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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 Section 240.14a-11(c) or
Section 240.14a-12
THE MAXIM GROUP, INC.
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(Name of Registrant as Specified in Its Charter)
NOT APPLICABLE
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(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:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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THE MAXIM GROUP, INC.
210 TOWNPARK DRIVE
KENNESAW, GEORGIA 30144
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 25, 1997
The annual meeting of shareholders of The Maxim Group, Inc. (the
"Company") will be held on Friday, July 25, 1997 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 available for grant thereunder from
2,000,000 shares to 3,000,000 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 June 16, 1997
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
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A.J. NASSAR
President and Chief Executive Officer
Kennesaw, Georgia
June 27, 1997
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR VOTE MAY
BE RECORDED AT THE MEETING IF YOU DO NOT ATTEND PERSONALLY.
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THE MAXIM GROUP, INC.
210 TOWNPARK DRIVE
KENNESAW, GEORGIA 30144
ANNUAL MEETING OF SHAREHOLDERS
JULY 25, 1997
_______________________
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, July 25, 1997, 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 27,
1997. 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 I 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 June 16, 1997. On that date the Company had outstanding and entitled
to vote 16,135,044 shares of common stock, par value $.001 per share (the
"Common Stock"), with each share entitled to one vote.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock as of June 1, 1997, 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.
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) TOTAL
------------------- ------------------ -------------
Richard A. Kaplan . . . . . . . . . . . . . 917,500 5.7%
7 Far View Hill
Rochester, New York 14620
A.J. Nassar(2) . . . . . . . . . . . . . . 1,001,440 6.0
210 TownPark Drive
Kennesaw, Georgia 30144
M.B. Seretean(3) . . . . . . . . . . . . . 677,000 4.1
H. Stanley Padgett(4) . . . . . . . . . . . 454,497 2.7
Larry M. Miller(5) . . . . . . . . . . . . 445,178 2.7
Ronald McSwain(6) . . . . . . . . . . . . . 346,500 2.1
Herb Wolk . . . . . . . . . . . . . . . . . 200,000 1.2
James W. Inglis(7) . . . . . . . . . . . . 170,000 *
J. Michael Nixon(8) . . . . . . . . . . . . 115,000 *
The Kaufmann Fund, Inc.(9) . . . . . . . . 1,250,000 7.7
140 E. 45th Street, 43rd Floor
New York, New York 10017
All directors and executive
officers as a group (13 persons) . . . . 4,427,075 24.7
*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 determined in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934. The percentages are based upon
16,135,044 shares outstanding as of June 1, 1997, 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 16,135,044 shares plus the number of shares
subject to presently exercisable options held by them, as indicated in
the following notes.
(2) Includes 496,440 shares of Common Stock subject to presently
exercisable stock options.
(3) Includes 425,000 shares of Common Stock subject to presently
exercisable stock options.
(4) Includes 441,320 shares of Common Stock subject to presently
exercisable stock options.
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(5) Includes 155,020 shares of Common Stock subject to presently
exercisable stock options.
(6) Includes 30,500 shares owned by a foundation and a trust with respect
to which Mr. McSwain serves as trustee.
(7) Includes 120,000 shares of Common Stock subject to presently
exercisable stock options.
(8) Includes 55,000 shares of Common Stock subject to presently
exercisable stock options.
(9) Based on a Schedule 13G dated February 28, 1997 filed by The Kaufmann
Fund. The Company makes no representation as to the accuracy or
completeness of the information reported.
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of nine 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 I
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 I directors, to serve for a term of three years and
until their successors are elected and qualified:
J. MICHAEL NIXON, age 52, 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.
HERB WOLK, age 65, 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 has 37 years of
experience in the retail carpet industry. Mr. Wolk is the Chairman-elect of the
American Floor Covering Association and is a co-founder of the Mayfield School,
a national sales training school for the floor covering industry.
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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.
JAMES W. INGLIS, age 53, has served as Chief Operating Officer, Senior
Executive Vice President and as a Director of the Company since May 1996. 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.
RICHARD A. KAPLAN, age 51, 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., an
organizational development company, since 1995. Mr. Kaplan served as Chairman
of the Board of Richland Industries Corp., a retail floorcovering chain based
in Rochester, New York, from 1972 to 1995.
RONALD H. MCSWAIN, age 54, has served as a Director of the Company since
1991. Since 1968, Mr. McSwain has served as the President and owner of
McSwain's Carpets, a retail floorcovering business with 17 stores in the
Cincinnati, Dayton, Columbus and Toledo, Ohio areas. Mr. McSwain serves as a
director of Johnson Investment Mutual Fund Trust, an investment company.
LARRY M. MILLER, age 56, has served as a Senior Executive Vice President
and Director of the Company since August 1996. Mr. Miller was the co-founder of
Image Industries, Inc. ("Image"), has served as a Director of Image since its
inception in 1976 and currently serves as Chairman of the Board, Secretary and
President, Image Carpets division. Mr. Miller was the initial President of
Image and has served as an executive officer every year thereafter. Mr. Miller
was elected to the Board of Directors of the Company in August 1996 in
accordance with the terms of the merger agreement with Image.
A.J. NASSAR, age 40, 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 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 floorcovering
products to floorcovering retailers.
H. STANLEY PADGETT, age 49, has served as a Senior Executive Vice
President and Director of the Company since August 1996. Since joining 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 72, 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.
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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, 1997 all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% shareholders were complied with.
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 17 meetings during the year ended January 31,
1997. 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 Ronald McSwain and M.B. Seretean.
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 did not meet during the year
ended January 31, 1997.
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 one
meeting during the year ended January 31, 1997.
The Stock Option Committee presently consists of Richard A. Kaplan, Ronald
McSwain 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 six meetings during the
year ended January 31, 1997.
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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, 1997.
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 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.
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EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
A.J. Nassar . . . . . . . . . 40 President, Chief Executive Officer and Director
James W. Inglis . . . . . . . 53 Chief Operating Officer, Senior Executive Vice President and Director
Larry M. Miller . . . . . . . 56 Senior Executive Vice President and Director
H. Stanley Padgett . . . . . 49 Senior Executive Vice President and Director; President of Image
Thomas P. Leahey . . . . . . 35 Executive Vice President, Finance and Treasurer
Sandra Fowler . . . . . . . . 34 Executive Vice President, Administration
H. Gene Harper . . . . . . . 36 Chief Financial Officer and Secretary
Herb Biggers . . . . . . . . 46 President of CarpetMAX Retail
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, Inglis, Miller and
Padgett.
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.
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 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.
HERB BIGGERS has served as President of CarpetMAX Retail since April 1997.
From July 1996 to April 1997, Mr. Biggers served as the Company's Senior Vice
President of Retail Operations. 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.
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EXECUTIVE COMPENSATION
The following table provides certain summary information for the fiscal
year ended January 31, 1997, for the ten month transition period ended January
31, 1996 and for fiscal year ended March 31, 1995 concerning compensation paid
or accrued by the Company to or on behalf of the Company's Chief Executive
Officer and the other executive officers of the Company whose total annual
salary and bonus exceeded $100,000 during the fiscal year ended January 31,
1997 (the "Named Executive Officers").
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
------------------ ---- ------ ----- ------------ ------- ------------
A.J. Nassar . . . . . . . 1997 $254,479 $ -- $2,295 200,000 --
President and Chief 1996(2) 165,456 25,000 6,618 142,400 (3) --
Executive Officer 1995 205,750 -- 1,653 110,000 (4) --
James W. Inglis . . . . . . 1997(5) $175,176 $ -- $ -- 200,000 $116,250(6)
Chief Operating Officer
H. Stanley Padgett . . . . 1997(7) $170,200 $ -- $ -- -- --
Senior Executive 1996(8) 284,200 -- -- --
Vice President 1995(9) 262,500 20,000 -- -- --
Larry M. Miller . . . . . . 1997(7) $138,500 $ -- $ -- --
Senior Executive 1996(8) 231,900 --
Vice President 1995(9) 212,500 20,000 -- -- --
____________________________________
(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) Includes options to purchase 62,400 shares of common stock which were
subsequently cancelled.
(5) Mr. Inglis joined the Company in May 1996.
(6) 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.
(7) Amounts indicated include compensation paid to Messrs. Miller
and 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) Represents compensation paid to Messrs. Miller and Padgett by Image
for its fiscal year ended June 29, 1996.
(9) Represents compensation paid to Messrs. Miller and Padgett by Image
for its fiscal year ended July 1, 1995.
EMPLOYMENT AGREEMENTS
The Company has entered into an Employment Agreement with A.J. Nassar,
pursuant to which Mr. Nassar will serve as Chief Executive Officer of the
Company. The Employment Agreement is for a term of three years, expiring on
June 4, 2000, and provides for an annual base salary of $400,000 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 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
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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, H. Stanley Padgett entered into an amendment to his
employment agreement with Image. Under the amended agreement, which will
expire on July 30, 1998, 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
twelve 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.
On August 30, 1996, Larry M. Miller entered into an amendment to his
employment agreement with Image which contains substantially the same terms as
described above for Mr. Padgett, except that: (i) Mr. Miller's annual base
salary is $240,000; and (ii) Mr. Miller is entitled to receive an additional
severance payment of $175,000 if his employment is voluntarily or involuntarily
terminated for any reason, with or without cause, or upon the death or
disability of Mr. Miller at any time during the term of his employment
agreement.
DIRECTORS' FEES
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 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, 1997: Ronald McSwain
and M.B. Seretean. None of the members ofthe 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
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Company and any of the members of the Compensation Committee during the year
ended January 31, 1997.
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 2,000,000 shares of Common
Stock (3,000,000 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, 1997 to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------- ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
% OF TOTAL OPTION TERM (1)
OPTIONS GRANTED TO EXERCISE OR ------------------
OPTIONS EMPLOYEES IN BASE PRICE
GRANTED FISCAL ($ Per EXPIRATION 5% 10%
NAME (#) YEAR Share) DATE --- ---
---- --------- ---------- ------ ----------
A.J. Nassar . . . . . . . 200,000(2) 26% $11.25 4/26/06 $1,415,00 $3,586,00
James W. Inglis . . . . . 200,000(3) 26% $11.25 4/26/06 $1,415,00 $3,586,00
H. Stanley Padgett . . . -- -- -- -- -- --
Larry M. Miller . . . . . -- -- -- -- -- --
_____________________________________________
(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. In addition, on May 1, 1997, Mr.
Nassar was granted an option to purchase 175,000 shares of Common
Stock at an exercise price of $11.00 per share, which options are
immediately exercisable.
(3) Options to purchase 100,000 shares of Common Stock are immediately
exercisable. Options to purchase 100,000 shares of Common Stock are
exercisable in increments of 20% per year commencing on April 26,
1997.
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The following table provides certain information concerning the value of
unexercised options held by the Named Executive Officers as of January 31,
1997. No stock options were exercised during fiscal 1997 by the Named
Executive Officers.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT FISCAL YEAR THE-MONEY OPTIONS AT
END FISCAL YEAR-END(A)
---------------------------- --------------------------------
NAME EXER- UNEXER- EXER- UNEXER-
---- CISABLE CISABLE CISABLE CISABLE
------- ------- ------- -------
A.J. Nassar . . . . . . . . . . . . . . . 321,440 28,560 $1,912,248 $ 141,372
James W. Inglis . . . . . . . . . . . . . 100,000 100,000 $ 525,000 $ 525,000
H. Stanley Padgett . . . . . . . . . . . 441,320 -- $6,864,600 $ --
Larry M. Miller . . . . . . . . . . . . . 155,020 -- $2,556,280 $ --
- - ---------------------------
(a) Dollar values were calculated by determining the difference between the
fair market value of the underlying securities at January 31, 1997 ($16.50
per share) 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
In August 1995, the Company loaned $820,987 to Kevodrew Realty, Inc.
("Kevodrew") a company controlled by A.J. Nassar, the President and Chief
Executive Officer of the Company, which loan bears interest at an annual rate
of prime. These funds were loaned to Kevodrew to provide interim financing for
the purchase by Kevodrew of a retail shopping center in Louisville, Kentucky.
This loan was repaid in May 1996. A primary tenant in the shopping center is a
company-owned store, which has entered into a five-year lease agreement with
Kevodrew providing for annual lease payments of $89,155. In addition to the
foregoing, the Company loaned to Mr. Nassar an additional $141,650, $349,265
and $318,104 during fiscal 1995, 1996 and 1997, respectively. As of April 15,
1997, a total of $812,777 was owed to the Company by Mr. Nassar, which amount
bears interest at an annual rate of 8%. The Company may in the future make
loans to officers and employees in furtherance of proper corporate purposes.
GCO leases two facilities in Montgomery, Alabama and an airplane from Dicky
W. McAdams, a former director of the Company and the Chairman of GCO. One of
these facilities and the airplane 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 $170,990 in
fiscal 1997.
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In connection with the employment by the Company of James W. Inglis as
its Chief Operating Officer and Senior Executive Vice President, the Company
issued to Mr. Inglis on May 15, 1996 50,000 shares of Common Stock at a purchase
price of $9.80 per share. This represents a discount of $116,250 or $2.325 per
share, based on the closing price of the Company's Common Stock as reported on
The Nasdaq National Market on May 15, 1996.
Ronald McSwain and Herb Wolk, directors of the Company, are also owners of
floorcovering 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.
FISCAL 1995 FISCAL 1996 FISCAL 1997
------------------------ ----------------------- --------------------------
AMOUNTS PAID AMOUNTS PAID AMOUNTS PAID
NAME TO COMPANY REBATES TO COMPANY REBATES TO COMPANY REBATES
---- ---------- ------- ---------- ------- ----------- -------
Ronald McSwain . $323,175 $274,550 $242,550 $206,453 $330,602 $210,113
Herb Wolk . . . . 72,134 48,328 47,604 26,863 61,485 25,553
--------- --------- --------- --------- --------- ---------
Total . . . $395,309 $322,878 $290,154 $233,316 $392,087 $235,666
======== ======== ======== ======== ======== ========
Although there has not been any independent determination of the fairness
and reasonableness of the terms and conditions of the transactions between the
Company and its affiliates, the Company believes that these transactions are on
terms no less favorable than those which could have been obtained from parties
not affiliated with the Company or other franchisees. As with any contractual
arrangement, the terms of these transactions are subject to adjustment should
the parties so desire. The Company, however, has no present intention of
adjusting the terms of these transactions.
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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 and the Nasdaq
Retail Stock Index for the period commencing on September 30, 1993 (the date of
the Company's initial public offering of Common Stock) and ending January 31,
1997 (the "Measuring Period"). 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., NASDAQ STOCK MARKET INDEX AND
NASDAQ RETAIL STOCK INDEX
9/30/93 3/31/94 3/31/95 1/31/96 1/31/97
------- ------- ------- ------- -------
The Maxium Group, Inc. $100 $229 $235 $179 $314
NASDAQ Stock Market Index $100 $ 98 $109 $142 $186
NASDAQ Retail Stock Index $100 $ 94 $ 92 $101 $124
* 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 AND
NASDAQ RETAIL STOCK INDEX
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REPORT OF COMPENSATION AND STOCK OPTION COMMITTEES
ON EXECUTIVE COMPENSATION
During the year ended January 31, 1997, the Compensation Committee of the
Board of Directors was comprised of two non-employee members of the Board and
the Stock Option Committee of the Board of Directors was comprised of three
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 performance. The
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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 provides for an annual base salary of $400,000. 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, 1997, the Stock Option Committee
granted the Chief Executive Officer options to purchase 200,000 shares of the
Company's Common Stock. In addition, options to purchase 200,000 shares of
Common Stock were granted to the Company 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
Ronald McSwain J. Michael Nixon
Herb Wolk 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.
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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 (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.
The 1993 Plan provides for the grant of options to purchase up to an
aggregate of 2,000,000 shares of the Company Common Stock. 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 June 15, 1997, 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: 525,000 shares; James W. Inglis: 200,000 shares; H.
Stanley Padgett: 41,318 shares; and Larry M. Miller: no shares); (ii) all
current executive officers as a group: 1,036,318 shares; (iii) all current
directors who are not executive officers as a group: 380,000 shares; (iv) each
nominee for election as a director (J. Michael Nixon: 55,000 shares; and Herb
Wolk: no shares) and (v) all employees, including all current officers who are
not executive officers, as a group: 1,616,921 shares.
DESCRIPTION OF PROPOSED AMENDMENT
On May 15, 1997, 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 3,000,000 shares from
2,000,000 shares. As of June 15, 1997, no 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 2,000,000 shares of Common
Stock (3,000,000 shares if the amendment to the 1993 Plan is approved by the
shareholders of the Company at the Annual Meeting).
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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 date
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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
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stock option. An optionee will be taxed only when the stock acquired upon
exercise of his 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 28%, 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 in computing an
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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.
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
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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, 1997. 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 1998 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, 1998 will be
selected during the third quarter of the current fiscal year.
On September 11, 1995, the Company dismissed its independent auditors, KPMG
Peat Marwick LLP, and on the same date engaged the firm of Arthur Andersen LLP
as its independent public accountants for the ten month period ended January
31, 1996. Each of these actions was approved by the Board of Directors of the
Company.
The reports of KPMG Peat Marwick LLP on the financial statements of the
Company for the past two fiscal years did not contain an adverse opinion or a
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles. In connection with the audits of the
Company's financial statements for each of the two fiscal years ended March 31,
1995 and 1994, and in the subsequent interim period prior to the dismissal of
KPMG Peat Marwick LLP, there were no disagreements with KPMG Peat Marwick LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement, if not resolved
to the satisfaction of KPMG Peat Marwick LLP, would have caused it to make
reference to the subject matter of the disagreement in its report.
ANNUAL REPORT ON FORM 10-KSB
The Company's Annual Report for the year ended January 31, 1997 on Form
10-KSB 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.
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SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 1998
annual meeting must be received at the Company's principal executive offices by
February 28, 1998 in order to be eligible for inclusion in the Company's proxy
statement and form of proxy for that meeting.
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 27, 1997
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APPENDIX
THE MAXIM GROUP, INC.
210 TownPark Drive
Kennesaw, Georgia 30144
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
1997 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 undersgined to
vote the Common Stock of the undersigned at the Annual Meeting of Shareholders
of THE MAXIM GROUP, INC. to be held on July 25, 1997, 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 PROPOSALS SET FORTH ON THE
REVERSE SIDE OF THIS PROXY CARD AND UNLESS INSTRUCTIONS TO THE CONTRARY ARE
INDICATED IN THE SPACE PROVIDED, THIS PROXY WILL BE SO VOTED.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign exactly as your name(s) appear(s) on the books of the Company.
When signing as attorney, trustee, executor, administrator or guardian, please
give your full 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.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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26
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- - -------------------------------------------------------------------------- 1. To elect two (2) directors to serve for a term of
THE MAXIM GROUP, INC. three years and until their successors are
- - -------------------------------------------------------------------------- obtained and qualified
For With For All
Mark box at right if an address change or comment has [ ] J. MICHAEL NIXON All held Except
been noted on the previous side of this card. HERB WOLK [ ] [ ] [ ]
INSTRUCTIONS: To withhold authority to vote for
for any individual nominee, mark the "For All
Except" box and strike a line through the name
RECORD DATE SHARES: of the nomination.
2. To approve an amendment For Against Abstain
to the 1993 Stock Option [ ] [ ] [ ]
Plan of the Company to
increase the number of
shares available for grant
thereunder from 2,000,000
shares to 3,000,000 shares.
3. To transact such other business incidental to the
Please be sure to sign and date this Proxy. Date: conduct at the Annual Meeting as may properly come
before the Annual Meeting or any postponements or
Shareholder sign here Co-owner sign here postponements thereof.
DETACH CARD