds, debentures, promissory notes, deeds and contracts of the Corporation. (c) Chief Executive Officer. The Chief Executive Officer shall be ----------------------- charged with general supervision of the management and policy of the Corporation, shall have general and active management power and authority over the business of the Corporation, shall see that all orders and resolutions of the Board of Directors are carried into effect and shall perform any and all other duties prescribed by the Board of Directors. Either the President or the Chairman of the Board of Directors may be Chief Executive Officer. In the absence of a resolution by the Board of Directors that the Chairman of the Board of Directors shall be the Chief Executive Officer, the President shall be the Chief Executive Officer. (d) Senior Vice Presidents. The Senior Vice Presidents shall perform ---------------------- such duties as may be assigned to them from time to time by the Board of Directors or by the President if the Board of Directors does not do so. In the absence or disability of the President, the Senior Vice Presidents, in order of seniority unless otherwise determined -7- by the Board of Directors, may exercise the powers and perform the duties pertaining to the office of President. (e) Vice Presidents. The Vice Presidents shall perform such duties as --------------- may be assigned to them from time to time by the Board of Directors or by the President if the Board of Directors does not do so. In the absence or disability of any Senior Vice President, the Vice Presidents may, in order of seniority unless otherwise determined by the Board of Directors, exercise the powers and perform the duties pertaining to the office of Senior Vice President. (f) Secretary. The Secretary, or in his absence an Assistant --------- Secretary, shall keep the minutes of all meetings of stockholders and of the Board of Directors and any committee thereof, give and serve all notices, attend to such correspondence as may be assigned to him, keep in safe custody the seal of the Corporation, and affix such seal to all such instruments properly executed as may require it, and shall perform all of the duties commonly incident to his office and shall have such other duties and powers as may be prescribed or determined from time to time by the Board of Directors or by the President if the Board of Directors does not do so. (g) Treasurer. The Treasurer, subject to the order of the Board of --------- Directors, shall have the care and custody of the monies, funds, and securities of the Corporation (other than his own bond, if any, which shall be in the custody of the President), shall maintain the general accounting books/accounting records and forms of the Corporation and shall have, under the supervision of the Board of Directors, all the powers and duties commonly incident to his office. In addition to the foregoing, the Treasurer shall have such duties as may be prescribed or determined from time to time by the Board of Directors or by the President if the Board of Directors does not do so. 4.3 Delegation of Authority. The Board of Directors may at any time ----------------------- delegate the powers and duties of any officer for the time being to any other officer, director or employee. 4.4 Compensation. The compensation of the officers of the Corporation ------------ shall be fixed by the Board of Directors or a committee thereof, and the fact that any officer is a director shall not preclude him from receiving compensation or from voting upon the resolution providing the same. ARTICLE V --------- Resignations, Vacancies and Removals ------------------------------------ 5.1 Resignations. Any director or officer may resign at any time by giving ------------ written notice thereof to the Board of Directors, the President or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof, and unless otherwise specified therein, the acceptance of any resignation shall not be necessary to make it effective. -8- 5.2 Vacancies. --------- (a) Directors. Any vacancy in the Board of Directors shall be filled --------- in the manner prescribed in the Certificate of Incorporation. (b) Officers. The Board of Directors may at any time or from time to -------- time fill any vacancy among the officers of the Corporation. 5.3 Removals. -------- (a) Directors. The entire Board of Directors, or any individual --------- member thereof, may be removed only as provided by the laws of the State of Delaware. (b) Officers. Subject to the provisions of any validly existing -------- agreement, the Board of Directors may at any meeting remove from office any officer, with or without cause, and may appoint a successor. ARTICLE VI ---------- Capital Stock ------------- 6.1 Certificates of Stock. Every stockholder shall be entitled to a --------------------- certificate or certificates for shares of the capital stock of the Corporation in such form as may be prescribed or authorized by the Board of Directors, duly numbered and setting forth the number and kind of shares represented thereby. Such certificates shall be signed by the Chairman of the Board of Directors, or by the President or a Vice President and by the Treasurer or an Assistant Treasurer or by the Secretary or an Assistant Secretary. Any or all of such signatures may be in facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on a certificate has ceased to be such officer, transfer agent or registrar before the certificate has been issued, such certificate may nevertheless be issued and delivered by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. 6.2 Transfer of Stock. Shares of the capital stock of the Corporation ----------------- shall be transferable only upon the books of the Corporation upon the surrender of the certificate or certificates properly assigned and endorsed for transfer. If the Corporation has a transfer agent or registrar acting on its behalf, the signature of any officer or representative thereof may be in facsimile. The Board of Directors may appoint a transfer agent and one or more co- transfer agents and a registrar and one or more co-registrars and may make or authorize such agents to make all such rules and regulations deemed expedient concerning the issuance, transfer and registration of shares of stock. -9- 6.3 Record Dates. In order that the Corporation may determine the ------------ stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix in advance a record date which, in the case of a meeting, shall not be less than ten (10) nor more than sixty (60) days prior to the scheduled date of such meeting and which, in the case of any other action, shall be not more than sixty (60) days prior to any such action permitted by the laws of the State of Delaware. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 6.4 Lost Certificates. In case of loss or mutilation or destruction of a ----------------- stock certificate, a duplicate certificate may be issued upon such terms as may be determined or authorized by the Board of Directors or by the chairman of the Board of Directors, the President or the Chief Executive Officer if the Board of Directors does not do so. ARTICLE VII ----------- Fiscal Year, Bank Deposits, Checks, Etc. ---------------------------------------- 7.1 Fiscal Year. The fiscal year of the Corporation shall be the calendar ----------- year unless otherwise fixed by resolution of the Board of Directors. 7.2 Bank Deposit, Checks, Etc. The funds of the Corporation shall be ------------------------- deposited in the name of the Corporation or of any division thereof in such banks or trust companies in the United States or elsewhere as may be designated from time to time by the Board of Directors, or by such officer or officers as the Board of Directors may authorize to make such designations. All checks, drafts or other orders for the withdrawal of funds from any bank account shall be signed by such person or persons as may be designated from time to time by the Board of Directors. The signatures on checks, drafts or other orders for the withdrawal of funds may be in facsimile if authorized in the designation. ARTICLE VIII ------------ Books and Records ----------------- 8.1 Place of Keeping Books. The books and records of the Corporation may ---------------------- be kept outside of the State of Delaware. 8.2 Examination of Books. Except as may otherwise be provided by the laws -------------------- of the State of Delaware, the Certificate of Incorporation or these By-laws, the Board of Directors shall have the power to determine from time to time whether and to what extent -10- and at what times and places and under what conditions any of the accounts, records and books of the Corporation are to be open to the inspection of any stockholder. No stockholder shall have any right to inspect any account or book or document of the Corporation except as prescribed by law or authorized by express resolution of the stockholders or of the Board of Directors. ARTICLE IX ---------- Notices ------- 9.1 Requirements of Notice. Whenever notice is required to be given by ---------------------- statute, the Certificate of Incorporation or these By-laws, it shall not mean personal notice unless so specified, but such notice may be given in writing by depositing the same in a post office, letter box, or mail chute postage prepaid and addressed to the person to whom such notice is directed at the address of such person on the records of the Corporation, and such notice shall be deemed given at the time when the same shall be thus mailed. 9.2 Waivers. Any stockholder, director or officer may, in writing or by ------- telegram or cable, at any time waive any notice or other formality required by statute, the Certificate of Incorporation or these By-laws. Such waiver of notice, whether given before or after any meeting or action, shall be deemed equivalent to notice. Presence of a stockholder either in person or by proxy at any meeting of stockholders and presence of any director at any meeting of the Board of Directors shall constitute a waiver of such notice as may be required by any statute, the Certificate of incorporation or these By-laws unless such presence is solely for the purpose of objecting to the lack of notice and such objection is stated at the commencement of the meeting. ARTICLE X --------- Seal ---- The corporate seal of the Corporation shall be in such form as the Board of Directors shall determine from time to time and may consist of a facsimile thereof or the words "Corporate Seal" or "Seal" enclosed in parentheses or brackets. ARTICLE XI ---------- Powers of Attorney ------------------ The Board of Directors may authorize one or more of the officers of the Corporation to execute powers of attorney delegating to named representatives or agents power to represent or act on behalf of the Corporation, with or without power of substitution. In the absence of any action by the Board of Directors, any officer of the Corporation may execute for and on behalf of the Corporation waivers of notice of meetings of stockholders and proxies for such meetings of any company in which the Corporation may hold voting securities. -11- ARTICLE XII ----------- Indemnification --------------- 12.1 Right to Indemnification. Each person who was or is made a party or ------------------------ is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, and whether formal or informal (hereinafter a "proceeding"), by reason of the fact: (i) that he or she is or was a director or an officer of the Corporation, or (ii) that he or she is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (collectively, "another enterprise" or "other enterprise"), whether either in case (i) or in case (ii), the basis of such proceeding is alleged action or inaction: (x) in an official capacity as a director or officer of the Corporation, or as a director, trustee, officer, employee or agent of such other enterprise, or (y) in any other capacity related to the Corporation or such other enterprise while so serving as a director, trustee, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by Section 145 (or any successor provision or provisions) of the General Corporation Law of the State of Delaware ("DGCL") as the same exists or may hereafter be amended (but, in the case of any such amendment, with respect to alleged action or inaction occurring prior to such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including without limitation attorneys' fees and expenses, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) actually and reasonably incurred by such person in connection therewith. The persons indemnified by this Article XII are hereinafter referred to as "indemnitees." Such indemnification as to such alleged action or inaction shall continue as to an indemnitee who has after such alleged action or inaction ceased to be a director or officer of the Corporation, or director, trustee, officer, employee or agent of such other enterprise; and shall inure to the benefit of the indemnitee's heirs, executors and administrators. -12- Notwithstanding the foregoing, except as may be provided by the Board of Directors, the Corporation shall not indemnify any such indemnitee in connection with a proceeding (or portion thereof) initiated by such indemnitee unless such proceeding (or portion thereof) was authorized by the Board of Directors (but this prohibition shall not apply to a counterclaim, cross-claim or third-party claim brought by the indemnitee in any proceeding). The right to indemnification conferred in this Article XII: (i) shall be a contract right; (ii) shall not be affected adversely to any indemnitee by any amendment of these Bylaws with respect to any alleged action or inaction occurring prior to such amendment; and (iii) shall, subject to any requirements imposed by law and these Bylaws, include the right to be paid by the Corporation the expenses (including attorneys' fees) incurred in defending any such proceeding in advance of its final disposition. 12.2 Undertakings for Advances of Expenses. If and to the extent the DGCL ------------------------------------- requires, an advancement by the Corporation of expenses incurred by an indemnitee pursuant to clause (iii) of the last sentence of Section 12.1 hereof (hereinafter an "advancement of expenses") shall be made only upon delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Article XII or otherwise. 12.3 Claims for Indemnification. If a claim for indemnification under -------------------------- Section 12.1 is not paid in full by the Corporation within 60 days after it has been received in writing by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If the indemnitee is successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses only upon a final adjudication that, the indemnitee has not met the applicable standard of conduct set forth in Section 145 of the DGCL (or any successor provision or provisions). Neither the failure of the Corporation (including the Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in Section 145 of the DGCL (or any successor provision or provisions), nor an actual determination by the Corporation (including the Board of Directors, independent legal counsel, or its -13- stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to have or retain such advancement of expenses, under this Article XII or otherwise, shall be on the Corporation. 12.4 Relationship to Other Rights and Provisions Concerning ------------------------------------------------------ Indemnification. The rights to indemnification and to the advancement of - --------------- expenses conferred in this Article XII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Amended and Restated Certificate of Incorporation of the Company, any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. 12.5 Other Employees and Agents. The Corporation may, to the extent -------------------------- authorized from time to time by the Board of Directors, grant rights to indemnification, and to the advancement of expenses, to any other employee or agent of the Corporation (or any person serving at the Corporation's request as a trustee, employee or agent of another enterprise) or to any person who is or was a director, officer, employee or agent of any of the Corporation's affiliates, predecessor or subsidiary corporations or of a constituent corporation absorbed by the Corporation in a consolidation or merger or who is or was serving at the request of such affiliate, predecessor or subsidiary corporation or of such constituent corporation as a director, officer, employee or agent of another enterprise, in each case as determined by the Board of Directors to the fullest extent of the provisions of this Article XII in cases of the indemnification and advancement of expenses of directors and officers of the Corporation, or to any lesser extent (or greater extent, if permitted by law) determined by the Board of Directors. If so indemnified, such person shall be included in the term "indemnitee" or "indemnitees" as used in this Article XII. 12.6 Insurance. The Corporation may maintain insurance, at its expense, to --------- protect itself and any director, trustee, officer, employee or agent of the Corporation or another enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. 12.7 Severability. In the event that any of the provisions of this Article ------------ XII (including any provision within a single section, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, the remaining provisions are severable and shall remain enforceable to the full extent permitted by law. 12.8 Indemnity Fund. Upon resolution adopted by the Board of Directors, -------------- the Corporation may establish a trust or other designated account, grant a security interest or -14- use other means (including, without limitation, a letter of credit), to ensure the payment of certain of its obligations arising under this Article XII and/or agreements which may be entered into between the Corporation and its officers, directors or agents from time to time. ARTICLE XIII ------------ Amendments ---------- These By-laws may be amended or repealed either: (a) at any meeting of stockholders at which a quorum is present by vote of a majority of the number of shares of stock entitled to vote present in person or by proxy at such meeting as provided in Article II, Sections 2.4 and 2.5 of these By-laws, or (b) at any meeting of the Board of Directors by a majority vote of the directors then in office; provided that the notice of such meeting of stockholders or directors or waiver of notice thereof contains a statement of the substance of the proposed amendment or repeal. -15- EX-10 3 0003.txt CONSULTING AGREEMENT August 1, 2000 Exhibit 10 Board of Directors Mohawk Industries, Inc. P.O. Box 12069 Calhoun, Georgia 30703-7002 Re: Consulting Services Members of the Board of Directors: This letter sets forth our agreement and understanding concerning my provision of consulting services to Mohawk Industries, Inc. (the "Company") following the effective date of my retirement and resignation as Chairman and Chief Executive Officer of the Company, which will be January 1, 2001. Consequently, this letter agreement (the "Agreement") shall become effective on January 1, 2001 and shall continue in effect, subject to paragraph 7, until my current term as a member of the Board of Directors of the Company (the "Board of Directors") expires at the Annual Meeting of Stockholders in 2001. Thereafter, this Agreement may be renewed by our mutual consent for a period ending at any time before the expiration of my next term, if any, as a member of the Board of Directors of the Company. As a condition to the renewal of this Agreement, I understand that I will have to be nominated for reelection as a member of the Board of Directors and be elected to that office. Therefore, in light of the mutual undertakings contained in this letter agreement and other good and valuable consideration, we agree as follows: 1. Business Services. The Company hereby contracts for and I, David L. Kolb ----------------- (the "Consultant"), agree to provide such services to the Company as are assigned by the Board of Directors and as are not inconsistent with the services the Consultant provided to the Company as its Chairman and Chief Executive Officer (the "Services"). The Services will be provided to the Company by Consultant as a director and Consultant shall be entitled to indemnification on the terms provided by the Certificate of Incorporation and Bylaws of the Company for such Services. During the term of this Agreement, the Consultant agrees to hold the non-executive officer, non-employee position of Chairman of the Board of Directors. Consultant agrees to devote his best efforts to the business of the Company and the performance of the Services, provided that the Consultant shall not be required to spend more than fifty percent (50%) of his available business time in the performance of Services hereunder during any calendar month and failure to spend more than fifty percent (50%) percent of his business time in the performance of the Services shall not be considered to not be his best efforts in the performance of the Services. The Consultant may perform Services on the premises of Company; however, he shall perform Services exercising independent judgment and without direct supervision by Company. 2. Compensation. As compensation for the Services, Consultant shall be paid ------------ an amount equal to fifty percent (50%) of his now current base salary as Chairman and Chief Executive Officer of the Company. Such amount shall be paid in the same manner and frequency as payments of his current base salary are made, provided, however, that the Company shall not withhold taxes from these payments. In addition, the Consultant shall be eligible to receive a bonus for 2001 to be calculated in the same manner and based on the same goals as apply to Corporate participants at Level B in the Company's 2001 Executive Incentive Program (or at the comparable level in any alternative bonus plan adopted by the Board of Directors for 2001) (the "2001 EIP"); provided however, that (a) such bonus payments shall not be subject to downward adjustment by the Compensation Committee of the Board of Directors except that Consultant's calculated bonus amount under the 2001 EIP will be reduced by the same percentage or amount if the calculated bonus amounts for all Corporate participants are reduced by a fixed percentage or amount by the Compensation Committee, (b) any Company stock issued to the Consultant as part of the bonus payment will be issued under the Mohawk Industries, Inc. 1997 Long- Term Incentive Plan and will be registered on the Company's Form S-8 registration statement with the Securities and Exchange Commission, and (c) in the event that the Consultant is not reelected as a member of the Board of Directors or this Agreement is terminated by the Company or not renewed, Consultant shall be entitled to a payout of a pro rata portion of such bonus for the portion of the 2001 plan year during which this Agreement was in effect and Consultant will be entitled to retain any Company stock paid to Consultant pursuant to such plan. Such bonus amount shall be paid in the same manner and at the same time as payments of bonus amounts are paid to other Corporate participants at Levels A or B in the 2001 EIP, provided, however, that the Company shall not withhold taxes from these payments. All benefits to which Consultant shall be entitled for the Services under this Agreement are as provided herein. Any benefits to which Consultant is entitled due to his prior service as an employee of the Company shall be governed by the terms of the plans and agreements under which such benefits are provided, except as specifically modified by this Agreement. 3. Payment of Taxes. Consultant acknowledges that he will have sole ---------------- responsibility for the payment of all federal, state and local estimated, withholding and employment taxes arising out of his relationship with the Company and the performance of the Services. Consultant acknowledges and agrees that the Company will not withhold on his behalf any sums for income tax, unemployment insurance, Social Security or any other withholding pursuant to any law or requirement of any governmental body. Each and every one of such payments and withholdings is the sole responsibility of Consultant. Consultant agrees to indemnify and hold the Company harmless from any and all loss or liability arising with respect to the failure of Company to withhold or make such payments and withholdings but not in excess of (i) the amounts included in any assesment by the applicable governmental agencies of the income tax that the Company would have been required to withhold pursuant to Section 3402 of the Internal Revenue Code (the "Code") and of the FICA tax that the Company would have been required to withhold pursuant to Section 3102 of the Code, and (ii) any interest accruing on such amounts. In the event the United States Internal Revenue Service ("IRS") should question or challenge the worker status of Consultant under this agreement, Consultant shall notify the Company of any such inquiry or challenge. Consultant and the Company agree that both parties shall have the right to participate in any discussion or negotiation occurring with the IRS, regardless of who initiates such discussions or negotiations, and each party shall notify the other in advance of any planned meeting or discussion. 4. Reimbursement of Expenses. Consultant shall be entitled to be reimbursed ------------------------- in accordance with the policies of the Company, as adopted and amended from time to time, for all 2 reasonable and necessary expenses incurred by him in connection with the performance of the Services; provided, however, Consultant shall, as a condition of such reimbursement, submit verification of the nature and amount of such expenses in advance of incurring the expense and in accordance with the reimbursement policies adopted by the Company from time to time. Additionally, the Company will continue to provide Consultant during the term of this Agreement with a Company car on the same basis as was previously available to Consultant prior to the effective date of this Agreement. 5. Calculation of SERP Benefits. On the effective date of this Agreement, ---------------------------- Consultant will no longer be considered an active employee of the Company and shall have retired for purposes of the Mohawk Industries, Inc. Supplemental Executive Retirement Plan (the "SERP"). In calculating Consultant's benefits under the SERP, the Company agrees and acknowledges that (i) Consultant's entire bonus payment under the Mohawk Industries, Inc. 2000 Executive Incentive Program ("2000 EIP") will be included as compensation under the SERP for the 60 months ending December 31, 2000, despite that fact that all or a portion of such bonus payment will not be paid to Consultant until after December 31, 2000 and that a portion of such bonus payment may not yet be vested and (ii) Consultant's entire bonus payment under the Mohawk Industries, Inc. 1995 Executive Incentive Plan ("1995 EIP") will be excluded as compensation under the SERP for the 60 months ending December 31, 2000, despite the fact that all or a portion of such bonus payment was paid to the Consultant during the 60 months ending December 31, 2000. In addition, the Consultant's SERP benefits as of the date of his retirement shall be secured by the Mohawk Industries, Inc. Benefit Security Trust (the "Benefit Security Trust") attached hereto as Exhibit A in the manner set forth in such Exhibit. 6. Calculation of Bonus under the EIP. For purposes of the 2000 EIP, the ---------------------------------- Company agrees that Consultant shall be entitled to receive the entire calculated bonus amount for the plan year ending December 31, 2000, notwithstanding Consultant's retirement from the Company and without any downward adjustment by the Compensation Committee of the Board of Directors except that Consultant's calculated bonus amount under the 2000 EIP will be reduced by the same percentage or amount if the calculated bonus amounts for all Corporate participants are reduced by a fixed percentage or amount by the Compensation Committee. Further, the Company agrees that Consultant shall be entitled to retain any Company stock that he receives under the 2000 EIP or that he has received under similar programs applicable to earlier fiscal years of the Company notwithstanding his retirement from the Company. 7. Termination. ----------- (a) This Agreement shall be terminated at the earliest of the following: (1) At any time by the Company upon fifteen (15) days prior written notice of termination delivered to me in accordance with the provisions of Section 9 hereof; (2) By Consultant upon a breach of this Agreement by the Company and failure by the Company to remedy such breach within thirty (30) days after receipt of notification thereof delivered in accordance with the provisions of Section 9 hereof. 3 (b) Upon termination all rights and obligations of the parties under this Agreement will immediately cease and terminate (except for the rights and obligations pursuant to Sections 5 and 6, which will survive such termination), and the Company will have no further obligation to Consultant with respect to this Agreement, except for compensation and reimbursable expenses accrued and unpaid at the date of termination. 8. Severability. This Agreement is intended to be performed in accordance ------------ with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations. If any provision of this Agreement, or the application thereof to any person or particular circumstance, shall, for any reason and to any extent, be invalid or unenforceable, it is the intention of the parties to this Agreement that the remainder of this Agreement and the application of such provisions to other persons or particular circumstances shall not be affected thereby, but rather shall be enforced to the greatest extent permitted by law. 9. Notices. Except as otherwise specifically provided herein, any notice ------- required or permitted to be given by a party pursuant to this Agreement must be given in writing, and personally delivered or mailed to the other party by certified or registered mail, return receipt requested, at the address set forth below the signature of such party on this Agreement or at such other address as such party may designate by written notice given in accordance with this Section 9. Any notice complying with this Section 9 will be deemed received upon actual receipt by the addressee. 10. Assignment. This Agreement, and the rights and obligations of the parties ---------- under this agreement may be assigned only upon the prior written approval of the parties. The rights and obligations of the parties will inure to the benefit of, will be binding upon and will be enforceable by the parties and their lawful successors and representatives. 11. Entire Agreement. Except as to the terms of the 2000 EIP, the 2001 EIP, ---------------- the SERP and the Benefit Security Trust, which shall be governed by separate agreements, this Agreement, when executed, embodies the entire agreement of the parties on the subject matter hereof; provided, that to the extent that the terms of the 2000 EIP, the 2001 EIP, the SERP and the Benefit Security Trust differ from the terms of this Agreement, the terms of this Agreement shall govern. No amendment or modification of this Agreement will be valid or binding upon the Company or Consultant unless made in writing and signed by the parties. 12. Modification and Waiver. Any term or condition of this Agreement may be ----------------------- waived in writing at any time by the party hereto which is entitled to the benefit of such term or condition. Any waiver on one occasion shall not be deemed to be a waiver of the same or of any other breach on any future occasion. This Agreement may be modified or amended only by a writing signed by all of the parties hereto. 13. Counterparts and Headings. This Agreement may be executed simultaneously ------------------------- in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. The headings set out in this Agreement are for the convenience of reference only and shall not be deemed to be a part of this Agreement. 4 14. Choice of Law. The validity and effect of this Agreement shall be governed ------------- by and construed and enforced in accordance with the internal laws of the State of Georgia, without giving effect to any rules regarding conflicts of law. 15. Venue. Any action, suit or proceeding arising out of or in connection with ----- this Agreement (collectively "Proceeding") shall be brought exclusively in the U.S. District court for the Northern District of Georgia or a state court of competent jurisdiction in Fulton County, Georgia. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection which such party may have to the laying of venue for any Proceeding in any such court. 16. Attorneys' Fees. If any action or other proceeding is brought for the --------------- enforcement of this Agreement, or because of any alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which the party may be entitled. IN WITNESS WHEREOF, the Company, through its duly authorized officer, and the Consultant have executed this Agreement, under seal, all as of the day and year first above written. ATTEST: MOHAWK INDUSTRIES, INC.. /s/ John D. Swift - ---------------------------------- John D. Swift Title: Vice President of Finance By: /s/ David L. Kolb ---------------------------- -------------------------------- [CORPORATE SEAL] Title: President & COO ----------------------------- CONSULTANT: /s/ David L. Kolb ----------------------------------- DAVID L. KOLB 5 EX-11 4 0004.txt COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (In thousands, except per share data) (Unaudited) Note: Earnings per share are presented in accordance with Regulation S-K Item 601 (b) and FAS No. 128.
Three Months Ended ----------------------------------------------------------- September 30, 2000 October 2, 1999 --------------------------- -------------------------- Net earnings $ 42,137 45,079 =========================== ========================== Weighted-average common and dilutive potential common shares outstanding: Weighted-average common shares outstanding 53,097 60,600 Add weighted-average dilutive potential common shares - options to purchase common shares, net 537 514 --------------------------- -------------------------- Weighted-average common and dilutive potential common shares outstanding 53,634 61,114 =========================== ========================== Basic earnings per share $ 0.79 0.74 =========================== ========================== Diluted earnings per share $ 0.79 0.74 =========================== ==========================
Nine Months Ended ----------------------------------------------------------- September 30, 2000 October 2, 1999 --------------------------- -------------------------- Net earnings $ 123,337 117,064 =========================== ========================== Weighted-average common and dilutive potential common shares outstanding: Weighted-average common shares outstanding 54,181 60,586 Add weighted-average dilutive potential common shares - options to purchase common shares, net 508 632 --------------------------- -------------------------- Weighted-average common and dilutive potential common shares outstanding 54,689 61,218 Basic earnings per share $ 2.28 1.93 =========================== ========================== Diluted earnings per share $ 2.26 1.91 =========================== ==========================
EX-27 5 0005.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MOHAWK INDUSTRIES, INC., QUARTERLY REPORT TO STOCKHOLDERS FOR THE QUARTER ENDED SEPTEMBER 30, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 0 0 474,859 79,963 592,828 1,080,443 1,192,149 569,277 1,822,859 445,414 592,747 0 0 608 729,715 1,822,859 2,456,405 2,456,405 1,835,740 1,835,740 7,000 12,174 28,587 203,265 79,928 123,337 0 0 0 123,337 2.28 2.26 Non Recurring change of $7,000 for Class action legal settlement.
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