SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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/ / Definitive Additional Materials
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Rule 14a-12
MAXIMUS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
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and 0-11.
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[LOGO]
1356 BEVERLY ROAD
MCLEAN, VIRGINIA 22101
(703) 734-4200
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 23, 2000
The 2000 Annual Meeting of Shareholders of MAXIMUS, Inc. will be held [at a
place to be determined in McLean, Virginia] on Wednesday, February 23, 2000 at
11:00 a.m., Eastern Standard Time, to consider and act upon the following
matters:
1. To elect four Class III Directors to serve until the 2003 Annual
Meeting of Shareholders.
2. To approve an amendment to the MAXIMUS Amended and Restated Articles
of Incorporation to increase the number of authorized shares of common stock
of MAXIMUS from 30,000,000 to 60,000,000 shares.
3. To ratify the appointment of Ernst & Young LLP as the company's
independent public accountants for the current fiscal year.
4. To transact any other business that may properly come before the
meeting or any adjournment of the meeting.
Shareholders of record at the close of business on December 17, 1999 will be
entitled to vote at the annual meeting or at any adjournment of the annual
meeting.
The board hopes that you will attend the meeting. Whether or not you plan to
attend, please complete, date, sign and return the enclosed proxy card in the
accompanying envelope. Your prompt response will greatly facilitate arrangements
for the meeting, and your cooperation will be appreciated.
By Order of the Board of Directors,
David R. Francis, SECRETARY
December , 1999
TABLE OF CONTENTS
PAGE
--------
General Information About Voting............................ 1
Security Ownership of Management and Five Percent Owners.... 2
Section 16(a) Beneficial Ownership Reporting Compliance..... 4
PROPOSAL 1: Election of Directors........................... 4
Board and Committee Meetings................................ 7
Director Compensation....................................... 8
Certain Relationships and Related Transactions.............. 8
Executive Compensation...................................... 8
Summary Compensation Table................................ 9
Option Grant Table........................................ 10
Fiscal Year-End Option Values............................. 10
Executive Employment Agreements............................. 11
Report of the Board of Directors and Compensation
Committee................................................. 11
Compensation Committee Interlocks and Insider
Participation............................................. 14
Stock Performance Graph..................................... 14
PROPOSAL 2: Amendment to the MAXIMUS Amended and Restated
Articles of Incorporation to Increase the Number of
Authorized Shares of Common Stock......................... 14
PROPOSAL 3: Ratification of Selection of Independent
Auditors.................................................. 15
Shareholder Proposals....................................... 15
Other Materials............................................. 16
APPENDIX A--Proposed Amendment to the MAXIMUS Amended and
Restated Articles of Incorporation........................ A-1
PROXY STATEMENT
Our board of directors is soliciting your proxy with the enclosed proxy card
for use at the 2000 Annual Meeting of Shareholders to be held on Wednesday,
February 23, 2000 and at any adjournments of the meeting. This proxy statement
and accompanying proxy card are first being sent or given to shareholders on or
about December , 1999.
GENERAL INFORMATION ABOUT VOTING
WHO CAN VOTE. You will be entitled to vote your shares of MAXIMUS common
stock at the annual meeting if you were a shareholder of record at the close of
business on December 17, 1999. As of that time, shares of common stock
were outstanding. You are entitled to one vote for each share of common stock
that you held.
HOW TO VOTE YOUR SHARES. You can vote your shares either by attending the
annual meeting and voting in person or by voting by proxy. If you choose to vote
by proxy, please complete, date, sign and return the enclosed proxy card. The
proxies named in the proxy card (David V. Mastran, Raymond B. Ruddy and F.
Arthur Nerret) will vote your shares as you have instructed. You may authorize
the proxies to vote your shares in favor of each of the proposals contained in
this proxy statement by simply signing and returning the proxy card without
indicating how your votes should be cast.
Even if you expect to attend the meeting, please complete and mail your
proxy card in any case in order to assure representation of your shares. If you
attend the meeting, you can always revoke your proxy by voting in person. No
postage is necessary if the proxy card is mailed in the United States.
QUORUM. A quorum of shareholders is required in order to transact business
at the annual meeting. A majority of the outstanding shares of common stock
entitled to vote must be present at the meeting, either in person or by proxy,
to constitute a quorum.
NUMBER OF VOTES REQUIRED. The number of votes required to approve each of
the three proposals that are scheduled to be presented at the meeting is as
follows:
PROPOSAL REQUIRED VOTE
-------- -------------
- - Election of directors. Plurality of the affirmative votes cast for or
against each nominee.
- - Amendment to our charter increasing the Affirmative vote of the holders of two-thirds of
authorized number of shares of common stock. the outstanding shares of common stock.
- - Ratification of the board's selection of Affirmative vote of the holders of a majority of
accountants. the shares of common stock present or represented
at the meeting.
ABSTENTIONS AND BROKER NON-VOTES. Abstentions and broker non-votes will be
considered present at the meeting for the purpose of constituting a quorum. A
broker non-vote occurs when a broker cannot vote a customer's shares registered
in the broker's name because the customer did not send the broker instructions
on how to vote on the matter. If the broker does not have instructions AND is
barred by law or applicable rules from exercising its discretionary voting
authority in the particular matter, then the shares will not be voted on the
matter, resulting in a "broker non-vote". Abstentions and broker non-votes will
not count as votes for or against a matter determined by a percentage or
plurality of votes cast. However, they will count as a vote against a matter
determined by a percentage or plurality of the outstanding shares entitled to
vote. Accordingly, abstentions and broker non-votes at this meeting will count
as votes against the proposed amendment to our charter increasing the shares of
our authorized stock.
DISCRETIONARY VOTING BY PROXIES ON OTHER MATTERS. Aside from the election
of directors, the proposed amendment to our charter and the ratification of our
independent auditors, we do not know of any other
proposal that may be presented at the 2000 Annual Meeting. However, if another
matter is properly presented to the meeting, the persons named in the
accompanying proxy card will exercise their discretion in voting on the matter.
HOW YOU MAY REVOKE YOUR PROXY. You may revoke the authority granted by your
executed proxy card at any time before we exercise it by notifying our Corporate
Secretary in writing, executing a new proxy card bearing a later date, or voting
in person at the annual meeting.
EXPENSES OF SOLICITATION. We will bear all costs of soliciting proxies. We
will request that brokers, custodians and fiduciaries forward proxy soliciting
material to the beneficial owners of stock held in their names, for which we
will reimburse their out-of-pocket expenses. In addition to solicitations by
mail, our directors, officers and regular employees, without additional
remuneration, may solicit proxies by telephone, telegraph and personal
interviews.
SECURITY OWNERSHIP OF MANAGEMENT AND FIVE PERCENT OWNERS
The following table shows the number of shares of common stock beneficially
owned as of December 8, 1999, by (i) the only persons known by us to own more
than five percent of our outstanding shares of common stock, (ii) our directors
and the nominees for director, (iii) the executive officers named in the Summary
Compensation Table contained in this proxy statement and (iv) all of our
directors and executive officers as a group.
The number of shares beneficially owned by each holder is based upon the
rules of the SEC. Under SEC rules, beneficial ownership includes any shares over
which a person has sole or shared voting or investment power as well as shares
which the person has the right to acquire within 60 days by exercising any stock
option or other right. Accordingly, this table includes shares that each person
has the right to acquire by or before February 6, 2000. Unless otherwise
indicated, each person has sole investment and voting power (or shares that
power with his or her spouse) over the shares in the table. By including in the
table shares that he or she might be deemed beneficially to own under SEC rules,
a holder does not admit beneficial ownership of those shares for any other
purpose.
To compute the percentage ownership of a shareholder, the total number of
shares deemed outstanding includes 21,008,607 shares that were outstanding on
December 8, 1999, plus any shares the holder could acquire upon exercising any
options exercisable by or before February 6, 2000.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
-------------------------
BENEFICIAL OWNER SHARES PERCENT
- ---------------- --------- --------
American International Group, Inc........................... 1,720,300(1) 8.2%
70 Pine Street
New York, NY 10270
Waddell & Reed Financial, Inc............................... 1,447,700(2) 6.9
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
David V. Mastran............................................ 6,765,340(3) 32.2
Raymond B. Ruddy............................................ 2,681,787(4) 12.8
Margaret Carrera............................................ 912,570(5) 4.3
Lynn P. Davenport........................................... 209,617(6) *
Russell A. Beliveau......................................... 152,804(7) *
George C. Casey............................................. 141,432(8) *
Robert J. Muzzio............................................ 115,797(9) *
2
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
-------------------------
BENEFICIAL OWNER SHARES PERCENT
- ---------------- --------- --------
Peter B. Pond............................................... 15,150(10) *
Jesse Brown................................................. 15,000(10) *
Louis E. Chappuie........................................... 5,518(11) *
Stephen Goldsmith........................................... 5,000(10) *
Thomas A. Grissen........................................... 1,225 *
All directors and executive officers as a group 8,308,312(12) 40.8
(23 persons)..............................................
- ------------------------
* Percentage is less than 1% of all outstanding shares of common stock.
(1) As reported on its Form 13F, Quarterly Holdings Reports Filed by Investment
Managers, filed with the SEC on November 15, 1999 by American International
Group, Inc., an institutional investment manager, for the period ended
September 30, 1999. Also includes shares beneficially owned by John McStay
Investment Counsel, L.P., an institutional investment manager included in
the report. The owners have shared voting power over 1,649,500 of these
shares and no voting power over 70,800 of these shares.
(2) As reported on its Form 13F, Quarterly Holdings Reports Filed by Investment
Managers, filed with the SEC on November 12, 1999 by Waddell & Reed
Financial, Inc., an institutional investment manager, for the period ended
September 30, 1999. Also includes shares beneficially owned by Waddell &
Reed Financial Services, Inc., Waddell & Reed, Inc., Waddell & Reed
Investment Management Company, and Waddell & Reed Asset Management Company,
all institutional investment managers included in the report. The shares are
owned by open-ended investment companies or managed accounts advised or
sub-advised by Waddell & Reed Investment Management Company or one of its
subsidiaries.
(3) Includes the holdings of (i) Dr. Mastran's spouse, consisting of 62,129
shares and 4,821 shares issuable under stock options exercisable by or
before February 6, 2000 and (ii) Mr. Ruddy, consisting of 2,681,787 shares,
who, under a written agreement, must vote such shares in a manner consistent
with instructions from Dr. Mastran until September 30, 2001. See "Executive
Employment Agreements." Dr. Mastran does not, however, have dispositive
power over Mr. Ruddy's shares.
(4) Includes 998,047 shares held by a trust of which Mr. Ruddy is the trustee
and beneficiary.
(5) Includes 150 shares issuable under stock options exercisable by or before
February 6, 2000.
(6) Includes 115,733 shares issuable under stock options exercisable by or
before February 6, 2000. Also includes 1,250 shares held by Mr. Davenport's
son.
(7) Includes 15,388 shares issuable under stock options exercisable by or
before February 6, 2000. Also includes 137,146 shares held in a trust of
which Mr. Beliveau and his spouse are the primary beneficiaries.
(8) Includes 25,825 shares issuable under stock options exercisable by or
before February 6, 2000.
(9) Consists of (i) 110,826 shares held in a trust of which Mr. Muzzio and his
spouse are co-trustees and co-beneficiaries, and (ii) 4,971 shares issuable
under stock options exercisable by or before February 6, 2000.
(10) Consists of shares issuable under stock options exercisable by or before
February 6, 2000.
(11) Includes shares held in a trust of which Mr. Chappuie is trustee.
(12) Includes 432,966 shares issuable under stock options exercisable by or
before February 6, 2000.
3
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our directors, our executive officers and anyone owning beneficially more
than ten percent of the our equity securities are required under Section 16(a)
of the Securities Exchange Act of 1934 to file with the SEC reports of their
ownership and changes of their ownership of our securities. They must also
furnish copies of the reports to us. Based solely on our review of the reports
furnished to us and written representations that no other reports were required,
we believe that during our 1999 fiscal year our directors, executive officers
and 10% beneficial owners complied with all applicable Section 16(a) filing
requirements, except that:
- a report by David R. Francis, one of our officers, reporting his
acquisition of shares of common stock was filed two weeks late;
- exit reports for Kevin Dorney, Charles H. Gray, John E. Parker and Philip
A. Richardson, former officers, reporting options granted to them during
fiscal year 1999 were filed two weeks late; and
- a report by Jesse Brown, one of our directors, reporting options granted
to him during fiscal year 1999 was filed three weeks late.
PROPOSAL 1: ELECTION OF DIRECTORS
The board has fixed the number of directors at twelve for the coming fiscal
year. Under our charter, the board is divided into three classes, with each
class having as nearly equal a number of directors as possible. The term of one
class expires, with their successors being subsequently elected to a three-year
term, at each annual shareholders meeting. At the 2000 Annual Meeting, four
Class III Directors will be elected to hold office for three years and until
their successors are elected and qualified. The board has nominated Lynn P.
Davenport, Thomas A. Grissen, David V. Mastran and Raymond B. Ruddy, who are
presently serving as directors, for election as Class III Directors at the
upcoming annual meeting. If you return your proxy card in the enclosed envelope,
the persons named in the enclosed proxy card will vote to elect these four
nominees unless you mark your proxy card otherwise. The proxy may not be voted
for a greater number of nominees than four. Each nominee has consented to being
named in this proxy statement and to serve if elected. If for any reason any
nominee should become unavailable for election prior to the annual meeting, the
proxy may vote for the election of a substitute. We do not presently expect that
any of the nominees will be unavailable.
The following table contains biographical information about the nominees for
Class III Director and current directors whose terms of office will continue
after the annual meeting. Information about the number of shares of common stock
beneficially owned by each nominee and director, directly or indirectly, as of
December 8, 1999, appears above under "Security Ownership of Management and Five
Percent Owners."
NAME AND AGE BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS DIRECTOR SINCE
- ------------ ----------------------------------------------------------- --------------
NOMINEES FOR CLASS III DIRECTORS
(PRESENT TERM EXPIRES IN 2000)
Lynn P. Davenport Lynn P. Davenport has served as the President of our Human 1994
Age: 52 Services Division since he joined MAXIMUS in 1991. He has
over twenty-five years of health and human services
experience in the areas of administration, productivity
improvement, management consulting, revenue maximization
and management information systems. Prior to joining us,
Mr. Davenport was employed by Deloitte & Touche, and its
predecessor, Touche Ross & Co., in Boston, Massachusetts,
where he became a partner in 1987. Mr. Davenport received
his M.P.A. in Public Administration
4
NAME AND AGE BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS DIRECTOR SINCE
- ------------ ----------------------------------------------------------- --------------
from New York University in 1971 and his B.A. in Political
Science and Economics from Hartwick College in 1969.
Thomas A. Grissen Thomas A. Grissen has served as President of our Government 1999
Age 40 Operations Group since March 1999. Prior to that, he served
as the General Manager and Vice President of TRW from
January 1998. Mr. Grissen was President of BDM
International from April 1997 until joining TRW. Before
starting at BDM International, Mr. Grissen was a principal
and managing director of Unisys for 16 years. Mr. Grissen
received his Executive M.B.A. from Michigan State
University and his B.A. in Business from Central Michigan
University.
David V. Mastran David V. Mastran has served as our President and Chief 1975
Age: 56 Executive Officer since he founded MAXIMUS in 1975. Dr.
Mastran received his Sc.D. in Operations Research from
George Washington University in 1973, his M.S. in
Industrial Engineering from Stanford University in 1966 and
his B.S. from the United States Military Academy at West
Point in 1965.
Raymond B. Ruddy Raymond B. Ruddy has served as our Chairman of the Board of 1985
Age: 56 Directors since 1985 and as President of our Consulting
Group since 1986. From 1969 until he joined MAXIMUS, Mr.
Ruddy served in various capacities with Touche Ross & Co.,
including Associate National Director of Consulting from
1982 until 1984 and the Director of Management Consulting
for the Boston, Massachusetts office from 1978 until 1983.
Mr. Ruddy received his M.B.A. from the Wharton School of
Business of the University of Pennsylvania and his B.S. in
Economics from Holy Cross College.
CLASS I DIRECTORS (PRESENT TERM EXPIRES IN 2001)
Margaret Carrera Margaret Carrera has served as President of Carrera-MAXIMUS 1998
Age: 45 and Vice-Chairwoman of our board since our acquisition of
the Carrera Consulting Group in August 1998. Prior to that
time she had served as President of Carrera Consulting
since its founding in 1991. Ms. Carrera has twenty years of
experience in management information systems. Prior to the
founding of Carrera Consulting Group, she served as West
Region Director of Information Systems consulting for the
Public Sector with Ernst & Young and Vice President of Bank
Card Processing for Bank of America. She has also held
positions at Cambridge Systems Group and Pacific Telephone.
Ms. Carrera received her M.B.A. in Finance from San
Francisco State University in 1980 and her B.A. in
Mathematics and Chemistry from United States International
University in 1975.
Louis E. Chappuie Louis E. Chappuie has served as President of DMG-MAXIMUS 1998
Age: 61 since our acquisition of David M. Griffith & Associates,
Ltd. in May 1998. Prior to that time he served as President
of Griffith from 1992 and Chairman of the Board of Griffith
from 1997. Before assuming the presidency of Griffith, he
was Executive Vice President of Griffith's Western Practice
Area in Sacramento,
5
NAME AND AGE BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS DIRECTOR SINCE
- ------------ ----------------------------------------------------------- --------------
California for 12 years. His additional experience includes
Arthur Young & Company and Foreign Service Officer, U.S.
State Department. Mr. Chappuie received his B.A. and M.A.
from the University of Minnesota in 1960 and 1961,
respectively, and has completed course work for a Ph.D. in
Economics.
Robert J. Muzzio Robert J. Muzzio has served in various positions with us 1996
Age: 65 since 1979, including Executive Vice President since 1987.
Mr. Muzzio has more than 30 years of experience as a health
care administrator, health systems researcher, and
personnel and manpower analyst. Prior to joining MAXIMUS,
Mr. Muzzio held many public and private sector positions in
the health care industry, including Life Support
Coordinator for the Morrison Knudsen Saudi Arabia
Consortium in 1978 and 1979 and Director of the Personnel
Policies Division of the Office of the Surgeon General,
Department of the Army, from 1976 until 1978. Mr. Muzzio
received his M.A. in Health Care Administration from Baylor
University in 1967 and his B.A. in Public Health from San
Jose State College in 1956.
Peter B. Pond Peter B. Pond has served as one of our directors since his 1997
Age: 55 election by the board in December 1997. Mr. Pond is a
Principal and Managing Director in the Investment Banking
Department at Donaldson, Lufkin & Jenrette Securities
Corporation in Chicago and is head of that company's
Midwest Investment Banking Group. Mr. Pond holds a B.S. in
Economics from Williams College and an M.B.A. from the
University of Chicago. He is also a director of Navigant
Consulting, Inc.
CLASS II DIRECTORS (PRESENT TERM EXPIRES IN 2002)
Russell A. Beliveau Russell A. Beliveau has served as President of our Office 1995
Age: 52 of Government Affairs and Investor Relations since
September 1998. Prior to that, he served as the President
of our Government Operations Group from 1995 to 1998. Mr.
Beliveau has more than 20 years' experience in the health
and human services industry during which he has worked in
both government and private sector positions at the senior
executive level. Mr. Beliveau's past positions include Vice
President of Operations at Foundation Health Corporation of
Sacramento, California from 1988 through 1994 and Deputy
Associate Commissioner (Medicaid) for the Massachusetts
Department of Public Welfare from 1983 until 1988. Mr.
Beliveau received his M.B.A. in Business Administration and
Management Information Systems from Boston College in 1980
and his B.A. in Psychology from Bridgewater State College
in 1974.
Jesse Brown Jesse Brown has served as one of our directors since his 1997
Age: 55 election by the board in September 1997. Mr. Brown, who is
currently President of Brown & Associates, Inc., an
international consulting company, served as Secretary of
Veteran Affairs under the Clinton Administration from 1993
until 1997, and as Executive Director of the Washington
office of Disabled American Veterans from 1989 to 1993. Mr.
Brown is an honors graduate of Chicago
6
NAME AND AGE BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS DIRECTOR SINCE
- ------------ ----------------------------------------------------------- --------------
City College and also attended Roosevelt University in
Chicago and Catholic University in Washington, D.C.
George C. Casey George C. Casey has served as President of the SPECTRUM 1999
Age 55 MAXIMUS Division since our acquisition of the Spectrum
Consulting Group, Inc. in March 1998. Prior to that, he had
served as President of Spectrum since October 1986. Before
joining Spectrum in 1986, Mr. Casey worked as a Partner for
KMG Main Hurdman, an international public accounting firm
that later merged with KPMG Peat Marwick. Mr. Casey has
extensive experience in project planning and management,
procurement and contract negotiations, and quality
assurance reviews and realignment. Mr. Casey earned a
B.S./B.A. degree from Northwestern University in 1966.
Stephen Goldsmith Stephen Goldsmith has served as one of our directors since 1999
Age 53 his election to our board in September 1999. Mr. Goldsmith
has been the Mayor of the City of Indianapolis, Indiana
since 1992. In January of 2000, Mr. Goldsmith plans to join
the Indianapolis law firm of Baker and Daniels as a
partner. In addition, Mr. Goldsmith is the Chief Domestic
Advisor for Texas Governor George W. Bush and has academic
appointments to Harvard University and University of
Pennsylvania. Mr. Goldsmith holds an A.B. from Wabash
College and a J.D. from the University of Michigan. Mr.
Goldsmith is the author of The Twenty-First Century City
Resurrecting Urban America and is published in Harvard
Business Review on issues of government reform. Mr.
Goldsmith is also a director of The Finish Line and
Consolidated Products, Inc. and is the Chairman of the
Board for the Manhattan Institute's Center for Civic
Innovation.
BOARD AND COMMITTEE MEETINGS
The board held five meetings during fiscal 1999.
Our board has a standing Audit Committee that assists the board in
discharging its duties and responsibilities relating to the review of our
finances. The Audit Committee provides the board with an independent review of
our financial health and of the reliability of our financial controls and
financial reporting. The members of the audit committee are Messrs. Brown, Pond
and Goldsmith. The Audit Committee held two meeting during fiscal 1999.
Our board also has a standing Compensation Committee that is responsible for
establishing cash compensation policies with respect to our executive officers,
employees, directors and consultants. The members of the Compensation Committee
are Dr. Mastran and Mr. Ruddy. The Compensation Committee held one meeting
during fiscal 1999. See "Report of the Board of Directors and Compensation
Committee."
7
DIRECTOR COMPENSATION
Directors who are also MAXIMUS employees do not receive additional
compensation for their services as directors. Outside directors are paid a fee
of $2,500 for each board and committee meeting that they attend in person.
During fiscal 1999, we paid Mr. Brown and Mr. Pond each $10,000 in directors'
fees.
Any director who is not a MAXIMUS employee is eligible to participate in our
1997 Director Stock Option Plan. Options under the Director Stock Option Plan
are automatically granted to an eligible director upon the election or
re-election of the director. Under the plan, each option consists of 5,000
shares of common stock for each year of the term of office to which the director
is elected, with any period of term of office less than a year deemed a full
year. The option becomes exercisable for 5,000 shares immediately upon grant
and, if the grant is for more than 5,000 shares, then it also becomes
exercisable for an additional 5,000 shares at each subsequent annual
shareholders meeting during which the optionee is an eligible director and
shares remain unvested under the option. Options granted under the Director
Stock Option Plan have a ten-year term. The exercise price for each option is
equal to our common stock's last sale price on the trading day immediately
preceding the date of grant, as reported on the New York Stock Exchange.
Currently, the only eligible directors are Messrs. Brown, Pond and Goldsmith.
During fiscal 1999, Mr. Goldsmith received an option for 15,000 shares upon
being elected to the board. Also, Mr. Brown received an option for 15,000 shares
when he was reelected as a director for a three-year term at our 1999 annual
shareholders meeting.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Pond is a Principal and Managing Director in the Investment Banking
Department at Donaldson, Lufkin & Jenrette Securities Corporation in Chicago.
DLJ was a managing underwriter for our IPO in June 1997 and our second public
offering of common stock in December 1998. We also employ DLJ Investment
Management Corp. to manage our securities portfolio.
Donna Muldoon Mastran, our Vice President of Administration, is married to
Dr. Mastran, MAXIMUS's President and CEO. In fiscal year 1999, Mrs. Mastran
received compensation of $159,500, composed of a base salary of $129,500 and a
bonus of $30,000, and a stock option to purchase 2,100 shares of common stock at
an exercise price of $26.25 for her services.
Keven L. Kvasnicka is employed by us as a Manager of Internal Computer
Equipment. Mr. Kvasnicka is married to Dr. Mastran's daughter. In fiscal year
1999, Mr. Kvasnicka received compensation of $63,833, composed of a base salary
of $57,833 and a bonus of $6,000, and a stock option to purchase 450 shares of
common stock at an exercise price of $26.25.
Michael Truby, one of our Vice Presidents, is married to one of our
executive officers, Holly A. Payne, the President of our Welfare Reform
Division. In fiscal year 1999, Mr. Truby received compensation of $216,583,
composed of a base salary of $159,583 and a bonus of $57,000, and a stock option
to purchase 3,839 shares of common stock at an exercise price of $26.25.
Ms. Carrera, Vice Chairwoman of our board and the President of
Carrera-MAXIMUS, owns the property in Sacramento, California where
Carrera-MAXIMUS operates. Ms. Carrera leases the property to Carrera-MAXIMUS
under a three-year lease for a monthly payment of $4,523.50. During our 1999
fiscal year, Ms. Carrera received a total of $49,778.82 in rental payments from
Carrera-MAXIMUS.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The table below provides compensation
information for our CEO and our four other most highly compensated executive
officers whose salary and bonus for the past fiscal year exceeded $100,000.
8
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION AWARDS(3)
COMPENSATION(1) ----------------------
FISCAL ------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) UNDERLYING OPTIONS COMPENSATION(4)
- --------------------------- -------- -------- -------- ---------------------- ---------------
David V. Mastran............... 1999 $350,000 -- -- --
President and Chief Executive 1998 350,841 -- -- --
Officer 1997 350,413 -- -- --
Raymond B. Ruddy............... 1999 350,000 -- -- $7,733
Chairman of the Board, Vice 1998 350,000 -- -- 6,400
President, and President of 1997 350,000 -- -- 3,067
Consulting Services
Lynn P. Davenport.............. 1999 311,538 $174,500 10,468 7,733
President of Human Services 1998 275,000 170,000 10,198 6,400
Division 1997 259,615 100,000 116,365(5) 6,454
Louis E. Chappuie (6).......... 1999 325,000 125,000 -- 6,750
President of DMG-MAXIMUS 1998 115,900 46,544 -- --
George C. Casey (7)............ 1999 324,000 50,000 1,619 7,733
President of SPECTRUM MAXIMUS 1998 167,375 100,000 103,299 3,200
Division
- ------------------------
(1) Compensation in the form of perquisites and other personal benefits has been
omitted when the total amount of those perquisites and personal benefits
constituted less than either $50,000 or 10% of the total annual salary and
bonus for the officer for the 1999 fiscal year.
(2) The bonuses shown for 1999 were earned in fiscal 1999, but paid on or about
October 21, 1999. Similarly, bonuses earned in fiscal 1998 were paid on
October 21, 1998, and bonuses earned in fiscal 1997 were paid on
October 27, 1997.
(3) The figures in this column for fiscal 1999 represent options to purchase
common stock at an exercise price of $26.25 per share. The figures in this
column for fiscal 1998 represent options to purchase common stock at an
exercise price of $27.625 per share.
(4) The figures in this column represent the company's contribution to the
employee's account under our 401(k) plan.
(5) Includes options to purchase 110,000 shares of common stock at an exercise
price of $1.46 per share and options to purchase 6,365 of common stock at an
exercise price of $26.50 per share.
(6) Mr. Chappuie joined us on May 12, 1998, the date we acquired Griffith. The
compensation information provided for fiscal 1998 only includes compensation
that Mr. Chappuie received from MAXIMUS during that year.
(7) Mr. Casey joined us on March 16, 1998, the date we acquired Spectrum. The
compensation information provided for fiscal 1998 only includes compensation
that Mr. Casey received from MAXIMUS during that year.
9
OPTION GRANT TABLE. The following table provides information for options
granted to our CEO and our four other most highly compensated executive officers
for fiscal year 1999.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE OF
------------------------------------------------------- ASSUMED
PERCENT ANNUAL RATES OF
NUMBER OF OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (2)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION -------------------
NAME GRANTED (1) IN FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ----------- -------------- ----------- ---------- -------- --------
David V. Mastran................... -- -- -- -- -- --
Raymond B. Ruddy................... -- -- -- -- -- --
Lynn P. Davenport.................. 10,198 1.2% $27.625 (1) $177,088 $449,272
Louis E. Chappuie.................. -- -- -- -- -- --
George C. Casey.................... 3,299 0.4 27.625 (1) 57,287 145,337
- ------------------------
(1) These options were granted on October 12, 1998 under our 1997 Equity
Incentive Plan. Each option expires upon the earlier of three months after
the officer's termination of employment or October 12, 2008.
(2) The values in this column are given for illustrative purposes; they do not
reflect our estimate or projection of future stock prices. The values are
based on an assumption that our common stock's market price will appreciate
at the stated rate, compounded annually, from the date of the option grant
until the end of the option's 10-year term. We based the values on the
common stock's last sale price on the business day immediately preceding the
date of grant, as reported on the New York Stock Exchange. Actual gains, if
any, on stock option exercises will depend upon the future performance of
our common stock's price, which will benefit all shareholders
proportionately.
FISCAL YEAR-END OPTION VALUES. The following table provides information for
exercisable and unexercisable stock options held by our CEO and our four other
most highly compensated officers as of September 30, 1999:
FISCAL YEAR-END OPTION VALUES (1)
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END (2)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
David V. Mastran.............................. -- -- -- --
Raymond B. Ruddy.............................. -- -- -- --
Lynn P. Davenport............................. 115,733 10,830 $3,149,421 $28,630
Louis E. Chappuie............................. -- -- -- --
George C. Casey............................... 25,825 77,474 37,858 113,572
- ------------------------
(1) No options were exercised during fiscal year 1999 by the officers named in
the table.
(2) The values in this column represent the difference between the last reported
sales price of the common stock as reported by the New York Stock Exchange
on September 30, 1999 ($29.9375) and the exercise price of the option,
multiplied by the number of shares subject to the option.
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EXECUTIVE EMPLOYMENT AGREEMENTS
COMPENSATION. The five officers named in the compensation tables above have
agreed to serve as officers of MAXIMUS under executive employment agreements.
Under these agreements, each of the officers, except Mr. Chappuie, is entitled
to a minimum base salary as follows: Dr. Mastran, $350,000; Mr. Ruddy, $350,000;
Mr. Davenport, $220,000; and Mr. Casey, $300,000. The amount of the salary and
bonus paid to Mr. Chappuie is fixed at $425,000 by his executive employment
agreement. In addition, each of these officers is entitled to receive a year-end
bonus that is consistent with our past practices under their employment
agreements. Mr. Ruddy's agreement provides that his aggregate compensation will
not be less than Dr. Mastran's aggregate compensation. In addition to a minimum
base salary and a year-end bonus, Mr. Casey received under his employment
agreement a non-qualified stock option to purchase 100,000 shares of common
stock as a signing bonus for joining MAXIMUS when we acquired Spectrum in
March 1998. The exercise price of his option is equal to the fair market value
of our stock on the date of Mr. Casey's agreement ($28.50), and the option vests
as to 25,000 shares on each of the first four anniversaries of the date of the
agreement.
TERM AND TERMINATION. Under their employment agreements, Dr. Mastran's,
Mr. Ruddy's and Mr. Davenport's employment terms began on June 18, 1997 and will
continue until September 30, 2001. Mr. Chappuie's employment term began on
May 12, 1998, the date we acquired Griffith, and continues through May 12, 2000.
This executive employment agreement superseded his employment agreement with
Griffith. Mr. Casey's employment term began on March 16, 1998, the date we
acquired Spectrum, and continues through March 15, 2002. The employment term for
each of these officers is subject to our right to terminate the officer's
employment if he breaches any material duty or obligation to us or engages in
other proscribed conduct.
OTHER TERMS. Each employment agreement provides that the officer will not
compete with us and will maintain our trade secrets in strict confidence. The
agreements with Dr. Mastran, Mr. Ruddy and Mr. Davenport restrict the officer's
ability to sell or transfer his shares of common stock until June 19, 2001 (the
fourth anniversary of our IPO). In addition, each of the officers named in the
compensation tables, except Mr. Chappuie, has in his employment agreement
piggyback registration rights to include his shares of common stock in a
registered offering of our shares. Mr. Ruddy agreed in his agreement to vote his
shares of common stock in a manner consistent with instructions from
Dr. Mastran until September 30, 2001.
REPORT OF THE BOARD OF DIRECTORS AND COMPENSATION COMMITTEE
The Compensation Committee of MAXIMUS's Board of Directors establishes the
cash compensation policies for the company's executive officers. The
Compensation Committee is composed of Dr. Mastran, President and Chief Executive
Officer, and Mr. Ruddy, Chairman of the Board of Directors, Vice President of
MAXIMUS and President of the Consulting Group. The Board of Directors is
responsible for approving the equity compensation of executive officers under
the MAXIMUS 1997 Equity Incentive Plan. The Board and the Compensation Committee
submit this report on compensation policies and actions during fiscal year 1999
with respect to Dr. Mastran, in his capacity as President and Chief Executive
Officer of the company, and the four other most highly compensated executive
officers whose combined salary and bonus for fiscal year 1999 exceeded $100,000,
named in the compensation tables contained in this proxy statement.
COMPENSATION PHILOSOPHY
MAXIMUS bases its executive compensation philosophy on the belief that
competitive compensation is essential to attract, motivate, retain and reward
highly-qualified and industrious executives who contribute to the company's
long-term success. Through its compensation policy, MAXIMUS strives to provide
total compensation that is competitive with other companies in comparable lines
of business. The
11
compensation program includes both motivational and retention-related
compensation components. Effective individual performance that meets and exceeds
the company's current plans and objectives is encouraged through bonus awards
and stock option grants. Stock options are granted in order to link a meaningful
portion of the compensation of the company's executives with the performance of
the company's common stock.
MAXIMUS endeavors to reward each executive's achievement of designated
targets that relate to the company's annual and long-term performance, customer
satisfaction and individual fulfillment of responsibilities. While compensation
survey data are useful guides for comparative purposes, MAXIMUS believes that an
effective compensation program also requires the application of judgment and
subjective determinations of individual performance. Therefore, the Compensation
Committee and Board apply their judgment to reconcile the program's objectives
with the realities of retaining valued employees.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to a public company for compensation over $1 million
paid to its chief executive officer and its four other most highly compensated
executive officers. However, if certain performance-based requirements are met,
qualifying compensation will not be subject to this deduction limit. MAXIMUS
currently intends to structure its stock options grants to executive officers in
a manner that meets these performance-based requirements.
EXECUTIVE COMPENSATION PROGRAM
Annual compensation for the company's executives consists of three principal
elements: base salary, cash bonus and stock options.
BASE SALARY. Each of the four most highly compensated officers named in the
Summary Compensation Table contained in this proxy statement receives an annual
base salary under the terms of his employment agreement with the company. The
Board approved Mr. Ruddy's and Mr. Davenport's employment agreements in 1997 and
approved Mr. Casey's and Mr. Chappuie's employment agreements in 1998. A minimum
annual base salary has been established for Mr. Davenport and Mr. Casey in their
employment agreements. The company sets the salaries or minimum salaries
contained in each of the employment agreements by referring to the executive's
salary history and by considering internal and external factors. At the
beginning of each fiscal year, the Compensation Committee reviews the base
salaries paid to Mr. Davenport and Mr. Casey. In 1999, the Committee adjusted
the annual base salary for Mr. Davenport and Mr. Casey based upon individual
performance, experience and the salaries paid to individuals in comparable
positions with other companies. Mr. Chappuie receives a fixed base salary.
Mr. Ruddy's compensation is set at the same level as Dr. Mastran's by the terms
of Mr. Ruddy's employment agreement.
CASH BONUS. Each of these officers, except Mr. Ruddy, also receives an
annual cash bonus as a significant part of his annual compensation. In fiscal
1999, the cash bonuses paid to each of the other officers named in the Summary
Compensation Table represented the following percentage of his total fiscal 1999
compensation: Mr. Davenport, 35.3%; Mr. Casey, 27.4%; and Mr. Chappuie, 13.1%.
The amount of the cash bonus awarded to Mr. Chappuie is fixed by the terms of
his employment agreement. The Compensation Committee determines the amount of
the cash bonuses awarded to its other executives based upon the company's
financial performance and that executive's contribution to this performance. The
Committee reviews and evaluates the performance of the executive's division or
activity, the impact of that division or activity on the company and the skills
and experience required for the job in assessing each executive's contribution
to the company's success. The Committee also compares these factors with similar
factors applied to other executives, both inside and outside of the company.
12
EQUITY OWNERSHIP. MAXIMUS also provides long-term incentive compensation to
its executives in the form of options to purchase common stock. The MAXIMUS
stock option program is designed to (i) highlight and reinforce the mutual
long-term interests between employees and the shareholders and (ii) attract and
retain important key executives, managers and individual contributors. The
retention of key executives is essential to the company's growth and
development.
The stock options that the company grants have relatively long vesting
periods. The retention value of these options is maximized, and the company's
executive officers are provided with an incentive for longer-term success,
through long vesting periods. Generally, stock options vest in equal annual
installments over four years beginning on the first anniversary of the date of
the option grant. If employees leave the company before their options vest, the
unvested portions are forfeited. While MAXIMUS believes that these longer
vesting periods are in the shareholders' best interest, the vesting periods may
result in an increased number of outstanding options compared to companies with
shorter vesting schedules.
In general, the number of shares of common stock underlying the stock
options granted to each executive reflects the significance of that executive's
current and anticipated contributions to the company. At the end of each fiscal
year, the company grants options to qualified employees at an exercise price
equal to the fair market value per share of common stock on the date of the
grant. In determining the 1999 fiscal year end option grants to the company's
executives, the Compensation Committee considered the equity compensation
policies of competitors and other privately-held and publicly-traded companies
with similar capitalizations. MAXIMUS expects to continue to apply this
philosophy to future grants of its stock options. Both Mr. Davenport and
Mr. Casey received option grants in fiscal 1999, as shown in the Fiscal Year End
Option Value table contained in this proxy statement. Mr. Ruddy and
Mr. Chappuie did not receive options grants in fiscal 1999.
The value that may be realized from exercisable options depends upon whether
the price of the company's common stock at any particular point in time
accurately reflects the company's performance. However, each individual
option-holder, and not the Board, makes the decision as to whether to exercise
options that have vested in any particular year.
DR. MASTRAN'S 1999 COMPENSATION
Dr. Mastran's minimum base annual compensation is fixed at $350,000 by his
employment agreement. His base compensation was not increased during fiscal
1999. When the Board approved Dr. Mastran's employment agreement, it set
Dr. Mastran's base salary at a level it believed was consistent with
Dr. Mastran's salary history at the company. Dr. Mastran's employment agreement
permits a large portion of his total compensation to be reflected by an annual
bonus. The Compensation Committee is responsible for determining Dr. Mastran's
annual bonus after the end of the fiscal year by evaluating the company's
overall financial performance and Dr. Mastran's contribution to the company's
performance. Despite Dr. Mastran's substantial contributions to the company's
performance in fiscal 1999, Dr. Mastran received no bonus, stock awards or
option grants in light of his existing significant equity ownership in the
company.
MAXIMUS, INC.
BOARD OF DIRECTORS
Russell A. Beliveau
Jesse Brown
Margaret Carrera
George C. Casey
Louis E. Chappuie
Lynn P. Davenport
Stephen Goldmith
Thomas A. Grissen
David V. Mastran
Robert J. Muzzio
Peter B. Pond
Raymond B. Ruddy
13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1999, MAXIMUS's compensation committee consisted of
Dr. Mastran and Mr. Ruddy. Dr. Mastran has served as President, Chief Executive
Officer and a director of the company since our incorporation in 1975.
Mr. Ruddy has served as the Chairman of our board and an officer of MAXIMUS
since 1985.
In addition, Messrs. Beliveau, Casey, Chappuie, Davenport, Grissen and
Muzzio and Ms. Carrera are officers and employees of MAXIMUS. In their capacity
as members of the board of directors, these individuals consider non-cash
compensation matters.
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total shareholder return on
MAXIMUS's common stock since June 13, 1997, the date on which our common stock
commenced trading on the New York Stock Exchange, with the cumulative total
return for the NYSE Stock Market Index (U.S. Companies) and the NYSE/AMEX/NASDAQ
SIC 8740-8749 Stocks Index (Management and Public Relations Services--U.S.
Companies). This graph assumes the investment of $100 on June 13, 1997 in
MAXIMUS's common stock, the NYSE Stock Market Index and the NYSE/AMEX/NASDAQ SIC
8740-8749 Stocks Index and assumes dividends are reinvested.
6/13/97 9/30/97 3/31/98 9/30/98 3/31/99 9/30/99
-------- -------- -------- -------- -------- --------
MAXIMUS, Inc................................. $100.00 $160.76 $166.32 $169.45 $161.81 $166.32
New York Stock Exchange--U.S................. $100.00 $107.76 $125.53 $112.14 $136.10 $134.19
Management and Public Relations Services
Companies--U.S............................. $100.00 $123.97 $121.17 $ 97.71 $ 94.15 $ 86.29
PROPOSAL 2: AMENDMENT TO THE MAXIMUS AMENDED AND RESTATED ARTICLES OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
On November 16, 1999, our board approved, subject to shareholder approval,
an amendment to Article SECOND of our Amended and Restated Articles of
Incorporation increasing the number of authorized shares of our common stock, no
par value, from 30,000,000 to 60,000,000 shares. The board recommends that you
consider and approve this proposed amendment.
We consider the proposed amendment to be in the best interests of the
company and our shareholders because it will ensure that we have a sufficient
number of shares of common stock for future use and will be able to act quickly
when the need arises. We would use the shares for such purposes as issuances in
possible future financing transactions, acquisitions of other companies or
business assets, stock splits and stock dividends. The additional shares could
be issued at the board's discretion, without delay and without requiring the
time and expense of a special shareholders' meeting or other shareholder action
unless special circumstances under applicable law, or the rules of the stock
exchange on which our shares are listed, would require otherwise.
As of December 8, 1999, 21,008,607 shares of common stock were outstanding.
An additional 3,477,066 shares were reserved for issuance under our 1997
Employee Stock Purchase Plan and two stock option plans, of which options to
purchase 2,296,158 shares were outstanding. We only have 5,514,327 shares of
common stock available for future use without increasing the number of
authorized shares. The holders of any additional, newly-authorized shares of
common stock issued in the future will have the same rights as current holders
of common stock. Your shares do not carry preemptive rights to receive
additional stock if additional shares are issued later. Therefore, future
issuances of common stock would dilute the percentage ownership of existing
shareholders.
14
VOTE REQUIRED
Holders of at least two-thirds of our outstanding shares of common stock
must vote FOR this proposal to approve the proposed amendment to our charter.
Therefore, because they are not votes FOR this proposal, abstentions and broker
non-votes will have the effect of votes against this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Our board has selected the firm of Ernst & Young LLP, independent public
accountants, as our accountants for fiscal year 2000. Although shareholder
approval of the board's selection of Ernst & Young is not required by law, the
board believes that it is advisable to give the shareholders an opportunity to
ratify this selection. If this proposal is not approved at the annual meeting,
the board will reconsider the selection of Ernst & Young.
Ernst & Young examined the company's financial statements for fiscal year
1999. Representatives of Ernst & Young are expected to attend the annual meeting
to respond to questions and will have the opportunity to make a statement if
they desire.
VOTE REQUIRED
The affirmative vote by the holders of a majority of the shares present, or
represented by proxy, is required to ratify the selection of Ernst & Young.
Abstentions and broker non-votes will be considered as present for quorum
purposes, but will not count as votes cast. Accordingly, abstentions and broker
non-votes will have no effect on the voting of this matter.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP.
SHAREHOLDER PROPOSALS
Generally, our bylaws require a shareholder who wishes to bring business
before or propose director nominations at an annual meeting to give written
notice to our Corporate Secretary at least 45 days before the meeting. However,
if we have given less than 60 days notice or public disclosure of the meeting,
then we must receive a shareholder's notice within 15 days after our notice or
disclosure was given. A shareholder notice must describe the proposed business
or nominee and identify the shareholder making the proposal or nomination.
Any proposal you intend to present at the 2001 Annual Meeting of
Shareholders must be received by MAXIMUS at our principal office at 1356 Beverly
Road, McLean, Virginia 22101, Attention: Corporate Secretary, not later than
August , 2000 if you wish to have it included in the proxy statement for that
meeting.
15
In addition, if we do not receive your proposal for presentation at the 2001
Annual Meeting by November , 2000, then our management proxies will be
permitted to use their discretionary voting authority when the proposal is
raised at the annual meeting, without having advised shareholders of the
proposal in the proxy statement for the 2001 Annual Meeting.
OTHER MATERIALS
Our annual report for fiscal year 1999 is being mailed to shareholders along
with this notice and proxy statement on or about December , 1999. The annual
report includes the Annual Report on Form 10-K for that fiscal year as filed
with the SEC. We will furnish you with a copy of the exhibits to the Annual
Report on Form 10-K upon receiving your written request and payment of an
appropriate processing fee. If you would like to receive these materials, you
should send your written request to the Corporate Secretary, MAXIMUS, Inc., 1356
Beverly Road, McLean, Virginia 22101. Please make any request prior to
January 31, 2000 so that we will have time to send you the materials prior to
the annual meeting.
By Order of the Board of Directors,
David R. Francis, SECRETARY
December , 1999
16
APPENDIX A
PROPOSED AMENDMENT TO THE
MAXIMUS AMENDED AND RESTATED ARTICLES OF INCORPORATION
The first sentence of Article SECOND of the MAXIMUS Amended and Restated
Articles of Incorporation is proposed to be amended as follows:
"SECOND: The Corporation is authorized to issue 60,000,000 shares of Common
Stock."
A-1