<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended April 30, 1997
Commission File Number 0-22232
THE MAXIM GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 58-2060334
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
210 Town Park Drive, Kennesaw, Georgia 30144
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 590-9369
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N/A
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(Former name, former address, and former fiscal year, if changed since last
report)
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 last 90 days.
Yes X No
-------- ----------
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
Common Stock, $.001 par value 16,135,044
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Class Outstanding at June 9, 1997
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PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
THE MAXIM GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
April 30, January 31,
Assets 1997 1997
======================================================== ========= ===========
<S> <C> <C>
Current assets:
Cash and cash equivalents, including restricted
cash of $1,800 at April 30, 1997 and $621 at
January 31, 1997 $ 4,400 $ 6,439
Current portion of franchise license fees
receivable, net of allowance for
doubtful accounts of $352 at April 30, 1997 and
$328 at January 31, 1997 2,341 2,070
Trade accounts receivable, net of allowance for
doubtful accounts of $1,771 at April 30, 1997 and
$1,380 at January 31, 1997 50,378 43,487
Accounts receivable from officers and employees 1,210 1,195
Current portion of notes receivable from
franchisees and related parties, net of
allowance for doubtful accounts
of $351 at April 30, 1997 and January 31, 1997 1,019 1,034
Inventories 44,000 42,148
Refundable income taxes 1,261 1,311
Deferred income taxes 3,293 3,859
Prepaid expenses 2,822 2,526
-------- --------
Total current assets 110,724 104,069
Property and equipment, net 102,601 101,403
Franchise license fees receivable, less current portion,
net of allowance for doubtful accounts of $210 at
April 30, 1997 and January 31, 1997 1,345 1,349
Notes receivable from franchisees, less current portion 446 477
Intangible assets, net of accumulated amortization
of $1,374 at April 30, 1997 and
$1,232 at January 31, 1997 10,154 10,204
Other assets 3,168 2,171
-------- --------
$228,438 $219,673
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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THE MAXIM GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
(In Thousands, Except Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
April 30, January 31,
Liabilities And Stockholders' Equity 1997 1997
======================================================== ========= ===========
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 2,626 $ 2,532
Current portion of capital lease obligations 519 537
Rebates payable to franchisees 2,917 3,471
Accounts payable 22,152 23,583
Accrued expenses 12,758 12,232
Deferred revenue 1,719 967
Deposits 2,696 2,460
-------- --------
Total current liabilities 45,387 45,782
Long-term debt, less current portion 57,578 91,100
Capital lease obligations, less current portion 1,949 2,120
Deferred taxes 5,352 4,517
-------- --------
Total liabilities 110,266 143,519
-------- --------
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock, $.001 par value; 1,000 shares
authorized, no shares issued or outstanding -- --
Common stock, $.001 par value; 25,000 shares
authorized, 16,133 shares issued and
outstanding at April 30, 1997 and 12,800 shares
issued and outstanding at January 31, 1997 16 13
Additional paid-in capital 100,888 62,124
Retained earnings 17,268 14,017
-------- --------
Total stockholders' equity 118,172 76,154
-------- --------
$228,438 $219,673
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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THE MAXIM GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 30, April 30,
--------- ---------
1997 1996
--------- ---------
<S> <C> <C>
Revenues:
Sales of floorcovering products $ 71,490 $ 56,625
Fiber and PET sales 5,772 9,615
Fees from franchise services 7,281 5,912
Other 1,682 1,090
-------- --------
Total revenues 86,225 73,242
Cost of sales 59,155 52,958
-------- --------
Gross profit 27,070 20,284
Selling, general, and administrative expenses (20,438) (17,125)
Interest income 94 133
Interest expense (1,401) (1,608)
Other 35 84
-------- --------
Earnings before income taxes 5,360 1,768
Income tax expense 2,109 616
-------- --------
Net earnings $ 3,251 $ 1,152
======== ========
Earnings per common and common equivalent share $ 0.20 $ 0.08
======== ========
Weighted average number of common and common
equivalent shares outstanding
16,630 13,611
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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THE MAXIM GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands, Except Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
April 30, April 30,
------------ ----------
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,251 $ 1,152
-------- --------
Adjustments to reconcile net earnings
to net cash (used in) provided by
operating activities:
Depreciation and amortization 2,729 1,955
Deferred income taxes 1,401 368
Changes in assets and liabilities:
Increase in receivables (7,125) (1,776)
(Increase) decrease in inventories (1,853) 2,909
Decrease in refundable income taxes 49 852
Increase in prepaid expenses and other assets (1,292) (857)
Decrease in rebates and accounts payable, accrued
expenses, deferred revenue, and deposits (470) (3,206)
-------- --------
Total adjustments (6,561) 245
-------- --------
Net cash (used in) provided by operating
activitieS (3,310) 1,397
-------- --------
Cash flows from investing activities:
Capital expenditures (3,878) (950)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 47,248 --
Proceeds from exercise of options, net 463 9
Purchase of treasury stock (8,944) (336)
Net payments of additional long-term debt (33,428) (1,684)
Principal payments on capital lease obligations (190) (130)
-------- --------
Net cash provided by (used in)
financing activities
5,149 (2,141)
-------- --------
Net decrease in cash (2,039) (1,694)
Cash, beginning of period 6,439 4,207
-------- --------
Cash, end of period $ 4,400 $ 2,513
======== ========
Supplemental disclosures of cash flow information:
Cash paid during period for:
Interest $ 1,332 $ 1,456
======== ========
Income taxes $ 1,122 $ 50
======== ========
Supplemental disclosure of noncash investing and financing
activities:
Common stock issued in connection with acquisitions 0 0
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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THE MAXIM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Information)
(Unaudited)
1. Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the 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 consolidated
financial statements and notes thereto included in the Company's 1997 Form
10-K as filed with the Securities and Exchange Commission.
The condensed consolidated financial statements give retroactive effect to
the merger of the Company and Image Industries, Inc. ("Image") on August
30, 1996, which was accounted for as a pooling of interests.
The results of operations for the periods presented are not necessarily
indicative of the operating results for the full year.
2. Inventories
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
April 30, January 31,
1997 1997
---- ----
<S> <C> <C>
Raw materials $ 8,662 $ 9,097
Work in process 3,130 3,271
Finished goods 32,208 29,780
-------- --------
$ 44,000 $ 42,148
======== ========
</TABLE>
3. Related-Party Transactions
Certain of the stockholders own franchises which utilize the services of
the Company. Trade accounts receivable at April 30, 1997 and January 31,
1997 include amounts due from these affiliated companies of $28 and $21,
respectively. In addition, rebates payable
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to franchisees at April 30, 1997 and January 31, 1997 include amounts due
to director-owned franchisees of $48 and $81, respectively.
Included in fees from brokering floorcovering products for the three-month
periods ended April 30, 1997 and 1996 is $92 and $14, respectively, earned
from services provided to these affiliated franchisees. Included in
advertising revenue for the three-month periods ended April 30, 1997 and
1996 is $50 and $10, respectively, earned from services purchased by
affiliated franchisees. Sales to affiliated franchisees of floorcovering
products for the three-month periods ended April 30, 1997 and 1996 was $0
and $16, respectively.
In August 1995, the Company loaned $821 to Kevodrew Realty, Inc.
("Kevodrew"), a company controlled by A. J. Nassar, the president and
chief executive officer of the Company, which loan bears interest at an
annual rate of prime. These funds were loaned to Kevodrew to provide
interim financing for the purchase by Kevodrew of a retail shopping center
in Louisville, Kentucky. This loan was repaid on May 22, 1996. A primary
tenant in the shopping center is a company-owned store, which has entered
into a five-year lease agreement with Kevodrew providing for annual lease
payments of $89.
As of April 30, 1997, Mr. Nassar had a demand note payable to the Company
for $817, accruing interest at the prime rate.
4. Acquisitions
In March 1997, the Company issued nonbinding letters of intent to acquire
McSwain Carpets, Inc. of Cincinnati, Ohio, and Tri-R of Orlando, Inc.
(d/b/a The Flooring Center) of Orlando, Florida. McSwain's Carpets
operates 17 stores in the Cincinnati, Dayton, Columbus, and Toledo, Ohio
areas. The acquisitions are subject to the execution of definitive
purchase agreements and the approval of the Companies' boards of
directors.
5. Subsequent Events
On May 26, 1997, the Company signed a commitment letter for a $125 million
Credit Facility to replace the outstanding facility. The new credit
facility will consist of (i) a $70 million revolving facility that matures
three years from the closing of the credit facility, (ii) a $30 million
term facility that matures five years from the closing of the credit
facility, and (iii) a $25 million letter of credit to back the issuance of
a bond to finance the expansion of the Company's fiber extrusion
capabilities. The new credit facility is expected to close by June 30,
1997.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Total Revenues. Total revenues increased 17.8% to $86.2 million for the three
months ended April 30, 1997 from $73.2 million for the three months ended April
30, 1996. The components of total revenues are discussed below:
Sales of Floorcovering Products. Sales of floorcovering products
increased 26.3% to $71.5 million for the three months ended April 30,
1997 from $56.6 million for the three months ended April 30, 1996.
Sales of floorcovering products in company-owned stores increased 25%
to $30.5 million for the three months ended April 30, 1997 from $24.4
million for the three months ended April 30, 1996. The growth in retail
sales of floorcovering products was primarily due to the impact of the
acquisitions of floorcovering retailers and, to a lesser extent, to
internal growth. The results of these acquired retailers are not fully
reflected in the prior year period, as such acquisitions were made at
various times during the year. Sales of manufactured carpet increased
28.5% to $37.9 million for the three months ended April 30, 1997 from
$29.5 million for the three months ended April 30, 1996. Unit sales of
manufactured carpet increased 40.8% to 6.9 million square yards for the
three months ended April 30, 1997 from 4.9 million square yards for the
three months ended April 30, 1996. Sales from the Company's two
distribution centers amounted to $3.1 million for the three months
ended April 30, 1997 and $3.3 million for the three months ended April
30, 1996, largely representing sales to the Company's franchisees.
Fees From Franchise Services. Fees from franchise services, which
include franchise license fees and royalties, brokering of
floorcovering products, and advertising, increased 23.7% to $7.3
million for the three months ended April 30, 1997 from $5.9 million for
the three months ended April 30, 1996. This increase was attributable
to increases in brokering activity generated from new CarpetMAX and GCO
franchisees, growth in demand for franchise services from existing
CarpetMAX and GCO franchisees, greater utilization of advertising and
other services offered to franchisees, and an expansion of advertising
services offered by the Company.
Fiber and PET Sales. Sales of fiber and Polyethylene terephthalate
("PET") decreased 39.6% to $5.8 million for the three months ended
April 30, 1997 from $9.6 million for the three months ended April 30,
1996. Unit sales decreased 6.7% to 15.4 million pounds for the three
months ended April 30, 1997 from 16.5 million pounds for the three
months ended April 30, 1996. The decrease in unit sales was the net
result of a temporary decrease in fiber production to install machinery
to increase future fiber production capacity. Unit selling prices
declined 35.2% for the three months ended April 30, 1997 compared to
the three months ended April 30, 1996, reflecting the comparable
decline in raw material costs.
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Gross Profit. Gross profit increased 33.5% to $27.1 million for the three months
ended April 30, 1997 from $20.3 million for the three months ended April 30,
1996. As a percentage of revenues, gross profit was 31.4% for the three months
ended April 30, 1997 compared to 27.7% for the three months ended April 30,
1996. The increase in gross profit as a percentage of revenues is primarily a
result of the recognition of lower raw material costs associated with
manufacturing operations.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased 19.3% to $20.4 million for the three months
ended April 30, 1997 from $17.1 million for the three months ended April 30,
1996. Increases in operating expenses on an absolute basis reflects an overall
growth in the size of the Company's operations required to serve the growing
retail base as well as increased selling costs at Image related to the addition
of 12 new sales people to service newly created territories. As a percentage of
revenues, selling, general, and administrative expenses increased to 23.7% for
the three months ended April 30, 1997 from 23.4% for the three months ended
April 30, 1996.
Interest Expense. Interest expense decreased 12.5% to $1.4 million for the three
months ended April 30, 1997 from $1.6 million for the three months ended April
30, 1996 due principally to the Company's applying $47.9 million of proceeds
received from an equity offering to its outstanding debt.
Income Tax Expense. The Company recorded income tax expense of $2.1 million for
the three months ended April 30, 1997 compared to $0.6 million for the three
months ended April 30, 1996. The effective tax rate for the three months ended
April 30, 1997 was 39.3%.
Net Earnings. As a result of the foregoing factors, the Company recorded net
earnings of $3.3 million for the three months ended April 30, 1997 compared to
net earnings of $1.2 million for the three months ended April 30, 1996.
Liquidity and Capital Resources
General. The Company's primary capital requirements are for new store openings,
investments in the manufacturing operations, working capital, and acquisitions.
The Company historically has met its capital requirements through a combination
of cash flows from operations, equity transactions, bank lines of credit, and
credit terms from suppliers.
In March 1997, the Board of Directors of the Company authorized
management to repurchase up to 1 million shares of common stock of the Company.
As of June 9, 1997, the Company had repurchased 877,500 shares of its common
stock in the open market for a total of $10 million. These purchases were, and
any future purchases will be, financed from borrowings under the Company's
revolving credit facility.
Credit Facilities. In connection with the Image merger, the Company established
three credit facilities aggregating $125 million (the "Credit Facility"). The
Credit Facility consists of (i) a $65 million revolving facility of which $3.3
million was available for borrowings on June 9, 1997 and which matures in August
1999, (ii) a $30 million term facility that matures in December 2001, and (iii)
a $30 million term facility that matures in September 2003. On February 23,
1997, the Company paid down the two term facilities with $47.9 million of
proceeds received from the issuance of 3.2 million shares of common stock. As of
June 9, 1997, the Company had a total of $46.1 million outstanding under the
revolving facility and $12 million under the term
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facilities. Amounts outstanding under the Credit Facility bear interest at a
variable rate based on LIBOR or the prime rate, at the Company's option. As of
June 9, 1997, the weighted average interest rate on amounts outstanding under
the Credit Facility was 8.25%. The Credit Facility contains customary covenants.
As of June 9, 1997, the Company was in compliance with all covenants under the
Credit Facility.
On May 26, 1997, the Company signed a commitment letter for a new $125
million credit facility to replace the existing Credit Facility. The new credit
facility will consist of (i) a $70 million revolving facility that matures three
years from the closing of the credit facility, (ii) a $30 million term facility
that matures five years from the closing of the credit facility, and (iii) a $25
million letter of credit to back the issuance of a bond to finance the expansion
of the Company's fiber extrusion capabilities. The new credit facility is
expected to close by June 30, 1997.
As of June 9, 1997, the Company also has approximately $1 million of
debt outstanding under various term loans at interest rates ranging from 5.9% to
10.5%.
Cash Flows. During the three months ended April 30, 1997, operating activities
used $3.3 million compared to cash provided of $1.4 million for the three months
ended April 30, 1996. The decrease in cash provided by operating activities
resulted primarily from an increase in receivables and inventories. The increase
in receivables and inventories was due to higher sales of floorcovering products
to franchisees and other carpet retailers.
During the three months ended April 30, 1997, investing activities used
$3.9 million compared to $1 million for the three months ended April 30, 1996.
The increase is primarily due to the addition of a new distribution facility and
costs associated with a new manufacturing computer system.
During the three months ended April 30, 1997, financing activities
provided cash of $5.1 million compared to a use of $2.1 million in the prior
year period. This increase is primarily due to the proceeds received from the
issuance of common stock.
Capital Expenditures. The Company anticipates that it will require approximately
$40 million in fiscal 1998 to open new Gallery Stores, reconfigure existing
CarpetMAX stores, expand its manufacturing capacity, and upgrade its management
information systems. The Company expects to open 30 new Gallery Stores in fiscal
1998. The Company estimates that capital expenditures to open a new Gallery
Store will average approximately $100,000, net of landlord allowances and
supplier participations. Preopening expenses will be approximately $50,000 per
store. The actual costs that the Company will incur in opening a new Gallery
Store cannot be predicted with precision because the Company has opened only two
Gallery Stores and opening costs will vary based upon geographic location, the
size of the store, the amount of supplier contributions, and the extent of the
buildout required at the selected site.
Recent Accounting Pronouncements. In March 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" and SFAS No. 129, "Disclosure of
Information About Capital Structure," both of which become effective for fiscal
years beginning after December 15, 1997. SFAS No. 128 changes certain reporting
and disclosure requirements for earnings per share. SFAS No. 129 continues the
existing requirements to disclose the pertinent rights and privileges of all
securities other
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than ordinary common stock but expands the number of companies subject to
portions of its requirements. The Company plans to adopt those statements for
the 1998 fiscal year.
Forward-Looking Statements. This Report contains statements that constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Those
statements appear in a number of places in this Report and include statements
regarding the intent, belief or current expectations of the Company, its
directors or its officers with respect to, among other things: (i) the timing,
magnitude and costs of the roll-out of the Gallery Stores; (ii) potential
acquisitions by the Company; (iii) the Company's financing plans; (iv) trends
affecting the Company's financial condition or results of operations; (v) the
Company's business and growth strategies; and (vi) the declaration and payment
of dividends. Any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking statements as a
result of various factors. The accompanying information contained in this
Report, including without limitation the information set forth under the
headings "Management's Discussion and Analysis of Financial Condition and
Results of Operations," identifies important factors that could cause such
differences.
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ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
10.13 Employment Agreement dated June 4, 1997 by and between A. J. Nassar
and registrant
11 Statements Regarding Computation of Per Share Earnings
27 Financial Data Schedule (for SEC use only)
(B) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended April 30, 1997.
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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.
THE MAXIM GROUP, INC.
Dated: June 9, 1997 By: /s/ A. J. Nassar
-------------------------------------
A. J. Nassar, President and
Chief Executive Officer
Dated: June 9, 1997 By: /s/ Gene Harper
-------------------------------------
Gene Harper, Chief Financial Officer
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EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 4th day of June,
1997, by and between The Maxim Group, Inc., a Georgia corporation (the
"Company"), and A.J. Nassar (hereinafter "Executive");
WHEREAS, the Board of Directors of the Company, recognizing the
experience and knowledge of Executive in the floor covering industry, desires to
retain the valuable services and business counsel of Executive, it being in the
best interests of the Company to arrange terms of employment for Executive so as
to reasonably induce Executive to remain in his capacities with the Company for
the term hereof; and
WHEREAS, Executive is willing to provide services to the Company, in
accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. For the Term of Employment, as hereinafter
defined, the Company agrees to employ Executive and Executive agrees to accept
such employment and to perform such duties and functions as the Board of
Directors of the Company may assign to Executive from time to time, but only
administrative and managerial functions commensurate with Executive's past
experience and performance level. Unless otherwise agreed to by Executive, he
shall perform such duties primarily from the Company's offices in Kennesaw,
Georgia. Executive agrees to devote his full time and energy to the business of
the Company, and shall perform his duties in a trustworthy and businesslike
manner, all for the purpose of advancing the interests of the Company.
It is hereby expressly agreed among the parties hereto that primary
responsibility for the supervision of Executive shall rest with the Board of
Directors of the Company, which shall review Executive's performance annually,
make adjustments to Executive's compensation and award such other bonuses and
employee benefits as it shall deem appropriate.
2. TITLE. Executive shall serve as Chief Executive Officer of the
Company, as well as such other positions, and with such titles, as the Board of
Directors and Executive may mutually agree upon during the Term of Employment
(as defined below).
3. TERM OF EMPLOYMENT. The "Term of Employment" referred to in
Section 1 hereof and hereinafter shall be three years, commencing on the date of
this Agreement. This Agreement shall automatically renew on the third
anniversary of the date of this Agreement unless earlier terminated in
accordance with Section 6 or 7 of the Agreement, or unless either party gives
the other written notice at least thirty (30) days prior to such anniversary
date that he or it does not desire to renew the Agreement.
<PAGE> 2
4. COMPENSATION.
4.1 Base Salary. During the Term of Employment, Executive shall be
paid an annual base salary (hereinafter "Base Salary"), which shall be paid in
equal installments in accordance with the Company's normal pay practices, but
not less frequently than monthly. Executive's initial annual Base Salary shall
be $400,000. The Board of Directors of the Company shall review Executive's Base
Salary annually and may modify such Base Salary for the subsequent one-year
period.
4.2 Incentive Bonus Plan. During the Term of Employment and in
addition to Executive's Base Salary, Executive shall be entitled to receive such
additional bonus payments determined as follows:
(a) A bonus equal in amount to $200,000 for each fiscal
year of the Company in which the Company meets or exceeds the estimated earnings
per share on a fully diluted basis for such fiscal year as approved by the Board
of Directors, before reduction due to extraordinary expenses or pooling charges
resulting from transactions or activities approved by the Board of Directors,
such charges or expenses determined in accordance with generally accepted
accounting principles. The estimated earnings per share for a fiscal year shall
be approved by the Board of Directors within ninety (90) days after the
commencement of the applicable fiscal year. For purposes hereof, it is agreed
that the estimated earnings per share for fiscal year 1998 is $1.05. Such bonus,
if owed, shall be payable within thirty (30) days after the Company's
independent certified public accountants have released audited year end
financial statements for the applicable fiscal year.
(b) Executive shall also be entitled to participate, in
the discretion of the Board of Directors, in such other executive incentive
bonus plans for any fiscal year or portion thereof as may from time to time be
designated by the Board of Directors for officers generally.
4.3 Additional Benefits. During the Term of Employment, Executive
shall have the right to participate in any and all employee benefit programs
established and maintained by the Company from time to time including, without
limitation, such medical or dental plans as may be established from time to time
by the Company. Executive shall be entitled to participate in any qualified or
unqualified stock option, pension, profit sharing or other employee benefit plan
adopted by the Company hereinafter and covering executive officers generally.
Throughout the Term of Employment, Executive shall also be entitled to
reimbursement for reasonable business expenses incurred by him in the
performance of his duties hereunder, including certain entertainment expenses,
as approved from time to time by the Board of Directors of the Company. In
addition, the Company shall pay all membership dues and related fees and
expenses of any civic club and social club memberships or professional
association memberships of Executive; provided the Company will only pay dues,
fees and expenses for one (1) country club. The Company shall provide Executive
with a monthly automobile allowance of $750.
4.4 Vacation. Executive shall be entitled to annual vacation leave
in accordance with the Company's vacation policy as set forth in the current
Employee Handbook of the Company. Vacation shall be scheduled at reasonable
times not in conflict with Executive's duties hereunder.
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5. ILLNESS, INCAPACITY OR DEATH DURING EMPLOYMENT.
(a) If by reason of illness or incapacity, Executive is
unable to perform his services or discharge his duties hereunder for sixty (60)
or more consecutive days or ninety (90) days in the aggregate during any twelve
(12) month period, then upon ten (10) days' prior notice, the Company may, in
its sole discretion, either suspend Executive without pay of any kind, salary or
bonus, until Executive is able to perform his services and discharge his duties
hereunder or terminate the employment of Executive, and thereupon, Executive
shall be paid his base salary from the date of termination through the 10-day
notice period.
(b) In the event of Executive's death, all obligations of
the Company under this Agreement shall terminate other than the payment of that
portion of the base salary and bonus, if any, earned by Executive to the date of
death.
6. TERMINATION.
6.1 For Cause. This Agreement may be terminated by the Board of
Directors of the Company immediately and without further obligation other than
for monies already paid, for any of the following reasons:
(a) the willful and continued failure by the Executive
for a period of sixty (60) days to substantially perform the Executive's duties
with the Company (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a notice of termination for "Good Reason" by the
Executive pursuant to Section 6.3 of this Agreement) after a written demand for
substantial performance is delivered to the Executive by the Board of Directors,
which demand specifically identifies the manner in which the Board believes that
the Executive has not substantially performed the Executive's duties,
(b) the willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise;
(c) conviction of Executive during the Term of Employment
of a crime involving breach of trust or moral turpitude; or
(d) engaging in any act or activity prohibited under the
terms of this Agreement.
For purposes of clauses (a) and (b) of this definition, no act, or failure to
act, on the Executive's part shall be deemed "willful" unless done, or omitted
to be done, by the Executive not in good faith and without reasonable belief
that the Executive's act, or failure to act, was in the best interest of the
Company. In the event that the Company discharges Executive alleging "cause"
under this Section 6.1 and it is subsequently determined judicially that the
termination was "without cause," then such discharge shall be deemed a discharge
without cause subject to the provisions of Section 6.2 hereof. In the event that
the Company discharges Executive alleging "cause" under this Section 6.1, such
notice of discharge shall be accompanied by a written and specific description
of the circumstances alleging such "cause."
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6.2 Without Cause. The Company may, upon thirty (30) days' written
notice to Executive, terminate this Agreement without cause at any time during
the Term of Employment (provided that any such termination that is covered by
Section 7 of this Agreement shall be treated in accordance with Section 7). In
such event and notwithstanding any provision to the contrary contained in any
stock option agreement of Executive, any stock options which have been granted
to Executive but which are not yet exercisable as of the date of notice of
termination shall be deemed to be presently exercisable as of the date of notice
of termination. The Company shall pay to Executive, as liquidated damages in
lieu of all other claims:
(a) The annual Base Salary which would otherwise be payable to
Executive had he remained in the employ of the Company during the
balance of the Term of Employment; provided, however, that the amount to
be paid as liquidated damages shall in no event be less than an amount
equal to twenty-four (24) months' Base Salary then in effect at the time
of Executive's termination. Said payment shall be made in equal monthly
installments throughout what would otherwise be the remaining Term of
Employment;
(b) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of (i) any annual and quarterly performance or
discretionary bonuses which have been allocated or awarded to the
Executive for a completed fiscal year preceding the date of termination
but has not yet been paid (pursuant to Section 4.2 hereof or otherwise),
and (ii) a pro rata portion of any annual and quarterly performance or
discretionary bonuses for the fiscal year in which the date of
termination occurs, determined by multiplying the net income of the
Company as of the date of termination by a fraction, the numerator of
which shall be the amount of any annual and quarterly performance or
discretionary bonus allocated or awarded to the Executive for the
completed fiscal year preceding the date of termination and the
denominator of which shall be the net income of the Company for the
completed fiscal year preceding the date of termination; and
(c) For a twelve (12) month period after the date of
termination, the Company shall arrange to provide Executive with life,
disability, accident and health insurance benefits substantially similar
to those which the Executive is receiving immediately prior to the
notice of termination. Benefits otherwise receivable by the Executive
pursuant to this Section 6.2(c) shall be reduced to the extent
comparable benefits are actually received by or made available to the
Executive without cost during the twelve (12) month period following the
Executive's termination of employment (and any such benefits actually
received by the Executive shall be reported to the Company by the
Executive).
The Company may, in its sole discretion, at any time during the period that
payments under this Section 6.2 would otherwise be due, discharge its
obligations pursuant to this Section 6.2 by paying to Executive the present
value of its obligations hereunder as determined by an enrolled actuary.
6.3 Executive's Obligations Upon Termination. Upon the termination
of his employment hereunder for whatever reason, Executive shall:
(a) Forthwith tender his resignation from any directorship or
office he may hold in the Company; and
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(b) Not at any time represent himself still to be
connected or to have any connection with the Company.
6.4 Effect of Termination. The provisions of this Agreement shall
survive the termination of this Agreement and the termination of Executive's
employment with the Company to the extent required to give full effect to the
covenants and agreements contained herein.
7. Change in Control of the Company.
7.1 Subject to Section 7.2 hereof, the Company shall pay the
Executive the payments described in this Section 7.1 (the "Change of Control
Payments") upon the termination of the Executive's employment following a Change
in Control and during the term of this Agreement, in addition to any of the then
unpaid compensation and benefits previously required to be paid to Executive
through the date of termination, unless such termination is (i) by the Company
for cause, or (ii) by reason of death, disability or voluntary resignation or
retirement of Executive. For purposes of the immediately preceding sentence, if
a termination of the Executive's employment occurs prior to a Change in Control,
but following a Potential Change in Control in which a person has entered into
an agreement with the Company the consummation of which will constitute a Change
in Control, such termination shall be deemed to have followed a Change in
Control and to have been (i) by the Company without cause, if the Executive's
employment is terminated without cause at the direction of such person, or (ii)
by the Executive with Good Reason, if the Executive terminates his employment
with Good Reason and the act (or failure to act) which constitutes Good Reason
occurs following such Potential Change in Control and at the direction of such
person. The Change of Control Payments shall be as follows:
(a) In lieu of any further salary payments to the Executive for
periods subsequent to the date of termination and in lieu of any
severance benefit otherwise payable to the Executive, the Company shall
pay to the Executive a lump sum severance payment, in cash, equal to two
(2) times the Executive's annual Base Salary in effect immediately prior
to the occurrence of the event or circumstance upon which the notice of
termination is based;
(b) The Company shall pay to the Executive a lump sum amount, in
cash, equal to the sum of (i) any annual and quarterly performance or
discretionary bonuses which have been allocated or awarded to the
Executive for a completed fiscal year preceding the date of termination
but has not yet been paid (pursuant to Section 4.2 hereof or otherwise),
and (ii) a pro rata portion of any annual and quarterly performance or
discretionary bonuses for the fiscal year in which the date of
termination occurs, determined by multiplying the Executive's bonuses
awarded or paid for the most recently completed fiscal year by a
fraction, the numerator of which shall be the number of full days the
Executive was employed by the Company during the fiscal year in which
the Executive's date of termination occurred and the denominator of
which shall be three hundred and sixty-five (365) days; and
(c) For a twelve (12) month period after the date of
termination, the Company shall arrange to provide the Executive with
life, disability, accident and health insurance benefits substantially
similar to those which the Executive is receiving immediately prior to
the notice of termination (without giving effect to any reduction in
such benefits subsequent to a Change in
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Control which reduction constitutes Good Reason). Benefits otherwise
receivable by the Executive pursuant to this Section 7.1(c) shall be
reduced to the extent comparable benefits are actually received by or
made available to the Executive without cost during the twelve (12)
month period following the Executive's termination of employment (and
any such benefits actually received by the Executive shall be reported
to the Company by the Executive). If the benefits provided to the
Executive under this Section 7.1.(c) shall result in a decrease,
pursuant to Section 7.2, in the Change of Control Payments and these
Section 7.1(c) benefits are thereafter reduced pursuant to the
immediately preceding sentence because of the receipt of comparable
benefits, the Company shall, at the time of such reduction, pay to the
Executive the lesser of (a) the amount of the decrease made in the
Change of Control Payments pursuant to Section 7.2, or (b) the maximum
amount which can be paid to the Executive without being, or causing any
other payment to be, nondeductible by the Company by reason of section
280G of the Code.
7.2 Notwithstanding any other provisions of this Agreement, in the
event that any payment or benefit received or to be received by the Executive in
connection with and contingent on a Change in Control or the termination of the
Executive's employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a Change in Control or any person affiliated with the Company or such
person) (all such payments and benefits, including the Change of Control
Payments, being hereinafter called "Total Payments") would not be deductible (in
whole or part), by the Company, an affiliate or person making such payment or
providing such benefit, as a result of section 280G of the Code, then, to the
extent necessary to make the remaining portion of the Total Payments deductible
(and after taking into account any reduction in the Total Payments provided by
reason of Section 280G of the Code in such other plan, arrangement or
agreement), (A) the cash Change of Control Payments and/or other cash payments
provided for hereunder, in each case, to the extent still unpaid, shall first be
reduced (if necessary, to zero), and (B) all other noncash Change of Control
Payments and/or other noncash benefits provided for hereunder, in each case, to
the extent still unfurnished, shall next be reduced (if necessary, to zero), and
(C) the Executive shall have no right to receive hereunder, and neither the
Company, any person whose actions result in a Change in Control or any person
affiliated with the Company or such person shall be obligated to make, pay or
furnish to the Executive hereunder any payment or benefit in excess of those
payments or benefits provided hereunder as reduced, if applicable, pursuant to
clause (A) or clause (B) above. For purposes of this limitation (i) no portion
of the Total Payments the receipt or enjoyment of which the Executive shall have
effectively waived in writing prior to the date of termination shall be taken
into account, (ii) no portion of the Total Payments shall be taken into account
which in the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive does not constitute a
"parachute payment" within the meaning of section 280G(b)(2) of the Code,
including by reason of section 280G(b)(4)(A) of the Code, (iii) the Change of
Control Payments shall be reduced only to the extent necessary so that the Total
Payments (other than those referred to in clauses (i) or (ii)) in their entirety
constitute reasonable compensation for services actually rendered within the
meaning of section 280G(b)(4)(B) of the Code or are otherwise not subject to
disallowance as deductions, in the opinion of the tax counsel referred to in
clause (ii); and (iv) the value of any noncash benefit or any deferred payment
or benefit included in the Total Payments shall be determined by the Company's
independent auditors in accordance with the principles of sections 280G(d)(3)
and (4) of the Code.
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If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding that, notwithstanding the good
faith of the Executive and the Company in applying the terms of this Section
7.2, the aggregate "parachute payments" paid to or for the Executive's benefit
are in an amount that would result in any portion of such "parachute payments"
not being deductible by reason of section 280G of the Code, then the Executive
shall have an obligation to pay the Company upon demand an amount equal to the
sum of (i) the excess of the aggregate "parachute payments" paid to or for the
Executive's benefit over the aggregate "parachute payments" that could have been
paid to or for the Executive's benefit without any portion of such "parachute
payments" not being deductible by reason of section 280G of the Code; and (ii)
interest on the amount set forth in clause (i) of this sentence at the rate
provided in section 1274(b)(2)(B) of the Code from the date of the Executive's
receipt of such excess until the date of such payment.
7.3 The payments and other items provided for in Section 7.1
(other than Section 7.1(c)) hereof shall be made not later than the fifteenth
(15th) day following the date of termination or the date of exercise by
Executive of any of Executive's rights hereunder; provided, however, that if the
amounts of such payments, and the limitation on such payments set forth in
Section 7.2 hereof, cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as determined in
good faith by the Company, of the minimum amount of such payments to which the
Executive is clearly entitled and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the date of termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 7.3, the Company
shall provide the Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has
received from outside counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
7.4 The Company also shall pay to the Executive all legal and
accounting fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to the Change of Control Payments
(including all such fees and expenses, if any, incurred in disputing any such
termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder). Such payments shall be made
within fifteen (15) business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
7.5 For purposes of this Agreement, the following terms shall have
the meanings indicated below:
(i) A "Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
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<PAGE> 8
(I) any persons becomes the beneficial owner,
directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such person
any securities acquired directly from the Company or its
affiliates, as such term is defined in the rules and
regulations of the Securities and Exchange Commission)
representing 35% or more of the combined voting power of the
Company's then outstanding securities; or
(II) during any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director designated by a person who has entered into an
agreement with the Company to effect a transaction described
in clause (I), (III) or (IV) of this paragraph) whose election
by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or
(III) the shareholders of the Company approve a
merger or statutory share exchange of the Company with any
other corporation, other than (i) a merger or statutory share
exchange which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity), in
combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, at least 75% of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or statutory share
exchange, or (ii) a merger or statutory share exchange
effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than 35%
of the combined voting power of the Company's then outstanding
securities; or
(IV) the shareholders of the Company approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all the Company's assets.
(ii) "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
(iii) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the
Executive's express written consent) after any Change in Control, or
after any Potential Change in Control under the circumstances described
in the second sentence of Section 7.1 hereof (treating all references
in paragraphs (I) through (VII) below to a "Change in Control" as
references to a "Potential Change in Control"), of any one of the
following acts by the Company, or failures by the Company to act:
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(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as an
executive officer of the Company or a substantial adverse
alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change in Control;
(II) a reduction by the Company in the
Executive's annual base salary as in effect on the date hereof
or as the same may be increased from time to time;
(III) the relocation of the Company's principal
executive offices to a location outside a ten (10) mile radius
from the city limits of Kennesaw, Georgia or the Company's
requiring the Executive to be based anywhere other than the
metropolitan area in which the Executive is based immediately
prior to the Change in Control except for required travel on
the Company's business to an extent substantially consistent
with the Executive's present business travel obligations;
(IV) the failure by the Company, without the
Executive's consent, to pay to the Executive any portion of
the Executive's current compensation or to pay to the
Executive any portion of an installment of deferred
compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation
is due;
(V) the failure by the Company to continue in
effect any compensation plan in which the Executive
participates immediately prior to the Change in Control which
is material to the Executive's total compensation, including
but not limited to the Company's stock option, incentive
compensation, bonus and other plans or any substitute plans
adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure
by the Company to continue the Executive's participation
therein (or in such substitute or alternative plan) on a basis
not materially less favorable, both in terms of the amount of
benefits provided and the level of the Executive's
participation relative to other participants, as existed at
the time of the Change in Control; or
(VI) the failure by the Company to continue to
provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Company's
pension, life insurance, medical, dental, health and accident,
or disability plans in which the Executive was participating
at the time of the Change in Control, the taking of any action
by the Company which would directly or indirectly materially
reduce any of such benefits or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the time
of the Change in Control, or the failure by the Company to
provide the Executive with the number of paid vacation days to
which the Executive is entitled on the basis of years of
service with the Company in accordance with the Company's
normal vacation policy in effect at the time of the Change in
Control;
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provided, that, the Executive's right to terminate Executive's
employment for Good Reason shall not be affected by the Executive's
incapacity due to physical or mental illness and the Executive's
continued employment shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good
Reason hereunder.
(iv) "person" shall mean legal person, whether an
individual or an entity, as the context may require.
(v) "Potential Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following
paragraphs shall have been satisfied;
(I) the Company enters into an agreement, the
consummation of which would result in the occurrence of a
Change in Control;
(II) the Company or any person publicly announces
an intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(III) any persons who is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power of the
Company's then outstanding securities, increases such person's
beneficial ownership of such securities by 5% or more over the
percentage so owned by such person on the date hereof; or
(IV) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in
Control has occurred.
8. CONFIDENTIALITY.
(a) Subject to Section 8(b) below, Executive agrees that,
both during the term of this Agreement and after the termination of this
Agreement, Executive will hold in a fiduciary capacity for the benefit of the
Company, and shall not directly or indirectly use or disclose, except as
authorized by the Company in connection with the performance of Executive's
duties, any Confidential Information, as defined hereinafter, that Executive may
have or acquire (whether or not developed or compiled by Executive and whether
or not Executive has been authorized to have access to such Confidential
Information) during the term of this Agreement. The term "Confidential
Information" as used in this Agreement shall mean and include any information,
data and know-how relating to the business of the Company that is disclosed to
Executive by the Company or known by him as a result of his relationship with
the Company and not generally within the public domain (whether constituting a
trade secret or not), including without limitation, the following information:
(i) financial information, such as the Company's
earnings, assets, debts, prices, fee structure, volumes of
purchases or sales or other financial data, whether relating
to the Company generally, or to particular products, services,
geographic areas or time periods;
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(ii) supply and service information, such as information
concerning the goods and services utilized or purchased by the
Company, the names or addresses of suppliers, terms of supply
or service contracts, or of particular transactions, or
related information about potential suppliers, to the extent
that such information is not generally known to the public,
and to the extent that the combination of suppliers or use of
a particular supplier, though generally known or available,
yields advantages to the Company the details of which are not
generally known;
(iii) marketing information, such as details about ongoing
or proposed marketing programs or agreements by or on behalf
of the Company, marketing forecasts or results of marketing
efforts or information about impending transactions;
(iv) personnel information, such as employees' personal or
medical histories, compen sation or other terms of employment,
actual or proposed promotions, hiring, resignations,
disciplinary actions, terminations or reasons therefor,
training methods, performance or other employee information;
(v) customer information, such as any compilation of
past, existing or prospective customers, customer proposals or
agreements between customers and the Company, status of
customer accounts or credit, or related information about
actual or prospective customers; and
(vi) information with respect to any corporate affairs
that the Company agreed to treat as confidential.
The term "Confidential Information" does not include information that has become
generally available to the public by the act of one who has the right to
disclose such information without violating any right of the Company or the
client to which such information pertains.
(b) The covenant contained in this Section 8 shall
survive the termination of Executive's employment with the Company for any
reason for a period of three (3) years; provided, however, that with respect to
those items of Confidential Information which constitute trade secrets under
applicable law, Executive's obligations of confidentiality and non-disclosure as
set forth in this Section 8 shall continue to survive after said three (3) year
period to the greatest extent permitted by applicable law. These rights of the
Company are in addition to those rights the Company has under the common law or
applicable statutes for the protection of trade secrets.
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<PAGE> 12
9. NON-COMPETITION.
(a) Executive acknowledges that he will perform services
hereunder which directly affect the Company's business presently conducted
within the territory comprised of the 48 contiguous states of the United States
(the "Territory"). Accordingly, the parties hereto deem it necessary to enter
into the protective agreement set forth below, the terms and conditions of which
have been negotiated by and between the parties hereto.
(b) In the event of termination of employment under this
Agreement pursuant to Section 6.1, 6.2 or 7.1 or by action of Executive prior to
the expiration of the Term of Employment, Executive agrees with the Company that
through the actual date of termination of the Agreement, and for a period of two
(2) years after such termination date, Executive shall not, without the prior
written consent of the Company, within the geographical limits of the Territory,
either directly or indirectly engage in, or perform services of the same type
performed or to be performed by Executive pursuant to this Agreement with any
business or organization that engages in the sale of franchises to retail floor
covering dealers, and the sale and distribution of floor covering products and
support services of the type offered or provided by the Company.
(c) Executive agrees that he will not take any customer
or franchise member lists of the Company after leaving his employ and that he
will, for so long as he is employed hereunder and for a period of two (2) years
following termination of his employment for any reason, refrain from soliciting
or attempting to solicit directly or indirectly or by assisting others, any
business from any of the Company's customers or franchise members, including
actively sought prospective customers or franchise members, with whom Executive
had material contact during his employment for purposes of providing products or
services that are similar to or competitive with those provided by the Company,
namely floor covering products and support services of the type offered or
provided by the Company.
(d) Executive agrees that he will, for so long as he is
employed hereunder and for a period of one year after termination of his
employment, refrain from recruiting or hiring, or attempting to recruit or hire,
directly or by assisting others, any employee of the Company who is employed by
the Company or any successor or affiliate of the Company if the Company or its
successor or affiliate is then engaged in the business of the sale of franchises
to retail floor covering dealers, and the sale and distribution of floor
covering products and support services of the type offered or provided by the
Company.
(e) The covenants of Executive set forth in this Section
9 are separate and independent covenants for which valuable consideration has
been paid, the receipt, adequacy and sufficiency of which are acknowledged by
Executive, and have also been made by Executive to induce the Company to enter
into this Agreement. The aforesaid covenants may be availed of or relied upon by
the Company in any court of competent jurisdiction, and shall form the basis of
injunctive relief and damages including expenses of litigation (including but
not limited to reasonable attorney's fees) suffered by the Company arising out
of any breach of the aforesaid covenants by Executive. The covenants of
Executive set forth in this Section 9 are cumulative to all other covenants of
Executive in favor of the Company contained in this Agreement and shall survive
the termination of this Agreement for the purposes intended. Should any
covenant, term or condition contained in this Section 9 become or be declared
invalid or unenforceable by a court of competent jurisdiction, then the parties
request that such
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<PAGE> 13
court judicially modify such unenforceable provision consistent with the intent
of Section 9 so that it shall be enforceable as modified, and in any event the
invalidity of any provision of Section 9 shall not affect the validity of any
other provision in Section 9 or elsewhere in this Agreement.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties hereto regarding employment of Executive, and
supersedes and replaces any prior agreements relating thereto.
11. ASSIGNMENT. Neither of the parties hereto may assign this
Agreement without the prior written consent of the other party hereto.
12. SEVERABILITY. Each section and subsection of this Agreement
constitutes a separate and distinct understanding, covenant and provision
hereof. In the event that any provision of this Agreement shall finally be
determined to be unlawful, such provision shall be deemed to be severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
13. GOVERNING LAW. This Agreement shall in all respects be
interpreted, construed and governed by and in accordance with the laws of the
State of Georgia.
14. RIGHTS OF THIRD PARTIES. Nothing herein, expressed or implied,
is intended to or shall be construed to confer upon or give to any person, firm
or other entity, other than the parties hereto and their permitted assigns, any
rights or remedies under or by reason of this Agreement.
15. AMENDMENT. This Agreement may not be amended orally but only
by an instrument in writing duly executed by the parties hereto.
16. NOTICES. Any notice or other document or communication
permitted or required to be given to Executive pursuant to the terms hereof
shall be deemed given if personally delivered to Executive or sent to him,
postage prepaid, by registered or certified mail, at 4652 Warrington Drive,
Roswell, Georgia 30075, or any such other address as Executive shall have
notified the Company in writing. Any notice or other document or other
communication permitted or required to be given to the Company pursuant to the
terms hereof shall be deemed given if personally delivered or sent to the
Company, postage prepaid, by registered or certified mail, at 210 Townpark
Drive, Kennesaw, Georgia 30144, or at such other address as the Company shall
have notified Executive in writing.
17. WAIVER. The waiver by either party hereto of a breach of any
provision of this Agreement by the other shall not operate or be construed as a
waiver of any subsequent breach of the same or any other provision of this
Agreement by the breaching party.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
THE MAXIM GROUP, INC.
Attest: /s/ H. Gene Harper By: /s/ M.B. Seretean
------------------------ -------------------------
Secretary Title: Chairman
---------------------
"EXECUTIVE"
/s/ A.J. Nassar (L.S.)
-----------------------------
A.J. Nassar
-14-
<PAGE> 1
EXHIBIT 11
THE MAXIM GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS
PER COMMON AND COMMON EQUIVALENT SHARE
(In Thousands, Except Per Share Information)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
April 30, April 30,
--------- ---------
1997 1996
<S> <C> <C>
Primary:
Net earnings applicable to common
and common equivalent shares $ 3,251 $ 1,152
======= =======
Shares:
Weighted average number of common shares outstanding 16,110 13,325
Shares issuable from assumed exercise of options 520 286
Weighted average number of common shares and ------- -------
common share equivalents assuming average
market price for period 16,630 13,611
======= =======
Primary earnings per common and common
equivalent share $ 0.20 $ 0.08
======= =======
Fully diluted:
Net earnings applicable to common
and common equivalent share $ 3,251 $ 1,152
======= =======
Shares:
Weighted average number of common shares outstanding 16,110 13,325
Shares issuable from assumed exercise of options 520 301
Weighted average number of common shares ------- -------
and common share equivalents at higher of
ending or average market price for period 16,630 13,626
======= =======
Fully diluted earnings per common and
common equivalent share $ 0.20 $ 0.08
======= =======
</TABLE>
1. Common equivalent shares represent stock options granted to key
employees and directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF THE MAXIM GROUP, INC. AND SUBSIDIARIES AS OF APRIL
30, 1997 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR
THE QUARTER ENDED APRIL 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<CASH> 4,400
<SECURITIES> 0
<RECEIVABLES> 57,422
<ALLOWANCES> 2,474
<INVENTORY> 44,000
<CURRENT-ASSETS> 110,724
<PP&E> 142,101
<DEPRECIATION> 39,500
<TOTAL-ASSETS> 228,438
<CURRENT-LIABILITIES> 45,387
<BONDS> 57,578
0
0
<COMMON> 16
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 228,438
<SALES> 86,225
<TOTAL-REVENUES> 86,225
<CGS> 59,155
<TOTAL-COSTS> 20,438
<OTHER-EXPENSES> 35
<LOSS-PROVISION> 125
<INTEREST-EXPENSE> 1,401
<INCOME-PRETAX> 5,360
<INCOME-TAX> 2,109
<INCOME-CONTINUING> 3,251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,251
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
