<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-62975
PROSPECTUS
3,150,000 SHARES
THE MAXIM GROUP, INC.
COMMON STOCK
--------------
The 3,150,000 shares of Common Stock (the "Common Stock") of The Maxim
Group, Inc. (the "Company") offered hereby are being sold by the holder of the
Common Stock of the Company named herein under "Selling Shareholder." Unless the
context otherwise requires, the holder of the Common Stock selling shares
hereunder is hereinafter referred to as the "Selling Shareholder." The Company
will not receive any proceeds from the sale of the Common Stock by the Selling
Shareholder. See "Selling Shareholder," "Plan of Distribution" and "Use of
Proceeds."
The Common Stock is traded on the New York Stock Exchange under the
symbol "MXG." On October 1, 1998, the last reported sale price for the Common
Stock, as reported on the New York Stock Exchange, was $18.00 per share.
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
===============================================================================
<TABLE>
<CAPTION>
OFFERING UNDERWRITING PROCEEDS TO PROCEEDS
PRICE TO DISCOUNTS AND SELLING TO
PUBLIC COMMISSIONS SHAREHOLDERS COMPANY
<S> <C> <C> <C> <C>
Per Share....... See Text See Text See Text See Text
Total .......... Below Below Below Below
===============================================================================
</TABLE>
The Selling Shareholder has advised the Company that it may elect to
offer for sale and to sell the Common Stock from time to time in one or more
transactions through brokers on the New York Stock Exchange, in private
transactions, or otherwise, in each case at market prices then prevailing or
obtainable. Accordingly, sales prices and proceeds to the Selling Shareholder
will depend upon price fluctuations and the manner of sale. The Selling
Shareholder may effect such transactions by selling to or through one or more
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, brokerage commissions or similar fees in amounts which
may vary from transaction to transaction. Such brokerage commissions and
charges, if any, will be paid by the Selling Shareholder. The Company will bear
all other expenses in connection with registering the shares offered hereby,
which expenses are estimated to total approximately $30,000. See "Plan of
Distribution."
----------------
The date of this Prospectus is October 2, 1998
<PAGE> 2
AVAILABLE INFORMATION
The Company is subject to certain informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and, in accordance therewith,
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Such reports and other information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can also be obtained at prescribed rates by writing to the Securities
and Exchange Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, the Commission maintains a web site that
contains reports, proxy and information statements and other information
regarding the Company at http://www.sec.gov. Such reports, proxy statements and
other information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed a Registration Statement on Form S-3 (together
with all amendments and exhibits filed or to be filed in connection therewith,
the "Registration Statement") under the Securities Act of 1933, as amended, with
respect to the Common Stock offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission pursuant
to the 1934 Act are hereby incorporated in this Prospectus by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1998;
(2) The Company's Amendment No. 1 on Form 10-K/A dated June 26,
1998 to its Annual Report on Form 10-K for the fiscal year
ended January 31, 1998;
(3) The Company's Quarterly Report on Form 10-Q for the quarter
ended April 30, 1998;
(4) The Company's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1998;
(5) The Company's Current Report on Form 8-K dated June 23, 1998;
(6) The Company's Current Report on Form 8-K dated August 9, 1998
and
(7) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A as filed with the
Commission on August 12, 1993 and as amended by Amendment No.
1 on Form 8-A/A as filed with the Commission on August 26,
1993.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the respective dates of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement.
2
<PAGE> 3
Any such statement so modified or superseded shall not be deemed, except as so
modified and superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information that has been incorporated by reference in this
Prospectus (excluding exhibits unless such exhibits are specifically
incorporated by reference into such documents). Please direct such requests to
the Secretary, The Maxim Group, Inc., 210 TownPark Drive, Kennesaw, Georgia
30144, telephone number (770) 590-9369.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including the documents incorporated by reference
herein, contains statements that constitute "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
1934 Act. These statements appear in a number of places in this Prospectus 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 CarpetMax Flooring Idea
Gallery(TM) 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 Company's ability to successfully integrate acquired
businesses. Investors are cautioned that 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. Among others, factors
that could adversely affect actual results and performance include local and
regional economic conditions in the areas served by the Company, the level of
customer spending for floorcovering products, competition among floorcovering
retailers and carpet manufacturers, changes in merchandise mixes, site selection
and related traffic and demographic patterns, inventory management and turnover
levels, realization of cost savings, and the Company's success in integrating
recent and potential future acquisitions. The accompanying information contained
in this Prospectus, as well as in the Company's 1934 Act filings, identifies
important additional factors that could adversely affect actual results and
performance. Prospective investors are urged to carefully consider such factors.
All forward-looking statements attributable to the Company are
expressly qualified in their entirety by the foregoing cautionary statements.
3
<PAGE> 4
THE COMPANY
The Maxim Group, Inc. (the "Company") operates and franchises one of
the largest floorcovering distribution networks in North America through several
retail floorcovering concepts, including CarpetMAX(R), New York Carpet World and
Carpetland USA, each a full-service floorcovering store format, and Georgia
Carpet OutletsTM ("GCO(R)"), a cash-and-carry discount floorcovering store
format. In addition, the Company, through its Image Industries, Inc. subsidiary
("Image"), is one of the largest manufacturers of polyester carpeting in the
United States. As a vertically integrated carpet manufacturer and a leading
floorcovering retailer, the Company believes that it is well positioned to
continue its leadership and growth in the approximately $15 billion
floorcovering industry.
Since commencing operations in 1991 as a franchisor of floorcovering
stores, the Company has grown its franchise network to include 380 franchise
territories, within which there are 463 CarpetMAX stores and 101 GCO stores in
49 states. The Company's fees from franchise services consist of up front
membership fees, either ongoing royalties or product brokerage fees and fees for
services such as advertising and employee training. The rapid growth of the
Company's franchise network resulted in the development of an integrated retail
infrastructure, including store development, marketing, advertising, credit,
sales training and product sourcing resources. In an effort to leverage this
retail infrastructure, the Company began acquiring existing CarpetMAX
franchisees in fiscal 1995 and opening Company-owned stores in fiscal 1996.
On August 9, 1998, the Company acquired substantially all of the
residential retail store assets of Shaw Industries, Inc. and its wholly owned
subsidiary, Shaw Carpet Showplace, Inc. (collectively, "Shaw"). These assets
include 266 retail stores, each of which operates under one of ten brand names,
including New York Carpet World, Carpetland USA and Carpet Exchange. The Company
intends to continue operating the residential retail store assets of Shaw as
retail floorcovering stores. In addition to these newly acquired stores, the
Company currently owns 71 CarpetMAX stores (including 39 Gallery stores) and six
GCO stores.
The Company has further developed its full-service retail format to
offer customers a wide selection of competitively priced floorcovering products
through CarpetMAX Flooring Idea Gallery stores (the "Gallery" stores). The
Company's Gallery stores are typically 6,500 square feet in size and offer
approximately 15,000 SKUs, including an extensive merchandising mix of carpet,
area rugs, hardwood flooring, ceramic tile, vinyl flooring, laminates and stone.
Gallery stores are located in prime retail locations with high consumer
visibility and are staffed with specialized floorcovering sales associates.
Gallery stores offer a wide range of services, including interior design
consulting, measuring, delivery and installation, and unconditional satisfaction
guarantees. The Company's strategy is to expand its ownership and operation of
Gallery stores. The Company currently operates 39 Gallery stores, including
eight stores which were converted into Gallery stores from the original
CarpetMAX format.
Through Image, the Company is one of the largest manufacturers of
polyester carpeting and one of the largest recyclers of polyethylene
terephthalate ("PET") soft drink bottles in the United States. The Company
converts PET bottles into PET flake and pellet and polyester fiber which is
either sold to third parties or spun into carpet yarn, the raw material used in
manufacturing polyester carpet. Image's vertically integrated operations provide
the Company's retail network with a captive source of low cost, high quality
private label polyester carpeting with a price advantage relative to
competitors. The Company believes that polyester carpeting, which currently
accounts for approximately 8% of
4
<PAGE> 5
industry-wide carpet sales, will enjoy market share growth because of certain
advantages over other carpet fibers such as nylon, including superior stain
resistance and vibrant coloring. For the year ended January 31, 1998, Image sold
3.0 million square yards of polyester carpeting through the Company's retail
distribution network (10.4% of total Image sales volume). Image sells to over
6,000 independent domestic and international retailers and distributors.
The Company's principal executive offices are located at 210 TownPark
Drive, Kennesaw, Georgia 30144, telephone number (770) 590-9369.
RISK FACTORS
THE PURCHASE OF THE SECURITIES OFFERED HEREBY INVOLVES SIGNIFICANT
RISKS. PROSPECTIVE INVESTORS SHOULD GIVE CAREFUL ATTENTION TO THE FOLLOWING
STATEMENTS RESPECTING CERTAIN RISKS APPLICABLE TO THE OFFERING.
SUBSTANTIAL LEVERAGE
The Company has substantial indebtedness and, as a result, significant
debt service obligations. As of July 31, 1998, the Company had approximately
$169 million of long-term debt. In addition, the indenture (the "Indenture")
relating to the Company's 9 1/4% Senior Subordinated Notes due 2007 (the
"Notes") and the Company's other debt instruments will allow the Company to
incur additional indebtedness, including senior indebtedness or secured
indebtedness in the future subject to certain limitations set forth therein. As
of August 15, 1998, the Company had an aggregate of $40 million of available
borrowings under its senior credit facility. The Company's ability to make
payments with respect to the Notes and to satisfy its other debt obligations
will depend upon its future operating performance, which will be affected by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond the Company's control. Any inability of the Company
to service its indebtedness may result in the acceleration of some or all of the
Company's indebtedness which would have a material adverse effect upon the
Company's financial condition.
If the Company is unable to service its indebtedness, it will be
required to adopt alternative strategies, which may include actions such as
reducing or delaying capital expenditures, curtailing or eliminating the opening
of Company-owned stores, selling assets, restructuring or refinancing its
5
<PAGE> 6
indebtedness or seeking additional equity capital. There can be no assurance
that any of these strategies could be effected on satisfactory terms, if at all.
The degree to which the Company is leveraged could have important
consequences to holders of the Common Stock, including: (i) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions or general corporate purposes may be
impaired; (ii) a substantial portion of the Company's cash flows from operations
may be dedicated to the payment of principal and interest on its indebtedness,
thereby reducing the funds available to the Company for its operations; (iii)
certain of the Company's indebtedness contains financial and other restrictive
covenants, including those restricting the incurrence of additional
indebtedness, the creation of liens, the sale of assets, the ratio of total debt
to total capitalization, the ratio of total debt to earnings before interest,
taxes, depreciation, amortization and rental expense ("EBITDAR"), the ratio of
senior debt to EBITDAR and certain interest coverage ratios; (iv) certain of the
Company's borrowings are and will continue to be at variable rates of interest
which exposes the Company to the risk of greater interest rates; and (v) the
Company may be more leveraged than certain of its competitors, which may place
the Company at a relative competitive disadvantage and make the Company more
vulnerable to changing economic conditions.
GROWTH THROUGH ACQUISITION
As part of its operating history and growth strategy, the Company has
consummated and may seek to consummate the acquisition of other businesses. In
particular, the Company recently completed the acquisition of the residential
retail store assets of Shaw, which significantly expanded the Company's retail
network by adding 266 floorcovering stores, each operating under one of ten
brand names, including New York Carpet World, Carpetland USA and Carpet
Exchange. The Company continually seeks acquisition candidates in selected
markets and from time to time engages in exploratory discussions with suitable
candidates. There can be no assurance, however, that the Company will be able to
identify and acquire targeted businesses or obtain financing for such
acquisitions on satisfactory terms. The process of integrating acquired
businesses into the Company's operations may result in unforeseen difficulties
and may require a disproportionate amount of resources and management attention.
In particular, as the Company expands its network of company-owned stores
through acquisitions, some of these acquired stores, although operating under
different brands, may be located in areas which fall within one or more
CarpetMAX franchisees' exclusive territories. The CarpetMAX franchisees affected
by these acquisitions may claim that the Company's expansion activities infringe
on their exclusive rights and/or constitute breaches of their CarpetMAX
franchise agreements. These claims could lead to CarpetMAX franchisees
terminating their franchise agreements, leaving the CarpetMAX franchise program
and thus impacting revenue received by the Company from these franchisees or
commencing litigation against the Company which would cause the Company to
expend resources (financial and otherwise) to defend these claims. In connection
with future acquisitions, the Company may incur significant charges to earnings
as a result of, among other things, restructuring charges. Future acquisitions
may be financed through the issuance of Common Stock, which may dilute the
ownership of the Company's shareholders, or through the incurrence of additional
indebtedness. Furthermore, there can be no assurance that competition for
acquisition candidates will not escalate, thereby increasing the costs of making
acquisitions or making suitable acquisitions unattainable.
6
<PAGE> 7
LIMITED HISTORY OF OPENING AND OPERATING COMPANY-OWNED STORES; RISKS ASSOCIATED
WITH GALLERY STORE ROLL-OUT; MANAGEMENT OF GROWTH
The Company has only limited experience in the acquisition,
construction and direct management of Company-owned stores. The Company's growth
and future operating results depend principally on its ability to manage the
newly-acquired Shaw retail stores and to open and operate stores during the
remainder of fiscal 1998 and fiscal 1999. The success of the Company's planned
Gallery store roll-out is dependent upon a number of factors including: (i) the
availability of new store locations in which the Company is not prohibited from
opening Company-owned stores pursuant to existing franchise agreements; (ii) the
negotiation of acceptable purchase or lease terms; (iii) the Company's financial
resources and its ability to control the operational aspects of its growth; and
(iv) the ability to hire, train and assimilate management and store-level
employees. The Company also competes for site locations with other businesses
which seek the same demographics and location characteristics. Moreover, the
Company may experience substantial delays in the opening of Company-owned
Gallery stores as well as increased expenses as a result of adverse weather
conditions and may experience substantial delays, increased expense or loss of
potential sites due to complexities associated with the regulatory and permit
processes. To the extent that the Company underestimates the cost to complete
the Gallery store roll-out or is unable to meet its contemplated opening
schedule and successfully integrate new Gallery stores into its ongoing
business, the Company's results of operations could be materially and adversely
affected. Although the Company believes that it can obtain suitable sites for
its projected Gallery store expansion and that its management and systems
controls will be adequate to support this growth, there can be no assurance that
the Company will be able to achieve the planned expansion on a timely basis, if
at all, that the Gallery store concept will be accepted in the marketplace or
that it will achieve planned operating results or results comparable with the
Company's existing CarpetMAX stores.
The Company's growth and future operating results also depend on its
ability to expand its carpet manufacturing capacity and add new franchisees. As
part of its growth, the Company intends to increase Image's annual fiber
production capacity from 100 million pounds to 150 million pounds by the end of
calendar 1998. The Company may experience substantial delays in its planned
manufacturing expansion, as well as increased expenses associated with any
unexpected expansion costs. To the extent that the Company underestimates the
cost of expansion, the Company's results of operations could be materially
adversely affected. In addition, there can be no assurance that the Company will
be able to increase the number of franchisees or that new franchisees will be as
profitable to the Company as the existing franchisees.
Additionally, the Company's growth and profitability will be
significantly dependent on the Company's ability to upgrade and integrate all of
its operations into a new management information system, accounting system,
internal control systems and purchasing systems. The inability of the Company to
accomplish such upgrades and integration on a timely basis or at all, could have
a material adverse effect on the successful operation of the Company's business,
implementation of its growth strategy and future operating strategy and future
operating results. The Company is currently developing a centralized information
system to integrate the Company's store operations and financial data. There can
be no assurance that the development of such information system will be
successful or accomplished within the anticipated time frame, if at all. If the
Company is unable to manage its growth effectively, the Company's business,
results of operations and financial condition could be materially adversely
affected.
7
<PAGE> 8
HIGHLY COMPETITIVE NATURE OF THE FLOORCOVERING INDUSTRY
Competition in the retail floorcovering market is intense due to the
significant number of retailers. Large retailers also provide significant
competition, including the Home Depot, Inc., Lowe's Corporation and Sears,
Roebuck & Co. The principal methods of competition within the retail
floorcovering industry include store location, product selection and
merchandising, customer service and price.
The Company's carpet manufacturing business competes with other carpet
manufacturers and manufacturers of alternative floorcoverings such as wood or
tile. Certain of the Company's competitors in the carpet manufacturing business
have greater financial and other resources than the Company. According to Floor
Focus, an industry trade publication, the 10 largest carpet manufacturers
accounted for approximately 85% of total U.S. carpet shipments in 1996. No
assurance can be given that the Company's competitors will not substantially
increase resources devoted to the production and marketing of products
competitive with those of the Company, which could require the Company to reduce
prices or increase spending on product development, marketing and sales, any of
which could have a material adverse effect on the Company.
FLUCTUATIONS IN QUARTERLY RESULTS, SEASONALITY AND CYCLICAL NATURE OF THE
FLOORCOVERING INDUSTRY
The Company's quarterly operating results have fluctuated in the past
and are expected to fluctuate in the future as a result of a variety of factors,
including the timing of store openings and related pre-opening expenses, weather
conditions, price increases by suppliers, actions by competitors, conditions in
the carpet manufacturing, home building and improvement markets and the
floorcovering industry in general, regional and national economic conditions and
other factors. Moreover, the Company expects its business to continue to exhibit
some measure of seasonality, which the Company believes is typical of the
floorcovering industry. Individual stores generally experience lower net sales,
operating income and cash flow from operations and the Company experiences lower
sales of manufactured carpets in the first and fourth fiscal quarters than in
the second and third fiscal quarters, due primarily to the effects of winter
weather on home construction and improvement projects.
The floorcovering industry historically has been adversely impacted by
economic downturns. The Company believes that the industry is significantly
influenced by economic conditions generally and particularly by consumer
behavior, consumer confidence, the level of personal discretionary spending, the
condition of the residential and commercial construction industries, interest
rates, credit availability and the overall strength of the economy. There can be
no assurance that a prolonged economic downturn would not have a material
adverse effect on the Company.
DEPENDENCE ON SENIOR MANAGEMENT
The success of the Company is largely dependent on the skills,
experience and efforts of its senior management and especially its President and
Chief Executive Officer, A.J. Nassar, and its Chief Operating Officer, David E.
Cicchinelli. The loss of the services of Mr. Nassar, Mr. Cicchinelli or other
members of the Company's senior management could have a material adverse effect
on the Company's business and prospects. The Company has entered into an
employment agreement with Mr. Nassar and maintains a key man life insurance
policy on Mr. Nassar in the amount of $2.0 million. The Company believes that
its future success will also depend in part upon its ability to attract, retain
and motivate qualified personnel. Competition for such personnel is intense.
Although the Company has recently
8
<PAGE> 9
hired several senior level management personnel with extensive retail
experience, there can be no assurance that the Company will continue to be
successful in attracting and retaining such personnel.
RISKS ASSOCIATED WITH PRICE AND AVAILABILITY OF RAW MATERIALS
The availability of low cost materials, particularly post-consumer PET
bottles, is important to the profitability of the Company's manufacturing
operations. An increase in the demand for post-consumer PET bottles could
increase prices for PET bottles, thereby increasing the Company's manufacturing
costs. Such increased costs could have an adverse effect on the profitability of
the Company's manufacturing operations. In recent years, post-consumer PET
bottle prices have fluctuated dramatically, most notably in fiscal 1996 when
prices increased 150% and subsequently returned to historical price levels.
There can be no assurance that such prices will not continue to experience
significant volatility. In addition, the Company plans to expand its fiber
production capacity, which will increase its requirements for PET bottles by up
to approximately 40%. The unavailability, scarcity or increased cost of such raw
materials could disrupt the Company's manufacturing operations which would have
a material adverse effect on these operations. In addition, any significant
change in the proportion of PET in the waste bottles supplied to the Company's
manufacturing operations, or the introduction of alternatives to PET bottles for
food packaging, could also disrupt the Company's manufacturing operations and
have a material adverse effect on the Company. Any decrease in the profitability
of the manufacturing operations would have an adverse effect on the Company's
overall results of operations.
DEPENDENCE ON SUPPLIERS FOR FLOORCOVERING PRODUCTS AND DISTRIBUTION
The Company's retail network relies on several large independent
floorcovering manufacturers for the production of floorcovering products. These
manufacturers include Shaw and Mohawk Industries, Inc. which together supplied
in excess of 50% of the Company's floorcovering purchases for the twelve months
ended July 31, 1998. In addition, the Company's retail inventory management is
highly dependent on the delivery capabilities of these manufacturers. Any
significant change in the Company's relationships with these manufactures, or in
the manner in which these manufacturers produce or distribute their products,
could have a material adverse effect on the Company. Although these
manufacturers have been reliable, high quality producers, there can be no
assurance that in the future these manufacturers will be willing or able to meet
the Company's requirements and those of its franchisees on a timely basis or
that their pricing and rebate policies will remain competitive. While the
Company believes there are a number of alternative manufacturers capable of
supplying and distributing the Company's floorcovering products, any delays in
obtaining alternative suppliers could have a material adverse effect of the
Company's operations and those of its franchisees. In addition, the Company
expects that suppliers will contribute to the opening expenses of new Gallery
stores. However, there can be no assurance that these suppliers will contribute
to such expenses and, to the extent that they do not, the Company's ability to
maintain its Gallery store roll-out may be adversely affected.
ENVIRONMENTAL AND REGULATORY MATTERS
The Company's operations and facilities are subject to numerous
federal, state and local laws and regulations designed to protect the
environment from wastes and emissions of hazardous substances and to provide a
safe workplace for the Company's employees. The Company believes that it is
either in material compliance with all currently applicable laws and regulations
or is operating in accordance with appropriate variances or similar
arrangements. The Company believes that compliance with current laws
9
<PAGE> 10
and regulations will not require significant capital expenditures or have a
material adverse effect on its operations. However, such laws and regulations
are subject to change in the future, and any failure by the Company to comply
with present or future regulations could subject it to future liabilities or the
suspension of production which could have a material adverse effect on the
Company's business. In addition, changes in environmental regulations could
restrict the Company's ability to expand its facilities or could require the
Company to incur substantial unexpected other expenses to comply with such
regulations.
The Company is subject to federal regulations and state laws that
regulate the offer and sale of franchisees and the franchisor-franchisee
relationship. The Company is not aware of any pending franchise legislation
which in its view is likely to have a material adverse effect on the operations
of the Company. The Company is aware, however, that various legislative
proposals have been or are being debated at both the state and federal levels
which could result in new laws regulating the offer and sale of franchises and
other aspects of the franchisor-franchisee relationship. It is possible that
such legislation, if enacted, could aversely affect the Company's franchise
operations.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Based on the assessment of the Company's information technology
systems, management presently believes that with the planned conversion to new
software and hardware and the planned modifications to existing software and
hardware, the effects of the Year 2000 issue will be timely resolved. The
Company is in the process of conducting an inventory and business risk
assessment of its non-information technology systems. These non-information
technology systems include items such as embedded technology including
microcontrollers used in the Company's manufacturing processes. The Company will
develop remediation plans for such non-information technology systems if its
business risk assessment indicates such is warranted. All costs associated with
analyzing the Year 2000 issue or making conversions to existing systems are
being expensed as incurred.
The Company is planning formal communications with all of its
significant suppliers of goods and services to determine the extent to which the
Company's operations and systems are vulnerable to those third parties' failure
to remediate their own Year 2000 issues. There can be no guarantee that the
systems of other companies on which the Company's operations and systems rely
will be timely converted and will not have an adverse effect on the Company's
results of operations. The Company will utilize predominately internal resources
to reprogram, or replace, and test the Company's software for Year 2000
compliance by June 1999, which is prior to any anticipated impact on its
operating systems. Management has not estimated a total cost of the Year 2000
issues; however, such costs are not expected to have a material effect on the
results of operations during any quarterly or annual reporting period.
The costs to the Company of Year 2000 compliance and the date on which
the Company believes it will complete the Year 2000 modifications are based on
management's best estimates, which were
10
<PAGE> 11
derived utilizing numerous assumptions of future events, including the continued
availability of certain resources, third-party modification plans, and other
factors. However, there can be no assurance that these estimates will be
achieved, and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties. Any failure of the Company's computer system or the systems of
third parties to achieve Year 2000 compliance on a timely basis could have a
material adverse effect on the Company's business, financial condition and
results of operations.
INDOOR AIR QUALITY
The effect of carpet and other floorcovering products on indoor air
quality has been the subject of debate in recent years. Although it is uncertain
whether emissions from carpet pose a health hazard, there can be no assurance
that researchers will not detect hazardous levels of emissions from carpet. The
discovery of adverse health effects resulting from carpet, or the public
perception thereof, could have a material adverse effect on the Company's
operations and those of its franchisees.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture governing the terms of the Notes contains certain
covenants limiting, subject to certain exceptions, the incurrence of additional
indebtedness, the payment of dividends, the redemption of capital stock, the
making of certain investments, the issuance of capital stock of subsidiaries,
the creation of liens and other restrictions affecting the Company's
subsidiaries, the issuance of guarantees, transactions with affiliates, asset
sales and certain mergers and consolidations. A breach of any of these covenants
could result in an event of default under the Indenture. In addition, the
Company's senior credit facility contains other restrictive covenants and
requires the Company to satisfy certain financial tests, including maintaining
certain ratios relating to levels of total debt, consolidated senior debt, and
EBITDAR (as defined herein). The Company's ability to comply with such covenants
and to satisfy such financial tests may be affected by events beyond its
control. A breach of any of these covenants could result in an event of default
under the senior credit facility and the Indenture. In the event of a default
under the senior credit facility, the lenders thereunder could elect to declare
all amounts borrowed, together with accrued interest, to be immediately due and
payable, and the lenders under the senior credit facility could terminate all
commitments thereunder and, if such borrowed amounts are not paid, enforce their
rights pursuant to the security interests on, or commence litigation that could
ultimately result in a sale of, certain assets of the Company. In addition, a
default under the senior credit facility could constitute a cross-default under
the Indenture, and a default under the Indenture could constitute a
cross-default under the senior credit facility.
POTENTIAL FAILURE TO MAKE PAYMENT UNDER A CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined in the
Indenture), each holder of the Notes may require the Company to purchase all or
a portion of such holder's Notes at 101% of the principal amount of the Notes,
together with accrued and unpaid interest, if any, to the date of purchase. In
such circumstances, the Company may be required to (i) repay all or a portion of
the outstanding principal of, and pay any accrued interest on, its senior
indebtedness, or (ii) obtain any requisite consent from its lenders to permit
the purchase. If the Company is unable to repay all of such indebtedness or is
unable to obtain the necessary consents, the Company may be unable to offer to
purchase the Notes,
11
<PAGE> 12
which will constitute an event of default under the Indenture. There can be no
assurance that the Company will have sufficient funds available at the time of
any Change of Control to make any debt payment (including purchases of Notes) as
described above or that the Company will be able to refinance its outstanding
indebtedness in order to permit it to repurchase the Notes or, if such
refinancing were to occur, that such financing will be on terms favorable to the
Company.
The events that constitute a Change of Control under the Indenture may
also be events of default under the senior credit facility or other senior
indebtedness of the Company. Such events may permit the holders under such debt
instruments to reduce the borrowings thereunder or accelerate the debt and, if
the debt is not paid, to enforce their rights pursuant to security interests on,
or commence litigation that could ultimately result in a sale of, certain assets
of the Company, thereby limiting the Company's ability to purchase the Notes.
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), contains provisions requiring supermajority
stockholder approval to effect certain extraordinary corporate transactions
which are not approved by the Board of Directors. These provisions make it more
difficult to effect a merger, sale of control or similar transaction involving
the Company even though a majority of the Company's stockholders may vote in
favor of such a transaction. The Company is also subject to the provisions of
Section 203 of the Delaware General Corporation Law, which may have the effect
of delaying, deferring, or preventing a change in control of the Company by
limiting transactions between the Company and "interested stockholders"
(generally, those stockholders who, together with their affiliates and
associates, own 15% or more of a company's outstanding capital stock). In
addition, the Company's Certificate of Incorporation includes a number of
additional anti-takeover provisions which, among other things, require a
staggered Board of Directors, limit the ability of stockholders to call special
meetings, eliminate stockholder action by unanimous consent, restrict the
ability of the stockholders to amend certain provisions of the Certificate of
Incorporation, permit the Board of Directors to amend the Bylaws without
stockholder consent and authorize the issuance of up to 1,000,000 shares of
preferred stock, issuable in series, the relative rights and preferences of
which may be designated by the Board of Directors. The effect of these
provisions is to make it more difficult to effect a change in control of the
Company through the acquisition of a large block of the Company's Common Stock
and may have the effect of encouraging persons considering unsolicited tender
offers or other unilateral takeover proposals to negotiate with the Company's
Board of Directors rather than pursue non-negotiated takeover attempts.
VOLATILITY OF STOCK PRICE
The market price of the Common Stock could be subject to significant
fluctuations in response to the Company's operating results and other factors,
and there can be no assurance that the market price of the Common Stock will not
decline below current levels. Developments in the floorcovering industry or
changes in general economic conditions could adversely affect the market price
of the Common Stock. In addition, the stock market has from time to time
experienced extreme price and volume volatility. These fluctuations may be
unrelated to the operating performance of particular companies whose shares are
traded and may adversely affect the market price of the Common Stock.
12
<PAGE> 13
USE OF PROCEEDS
The Company will not receive any of the cash proceeds from the sale of
shares of the Common Stock by the Selling Shareholder. See "Selling Shareholder"
for information regarding the Selling Shareholder.
SELLING SHAREHOLDER
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of September 1, 1998 by
the shareholder of the Company who is offering securities pursuant to this
Prospectus (the "Selling Shareholder"). "Beneficial Ownership" includes shares
for which an individual, directly or indirectly, has or shares voting or
investment power or both. The listed person has sole voting and investment power
over the shares listed opposite its name.
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING (1)
--------------------- -----------------------
NUMBER SECURITIES TO NUMBER
NAME OF BENEFICIALLY PERCENT BE SOLD BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS IN OFFERING OWNED OF CLASS
- ---------------- ------------ -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Shaw Industries, Inc.............. 3,150,000 16.4% 3,150,000 0 0
616 East Walnut Avenue
Dalton, Georgia 30720
</TABLE>
- ---------------------
(1) Assumes that all the shares of Common Stock covered hereby will be sold
by the Selling Shareholder in the offering and that the Selling
Shareholder does not acquire any additional shares during the offering.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock of $.001 par value and 1,000,000 shares of Preferred
Stock of $.001 par value, issuable in series, the relative rights and
preferences of which may be designated by the Board of Directors.
COMMON STOCK
Each record holder of Common Stock is entitled to one vote for each
share held on all matters properly submitted to the stockholders for their vote.
Cumulative voting for the election of directors is not permitted by the
Certificate of Incorporation. Holders of outstanding Common Shares are entitled
to those dividends declared by the Board of Directors out of legally available
funds; and, in the event of liquidation, dissolution, or winding up of the
affairs of the Company, holders are entitled to receive, ratably, the net assets
of the Company available to holders of Common Shares after distribution is made
to the preferred stockholders (see " -- Preferred Stock," below). Holders of
outstanding Common Shares have no preemptive, conversion, or redemptive rights.
All of the issued and outstanding Common Shares are duly authorized, validly
issued, fully paid, and nonassessable.
13
<PAGE> 14
PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of $.001 par
value Preferred Stock, none of which is outstanding. The Board of Directors has
the power, without further action by the stockholders, to divide any and all
shares of Preferred Stock into series and to fix and determine the relative
rights and preferences of the Preferred Stock, such as the designation of series
and the number of shares constituting such series, dividend rights, redemption
and sinking fund provisions, liquidating and dissolution preferences, conversion
or exchange rights and voting rights, if any. Issuances of Preferred Stock by
the Board of Directors may result in such shares having senior dividend and/or
liquidation preferences to the holders of shares of Common Stock and may dilute
the voting rights of such holders. Issuances of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
rights of holders of the Common Stock. In addition, the issuance of Preferred
Stock could make it more difficult for a third party to acquire a majority of
the outstanding voting stock. Accordingly, the issuance of Preferred Stock may
be used as an "anti-takeover" device without further action on the part of the
stockholders of the Company. The Company has no present plans to issue any
shares of Preferred Stock.
TRANSFER AGENT
Wachovia Bank, N.A. acts as the Transfer Agent for the Common Shares of
the Company.
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby for the benefit of the
Selling Shareholder were originally issued by the Company pursuant to the
private placement exemption from registration provided in Sections 3(b) and/or
4(2) of the Securities Act of 1933, as amended. The Company has agreed to
register the shares for resale by the Selling Shareholder. The Company will not
receive any of the proceeds from the sale of such shares by the Selling
Shareholder.
The Common Stock may be sold from time to time by the Selling
Shareholder, or by pledgees, donees, transferees or other successors in
interest. Such sales may be made on the New York Stock Exchange at prices and at
terms then prevailing or at prices related to the then current market price, or
in negotiated transactions. Accordingly, sales prices and proceeds to the
Selling Shareholder will depend upon market price fluctuations and the manner of
sale. The shares may be sold by one or more of the following, without
limitation: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction, (b) purchases by a broker or
dealer as principal and resale by such broker or dealer or for its account
pursuant to the Prospectus, as supplemented, (c) an exchange distribution in
accordance with the rules of such exchange, and (d) ordinary brokerage
transactions and transactions in which the broker solicits purchasers. In
addition, any securities covered by the Prospectus which qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to the
Prospectus, as supplemented. From time to time the Selling Shareholder may
engage in short sales, short sales against the box, puts and calls and other
transactions in securities of the Company or derivatives thereof, and may sell
and deliver the shares in connection therewith.
14
<PAGE> 15
From time to time, the Selling Shareholder may pledge its shares
pursuant to the margin provisions of any customer agreements with its brokers.
Upon a default by the Selling Shareholder, the broker may offer and sell the
pledged shares of Common Stock from time to time as described hereunder.
The Selling Shareholder may effect transactions by selling to or
through one or more broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, brokerage commissions or
similar fees in amounts which may vary from transaction to transaction. The
Selling Shareholder will pay such brokerage commissions and charges. The Company
will bear all other expenses in connection with registering the shares offered
hereby, which expenses are estimated to total approximately $30,000.
Pursuant to a certain Agreement and Plan of Merger, dated August 13,
1998, among Shaw, its wholly-owned subsidiary, Chessman Acquisition Corp., Queen
Carpet Corporation ("Queen") and the shareholders of Queen (the "Queen
Shareholders"), Shaw, at its option, is entitled to pay a portion of the merger
consideration by means of delivery to the Queen Shareholders of the 3,150,000
shares of Common Stock of the Company currently owned by Shaw.
The Selling Shareholder has advised the Company that it has not entered
into any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of the shares offered hereby.
LEGAL MATTERS
Certain legal matters with respect to the legality of the shares of
Common Stock offered hereby have been passed upon for the Company by Smith,
Gambrell & Russell, LLP, Atlanta, Georgia.
EXPERTS
The consolidated financial statements and schedules of the Company as
of January 31, 1998 and 1997, for the fiscal years ended January 31, 1998 and
1997 and for the ten months ended January 31, 1996, and the financial statements
of The Maxim Group 401(k) Plan as of December 31, 1997 and March 31, 1997 and
for the nine months ended December 31, 1997, incorporated by reference in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in giving said reports.
15
<PAGE> 16
================================================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................................................2
Incorporation of Certain
Documents by Reference..............................................2
Cautionary Notice Regarding
Forward-Looking Statements..........................................3
The Company...........................................................4
Risk Factors..........................................................5
Use of Proceeds......................................................13
Selling Shareholder..................................................13
Description of Securities............................................13
Plan of Distribution.................................................14
Legal Matters........................................................15
Experts..............................................................15
</TABLE>
================================================================================
================================================================================
THE MAXIM GROUP, INC.
3,150,000 SHARES
COMMON STOCK
PROSPECTUS
OCTOBER 2, 1998
210 TOWNPARK DRIVE
KENNESAW, GEORGIA 30144
(770) 590-9369
================================================================================
