<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule 240.14a-12
[ ] Confidential, for Use by the Commission Only (as permitted by Rule
14a-6(e)(2))
MAXIMUS, INC.
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
MAXIMUS, INC.
1356 BEVERLY ROAD
MCLEAN, VIRGINIA 22101
(703) 734-4200
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 16, 1998
The Annual Meeting of Shareholders of MAXIMUS, Inc. (the "Company") will be
held at The Marriott Hotel at Dulles Airport, 33 West Service Road, Chantilly,
Virginia 22021 on Monday, February 16, 1998 at 10:00 a.m., Eastern Standard
Time, to consider and act upon the following matters:
1. To elect two Class I Directors to serve until the 2001 Annual
Meeting of Shareholders.
2. To ratify the selection by the Board of Directors of Ernst & Young
LLP as the Company's independent public accountants for the current fiscal
year.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on December 15, 1997 will
be entitled to vote at the Annual Meeting or any adjournment thereof.
By Order of the Board of Directors,
Donna J. Muldoon, Secretary
Dated: December 29, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE
PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE> 3
MAXIMUS, INC.
1356 BEVERLY ROAD
MCLEAN, VIRGINIA 22101
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 16, 1998
------------------------
GENERAL INFORMATION
The enclosed proxy is solicited on behalf of the Board of Directors of
MAXIMUS, Inc. (the "Company") for use at the 1998 Annual Meeting of Shareholders
to be held on Monday, February 16, 1998 (the "Annual Meeting") and at any
adjournments thereof. The approximate date on which this proxy statement and
accompanying proxy are first being sent or given to security holders is December
29, 1997.
The authority granted by an executed proxy may be revoked at any time
before its exercise by filing with the Secretary of the Company a written
revocation or a duly executed proxy bearing a later date or by voting in person
at the Annual Meeting.
The Company's Annual Report for the fiscal year ended September 30, 1997
(which consists in principal part of the Company's Annual Report on Form 10-K
for such year as filed with the Securities and Exchange Commission) is being
mailed to shareholders with the mailing of this Notice and Proxy Statement on or
about December 29, 1997. A copy of the Exhibits to the Company's Annual Report
on Form 10-K for such year will be furnished to any shareholder upon payment of
an appropriate processing fee pursuant to a written request sent to the
Secretary, MAXIMUS, Inc., 1356 Beverly Road, McLean, Virginia 22101.
VOTING SECURITIES AND VOTES REQUIRED
Only shareholders of record at the close of business on December 15, 1997
will be entitled to vote at the Annual Meeting. On that date, the Company had
outstanding 14,790,970 shares of common stock, no par value (the "Common
Stock"), each of which is entitled to one vote.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting shall
be necessary to constitute a quorum for the transaction of business. Abstentions
and "broker non-votes" will be considered as present for quorum purposes but
will not be counted as votes cast. (A "broker non-vote" occurs when a registered
broker holding a customer's shares in the name of the broker has not received
voting instructions on the matter from the customer, is barred by applicable
rules from exercising discretionary voting authority in the matter, and so
indicates on the proxy.) Accordingly, abstentions and "broker non-votes" will
have no effect on the voting on a matter requiring the affirmative vote of a
certain percentage or a plurality of the votes cast or shares voting on a
matter.
A director may be elected by a plurality of the affirmative votes cast in
such election of directors. The affirmative vote of the holders of a majority of
the shares of Common Stock present or represented at the Annual Meeting is
required for the ratification of the Board's selection of accountants.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of December 15, 1997,
regarding the ownership of the Company's Common Stock by (i) the only persons
known by the Company to own more than five percent of the outstanding shares,
(ii) all directors and director nominees of the Company, (iii) each of the
executive officers of the Company named in the Summary Compensation Table (the
"Named Executive Officers") and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
-------------------------
BENEFICIAL OWNER SHARES PERCENT
- --------------------------------------------------------------------- --------- -------
<S> <C> <C>
David V. Mastran..................................................... 8,120,907(2) 54.9%
Donna J. Muldoon..................................................... 4,878,135(3) 33.0
Raymond B. Ruddy..................................................... 3,242,772 21.9
Lynn P. Davenport.................................................... 274,762(4) 1.8
Susan D. Pepin....................................................... 229,680(5) 1.5
Russell A. Beliveau.................................................. 201,627(6) 1.4
Robert J. Muzzio..................................................... 114,401(7) *
Jesse Brown.......................................................... 5,000(8) *
Peter B. Pond........................................................ 5,000(8) *
All directors and executive officers as a group (11 persons)......... 9,000,073(9) 59.7%
</TABLE>
- ---------------
* Percentage is less than 1% of the total number of outstanding shares of
Common Stock of the Company.
(1) The number of shares beneficially owned by each director or executive
officer is determined under rules of the Securities and Exchange Commission,
and the information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rules, beneficial ownership includes any
shares as to which the individual has the sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire within 60 days of December 15, 1997 through the exercise of any
stock option or other right. Unless otherwise indicated, each person has
sole investment and voting power (or shares such power with his or her
spouse) with respect to the shares set forth in the table. The inclusion
therein of any shares deemed beneficially owned does not constitute an
admission of beneficial ownership of such shares. The number of shares
deemed outstanding includes 14,790,970 shares outstanding as of December 15,
1997, plus any shares subject to issuance upon exercise of options held by
the person in question that are currently exercisable or exercisable within
60 days after December 15, 1997.
(2) Includes the holdings of (i) Dr. Mastran's spouse, Ms. Muldoon, consisting
of 89,129 shares and 3,575 shares issuable upon exercise of stock options
exercisable within the 60-day period following December 15, 1997 and (ii)
Mr. Ruddy, consisting of 3,242,772 shares, who is obligated by written
agreement to vote such shares in a manner consistent with instructions
received from Dr. Mastran until September 30, 2001. See "Executive
Employment Agreements." Dr. Mastran does not, however, have dispositive
power over Mr. Ruddy's shares.
(3) Includes 3,575 shares issuable upon exercise of stock options exercisable
within the 60-day period following December 15, 1997. Also includes the
holdings of Ms. Muldoon's spouse, Dr. Mastran, consisting of 4,785,431
shares.
(4) Includes 110,000 shares issuable upon exercise of stock options exercisable
within the 60-day period following December 15, 1997. Also includes the
holdings of Mr. Davenport's son consisting of 1,250 shares.
(5) Includes 110,000 shares issuable upon exercise of stock options exercisable
within the 60-day period following December 15, 1997.
(6) Includes 12,100 shares issuable upon exercise of stock options exercisable
within the 60-day period following December 15, 1997.
2
<PAGE> 5
(7) Consists of (i) 110,826 shares held by the Robert J. Muzzio Trust U/A dtd
10/17/96, of which Mr. Muzzio and his spouse are co-trustees and
co-beneficiaries, and (ii) 3,575 shares issuable upon exercise of stock
options exercisable within the 60-day period following December 15, 1997.
(8) Consists of shares issuable upon exercise of stock options exercisable
within the 60-day period following December 15, 1997.
(9) See footnotes (2) through (8) above. Also, includes the holdings of (i) F.
Arthur Nerret, Vice President, Finance and Chief Financial Officer of the
Company, consisting of 4,200 shares and 3,925 shares issuable upon exercise
of stock options exercisable within the 60-day period following December 15,
1997, and (ii) Ilene R. Baylinson, President of the Company's Federal
Services Division, consisting of 5,921 shares and 34,650 shares issuable
upon exercise of stock options exercisable within the 60-day period
following December 15, 1997.
Dr. Mastran and Ms. Muldoon, both of whom are directors and officers of the
Company, are married to each other.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's directors, certain of its executive officers and persons who
own beneficially more than ten percent of the Company's equity securities are
required under Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to file reports of ownership and changes in ownership of
Company securities with the Securities and Exchange Commission. Copies of these
reports must also be furnished to the Company. Based solely on a review of the
copies of reports furnished to the Company and written representations that no
other reports were required, the Company believes that during its 1997 fiscal
year the Company's directors, executive officers and 10% beneficial owners
complied with all applicable Section 16(a) filing requirements, except that (i)
a report filed in June 1997 by F. Arthur Nerret, Chief Financial Officer of the
Company, failed to disclose an option to purchase Common Stock of the Company,
which report was subsequently corrected by amendment, (ii) a late report was
filed by Mr. Davenport reporting the purchase by his son of shares of the
Company's Common Stock in the Company's initial public offering, and (iii) a
late report was filed by each of Mr. Beliveau, Mr. Davenport, Dr. Mastran, Ms.
Muldoon, Mr. Muzzio, Ms. Pepin and Mr. Ruddy, each a director of the Company,
reporting his or her sale of shares in the Company's initial public offering and
by Mr. Nerret reporting his purchase of shares of the Company's Common Stock in
such offering.
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at eight for the
coming year. Pursuant to the Company's Amended and Restated Articles of
Incorporation, the Board of Directors is divided into three classes, with each
class being as nearly equal in number of directors as possible. The term of one
class expires, and their successors are elected for a term of three years, at
each annual meeting of the Company's shareholders. At the 1998 Annual Meeting of
Shareholders, two Class I Directors will be elected to hold office for three
years and until their successors are elected and qualified. Robert J. Muzzio and
Peter B. Pond, who are presently serving as directors, have been nominated for
election as Class I Directors by the Board of Directors. Donna J. Muldoon,
currently a director of the Company, has determined not to stand for re-election
as a director. There have been no disagreements between Ms. Muldoon and the
Company on any matter relating to the Company's operations, policies or
practices. The persons named in the enclosed proxy card (Dr. Mastran, Mr. Ruddy,
Mr. Nerret and Lynnette C. Fallon) will vote to elect the two nominees for Class
I Directors recommended by the Board of Directors unless authority to vote for
the election of either or both of the nominees is withheld by marking the proxy
card to that effect. The proxy may not be voted for a greater number of persons
than the number of nominees named. Both nominees have consented to being named
in this Proxy Statement and to serve if elected. If for any reason either
nominee should become unavailable for election prior to the Annual Meeting, the
person acting under the proxy may vote the proxy for the election of a
substitute. It is not presently expected that either of the nominees will be
unavailable.
3
<PAGE> 6
The following table contains certain information about the nominees for
Class I Director and current directors whose term of office as a director will
continue after the Annual Meeting. Information with respect to the number of
shares of Common Stock beneficially owned by each nominee and director, directly
or indirectly, as of December 15, 1997, appears under "Security Ownership of
Certain Beneficial Owners and Management."
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE AND DIRECTOR
NAME AND AGE OTHER DIRECTORSHIPS SINCE
- ------------------------- -------------------------------------------------------- --------
<S> <C> <C>
NOMINEES FOR CLASS I DIRECTORS (PRESENT TERM EXPIRES IN 1998)
Robert J. Muzzio Robert J. Muzzio has served in various positions with 1996
Age: 63 the Company since 1979, including Executive Vice
President since 1987, and has more than 30 years of
experience as a health care administrator, health
systems researcher, and personnel and manpower analyst.
Prior to joining the Company, Mr. Muzzio held many
public and private sector positions in the health care
industry, including Life Support Coordinator for the
Morrison Knudsen Saudi Arabia Consortium in 1978 and
1979 and Director of the Personnel Policies Division of
the Office of the Surgeon General, Department of the
Army, from 1976 until 1978. Mr. Muzzio received his M.A.
in Health Care Administration from Baylor University in
1967 and his B.A. in Public Health from San Jose State
College in 1956.
Peter B. Pond Peter B. Pond has served as a director of the Company 1997
Age: 53 since his election by the Board in December 1997. Mr.
Pond is a Principal and Managing Director in the
Investment Banking Department at Donaldson, Lufkin &
Jenrette Securities Corporation in Chicago and is head
of that company's Midwest Investment Banking Group. Mr.
Pond holds a BS in Economics from Williams College and
an MBA from the University of Chicago. He is a director
of The Metzler Group, Inc.
CLASS II DIRECTORS (PRESENT TERM EXPIRES IN 1999)
Russell A. Beliveau Russell A. Beliveau has served as the President of the 1995
Age: 50 Company's Government Operations Group since 1995. Mr.
Beliveau has more than 20 years experience in the Health
and Human Services Industry during which he has worked
in both government and private sector positions at the
senior executive level. Mr. Beliveau's past positions
include Vice President of Operations at Foundation
Health Corporation of Sacramento, California from 1988
through 1994 and Deputy Associate Commissioner
(Medicaid) for the Massachusetts Department of Public
Welfare from 1983 until 1988. Mr. Beliveau received his
M.B.A. in Business Administration and Management
Information Systems from Boston College in 1980 and his
B.A. in Psychology from Bridgewater State College in
1974.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE AND DIRECTOR
NAME AND AGE OTHER DIRECTORSHIPS SINCE
- ------------------------- -------------------------------------------------------- --------
<S> <C> <C>
Jesse Brown Jesse Brown has served as a director of the Company 1997
Age: 53 since his election by the Board in September 1997. Mr.
Brown, who is currently President of Brown & Associates,
Inc., an international consulting company, served as
Secretary of Veteran Affairs under the Clinton
Administration from 1993 until 1997, and as Executive
Director of the Washington office of Disabled American
Veterans from 1987 to 1993. Mr. Brown is an honors
graduate of Chicago City College and also attended
Roosevelt University in Chicago and Catholic University
in Washington, D.C.
Susan D. Pepin Susan D. Pepin has served as the President of the 1996
Age: 43 Company's Systems Planning and Integration Division
since 1994 and has been with the Company since 1988. She
has over 14 years experience in technical management and
consulting with a focus on health and human services
management information systems. Before joining the
Company, Ms. Pepin served as Director of Eligibility
Systems for the Massachusetts Department of Public
Welfare from 1984 until 1987 and a Project Leader for
Wang Laboratories, Inc. from 1979 until 1984. Ms. Pepin
received her B.S. in Home Economics with a concentration
in Consumer Studies and a minor in Business from the
University of New Hampshire in 1976.
CLASS III DIRECTORS (PRESENT TERM EXPIRES IN 2000)
Lynn P. Davenport Lynn P. Davenport has served as the President of the 1994
Age: 50 Company's Human Services Division since he joined the
Company in 1991. He has over thirteen years of health
and human services experience in the areas of
administration, productivity improvement, management
consulting, revenue maximization and management informa-
tion systems. Prior to joining the Company, Mr.
Davenport was employed by Deloitte & Touche, and its
predecessor, Touche Ross & Co., in Boston,
Massachusetts, where he became a partner in 1987. Mr.
Davenport received his M.P.A. in Public Administration
from New York University in 1971 and his B.A. in
Political Science and Economics from Hartwick College in
1969.
David V. Mastran David V. Mastran has served as President and Chief 1975
Age: 55 Executive Officer since he founded the Company in 1975.
Dr. Mastran received his Sc. D. in Operations Research
from George Washington University in 1973, his M.S. in
Industrial Engineering from Stanford University in 1966
and his B.S. from the United States Military Academy at
West Point in 1965.
Raymond B. Ruddy Raymond B. Ruddy has served as the Chairman of the Board 1985
Age: 54 of Directors since 1985 and President of the Company's
Consulting Group since 1986. From 1969 until he joined
the Company, Mr. Ruddy served in various capacities with
Touche Ross & Co., including, Associate National
Director of Consulting from 1982 until 1984 and Director
of Management Consulting (Boston, Massachusetts office)
from 1978 until 1983. Mr. Ruddy received his M.B.A. from
the Wharton School of Business of the University of
Pennsylvania and his B.S. in Economics from Holy Cross
College.
</TABLE>
5
<PAGE> 8
BOARD AND COMMITTEE MEETINGS
In January 1997, the Board of Directors established a standing Audit
Committee which assists the Board of Directors in discharging its duties and
responsibilities by providing the Board with an independent review of the
financial health of the Company and of the reliability of the Company's
financial controls and financial reporting. The members of the Audit Committee
are Messrs. Brown and Pond. The Audit Committee held no meetings during fiscal
1997.
The Company also has a standing Compensation Committee of the Board of
Directors, which is responsible for establishing cash compensation policies with
respect to the Company's executive officers employees, directors and
consultants. The Compensation Committee held three meetings during fiscal 1997.
The members of the Compensation Committee are Dr. Mastran and Mr. Ruddy. See
"Report of the Board of Directors and Compensation Committee."
During fiscal 1997, the Board of Directors held four meetings, and each
director attended 100% of the meetings of the Board of Directors and of all
committees of the Board on which he or she served.
DIRECTOR COMPENSATION
Directors who are also employees of the Company do not receive additional
compensation for their services as directors. Outside directors are paid $2,500
for attendance at each meeting of the Board of Directors or committees thereof.
During fiscal 1997, no payments were made to directors in connection with their
services.
Any director who is not an employee of the Company is eligible to
participate in the Company's 1997 Director Stock Option Plan (the "Director
Plan"), unless such director irrevocably elects not to participate (an "Eligible
Director"). Options under the Director Plan are automatically granted to
Eligible Directors upon the election or reelection of such directors. Under the
Director Plan, as amended on December 11, 1997, each option consists of 5,000
shares of Common Stock for each year of the term of office to which the director
is elected (with any period of term of office less than a year deemed a full
year). Such option becomes exercisable with respect to 5,000 shares immediately
upon grant and, in the event the grant is for more than 5,000 shares, with
respect to an additional 5,000 shares at each subsequent annual meeting of
shareholders during which the optionee is an Eligible Director and there remain
unvested shares underlying the option. Options granted under the Director Plan
have a term of ten years. The exercise price for each option is equal to the
last sale price for the Common Stock on the business day immediately preceding
the date of grant, as reported on the New York Stock Exchange. Currently, the
only Eligible Directors are Messrs. Brown and Pond. Upon his election to the
Board in September 1997, Mr. Brown received an option for 4,000 shares. In
connection with the Amendment to the Director Plan in December 1997, Mr. Brown
received an additional option for 6,000 shares. Mr. Pond received an option for
5,000 shares upon his election to the Board in December 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Pond serves as a Principal and Managing Director in the Investment
Banking Department at Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") in Chicago. DLJ served as a managing underwriter for the initial public
offering by the Company of its Common Stock completed in June 1997. The Company
also employs DLJ Investment Management Corp. to manage the Company's securities
portfolio.
In May 1995, the Company entered into a Stock Purchase Agreement with Mr.
Ruddy, under which the parties agreed that the Company would purchase up to
2,878,040 of Mr. Ruddy's shares of Common Stock over a four year period at a
price per share equal to the book value of the stock on the date of sale,
subject to various conditions including an election by Mr. Ruddy after each
fiscal year end to demand such sale. No shares were purchased subject to this
agreement, and the agreement terminated upon completion of the Company's initial
public offering in June 1997.
In March 1996, the Company loaned to Mr. Davenport the aggregate principal
amount of $85,000, evidenced by an interest bearing promissory note. The note
was repaid in full in January 1997.
6
<PAGE> 9
EXECUTIVE COMPENSATION
Summary Compensation Table. The table below sets forth certain
compensation information for the Chief Executive Officer of the Company and the
four most highly compensated executive officers of the Company whose salary and
bonus for the fiscal year ended September 30, 1997 exceeded $100,000
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION AWARDS(3)
COMPENSATION(1) ----------------------
FISCAL --------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) UNDERLYING OPTIONS COMPENSATION(4)
- ----------------------------- ------ -------- -------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
David V. Mastran............. 1997 $358,413 -- -- --
President and 1996 311,538 $190,039 -- --
Chief Executive Officer
Raymond B. Ruddy............. 1997 350,000 -- -- $ 3,067
Chairman of the Board, 1996 300,000 177,165 -- 12,000
Vice President of the
Company, and President of
Consulting Services
Russell A. Beliveau.......... 1997 246,634 75,000 16,874(5) 5,758
President of Government 1996 215,000 70,000 9,900 8,600
Operations Group
Lynn P. Davenport............ 1997 259,615 100,000 116,365(6) 6,454
President of Human 1996 212,884 246,067 13,200 6,063
Services Division
Susan D. Pepin............... 1997 219,167 85,000 115,411(7) 6,734
President of Systems 1996 184,358 212,883 13,200 7,374
Planning and Integration
Division
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where the aggregate amount of such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total amount of annual salary and bonus for the
executive officer for the fiscal year ended September 30, 1997.
(2) Bonuses earned for the fiscal year ended September 30, 1997 were paid on
October 21, 1997 for each of the Named Executive Officers receiving a bonus
for such fiscal year. Bonuses earned for the fiscal year ended September 30,
1996 were paid on September 30, 1996 for Messrs. Ruddy and Beliveau; on
October 21, 1996 for Dr. Mastran; and on December 20, 1996 for Mr. Davenport
and Ms. Pepin.
(3) For fiscal 1996, the figures in this column represent rights to purchase
shares of Common Stock at a price of $0.94 per share granted to certain
Named Executive Officers in the year ended September 30, 1996 for
performance during the year ended September 30, 1995. All such purchase
rights were exercised in March 1996.
(4) The figures in this column represent the amount contributed by the Company
to the employee under the Company's 401(k) Plan.
(5) Includes options to purchase 12,100 and 4,774 shares of Common Stock at
exercise prices of $1.46 and $26.50 per share, respectively.
(6) Includes options to purchase 110,000 and 6,365 shares of Common Stock at
exercise prices of $1.46 and $26.50 per share, respectively.
(7) Includes options to purchase 110,000 and 5,411 shares of Common Stock at
exercise prices of $1.46 and $26.50 per share, respectively.
7
<PAGE> 10
Option Grant Table. The following table sets forth certain information
concerning options granted to the Named Executive Officers in the fiscal year
ended September 30, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED
PERCENT ANNUAL RATES OF
NUMBER OF OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (2)
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------
NAME GRANTED(1) IN FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---------------------------------- --------- -------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
David V. Mastran.................. -- -- -- -- -- --
Raymond B. Ruddy.................. -- -- -- -- -- --
Russell A. Beliveau............... 12,100 2.3% $ 1.46 (2) $ 11,110 $ 28,155
Lynn P. Davenport................. 110,000 20.7 1.46 (2) 101,000 255,955
Susan D. Pepin.................... 110,000 20.7 1.46 (2) 101,000 255,955
</TABLE>
- ---------------
(1) These options were granted on January 31, 1997 under the Company's 1997
Equity Incentive Plan in exchange for options originally granted in November
1996 and became fully exercisable upon consummation of the Company's initial
public offering in June 1997. Each option expires upon the earlier of the
termination of the Named Executive Officer's employment with the Company or
January 31, 2007.
(2) Potential realizable value is based on an assumption that the market price
of the stock will appreciate at the stated rate, compounded annually, from
the date of grant until the end of the 10-year term. There was no public
trading market for the Common Stock at the date of grant. Accordingly, these
values have been calculated based on $1.46 per share, the book value per
share at September 30, 1996, which is also the exercise price. These values
are calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate or projection of future
stock prices. Actual gains, if any, on stock option exercises will be
dependent upon the future performance of the price of the Company's Common
Stock, which will benefit all stockholders proportionately.
On October 28, 1997, Mr. Beliveau, Mr. Davenport and Ms. Pepin were each
granted options under the Company's Equity Incentive Plan to purchase 4,774,
6,365, and 5,411 shares of Common Stock of the Company, respectively, at an
exercise price of $26.50 per share, the closing sales price of the Company's
Common Stock as reported by the New York Stock Exchange on October 27, 1997.
Each option may be exercised on a cumulative basis with respect to one-fourth of
the shares underlying the option on each of the first, second, third and fourth
anniversaries of the date of grant. Each option expires upon the earlier of the
executive's termination of employment or October 28, 2007.
Fiscal Year-End Option Values. The following table sets forth certain
information concerning exercisable and unexercisable stock options held by the
Named Executive Officers as of September 30, 1997:
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David V. Mastran...................... -- -- -- --
Raymond B. Ruddy...................... -- -- -- --
Russell A. Beliveau................... 12,100 -- $ 332,508 --
Lynn P. Davenport..................... 110,000 -- 3,022,800 --
Susan D. Pepin........................ 110,000 -- 3,022,800 --
</TABLE>
- ---------------
(1) No options were exercised during the fiscal year ended September 30, 1997 by
the Named Executive Officers.
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<PAGE> 11
(2) Value of unexercised in-the-money options represents the difference between
the last reported sales price of the Company's Common Stock as reported by
the New York Stock Exchange on September 30, 1997 ($28.94) and the exercise
price of the option, multiplied by the number of shares subject to the
option.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has entered into Executive Employment, Non-Compete,
Confidentiality and Stock Restriction Agreements with Dr. Mastran, Mr. Ruddy,
Mr. Beliveau, Ms. Pepin, Mr. Davenport and Ilene R. Baylinson, President of the
Company's Federal Services Division, (each, an "Executive Agreement") pursuant
to which each individual has agreed to serve as an officer of the Company. Under
the terms of the Executive Agreements, each officer is entitled to a base salary
and a year-end bonus consistent with the Company's past practices. The initial
base salary for each of Dr. Mastran, Mr. Ruddy, Mr. Beliveau, Mr. Davenport, Ms.
Pepin and Ms. Baylinson is $350,000, $350,000, $237,500, $250,000, $220,000 and
$182,000, respectively. In addition, Mr. Ruddy's Executive Agreement provides
that his aggregate compensation shall not be less than that paid to Dr. Mastran.
The term of the employment obligation under each Executive Agreement commenced
on June 18, 1997 and continues until September 30, 2001, subject to the right of
the Company to terminate each officer if the officer breaches any material duty
or obligation to the Company or engages in certain other proscribed conduct.
Each Executive Agreement also provides that the officer will not compete with
the Company and will maintain the Company's trade secrets in strict confidence.
In addition, each Executive Agreement restricts the ability of the officer to
sell or transfer shares of Common Stock of the Company held by such officer
until June 19, 2001 (the fourth anniversary of the closing of the Company's
initial public offering), and grants to the officer certain piggyback
registration rights with respect to such shares.
In the Executive Agreements with each of Raymond B. Ruddy and David V.
Mastran, such executives agreed to vote their shares in favor of the election of
the other to the Board of Directors, as long as each such executive owns or
controls at least 20% of the outstanding Common Stock. In addition, Mr. Ruddy
agreed in his Executive Agreement to vote his shares of Common Stock in a manner
consistent with instructions received from Dr. Mastran until September 30, 2001.
REPORT OF THE BOARD OF DIRECTORS AND COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors (the
"Board") was established in January 1997 and is currently composed of Dr.
Mastran, President and Chief Executive Officer, and Mr. Ruddy, Vice President of
the Company and President of the Consulting Group. Prior to January 1997, all
executive compensation was determined by the Board and Dr. Mastran. The
Compensation Committee is responsible for establishing cash compensation
policies with respect to the Company's executive officers. The objective of the
Company's executive compensation program is to establish compensation levels
designed to enable the Company to attract, retain and reward executive officers
who contribute to the long-term success of the Company so as to enhance
shareholder value. The Board also administers the Company's 1997 Equity
Incentive Plan. This report is submitted by the Board and the Compensation
Committee and addresses the compensation policies for fiscal year 1997 as they
affected Dr. Mastran, in his capacity as President and Chief Executive Officer
of the Company, and the top four executive officers other than Dr. Mastran whose
combined salary and bonus for fiscal year 1997 exceeded $100,000, named in the
preceding compensation tables (the "Other Executive Officers").
Compensation Philosophy
The Company's executive compensation philosophy is based on the belief that
competitive compensation is essential to attract, motivate and retain highly
qualified and industrious employees. The Company's policy is to provide total
compensation that is competitive for comparable work and comparable corporate
performance. The compensation program includes both motivational and
retention-related compensation components. Bonuses are included to encourage
effective performance relative to current plans and objectives. Stock option
grants are key components of the executive compensation program and are intended
to provide executives with
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<PAGE> 12
an equity interest in the Company so as to link a meaningful portion of the
compensation of the Company's executives with the performance of the Company's
Common Stock.
In executing its compensation policy, the Company seeks to relate
compensation with the Company's financial performance and business objectives,
reward high levels of individual performance and tie a significant portion of
total executive compensation to both the annual and long-term performance of the
Company. While compensation survey data are useful guides for comparative
purposes, the Company believes that a successful compensation program also
requires the application of judgment and subjective determinations of individual
performance, and to that extent the Compensation Committee applies its judgment
in reconciling the program's objectives with the realities of retaining valued
employees.
Executive Compensation Program
Annual compensation for the Company's Other Executive Officers consists of
three principal elements: base salary, cash bonus and stock options.
Base Salary and Cash Bonus. Each of the Other Executive Officers have
entered into employment agreements approved by the Board of Directors in January
1997 (the "Executive Agreements") and which became effective in June 1997. The
minimum annual base salary set forth in each of the Executive Agreements was
established by the Board on the recommendation of Dr. Mastran in light of each
executive's salary history with the Company and to create internal and external
equities. The annual base salary for each of the Other Executive Officers was
not adjusted in fiscal 1997 from the minimum established in each Executive
Agreement. In the future, the Compensation Committee intends to engage in annual
reviews of the base salaries paid to the Other Executive Officers, in light of
salaries paid to individuals in comparable positions with other companies,
including competitors of the Company, as well as individual performance. The
Company also intends to compare the salary levels of its executive officers with
other leading companies through reviews of survey and proxy statement data.
A significant component of the annual compensation of the Other Executive
Officers, except for Mr. Ruddy, is comprised of an annual cash bonus. In fiscal
1997, the cash bonuses paid to Mr. Beliveau, Mr. Davenport and Ms. Pepin
represented 22.9%, 27.3% and 27.3%, respectively, of each of their respective
total compensation for such year. Mr. Ruddy did not receive a bonus in light of
his existing significant equity ownership of the Company. Cash bonuses are tied
directly to the Company's financial performance and the contribution of each
executive to such performance. In order to determine such contribution, the
Committee reviews and evaluates the performance of the department or activity
for which each executive has responsibility, the impact of that department or
activity on the Company and the skills and experience required for the job,
coupled with a comparison of these elements with similar elements for other
executives both inside and outside the Company.
Equity Ownership. Executive officer compensation also includes long-term
incentives afforded by options to purchase shares of Common Stock. The purposes
of the Company's stock option grant program are to (i) highlight and reinforce
the mutuality of long-term interests between employees and the shareholders and
(ii) to assist in the attraction and retention of critically important key
executives, managers and individual contributors who are essential to the
Company's growth and development.
The Company's stock option grants include long vesting periods to optimize
the retention value of these options and to orient the Company's executive
officers to longer term success. Generally, stock options vest in equal annual
installments over four years commencing on the first anniversary of the date of
grant and, if employees leave the Company before these vesting periods, they
forfeit the unvested portions of these awards. While the Company believes that
these longer vesting periods are in the best interest of shareholders, they may
result in an increased number of outstanding options compared to companies with
shorter vesting schedules.
The number of shares of Common Stock subject to stock options grants is
generally intended to reflect the significance of the executive's current and
anticipated contributions to the Company. Prior to completion of the Company's
initial public offering in June 1997, executive officers were permitted to apply
their annual
10
<PAGE> 13
bonus toward the purchase of the Company's Common Stock at a purchase price per
share equal to the book value of the stock. Such stock was also subject to
repurchase by the Company upon termination of employment. Since June 1997, the
Board has determined to grant at each fiscal year end to employees earning a
salary in excess of $50,000 options at an exercise price equal to 100% of the
fair market value per share on the date of grant. In determining the 1997 fiscal
year end option grants to the Company's executives, the Board considered the
equity compensation policies of competitors and other companies, both privately
held and publicly traded, with comparable capitalizations. The Board expects to
continue to apply this philosophy to its future grants of stock options. All of
the Other Executive Officers except Mr. Ruddy received option grants in fiscal
1997, as shown in the table above. Mr. Ruddy did not receive an option grant in
light of his existing significant equity ownership of the Company.
The value realizable from exercisable options is dependent upon the extent
to which the Company's performance is reflected in the price of the Company's
Common Stock at any particular point in time. However, the decision as to
whether such value will be realized through the exercise of an option in any
particular year is primarily determined by each individual within the limits of
the vesting schedule and not by the Board.
Dr. Mastran's 1997 Compensation
Dr. Mastran has an Executive Agreement with the Company that became
effective in June 1997 and fixes his minimum base annual compensation at
$350,000. Dr. Mastran's base compensation was not increased during fiscal 1997.
The Board, in approving Dr. Mastran's agreement, set Dr. Mastran's base salary
at a level it believes is consistent with Dr. Mastran's salary history at the
Company and permits a large portion of Dr. Mastran's total compensation to be
reflected by his annual bonus, which is determined by the Compensation Committee
after the end of the fiscal year and reflects the Company's overall financial
performance and the contribution of Dr. Mastran to such performance. For fiscal
1997, however, Dr. Mastran received no bonus, stock awards or option grants in
light of his existing significant equity ownership in the Company.
MAXIMUS, INC.
BOARD OF DIRECTORS
Russell A. Beliveau
Jesse Brown
Lynn P. Davenport
David V. Mastran
Donna J. Muldoon
Robert J. Muzzio
Susan D. Pepin
Peter B. Pond
Raymond B. Ruddy
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended September 30, 1997, the Company's Compensation
Committee consisted of Dr. Mastran and Mr. Ruddy. Dr. Mastran has served as
President, Chief Executive Officer and a director of the Company since its
incorporation in 1975, and Mr. Ruddy has served as an officer and director of
the Company since 1985.
11
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total shareholder return on the
Company's Common Stock since June 13, 1997, the date on which the Company's
Common Stock commenced trading on the New York Stock Exchange, with the
cumulative total return for the NYSE Stock Market Index (U.S. Companies) and the
NYSE/AMEX/NASDAQ SIC 8740-8749 Stocks Index (Management and Public Relations
Services -- U.S. Companies). This graph assumes the investment of $100 on June
13, 1997 in the Company's Common Stock, the NYSE Stock Market Index and the
NYSE/AMEX/NASDAQ SIC 8740-8749 Stocks Index and assumes dividends are
reinvested.
[CHART]
<TABLE>
<CAPTION>
6/13/97 6/30/97 7/31/97 8/29/97 9/30/97
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
MAXIMUS. Inc. $100.00 $99.31 $128.47 $127.08 $160.76
New York Stock Exchange-U.S. $100.00 $99.61 $106.68 $101.92 $107.75
Management and Public Relations
Services Companies-U.S. $100.00 $105.73 $113.78 $109.41 $123.70
</TABLE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP,
independent public accountants, as accountants of the Company for the fiscal
year ending September 30, 1998. Although shareholder approval of the Board of
Directors' selection of Ernst & Young LLP is not required by law, the Board of
Directors believes that it is advisable to give the shareholders an opportunity
to ratify this selection. If this proposal is not approved at the Annual
Meeting, the Board of Directors will reconsider the selection of Ernst & Young
LLP.
The firm of Ernst & Young LLP, independent public accountants, examined the
Company's financial statements for the year ended September 30, 1997.
Representatives of Ernst & Young LLP are expected to attend the Annual Meeting
to respond to appropriate questions and will have the opportunity to make a
statement if they desire.
OTHER MATTERS
Management does not know of any other matters which may properly come
before the meeting. However, if any other matters are properly presented to the
Annual Meeting, it is the intention of persons named in the accompanying proxy
to vote, or otherwise act, in accordance with their judgment on such matters.
12
<PAGE> 15
SHAREHOLDER PROPOSALS
The Company's Bylaws require a shareholder who wishes to bring business
before or propose director nominations at an annual meeting to give written
notice to the Secretary of the Company not less than 45 days before the meeting,
unless less than 60 days' notice or public disclosure of the meeting is given,
in which case the shareholder's notice must be received within 15 days after
such notice or disclosure is given. The notice must contain specified
information about the proposed business or nominee and the shareholder making
the proposal or nomination.
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company at its principal office
at 1356 Beverly Road, McLean, Virginia 22101, Attention: Secretary, not later
than August 31, 1998 for inclusion in the proxy statement for that meeting.
EXPENSES OF SOLICITATION
All costs of solicitations of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and the Company will reimburse them for their out-of-pocket
expenses in this connection.
By Order of the Board of Directors,
Donna J. Muldoon, Secretary
December 29, 1997
THE BOARD OF DIRECTORS HOPES THAT SHAREHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL
BE APPRECIATED.
13
<PAGE> 16
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
MAXIMUS, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS FEBRUARY 16, 1998
The undersigned stockholder of MAXIMUS, Inc. (the "Company") hereby appoints
David V. Mastran, Raymend B. Ruddy and F. Arthur Nerret, and each of them acting
singly, the attorneys and proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all the shares of capital
stock of the Company entitled to vote at the Annual Meeting of Sharesholders of
the Company to be held on February 16, 1997, and at all adjournments thereof,
hereby revoking any proxy heretofore given with respect to such shares.
(Continued and to be signed on the reverse side)
-----------
SEE REVERSE
SIDE
-----------
- --------------------------------------------------------------------------------
<PAGE> 17
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
MAXIMUS, INC.
February 16, 1998
<TABLE>
<S> <C>
Please Detach and Mail in the Envelope Provided
- ------------------------------------------------------------------------------------------------------------------------------------
Please mark your
A [X] votes as in this
example.
WITHHELD
FOR from both
both nominees nominees FOR AGAINST ABSTAIN
1. Election of [ ] [ ] Nominees: Robert J. Muzzio 2. To ratify the selection Ernst & [ ] [ ] [ ]
Class I Peter B. Pond Young as independent public
Directors accountants.
This Proxy when property executed will be voted in the
manner directed herein by the undersigned shareholders. If
FOR, except vote withheld from the following nominees: no specification is made, this proxy will be voted for
proposals 1 and 2. In their discretion, the proxies are
______________________________________________________ also authorized to vote upon such matters as may properly
come before the meeting.
MARK HERE [ ] MARK HERE [ ]
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE BELOW THE MEETING
Address change:____________________________________________
___________________________________________________________
Signature ___________________________ Date _______________ 1997 Signature ___________________________ Date _______________ 1997
Note: Please sign exactly as name appears on stock certificate. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a partner, please sign in partnership name by
authorized person.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
