<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commissioner Only (as permitted by Rule
14a-6(c)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
THE MAXIM GROUP, INC.
---------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
NOT APPLICABLE
---------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:_______________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):___________________________________________
4) Proposed maximum aggregate value of transaction:_____________
5) Total fee paid:_______________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ____________________________________
2) Form, Schedule or Registration Statement No.: _______________
3) Filing Party: ____________________________________
4) Date Filed: ____________________________________
<PAGE> 2
[MAXIM LETTERHEAD]
June 4, 1998
Dear Stockholder:
This year's Annual Meeting of Stockholders ("Annual Meeting") of The
Maxim Group, Inc. (the "Company") will be held on Friday, June 26, 1998 at 10:00
a.m., local time, at the Company's offices, 210 TownPark Drive, Kennesaw,
Georgia 30144. You are cordially invited to attend.
The Notice of Annual Meeting and a Proxy Statement, which describe the
formal business to be conducted at the Annual Meeting, follow this letter.
After reading the Proxy Statement, please promptly mark, sign and
return the enclosed proxy in the prepaid envelope to assure that your shares
will be represented. Your shares cannot be voted unless you date, sign and
return the enclosed proxy or attend the Annual Meeting in person. Regardless of
the number of shares you own, your careful consideration of, and vote on, the
matters before our stockholders are important.
A copy of the Company's 1998 Annual Report is also enclosed for your
information.
We look forward to seeing you at the Annual Meeting.
Very truly yours,
/s/ A.J. Nassar
A. J. NASSAR
President and Chief Executive Officer
<PAGE> 3
THE MAXIM GROUP, INC.
210 TOWNPARK DRIVE
KENNESAW, GEORGIA 30144
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 26, 1998
The annual meeting of shareholders of The Maxim Group, Inc. (the
"Company") will be held on Friday, June 26, 1998 at 10:00 a.m., at the principal
office of the Company located at 210 TownPark Drive, Kennesaw, Georgia 30144,
for the following purposes:
(1) To elect two (2) directors to serve for a term of three years and
until their successors are elected and qualified;
(2) To approve an amendment to the 1993 Stock Option Plan of the
Company to increase the number of shares of Common Stock available for grant
thereunder from 3,000,000 shares to 4,000,000 shares; and
(3) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on May 28, 1998
will be entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
A Proxy Statement and a proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date and return the proxy promptly. If you
attend the meeting, you may, if you wish, withdraw your proxy and vote in
person.
By Order of the Board of Directors,
/s/ A.J. Nassar
A.J. NASSAR
President and Chief Executive Officer
Kennesaw, Georgia
June 4, 1998
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR VOTE MAY BE
RECORDED AT THE MEETING IF YOU DO NOT ATTEND PERSONALLY.
<PAGE> 4
THE MAXIM GROUP, INC.
210 TOWNPARK DRIVE
KENNESAW, GEORGIA 30144
ANNUAL MEETING OF SHAREHOLDERS
JUNE 26, 1998
-----------------------
PROXY STATEMENT
-----------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of The Maxim Group, Inc. (the "Company")
for the Annual Meeting of Shareholders to be held on Friday, June 26, 1998, and
any adjournments or postponements thereof, at the time and place and for the
purposes set forth in the accompanying notice of the meeting. The expense of
this solicitation, including the cost of preparing and mailing this Proxy
Statement, will be paid by the Company. In addition to solicitations by mail,
officers and regular employees of the Company, at no additional compensation,
may assist in soliciting proxies by telephone. This Proxy Statement and the
accompanying proxy are first being mailed to shareholders on or about June 4,
1998. The address of the principal executive offices of the Company is 210
TownPark Drive, Kennesaw, Georgia 30144.
Any proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the meeting and gives oral notice of his election to
vote in person, without compliance with any other formalities. In addition, any
proxy given pursuant to this solicitation may be revoked prior to the meeting by
delivering to the Secretary of the Company an instrument revoking it or a duly
executed proxy for the same shares bearing a later date. Proxies which are
returned properly executed and not revoked will be voted and will be voted in
accordance with the shareholder's directions specified thereon. Where no
direction is specified, proxies will be voted for the election of the nominees
named below as Class II Directors of the Company and for adoption of the
amendment to the 1993 Stock Option Plan. Abstentions and broker non-votes will
not be counted as votes either in favor of or against the proposal to amend the
1993 Stock Option Plan.
The record of shareholders entitled to vote at the annual meeting was
taken on May 28, 1998. On that date the Company had outstanding and entitled to
vote 16,167,613 shares of common stock, par value $.001 per share (the "Common
Stock"), with each share entitled to one vote.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock as of April 15, 1998, with respect to (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each of the Company's directors, (iii) each of the
Named Executive Officers (as defined herein), and (iv) all directors and
executive officers as a group. Unless otherwise indicated, each of the
stockholders has sole voting and investment power with respect to the shares
beneficially owned.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) TOTAL
- ------------------- --------------------- -------
<S> <C> <C>
Richard A. Kaplan......................................... 930,000 5.7%
7 Far View Hill
Rochester, New York 14620
A.J. Nassar(2)............................................ 1,210,960 7.1
210 TownPark Drive
Kennesaw, Georgia 30144
M.B. Seretean............................................. 677,000 4.2
H. Stanley Padgett(3)..................................... 179,497 1.1
Herb Biggers(4)........................................... 20,000 *
Thomas P. Leahey(5)....................................... 57,000 *
David E. Cicchinelli...................................... 0 0
James W. Inglis(6)........................................ 190,000 1.2
J. Michael Nixon.......................................... 115,000 *
Herb Wolk................................................. 200,000 1.2
FMR Corp.(7).............................................. 1,206,100 7.4
82 Devonshire Street
Boston, Massachusetts 02109
Wellington Management Company, LLP(8)..................... 1,002,700 6.5
75 State Street
Boston, Massachusetts 02109
Cumberland Associates LLC(9).............................. 876,700 5.4
1114 Avenue of the Americas
New York, New York 10036
All directors and executive
officers as a group
(13 persons)(10)........................................ 3,685,836 21.1
</TABLE>
- --------------------
*Less than one percent of outstanding shares
(1) "Beneficial Ownership" includes shares for which an individual,
directly or indirectly, has or shares voting or investment power or
both and also includes options which are exercisable within sixty days
of the date hereof. Beneficial ownership as reported in the above
table has been
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<PAGE> 6
determined in accordance with Rule 13d-3 of the Securities Exchange Act
of 1934. The percentages are based upon 16,306,360 shares outstanding
as of April 15, 1998, except for certain parties who hold presently
exercisable options to purchase shares. The percentages for those
parties who hold presently exercisable options are based upon the sum
of 16,306,360 shares plus the number of shares subject to presently
exercisable options held by them, as indicated in the following notes.
(2) Includes 705,960 shares of Common Stock subject to stock options
exercisable within the next 60 days.
(3) Includes 166,320 shares of Common Stock subject to stock options
exercisable within the next 60 days.
(4) Includes 20,000 shares of Common Stock subject to stock options
exercisable within the next 60 days.
(5) Includes 57,000 shares of Common Stock subject to stock options
exercisable within the next 60 days.
(6) Includes 140,000 shares of Common Stock subject to stock options
exercisable within the next 60 days.
(7) According to a Schedule 13G dated February 14, 1998 filed with the
Commission by FMR Corp. ("FMR"), Edward C. Johnson 3d and Abigail P.
Johnson, Mr. Johnson is the Chairman of FMR and the owner of 12% of the
aggregate outstanding voting stock of FMR and Ms. Johnson is a director
of FMR and the owner of 24.5% of the aggregate outstanding voting stock
of FMR and each may be deemed to be members of a controlling group with
respect to FMR. The Schedule 13G states that (i) Fidelity Management &
Research Company, a registered investment adviser and a wholly-owned
subsidiary of FMR ("Fidelity"), is the beneficial owner of 956,400
shares of Common Stock as a result of acting as investment advisor to
various registered investment companies (the "Funds"), (ii) Mr.
Johnson, FMR (through its control of Fidelity) and the Funds each has
sole power to dispose of the 956,400 shares owned by the Funds, and
(iii) the power to vote all of the 956,400 shares resides with the
Board of Trustees of the Funds. The Schedule 13G further states that
(i) Fidelity Management Trust Company ("Fidelity Management"), a
wholly-owned subsidiary of FMR and a bank as defined in Section 3(a)(6)
of the Exchange Act, is the beneficial owner of 249,700 shares of
Common Stock as a result of it serving as investment manager of the
institutional account(s) and (ii) each of Mr. Johnson and FMR (through
its control of Fidelity Management) has sole voting and dispositive
power over 249,700 shares of Common Stock owned by such institutional
account(s). The Company makes no representation as to the accuracy or
completeness of the information reported.
(8) Based on a Schedule 13G dated January 14, 1998 filed with the
Commission by Wellington Management Company. The Company makes no
representation as to the accuracy or completeness of the information
reported.
(9) Based on a Schedule 13G dated April 6, 1998 filed with the Commission
by Cumberland Associates LLC. The Company makes no representation as to
the accuracy or completeness of the information reported.
(10) Includes an aggregate of 1,192,659 shares of Common Stock subject to
stock options exercisable within the next 60 days.
-3-
<PAGE> 7
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of eight
persons. The Company's Certificate of Incorporation provides that the Board of
Directors shall consist of not less than three nor more than 15 members, the
precise number to be determined from time to time by the Board of Directors. At
the Company's 1996 Annual Meeting of Shareholders held in August 1996, the Board
of Directors was classified into three classes, as nearly equal in number as
possible, each of which, after initial terms of one, two and three years, will
serve for three years, with one class being elected each year. Two Class II
directors are presently standing for election to the Board. The Board of
Directors recommends the election of the two nominees listed below.
Each of the nominees has consented to being named in this Proxy
Statement and to serve as a director of the Company if elected. In the event
that any nominee withdraws or for any reason is not able to serve as a director,
the proxy will be voted for such other person as may be designated by the Board
of Directors, but in no event will the proxy be voted for more than two
nominees. The affirmative vote of a plurality of all votes cast at the meeting
by the holders of the Common Stock is required for the election of the two
nominees standing for election. Management of the Company has no reason to
believe that any nominee will not serve if elected.
The following persons have been nominated by management for election to
the Board of Directors as Class II directors, to serve for a term of three years
and until their successors are elected and qualified:
DAVID E. CICCHINELLI, age 45, has served as President, Retail Groups of
the Company since May 1998 and as a director of the Company since October 1997.
Mr. Cicchinelli was a management consultant from November 1997 to May 1998 and
served as the President and Chief Executive Officer of Color Tile, Inc., a
retail floor covering company, from April 1996 to October 1997. Prior to joining
Color Tile, Inc., Mr. Cicchinelli served as the President and Chief Operating
Officer of Carpetland USA, Inc., a retail floor covering company, from 1984 to
April 1996.
JAMES W. INGLIS, age 54, has served as a director of the Company since
May 1996 and served as its Chief Operating Officer and Senior Executive Vice
President from May 1996 to March 1998. Mr. Inglis has served as consultant to
the Company since March 1998. From 1983 to 1996, Mr. Inglis served in various
capacities with The Home Depot, Inc., a home improvement retailer, including
most recently as its Executive Vice President of Strategic Development and as a
member of its board of directors. Mr. Inglis serves as a director of K&G Men's
Center, Inc., a clothing retailer.
The following persons are members of the Board of Directors who are not
standing for election to the Board this year and whose term will continue after
the Annual Meeting of Shareholders.
RICHARD A. KAPLAN, age 52, has served as Chairman Emeritus of the
Company since February 1995 and served as Chairman of the Board of the Company
from 1989 to February 1994. Mr. Kaplan founded the Company in 1989. Mr. Kaplan
has also served as Chairman of the Board of Worksmart International, Inc., a
personnel consulting company, since 1995. Mr. Kaplan served as Chairman of the
Board of Richland Industries Corp., a retail floor covering chain based in
Rochester, New York, from 1972 to 1995.
A.J. NASSAR, age 41, has served as President, Chief Executive Officer
and a Director of the Company since December 1990. From 1986 to 1990, Mr. Nassar
served as Vice President and Chief
-4-
<PAGE> 8
Operating Officer of Kenny Carpet and Linoleum, Inc., a multistore retail carpet
chain in western New York. He was previously employed in the carpet
manufacturing industry by Trend Carpet Mills and Queen Carpet Mills, where he
was responsible for sales of floor covering products to floor covering
retailers. Mr. Nassar serves as a director of North Atlantic Acquisition Corp.,
a blind pool investment company.
J. MICHAEL NIXON, age 53, has served as a Director of the Company since
February 1996. Mr. Nixon has served as the President and co-owner of Q.I.
Corporation, a building materials contractor, since 1967.
H. STANLEY PADGETT, age 50, has served as a Senior Executive Vice
President and Director of the Company since August 1996. Since joining Image
Industries, Inc., a wholly-owned subsidiary of the Company ("Image") in 1976,
Mr. Padgett has served as Vice President of Manufacturing and Vice President of
Operations of Image prior to becoming its President and Chief Executive Officer
in July 1990. Mr. Padgett has been a member of the Board of Directors of Image
since September 1990. Mr. Padgett was elected to the Board of Directors of the
Company in August 1996 in accordance with the terms of the merger agreement with
Image.
M.B. SERETEAN, age 73, has served as a Director of the Company since
September 1993 and as its Chairman of the Board since February 1995. Mr.
Seretean was a founder of Coronet Industries, Inc., a carpet manufacturer, in
1956 and served as its President and Chairman of the Board until his retirement
in 1987. Mr. Seretean serves as a director of Trend Laboratories, Inc., a
cosmetics company. He is a former director of RCA Corporation, Turner
Broadcasting Corporation, the Atlanta Hawks and the Atlanta Braves.
HERB WOLK, age 66, has served as a director of the Company since 1991.
Mr. Wolk is the owner and President of Cadillac Carpet Distributors and has
served in various capacities with that company since 1976. Mr. Wolk is the
Chairman-elect of the American Floor Covering Association.
There are no family relationships between any director or executive
officer and any other director or executive officer of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than 10% of the
outstanding Common Stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater than 10%
shareholders are also required to furnish the Company with copies of all forms
they file under this regulation. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and
representations that no other reports were required, during the fiscal year
ended January 31, 1998 all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% shareholders were complied with, except
for Richard A. Kaplan, a director of the Company, who failed to file on a timely
basis one report relating to one transaction.
-5-
<PAGE> 9
Although it is not the Company's obligation to make filings pursuant to
Section 16 of the Securities Exchange Act of 1934, the Company has adopted a
policy requiring all Section 16 reporting persons to report monthly to the Chief
Financial Officer of the Company as to whether any transactions in the Company's
Common Stock occurred during the previous month.
MEETINGS OF THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
The Board of Directors held 15 meetings during the year ended January
31, 1998. Each director attended at least 75% or more of the aggregate number of
meetings held by the Board of Directors and the committees on which he served.
The Company's Board of Directors has four standing committees -- the Audit
Committee, the Compensation Committee, the Stock Option Committee and the
Directors' Nominating Committee.
The Audit Committee presently consists of Richard A. Kaplan and J.
Michael Nixon. The Audit Committee has been assigned the principal functions of:
(i) recommending the independent auditors; (ii) reviewing and approving the
annual report of the independent auditors; (iii) approving the annual financial
statements; and (iv) reviewing and approving summary reports of the auditor's
findings and recommendations. The Audit Committee held one meeting during the
year ended January 31, 1998.
The Compensation Committee presently consists of Richard A. Kaplan, J.
Michael Nixon, M.B. Seretean and Herb Wolk. The Compensation Committee has been
assigned the functions of approving and monitoring the remuneration arrangements
for senior management. The Compensation Committee held two meetings during the
year ended January 31, 1998.
The Stock Option Committee presently consists of Richard A. Kaplan and
Herb Wolk. The Stock Option Committee has been assigned the functions of
administering the Company's 1993 Stock Option Plan and granting options
thereunder. The Stock Option Committee held four meetings during the year ended
January 31, 1998.
The Directors' Nominating Committee presently consists of Richard A.
Kaplan, A.J. Nassar and Herb Wolk. The Directors' Nominating Committee has been
assigned the functions of making recommendations to the full Board for the
selection of director nominees. The Directors' Nominating Committee did not meet
during the year ended January 31, 1998.
Any shareholder entitled to vote for the election of directors may
nominate a person or persons for election as a director only if written notice
of such shareholder's intention to make any such nomination is given either by
personal delivery or mailed by the United States Mail, postage prepaid,
certified and return receipt requested, to the Secretary of the Company not
later than the later of (i) the close of business on the seventh (7th) calendar
day following the date on which notice of the meeting of shareholders for the
election of directors is first given to shareholders (any such notice of meeting
of shareholders shall not be given earlier than the record date for the meeting
of shareholders) and (ii) a date ninety (90) days prior to the date of the
meeting of shareholders. Each such notice shall set forth: (a) the name and
address of the shareholder who intends to make the nomination and of the person
or persons to be nominated; (b) a representation that the shareholder is a
holder of record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all arrangements or
understandings
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<PAGE> 10
between the shareholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the shareholder; (d) such other information regarding each nominee
proposed by such shareholder as would have been required to be included in a
proxy statement filed pursuant to the proxy rules of the Commission had each
nominee been nominated, or intended to be nominated, by the Board; and (e) the
consent of each nominee to serve as a director of the Company if so elected.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
A.J. Nassar...................... 41 President, Chief Executive Officer and Director
H. Stanley Padgett............... 50 Senior Executive Vice President and Director; President of Image
David E. Cicchinelli............. 45 President, Retail Groups
Herb Biggers..................... 47 Chief Operating Officer
Thomas P. Leahey................. 36 Executive Vice President, Finance and Treasurer
Mack Hale........................ 56 Executive Vice President, Merchandising
Sandra Fowler.................... 35 Executive Vice President, Administration
H. Gene Harper................... 37 Chief Financial Officer and Secretary
</TABLE>
The executive officers of the Company are appointed by the Board of
Directors and hold office at the pleasure of the Board. See "Election of
Directors" for information with respect to Messrs. Nassar, Padgett and
Cicchinelli.
HERB BIGGERS has served in various capacities with the Company since
July 1996, including Chief Operating Officer since March 1998. Mr. Biggers was a
General Manager in the Expo division of The Home Depot, Inc. from January 1994
to October 1995, and the President and Chief Executive Officer of Hancock Park
Associates from 1988 to 1994. Mr. Biggers' retail experience includes positions
of Chief Operating Officer of Seattle Lighting Corporation, the President and
Chief Executive Officer of Forecast Lighting, Inc., and President and Chief
Executive Officer of Homestead Fan Company.
THOMAS P. LEAHEY has served as Executive Vice President, Finance of the
Company since August 1993 and as Treasurer since July 1994. Mr. Leahey was
employed by the Wachovia Bank of Georgia, N.A. from September 1991 to August
1993 as a Vice President in the Corporate Banking Division. Mr. Leahey's banking
career began in January 1984 and included service with Barnett Bank of Central
Florida, N.A. and, from March 1987 to July 1991, with Fleet/Norstar Financial
Group.
MACK HALE has served in various capacities with the Company since May
1993, including Executive Vice President, Merchandising since April 1998. From
January 1992 to May 1993, Mr. Hale served as Executive Vice President of
Unituft, Inc., a floor covering marketing support company. Mr. Hale served as
Vice President of Sales and Director of Marketing of Mohawk Industries, Inc., a
major carpet manufacturer, from 1983 to 1991. At Mohawk, Mr. Hale was
responsible for all marketing and promotional functions. Prior to his employment
at Mohawk, Mr. Hale served as Vice President, Sales of Horizon Industries, Inc.,
a major carpet manufacturer.
SANDRA FOWLER has served as Executive Vice President, Administration of
the Company since September 1993. From 1982 to September 1993, Ms. Fowler served
in various capacities with Shaw, the
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<PAGE> 11
nation's largest carpet manufacturer, including Manager of Corporate Accounts,
where she acted as the liaison between that company and its corporate customers
in all areas, ranging from sales to administration.
H. GENE HARPER has served as Chief Financial Officer and Secretary of
the Company since September 1994. Mr. Harper was employed by KPMG Peat Marwick
LLP from 1983 to September 1994 as a senior manager in the audit department.
EXECUTIVE COMPENSATION
The following table provides certain summary information for the fiscal
years ended January 31, 1998 and 1997 and for the ten month transition period
ended January 31, 1996 concerning compensation paid or accrued by the Company to
or on behalf of the Company's Chief Executive Officer and each of the other four
most highly compensated executive officers of the Company (the "Named Executive
Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------------- ------------
OTHER NUMBER OF
NAME AND ANNUAL OPTIONS OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDED COMPENSATION
- --------------------------- ---- -------- -------- --------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
A.J. Nassar................ 1998 $350,012 $265,000 $ 2,375 275,000 --
President and Chief 1997 229,479 -- 2,295 200,000 --
Executive Officer 1996(2) 165,456 25,000 1,654 142,400(3) --
James W. Inglis............ 1998 $218,384 $ 75,000 -- -- --
Chief Operating Officer 1997(4) 175,176 -- 200,000 $116,250(5)
H. Stanley Padgett......... 1998 $295,000 -- -- 25,000 $10,926(5)
Senior Executive 1997(6) 170,200 -- -- -- --
Vice President 1996(7) 284,200 -- -- -- --
Herb Biggers............... 1998 $173,828 $ 11,250 -- 50,000 --
Chief Operating Officer 1997(8) 51,330 21,250 -- 50,000 $ 5,626
Thomas P. Leahey........... 1998 $ 96,147 $ 30,000 $ 1,436 25,000 --
Executive Vice President, 1997 75,762 6,195 1,125 -- --
Finance 1996(2) 58,286 -- -- -- --
</TABLE>
- ---------------------
(1) Represents the Company's matching contribution under its 401(k) plan.
(2) Represents compensation for the ten-month period ended January 31,
1996, which period was the result of a change in the fiscal year end of
the Company from March 31 to January 31.
(3) Includes options to purchase 40,000 shares of common stock which were
subsequently cancelled.
(4) Mr. Inglis joined the Company in May 1996.
(5) Represents the discount to fair market value in connection with the
purchase by Mr. Inglis of 50,000 shares of Common Stock from the
Company in May 1996.
(6) Amounts indicated include compensation paid to Mr. Padgett by (i) the
Company and Image subsequent to the acquisition of Image by the Company
on August 30, 1996 and (ii) Image for the period from June 30, 1996 to
August 30, 1996.
-8-
<PAGE> 12
(7) Represents compensation paid to Mr. Padgett by Image for its fiscal
year ended June 29, 1996.
(8) Mr. Biggers joined the Company in July 1996 and became its Chief
Operating Officer in March 1998.
EMPLOYMENT AGREEMENTS
On June 4, 1997, the Company entered into an Employment Agreement with
A.J. Nassar, pursuant to which Mr. Nassar serves as Chief Executive Officer of
the Company. The Employment Agreement, which was amended on January 1, 1998, is
for a term of three years, expiring on June 4, 2000, and provides for an annual
base salary of $600,000 plus an annual bonus of $200,000 for each fiscal year in
which the Company attains certain earnings targets established by the Board of
Directors. The Employment Agreement will automatically renew unless it is
earlier terminated or either the Company or Mr. Nassar elects not to renew the
Employment Agreement. The Employment Agreement provides for certain severance
payments to be paid to Mr. Nassar in the event of a change in control of the
Company. In the event of a change in control, Mr. Nassar will be entitled,
during the term of his Employment Agreement, to terminate his employment with
the Company and, subject to certain adjustments, to receive a lump sum cash
payment equal to two years' salary, as well as 12 months' provision of employee
benefits and a pro rata portion of his annual bonus. In the event Mr. Nassar is
terminated by the Company without cause, he will receive during the balance of
his term of employment (not to exceed 24 months), the annual base salary which
would otherwise be payable to Mr. Nassar had he remained in the employ of the
Company. In addition, all unvested stock options will become immediately
exercisable and Mr. Nassar will receive 12 months' provision of employee
benefits and a pro rata portion of his annual bonus. The Employment Agreement
contains non-compete and non- solicitation provisions, effective through the
actual date of termination of the Employment Agreement and for a period of two
years thereafter.
On August 30, 1996 and again on July 30, 1997, H. Stanley Padgett
entered into amendments to his employment agreement with Image. Under the
amended agreement, which will expire on July 30, 2000, Mr. Padgett serves as a
Senior Executive Vice President of the Company and as the President and Chief
Executive Officer of Image. Mr. Padgett will be entitled to receive an annual
base salary of $295,000 which is subject to increase at the discretion of the
Compensation Committee, plus certain specified benefits and other benefits
generally available to other senior executive officers of Image. The employment
agreement provides that the Compensation Committee may also grant an annual
bonus to Mr. Padgett. In the event that Mr. Padgett's employment is terminated
without cause, as defined under the agreement, he is entitled to a severance
payment equal to the salary which would be owed to him through the remainder of
the term of the agreement, but in no event less than one year's then-current
salary, as well as a bonus equal to the average of the two prior years' annual
bonuses. In addition, certain benefits shall be continued for a period of six
months, and all unvested options held by Mr. Padgett which would vest in the
year of termination shall vest in full. In the event of termination of Mr.
Padgett's employment for any reason other than cause within 12 months after a
change in control, the Company shall pay Mr. Padgett an amount equal to his
annual base salary as then in effect, in lieu of any other severance payment,
and shall continue certain benefits, including a company automobile and medical,
life and disability insurance, for a period of six months. If Mr. Padgett's
employment is terminated for cause, or if he voluntarily terminates his
employment with Image, he shall not be entitled to a severance payment or bonus
and shall be subject to a one-year noncompetition covenant. Termination of
employment includes death, disability, voluntary termination by the employee or
involuntary termination by Image with or without cause, which would include a
material change in position or responsibility.
COMPENSATION OF DIRECTORS
Directors of the Company who are compensated as officers of the Company
serve without compensation for their services as directors. All directors of the
Company are reimbursed by the Company for all out-of-pocket expenses reasonably
incurred by them in the discharge of their duties as directors, including
out-of-pocket expenses incurred in attending meetings of the Board of Directors
and
-9-
<PAGE> 13
of any committees of the Board of Directors. In addition, from time to time,
certain of the Company's outside directors assist in conducting workshops and
orientation sessions for the Company's franchisees, for which they customarily
have been paid consulting fees of $10,000 annually.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following persons served as members of the Compensation Committee
of the Board of Directors during the year ended January 31, 1998: Richard A.
Kaplan, J. Michael Nixon, M.B. Seretean and Herb Wolk. None of the members of
the Compensation Committee has been an officer or employee of the Company or any
of its subsidiaries. Except as set forth herein under "Certain Transactions,"
there were no material transactions between the Company and any of the members
of the Compensation Committee during the fiscal year ended January 31, 1998.
STOCK OPTION PLAN
The Company has adopted a 1993 Stock Option Plan (the "1993 Plan") for
employees who are contributing significantly to the management or operation of
the business of the Company or its subsidiaries as determined by the Company's
Board of Directors or the committee administering the 1993 Plan. The 1993 Plan
provides for the grant of options to purchase up to 3,000,000 shares of Common
Stock (4,000,000 shares if the proposed amendment to the 1993 Plan is approved
at the Annual Meeting) at the discretion of the Board of Directors of the
Company or a committee designated by the Board of Directors to administer the
1993 Plan. The option exercise price must be at least 100% (110% in the case
incentive stock options granted to a holder of 10% or more of the Common Stock)
of the fair market value of the Common Stock on the date the option is granted
and the options are exercisable by the holder thereof in full at any time prior
to their expiration in accordance with the terms of the 1993 Plan. Stock options
granted pursuant to the 1993 Plan will expire on or before (1) the date which is
the tenth anniversary of the date the option is granted, or (2) the date which
is the fifth anniversary of the date an incentive stock option is granted in the
event that the option is granted to a key employee who owns more than 10% of the
total combined voting power of all classes of stock of the Company or any
subsidiary of the Company.
The following table provides certain information concerning individual
grants of stock options under the 1993 Plan made during the fiscal year ended
January 31, 1998 to the Named Executive Officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
GRANTED TO EXERCISE OR PRICE APPRECIATION FOR
OPTIONS EMPLOYEES IN BASE PRICE OPTION TERM (1)
GRANTED FISCAL ($ PER EXPIRATION --------------------------
NAME (#) YEAR SHARE) DATE 5% 10%
---- ------- ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
A.J. Nassar................... 175,000(2) 13.5% $11.00 5/01/07 $1,210,621 $3,067,954
200,000(2) 15.3% 13.75 1,729,459 4,382,791
James W. Inglis............... -- -- -- 11/01/07 -- --
H. Stanley Padgett............ 25,000(3) 1.9% 13.75 11/01/07 216,182 547,849
Herb Biggers.................. 50,000(4) 3.8% 11.50 5/01/07 361,614 916,402
Thomas P. Leahey.............. 10,000(4) 0.8% 10.00 5/01/07 62,889 159,374
15,000(3) 1.2% 13.75 11/01/07 129,709 328,709
</TABLE>
-10-
<PAGE> 14
(1) The dollar amounts under these columns represent the potential
realizable value of each grant of option assuming that the market price
of the Company's Common Stock appreciates in value from the date of
grant at the 5% and 10% annual rates prescribed by the SEC and
therefore are not intended to forecast possible future appreciation, if
any, of the price of the Company's Common Stock.
(2) Options are immediately exercisable.
(3) Options vest in increments of 20% per year commencing on November 1,
1998.
(4) Options in increments of 20% per year commencing on May 1, 1998.
The following table provides certain information concerning options
exercised during fiscal 1998 and the value of unexercised options held by the
Named Executive Officers as of January 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR END AT FISCAL YEAR-END (A)
SHARES -------- -----------------------
ACQUIRED ON VALUE EXER- UNEXER- EXER- UNEXER-
NAME EXERCISE (#) REALIZED ($) CISABLE CISABLE CISABLE CISABLE
- ---- ------------ ------------ ------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
A.J. Nassar......................... -- -- 705,960 19,040 $3,824,852 $103,768
James W. Inglis..................... -- -- 120,000 80,000 690,000 460,000
H. Stanley Padgett.................. 275,000 $4,231,250 166,320 25,000 2,413,010 81,250
Herb Biggers........................ -- -- 10,000 90,000 50,000 475,000
Thomas P. Leahey.................... -- -- 55,000 25,000 620,000 118,750
</TABLE>
- ---------------------------
(a) Dollar values were calculated by determining the difference between the
closing price of $17.00 per share of common stock, as reported by the New
York Stock Exchange on January 31, 1998, and the exercise price of the
options.
EMPLOYEE RETIREMENT SAVINGS PLAN
The Company has established a savings and profit-sharing plan that
qualifies as a tax-deferred savings plan under Section 401(k) of the Internal
Revenue Code (the "401(k) Plan") for its salaried employees who are at least 21
years old and who have completed one year of service with the Company. Under the
401(k) Plan, eligible employees may contribute up to 20% of their gross salary
to the 401(k) Plan or $9,500, whichever is less. Each participating employee is
fully vested in contributions made by such employee. The Company presently
matches 25% of the amount contributed by an employee up to 6% of the employee's
salary, but the Company's policy regarding matching contributions may be changed
annually in the discretion of the Board of Directors. All amounts contributed
under the 401(k) Plan are invested in one or more investment accounts
administered by an independent plan administrator.
CERTAIN TRANSACTIONS
As of April 1, 1998, a total of $1.0 million was owed to the Company by
A.J. Nassar, the Company's President and Chief Executive Officer. The largest
aggregate amount of indebtedness outstanding from Mr. Nassar to the Company
since the beginning of fiscal 1998 was $1.8 million. All amounts owed by Mr.
Nassar bear interest at an annual rate of 8%. Mr. Nassar has agreed to repay all
outstanding obligations to the Company in five annual installments of $200,000
per year (plus accrued
-11-
<PAGE> 15
interest) commencing on July 1, 1998 and on each March 1 thereafter until
maturity. Certain of the loans made to Mr. Nassar in the past were done without
prior approval of the Board of Directors of the Company, but were later ratified
by the Board. All borrowings were made by Mr. Nassar to fund certain of his
personal expenses. No additional loans will be made by the Company to Mr.
Nassar. The Company may in the future, however, make loans to other officers and
employees in furtherance of proper corporate purposes.
In August 1997, the Company invested $1.0 million in North Atlantic
Acquisition Corp. ("North Atlantic"), a blind pool investment vehicle. A.J.
Nassar, the President and Chief Executive Officer of the Company, is a director
and a shareholder of North Atlantic. At the time of the Company's investment in
North Atlantic, Mr. Nassar owned 14.1% of the outstanding Class A common stock
of North Atlantic. As a result of North Atlantic's initial public offering in
late 1997, Mr. Nassar's percentage of ownership was reduced to 1.7% of the
outstanding shares of Class A common stock.
Kevodrew Realty, Inc. ("Kevodrew"), a company controlled by A.J.
Nassar, leases space to a Company-owned store in Louisville, Kentucky. Payments
by the Company to Kevodrew pursuant to this lease totaled $89,983 in fiscal
1998.
In March 1998, the Company entered into a three-year consulting
agreement with James W. Inglis, a director of the Company and its former Chief
Operating Officer. The consulting agreement, which is cancelable upon thirty
days notice by either party, provides for Mr. Inglis to receive an annual
consulting fee of $100,000, for which he will oversee merchandising and
marketing of the Company's CarpetMAX stores. The consulting agreement contains
non-compete provisions, effective through the actual date of termination of the
consulting agreement.
In January 1998, the Company loaned $100,000 to Herb Biggers, the
Company's Chief Operating Officer. This loan bears interest at an annual rate of
8.5%, payable monthly, with principal due on demand. This loan was made to Mr.
Biggers to fund certain of his personal expenses. The maximum aggregate amount
of indebtedness outstanding for Mr. Biggers to the Company since the beginning
of fiscal 1998 was $102,000. As of April 1, 1998, $102,000 was owed by Mr.
Biggers to the Company.
GCO leases two facilities in Montgomery, Alabama, from Dicky W.
McAdams, a former director, who served on the Board of Directors of the Company
from 1991 to August 1997, and the former Chairman of GCO. One of these
facilities is owned directly by Mr. McAdams and the other facility is owned by a
partnership in which Mr. McAdams has a 50% interest. Lease payments to Mr.
McAdams and the partnership totaled $167,568 in fiscal 1998.
Richard A. Kaplan and Herb Wolk, directors of the Company, and Ronald
McSwain, a former director of the Company, own or owned floor covering retailers
which are franchisees of the Company. The following table sets forth for the
periods indicated, the amounts paid to the Company by the franchisees controlled
by these directors and rebates received by these franchisees. Rebate payments to
these franchisees by the Company represent a pass through of volume rebates paid
by various floorcovering manufacturers to the Company.
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1997 FISCAL 1998
--------------------- ----------------------- ----------------------
AMOUNTS PAID AMOUNTS PAID AMOUNTS PAID
NAME TO COMPANY REBATES TO COMPANY REBATES TO COMPANY REBATES
- ----------------- ----------- -------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Kaplan $ 55,187 $ 35,909 $ -- $ -- $ -- $ --
Ronald McSwain 242,550 206,453 330,602 210,113 465,048 231,743
Herb Wolk 47,604 26,863 61,485 25,553 134,384 72,903
----------- -------- ----------- -------- ----------- --------
Total $ 345,341 $269,225 $ 392,087 $235,666 $ 599,432 $304,646
=========== ======== =========== ======== =========== ========
</TABLE>
The ability of the Company to enter into future transactions with
affiliates is limited by the terms of its Senior Notes and Credit Facility.
-12-
<PAGE> 16
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total stockholder return on the Company's Common Stock against
the cumulative total return of the Nasdaq Stock Market Index, the Nasdaq Retail
Stock Index, the Standard & Poor's 500 Index and the Standard & Poor's Retail
Composite Index for the period commencing on September 30, 1993 (the date of the
Company's initial public offering of Common Stock) and ending January 30, 1998
(the "Measuring Period"). The Nasdaq Stock Market Index and the Nasdaq Retail
Stock Index have historically been the indicies against which the Common Stock
has been measured because, prior to 1997, the Common Stock was quoted on the
Nasdaq National Market. In June 1997, the Company listed the Common Stock on the
New York Stock Exchange and quotation of the Common Stock on the Nasdaq National
Market was terminated. The Company intends to discontinue use of the Nasdaq
Stock Market and the Nasdaq Retail Stock Indices in future proxy statements. The
Company intends to use the Standard & Poor's 500 and Standard & Poor's Retail
Composite Indices in lieu thereof because, in the Company's opinion, these
indices will provide the Company's shareholders with a better benchmark for the
Company's performance versus its peers in the retail industry.
The graph assumes that the value of the investment in the Company's
Common Stock and each index was $100 on September 30, 1993. The yearly change in
cumulative total return is measured by dividing (i) the sum of (a) the
cumulative amount of dividends for each fiscal year, assuming dividend
reinvestment, and (b) the change in share price between the beginning and end of
the Measuring Period, by (ii) the share price at the beginning of the Measuring
Period. The Company has not paid any cash dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG THE MAXIM GROUP, INC.
COMMON STOCK, NASDAQ STOCK MARKET INDEX, NASDAQ RETAIL STOCK
INDEX, S&P 500 INDEX AND S&P RETAIL COMPOSITE INDEX
<TABLE>
<CAPTION>
MEASUREMENT
PERIOD (FISCAL YEAR THE MAXIM NASDAQ STOCK NASDAQ RETAIL S&P RETAIL
COVERED) GROUP, INC. MARKET INDEX STOCK INDEX S&P 500 INDEX COMPOSITE INDEX
------------------- ----------- ------------ ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
September 30, 1993 $100 $100 $100 $100 $100
March 31, 1994 229 98 94 98 99
March 31, 1995 235 109 92 113 101
January 31, 1996* 179 142 101 146 101
January 31, 1997 314 186 124 185 120
January 31, 1998 324 220 146 235 179
</TABLE>
* On January 13, 1996, the Company changed its fiscal year end from March 31 to
January 31.
ASSUMES $100 INVESTED ON SEPTEMBER 30, 1993 IN THE MAXIM GROUP, INC.
COMMON STOCK, NASDAQ STOCK MARKET INDEX, NASDAQ RETAIL STOCK
INDEX, S&P 500 INDEX AND S&P RETAIL COMPOSITE INDEX
-13-
<PAGE> 17
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEES
ON EXECUTIVE COMPENSATION
During the year ended January 31, 1998, the Compensation Committee of
the Board of Directors was comprised of four non-employee members of the Board
and the Stock Option Committee of the Board of Directors was comprised of two
non-employee members of the Board. The Compensation Committee is responsible
for: (i) setting the Company's compensation philosophy and policies; (ii) review
and approval of pay recommendations for the executive officers of the Company;
and (iii) initiation of all compensation actions for the Chief Executive Officer
of the Company. The Stock Option Committee is responsible for setting the terms
and administering the Company's 1993 Stock Option Plan.
The Company's compensation policies have been designed to align the
financial interests of the Company's management with those of its shareholders,
and reflect the nature of the Company by taking into account the Company's
operating environment and the expectations for continued growth and enhanced
profitability. Compensation for each of the Company's executive officers
consists of a base salary, an annual discretionary bonus and stock options. The
Company does not currently provide executive officers with other long term
incentive compensation other than the ability to contribute their earnings to
the Company's 401(k) Plan.
The Compensation Committee's philosophy is that the predominant portion
of an executive's compensation should be based directly upon the value of
long-term incentive compensation in the form of stock option awards. The
Compensation Committee believes that providing executives with the opportunities
to acquire significant stakes in the growth and prosperity of the Company
(through grants of stock options), while maintaining other elements of the
Company's compensation program at conservative levels, will enable the Company
to attract and retain executives with the outstanding management abilities and
entrepreneurial spirit which are essential to the Company's ongoing success.
Furthermore, the Compensation Committee believes that this approach to
compensation motivates executives to perform to their full potential.
At least annually, the Compensation Committee reviews salary
recommendations for the Company's executives (other than the Chief Executive
Officer) and then approves such recommendations, with any modifications it has
deemed appropriate. The annual salary recommendations are made under the
ultimate direction of the Chief Executive Officer, based on peer group and
national industry surveys of total compensation packages, as well as evaluations
of the individual executive's past and expected future performance. Similarly,
the Compensation Committee fixes the base salary of the Chief Executive Officer
based on a review of competitive compensation data, the Chief Executive
Officer's overall compensation package, and the Compensation Committee's
assessment of his past performance and its expectation as to his future
performance in leading the Company.
The Compensation Committee also determines, based upon the
recommendation of the Chief Executive Officer, the annual bonus, if any, to be
paid to executive officers (other than the Chief Executive Officer). The amount
of each individual bonus is determined based upon an evaluation of such factors
as individual performance, increases in the Company's revenue, net income, net
income per share and market penetration, as well as the executive's contribution
to the Company's performance. The Compensation Committee applies similar
criteria in setting the amount of annual bonus, if any, earned by the Chief
Executive Officer.
Stock options represent a substantial portion of compensation for the
Company's executive officers, including the Chief Executive Officer. Stock
options are granted at the prevailing market price on the date of grant, and
will only have value if the Company's stock price increases. Generally, grants
vest in equal amounts over a period of five years (although certain special
types of grants may vest either immediately or over a shorter period) and
executives must be employed by the Company at the time of vesting in order to
exercise the options. Grants of stock options generally are based upon the level
of the executive's position with the Company and an evaluation of the
executive's past and expected future
-14-
<PAGE> 18
performance. The Compensation Committee believes that dependence on stock
options for a significant portion of executives' compensation more closely
aligns such executives' interests with those of the Company's shareholders,
since the ultimate value of such compensation is linked directly to stock price.
The Company recently negotiated a new employment agreement for its
Chief Executive Officer, which currently provides for an annual base salary of
$600,000. The base salary paid to the Chief Executive Officer is reviewed
annually by the Compensation Committee and may be adjusted based on competitive
compensation data, the Chief Executive Officer's overall compensation package
and the Compensation Committee's assessment of his past experience and its
expectation as to his future contributions in leading the Company and its
businesses. The Compensation Committee did not increase the salary of any other
executive officer.
During the year ended January 31, 1998, the Stock Option Committee
granted the Chief Executive Officer options to purchase 375,000 shares of the
Company's Common Stock. In addition, options to purchase 50,000 shares of Common
Stock were granted to the Company's new Chief Operating Officer during the year.
Each of these stock option awards were based upon an evaluation of individual
performance criteria and is consistent with the philosophy of providing
incentives based on the Company's future performance.
The Compensation Committee continually evaluates the Company's
compensation policies and procedures with respect to executives. Although the
Compensation Committee believes that current compensation policies have been
successful in aligning the financial interests of executive officers with those
of the Company's shareholders and with Company performance, it continues to
examine what modifications, if any, should be implemented to further link
executive compensation with both individual and Company performance.
STOCK OPTION COMMITTEE COMPENSATION COMMITTEE
Richard A. Kaplan Richard A. Kaplan
Herb Wolk J. Michael Nixon
M. B. Seretean
Herb Wolk
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the foregoing
Report of Compensation and Stock Option Committees on Executive Compensation and
the Stockholder Return Performance Graph shall not be incorporated by reference
into any such filings.
-15-
<PAGE> 19
AGENDA ITEM TWO
PROPOSAL TO AMEND 1993 STOCK OPTION PLAN
GENERAL
On July 30, 1993, the Board of Directors of the Company adopted a 1993
Stock Option Plan (as amended, the "1993 Plan") for eligible officers, directors
and key employees of the Company. The 1993 Plan provides for the grant of both
incentive and non-qualified stock options. The purpose of the 1993 Plan is to
encourage and enable eligible directors, officers and key employees of the
Company and its subsidiaries to acquire proprietary interests in the Company and
its subsidiaries through the ownership of common stock of the Company and to
provide motivation for participating directors, officers and key employees to
remain in the employ of and to give greater effort on behalf of the Company.
Under the terms of the 1993 Plan, the Stock Option Committee of the
Board of Directors may grant options to purchase shares of Common Stock to
officers, directors and employees of the Company or of a subsidiary of the
Company.
As of May 15, 1998, the Company had granted options to purchase shares
of Common Stock pursuant to the 1993 Plan as follows: (i) each Named Executive
Officer (A.J. Nassar: 827,400 shares; James W. Inglis: 200,000 shares; H.
Stanley Padgett: 66,318 shares; Herb Biggers: 100,000 shares; and Thomas P.
Leahey: 80,000 shares); (ii) all current executive officers as a group:
1,475,615 shares; (iii) all current directors who are not executive officers as
a group: 380,000 shares; (iv) each nominee for election as a director (David E.
Cicchinelli: 15,000 shares; and James W. Inglis: 200,000 shares) and (v) all
employees, including all current officers who are not executive officers, as a
group: 2.5 million shares.
DESCRIPTION OF PROPOSED AMENDMENT
On May 1, 1998, the Board of Directors of the Company adopted an
amendment to the 1993 Plan which would increase the number of shares of the
Company Common Stock available for grant thereunder to 4,000,000 shares from
3,000,000 shares. As of May 15, 1998, less than 10,000 shares of Common Stock
remained available for grant under the 1993 Plan. The proposed increase in the
number of authorized shares would ensure the uninterrupted continuation of the
1993 Plan. The Board of Directors recommends that shareholders vote FOR the
proposed amendment. The affirmative vote of a majority of the shares of the
Company Common Stock represented in person or by proxy at the Annual Meeting is
necessary for the approval of the amendment to the 1993 Plan.
DESCRIPTION OF 1993 PLAN
Effective Date. The effective date of the 1993 Plan is July 30,1993.
The 1993 Plan shall remain in effect until all shares subject to or which may
become subject to the 1993 Plan shall have been purchased pursuant to options
granted under the 1993 Plan, provided that options under the 1993 Plan must be
granted within ten (10) years from the effective date.
Shares Subject to the 1993 Plan. The shares of the Company's common
stock available for issuance under the 1993 Plan may, at the election of the
Board of Directors, be either treasury shares or shares originally issued for
such purpose. The maximum number of shares which shall be reserved and made
available for sale under the 1993 Plan shall be 3,000,000 shares of Common Stock
(4,000,000 shares if the amendment to the 1993 Plan is approved by the
shareholders of the Company at the Annual
-16-
<PAGE> 20
Meeting). Any shares subject to an option which for any reason expires or is
terminated may again be subject to an option under the 1993 Plan.
Persons Eligible to Participate in the 1993 Plan. Under the 1993 Plan,
options may be granted only to officers, directors and key employees of the
Company or its subsidiaries.
Administration of the 1993 Plan. The 1993 Plan shall be administered by
the Board of Directors or by a committee comprised of no fewer than two (2)
members appointed by the Board of Directors of the Company from among its
members (the "Committee"). Members of the Committee shall be "disinterested
persons" as such term is defined under Rule 16b-3 under the Securities Exchange
Act of 1934, as amended. Subject to the provisions of the 1993 Plan, the Board
of Directors or the Committee has the authority to determine the employees to
whom options shall be granted and to determine exercise prices, vesting
requirements, the term of and the number of shares covered by each option.
Exercise Price, Terms of Exercise and Payment for Shares. Each option
granted under the 1993 Plan will be represented by an Option Agreement which
shall set forth the terms particular to that option, including the number of
shares covered by the option, the exercise price, the term of the option and any
vesting requirements.
The exercise price of options granted under the 1993 Plan will be
determined by the Committee, but in no event shall be less than 100% of the
Average Market Price of the common stock on the date of the grant of the option.
The term Average Market Price is defined in the 1993 Plan to be the average of
the high bid and low ask prices as of the close of business for the Company's
shares of common stock in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc., Automated Quotation System (or
other national quotation service). If the Company's common stock is registered
on a national securities exchange, then Average Market Price shall mean the
closing price of the Company's common stock on such national securities
exchange. If the Company's Common Stock is not traded in the organized markets,
then the price shall be the fair market value of the common stock as determined
in good faith by the Board of Directors or the Committee, but in no case less
than the par value of such stock.
Options may be exercised in whole or in part by the optionee, but in no
event later than ten (10) years from the date of the grant. Any incentive stock
option granted under the 1993 Plan to an individual who owns more than 10% of
the total combined voting power of all classes of stock of the Company or a
subsidiary may not be purchased at a price less than 110% of the market price on
the day the option is granted, and no such option may be exercised more than
five (5) years from the date of grant. The purchase price for the shares shall
be paid in cash or shares of common stock of the Company, or a combination of
both. Upon payment, the Company will deliver stock certificates for such shares
to the optionee.
Termination of Service. In the event that a holder of an option granted
under the 1993 Plan ceases to be a director or employee of the Company or any
subsidiary of the Company for any reason other than his death or total and
permanent disability, any incentive stock option or unexercised portion thereof,
which is otherwise exercisable on the date of such termination, shall expire
three (3) months from the date of such termination. Any incentive stock options
which are not exercisable on the date of such termination shall immediately
terminate.
Upon the death or total and permanent disability of the holder of an
option, any incentive stock option or unexercised portion thereof which is
otherwise exercisable shall expire within one year of the
-17-
<PAGE> 21
date of such death or disability. Any incentive stock options which were not
exercisable on the date of such death or disability shall be immediately
exercisable for a period of one year.
Options granted under the 1993 Plan are exercisable during the lifetime
of the optionee only by the optionee. All options granted under the 1993 Plan
are non-transferable except by will or under the laws of descent and
distribution.
Reorganization and Recapitalization. In case the Company is merged or
consolidated with another corporation and the Company is not the survivor, or in
case the Company is acquired by another corporation, or in case of a separation,
reorganization, recapitalization or liquidation of the Company, the Board of
Directors of the Company shall either make appropriate provision for the
protection of any outstanding options, including without limitation the
substitution of appropriate stock of the Company or of the merged, consolidated
or otherwise reorganized corporation which will be issuable in respect of the
shares of the Common Stock of the Company, or upon written notice to the
optionee, provide that the option must be exercised within 60 days or it will be
terminated.
In the event that dividends are payable in Common Stock of the Company
or in the event there are splits, subdivisions or combinations of shares of
Common Stock of the Company, the number of shares available under the 1993 Plan
will be increased or decreased proportionately, as the case may be, and the
number of shares deliverable upon the exercise thereafter of any option
theretofore granted will be increased or decreased proportionately, as the case
may be, without change in the aggregate purchase price.
Limitation on Number of Shares That May be Purchased. For incentive
stock options granted under the 1993 Plan, the aggregate fair market value
(determined at the time the option was granted) of the shares with respect to
which incentive stock options are exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000.
Amendment and Termination of the 1993 Plan. With respect to any shares
of stock at the time not subject to options, the Board of Directors may at any
time and from time to time, terminate, modify or amend the 1993 Plan in any
respect, except that no such modification or amendment shall be made absent the
approval of the shareholders of the Company to: (i) increase the maximum number
of shares for which options may be granted under the 1993 Plan; (ii) reduce the
option price or waiting period; (iii) extend the period during which options may
be granted or exercised; (iv) change the class of employees eligible for
incentive stock options; (v) otherwise materially modify the requirements as to
eligibility for participation in the 1993 Plan; or (vi) otherwise materially
increase the benefits accruing to participants under the 1993 Plan.
With the consent of the affected optionee, the Board of Directors or
the Committee may amend outstanding option agreements in a manner consistent
with the 1993 Plan.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. All incentive stock options granted or to be
granted under the 1993 Plan which are designated as incentive stock options are
intended to be incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
Under the provisions of Section 422 of the Code, neither the holder of
an incentive stock option nor the Company will recognize income, gain, deduction
or loss upon the grant or exercise of an incentive stock option. An optionee
will be taxed only when the stock acquired upon exercise of his
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<PAGE> 22
incentive stock option is sold or otherwise disposed of in a taxable
transaction. If at the time of such sale or disposition the optionee has held
the shares for the required holding period (two years from the date the option
was granted and one year from the date of the transfer of the shares to the
optionee), the optionee will recognize long-term capital gain or loss, as the
case may be, based upon the difference between his exercise price and the net
proceeds of the sale. However, if the optionee disposes of the shares before the
end of such holding period, the optionee will recognize ordinary income on such
disposition in an amount equal to the lesser of:
(a) gain on the sale or other disposition; or
(b) the amount by which the fair market value of the shares on the
date of exercise exceeded the option exercise price, with any excess gain being
capital gain, long-term or short-term, depending on whether or not the shares
had previously been held for more than one year on the date of sale or other
taxable disposition.
The foregoing discussion and the reference to capital gain or loss
treatment therein assume that the option shares are a capital asset in the hands
of the optionee. A sale or other disposition which results in the recognition of
ordinary income to the optionee will also result in a corresponding income tax
deduction for the Company.
The 1993 Plan permits an optionee to pay all or part of the purchase
price for shares acquired pursuant to exercise of an incentive stock option by
transferring to the Company other shares of the Company's common stock owned by
the optionee. Section 422 of the Code provides that an option will continue to
be treated as an incentive stock option even if an optionee exercises such
incentive stock option with previously acquired stock of the corporation
granting the option. Accordingly, except as noted below with respect to certain
"statutory option stock," an optionee who exercises an incentive stock option in
whole or in part by transferring to the Company shares of the Company's common
stock will recognize no gain or loss upon such exercise. The optionee's basis in
the shares so acquired will be equal to the optionee's cost basis in the shares
surrendered (plus, in the case of payment of the purchase price in a combination
of cash and surrendered shares, the amount of any cash paid).
Section 424(c)(3) of the Code provides that if "statutory option stock"
is transferred in connection with the exercise of an incentive stock option, and
if the holding period requirements under Section 422(a)(1) of the Code are not
met with respect to such statutory option stock before such transfer, then
ordinary income will be recognized as a result of the transfer of statutory
option stock. However, the incentive stock option stock acquired through the
exchange of statutory option stock will still qualify for favorable tax
treatment under Section 422 of the Code.
Incentive stock options offer two principal tax benefits: (1) the
possibility of converting ordinary income into capital gain to the extent of the
excess of fair market value over option price at the time of exercise, and (2)
the deferral of recognition of gain until disposition of the stock acquired upon
the exercise of the option.
At present, the maximum tax rate on capital gains is 20% for assets
held for more than 18 months and 28% for assets held for more than 12 months but
not more than 18 months, while the maximum tax rate on ordinary income is 39.6%.
Thus, the conversion of ordinary income into capital gain produces some tax
benefit for certain taxpayers. However, the benefit of income deferral generally
provided by incentive stock options is reduced for some taxpayers since the
excess of the fair market value of shares acquired through the exercise of an
incentive stock option over the exercise price is taken into account
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<PAGE> 23
in computing an individual taxpayer's alternative minimum taxable income. Thus,
the exercise of an incentive stock option could result in the imposition of an
alternative minimum tax liability.
In general, an option granted under the 1993 Plan which is designated
as an incentive stock option will be taxed as described above. However, in some
circumstances an option which is designated as an incentive stock option will be
treated as a non-qualified stock option and the holder taxed accordingly. For
example, a change in the terms of an option which gives the employee additional
benefits may be treated as the grant of a new option. Unless all the criteria
for treatment as an incentive stock option are met on the date the "new option"
is considered granted (such as the requirement that the exercise price of the
option be not less than the fair market value of the stock as of the date of the
grant), the option will be treated and taxed as a non-qualified stock option.
Non-Qualified Stock Options. All options granted or to be granted under
the 1993 Plan which do not qualify as incentive stock options are non-statutory
options not entitled to special tax treatment under Section 422 of the Code.
A participant in the 1993 Plan will recognize taxable income upon the
grant of a non-qualified stock option only if such option has a readily
ascertainable fair market value as of the date of the grant. In such a case, the
recipient will recognize taxable ordinary income in an amount equal to the
excess of the fair market value of the option as of such date over the price, if
any, paid for such option. No income would then be recognized on the exercise of
the option, and when the shares obtained through the exercise of the option are
disposed of in a taxable transaction, the resulting gain or loss would be
capital gain or loss (assuming the shares are a capital asset in the hands of
the optionee). However, under the applicable Treasury Regulations, the
non-qualified stock options issued under the 1993 Plan will not have a readily
ascertainable fair market value unless at the time such options are granted
similar options of the Company are actively traded on an established market. The
Company presently has no such actively traded options.
Upon the exercise of a non-statutory option not having a readily
ascertainable fair market value, the optionee recognizes ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the option exercise price for those shares. The Company is not
entitled to an income tax deduction with respect to the grant of a non-statutory
stock option or the sale of stock acquired pursuant thereto. The Company
generally is permitted a deduction equal to the amount of ordinary income the
optionee is required to recognize as a result of the exercise of a non-statutory
stock option.
The 1993 Plan permits the Committee to allow an optionee to pay all or
part of the purchase price for shares acquired pursuant to an exercise of a
non-statutory option by transferring to the Company other shares of the
Company's Common Stock owned by the optionee. If an optionee exchanges
previously acquired Common Stock pursuant to the exercise of a non-qualified
stock option, the Internal Revenue Service has ruled that the optionee will not
be taxed on the unrealized appreciation of the shares surrendered in the
exchange. In other words, the optionee is not taxed on the difference between
his or her cost basis for the old shares and their fair market value on the date
of the exchange, even though the previously acquired shares are valued at the
current market price for purposes of paying all or part of the option price.
General. The 1993 Plan is not qualified under Section 401(a) of the
Code and is not subject to the provisions of the Employee Retirement Income
Security Act of 1974.
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<PAGE> 24
The preceding discussion is based upon federal tax laws and regulations
in effect on the date of this Proxy Statement, which are subject to change, and
upon an interpretation of the statutory provisions of the Code, its legislative
history and related income tax regulations. Furthermore, the foregoing is only a
general discussion of the federal income tax consequences of the 1993 Plan and
does not purport to be a complete description of all federal income tax aspects
of the 1993 Plan. Option holders may also be subject to state and local taxes in
connection with the grant or exercise of options granted under the 1993 Plan and
the sale or other disposition of shares acquired upon exercise of the options.
Each employee receiving a grant of options should consult with his or her
personal tax advisor regarding federal, state and local consequences of
participating in the 1993 Plan.
The approval of the holders of a majority of the shares of the Company
Common Stock present and voting at the Annual Meeting is necessary to approve
the proposed amendment to the 1993 Plan. THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS APPROVE THE PROPOSED AMENDMENT TO THE 1993 PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has served as independent auditors of the Company
for the fiscal year ended January 31, 1998. Representatives of Arthur Andersen
LLP are expected to be present at the shareholders' meeting and will have the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions. The Company has not selected its independent accountants
for the 1999 fiscal year. The Company anticipates that the independent
accountants who will examine and report on the Company's consolidated financial
statements for the year ending January 31, 1999 will be selected during the
third quarter of the current fiscal year.
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report for the year ended January 31, 1998 on Form
10-K as filed with the Securities and Exchange Commission, is available to
shareholders who make written request therefor to the Company, Attention: Chief
Financial Officer at 210 TownPark Drive, Kennesaw, Georgia 30144. Copies of
exhibits and basic documents filed with that report or referenced therein will
be furnished to shareholders of record upon request.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's
1999 annual meeting must be received at the Company's principal executive
offices by January 30, 1999 in order to be eligible for inclusion in the
Company's proxy statement and form of proxy for that meeting.
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<PAGE> 25
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before
the annual meeting. However, if other matters should come before the annual
meeting it is the intention of the persons named in the enclosed form of Proxy
to vote the Proxy in accordance with their judgment of what is in the best
interest of the Company.
By Order of the Board of Directors,
/s/ A.J. Nassar
A.J. NASSAR
President and Chief Executive Officer
Kennesaw, Georgia
June 4, 1998
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<PAGE> 26
EXHIBIT A
THE MAXIM GROUP, INC.
210 TOWNPARK DRIVE
KENNESAW, GEORGIA 30144
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1998 ANNUAL MEETING OF SHAREHOLDERS.
The undersigned hereby appoints A.J. Nassar and Thomas P. Leahey or either of
them, with power of substitution to each, the proxies of the undersigned to vote
the Common Stock of the undersigned at the Annual Meeting of Shareholders of THE
MAXIM GROUP, INC. to be held on June 26, 1998, at 10:00 a.m. at 210 TownPark
Drive, Kennesaw, Georgia 30144, and any adjournments or postponements thereof:
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ABOVE PROPOSALS LISTED ON THE
REVERSE SIDE AND UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE
PROVIDED, THIS PROXY WILL BE SO VOTED.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE
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NOTE: Please date and sign this Proxy exactly as name(s) appear(s) on reverse
side. When signing as an attorney, trustee, executor, administrator or guardian,
please give your title as such. If a corporation or partnership, give full name
by authorized officer. In the case of joint tenants, each joint owner must sign.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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<PAGE> 27
<TABLE>
<CAPTION>
<S> <C> <C>
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
--------------------------- 1. To elect two (2) directors to
serve for a term of three
THE MAXIM GROUP, INC. years and until their
successors are elected and
--------------------------- qualified.
FOR ALL WITH- FOR ALL
NOMINEES HOLD EXCEPT
David E. Cicchinelli [ ] [ ] [ ]
James W. Inglis
Mark box at right if an address [ ] INSTRUCTION: To withhold authority
change or comment has been noted to vote for any individual nominee
on the reverse side of this card. mark the "For All Except"box and
write that nominee's name in the
space provided below.
---------------------------------
RECORD DATE SHARES:
For Against Abstain
2. To approve an amendment to the [ ] [ ] [ ]
1993 Stock Option Plan of the Company to
increase the number of shares of Common
Stock available for
grant thereunder from 3,000,000 shares to
4,000,000 shares.
Please be sure to sign and date this Proxy. Date:
---------------
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Shareholder sign here Co-owner sign here
3. To transact such other business
incidental to the conduct of the Annual
Meeting as may properly come before the
Annual Meeting or any adjournments or
postponements thereof.
DETACH CARD DETACH CARD
</TABLE>
