.~nr~~, ~x exa~cnaRs ~f.~yFfiap T, OT11~9r C~s

Bq:

Det' itg "lei'lt

Attorneys for Defendant Gary Brugliera

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

In re THE MAXIM GROUP, INC SECURITIES LITIGATION

CLASS ACTION Hon. Charles A. Pannell, Jr.

This Document Relates to: All Actions

STIPULATION OF SETTLEMENT

JEFFREY H. SQUIRE IRA M. PRESS PAMELA E. KULSRUD KIRBY ivlCilv'ERIv'EY & SQUIRE, LLP 830 Third Avenue, 10th Floor New York, NY 10022 Telephone: (212) 371-6600

Lead Counsel for Plaintiffs

JOHN G. DESPRIET DAVID C. NEWMAN SMITH, GAMBRELL & RUSSELL, LLP 1230 Peachtree Street, N.E., Suite 3 100 Atlanta, Georgia 30309-3592 Telephone: (404) 815-3500

Attorneys for Defendants A.J. Nassar and Richard A. Kaplan

WILLIAM G. LEONARD LEONARD & SWENSON, LLP 2115 East Lake Road Atlanta, Georgia 30307 Telephone: (404) 371-0630

ORIGINAL

Case No. 1 :99-CV-1280-CAP

r r

Group, Inc . n/k/a Flooring America, Inc. ("Maxim" or the "Company") :

May 27, 1999

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This Stipulation of Settlement dated as of March 10, 2004 (the "Stipulation")

is made and entered into by and among the foiiowing Seuuing rariies ("JCtlllllg

Parties"; (as defined further in Section IV hereof) to the above-entitled action : (i)

plaintiffs (ors behalf of themselves and each of the Class Members), by and through

Lead Counsel in the Class Action ; (ii) the defendants A.J . Nassar, Gary Brugliera and

Richard A. Kaplan (the "Defendants") by and through their counsel of record in the

Class Action; (iii) St . Paul Mercury Insurance Co . ("St . Paul") ; and (iv) Royal

Indemnity Co. ("Royal") . St . Paul and Royal are hereafter referred to collectively as

the "Insurers." The Stipulation is intended by the Settling Parties to fully, finally and

forever resolve, discharge, dismiss and settle the Released Claims (as defined in

Section IV hereof), upon and subject to the terms and conditions set forth below.

I. THE LITIGATION

On and after May 19, 1999, the following actions were filed in the United

States District Court for the Northern District of Georgia (the "Court") as securities

class actions on behalf of persons who purchased the common stock of The Maxim

Abbreviated Case Name Case No .

Stark v. The Maxim Group, Inc., et al. 1 :99-CV-1280

Best v. The Maxim Group, Inc., et al . 1 :99-CV-1294

Horton v. The Maxim Group, Inc., et al. 1 :99-CV-1372

Date Filed

May 19, 1999

May 20, 1999

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Czrnningharn v. The Maxim Group, hoc., 1 :99-CV-1679 et al. Green v. The Maxim Group, Inc., et al . 1 :99-CV- 1727

Kowaleski v. The Maxim Group, Inc., et 1 :99-CV-1739 al.

July 2, 1999

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Holsomback v. The Maxim Group. Inc. . 1 :99-CV-1446 et al. Cnnti v. The _Maxim Group, Inc-, et cal . 1 :99-CV-1455

Knicp/er v. Thie "V1axi;r Group, Inc., et al. 11 :99-CV- 1520

Lee v. The Maxim Croup, Inc., et al . 1 :99-CV-1554

Burke v. The Maxim Group, Inc., et al . 1 :99-CV-1625

June 4, 1999

June 7, 1999

June 11, 1999

June 15, 1999

Julie 22, 1999

June 25, 1999

July I, 1999

By Order dated August 17, 1999, the Court consolidated these actions for all

purposes as In re The Maxim Group, Inc., Securities Litigation, Case No. 1 :99-CV-

1280-CAP (collectively the "Class Action") . On February 8, 2000, the Court granted

the motion of Rudman Partners, L.P . to be appointed lead plaintiff under

521ll(a)(3)(B) of the Securities Exchange Act of 1934 (the "Exchange Act") and

approved lead plaintiffs selection of Kirby McInerney & Squire, LLP as Lead

Counsel . The Court also appointed Gambrel) & Stolz, L.L.P . as Local Counsel for

plaintiffs pursuant to §21 D(a)(3)(B)(v) of the Exchange Act.

On April 10, 2000, plaintiffs tiled an amended and consolidated class action

complaint (the "Complaint") . The Complaint alleges that Defendants and Maxim

violated Sections 10(b) and 20(a) of the Exchange Act, I S U.S .C . $ti 78j(6) and 78t(a)

and Rule lOb-5 promulgated thereunder by the Securities and Exchange

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Commission, 17 C .F.R. ti 240.1 Ob-5, by improperly accounting for vendor rebates and

misrepresenting the success nt the Maxim acquisition of retail storey from Shaw

]nductriac in August 1008, ihnc reglil,[ink in an nvergtatern,Pnt pt �M,gki ;n~c fISCuI year

1999 t:. .̂arcial results, as reported in its quarterly financial statements, ai:d srtit:cial 1y

inflating Maxim's stock price .

On June 30, 2000, Maxim filed for bankruptcy in the United States Bankruptcy

Court for the Northern District of Georgia ("Bankruptcy Court"), pursuant to Chapter

1 1 of the Bankruptcy Code. The Court entered an order staying proceedings as to

Maxim on July 11, 2000 .

On November 14, 2000, Messrs . Nassar, Kaplan and Brugliera filed a motion

to dismiss the Complaint. On July 10, 2001, the Court granted in part that motion by

dismissing the Section 10(b) and Rule 106-5 claims against Mr. Kaplan, but denied

the remainder of that motion .

Plaintiffs filed a motion for class certification on November 26, 2001 . On

August 2, 2002, the Court granted that motion, certified a class period from June 2,

1998 to July 13, 1999 and appointed lead plaintiff Rudman Partners, L.P ., Anthony

V iscusi, James T. Meadows, Jr . and John D . Meadows, III as class representatives (the

"Representative Plaintiffs")

On November 7, 2002, Defendant AT Nassar tiled for bankruptcy i n the United

States Bankruptcy Court for the Northern District of Georgia ("Bankruptcy Court"),

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pursuant to Chapter 7 of the Bankruptcy Code. On March 25, 2003, the Bankruptcy

Court eranted Defendant Nassar a discharge.

(fin November ?7, ?(_)f_1?, the Eleventh ('i_rr_i it granted Defendants' petition

pursuant ?e FRCP 23(fl, to appeal ?he Court's August 2, 2002 order ce:-tifying the

Class . On July 14, 3003, the Eleventh Circuit granted the parties' Joint Motion To

Stay Proceedings in the appeal, up to and including January 6, 2004 .

On June 18, 2003, the Settling Parties executed a Memorandum of

Understanding, which set forth the basic terms of a settlement agreement and

mandated negotiation and execution of this Stipultion .

II. DEFENDANTS' DENIALS OF WRONGDOING AND LIABILITY

The Defendants have denied and continue to deny each and all of the claims and

contentions alleged by the plaintiffs in the Class Action . The Defendants expressly

have denied and continue to deny all charges of wrongdoing or liability against them

arising out of any of the conduct, statements, acts or omissions alleged, or that could

have been alleged, in the Class Action . The Defendants also have denied and continue

to deny, inter alia, the allegations that plaintiffs or the Class have suffered damage,

that the price of Maxim conunon stock was artificially inflated by reason of the

alleged misrepresentations, non-disclosures or otherwise, or that plaintiffs or the Class

were harmed by the conduct alleged in the Complaint.

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Nonetheless, the Defendants have concluded that further conduct of the Class

Action would he protracted and expensive- and that it is desirable that the ('lass

Action be fully and finally settled in the inanner and upon the terms and conditions

set forth in this Stipulation . The Defendants also have taken into account the

uncertainty and risks inherent in any litigation, especially in complex cases like the

Class Action . The Defendants have, therefore, determined that it is desirable and

beneficial to them that the Class Action be settled in the manner and upon the terms

and conditions set forth in this Stipulation.

III. PLAINTIFFS' CLAIMS AND THE BENEFITS OF SETTLEMENT

Plaintiffs believe that the claims asserted in the Class Action have merit.

However, Lead Counsel recognizes and acknowledges the expense and length of

continued proceedings necessary to prosecute the Class Action against the Defendants

through trial and through appeals . Lead Counsel has taken into account the uncertain

outcome and the risk of any litigation, especially in complex actions such as the Class

Action, the possibility that plaintiffs would be unable to collect all or part of any

judgment (especially in this case where A .J . Nassar, who is one of only three

defendants, has been discharged pursuant to an order of discharge granted by the

Bankruptcy Court on March 25, 2003), as well as the difficulties and delays inherent

in such litigation . Lead Counsel also is mindful of the inherent problems of proof

under and possible defenses to the violations asserted in the Class Action . Lead

7

Counsel believe that the settlement set forth in this Stipulation confers substantial

benefits upon the Class . Based on their evaluation . Lead Counsel has determined that

the settlement set forth in the Srini~larion is in the heir interests of the plaintiffi and

!he Class.

IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and

among the Representative Plaintiffs (for themselves and on behalf of the Members of

the Class), the Defendants, and the Insurers, by and through their respective counsel

or attorneys of record, that, subject to the approval of the Court, the Class Action and

the Released Claims shall be finally and fully compromised, settled and released and

the Class Action shall be dismissed with prejudice, as to all Settling Parties, upon and

subject to the terms and conditions of the Stipulation as follows :

1 . Definitions

As used in the Stipulation the following terms have the meanings specified below :

1 .1 "Authorized Claimant" means any Class Member whose claim for

recovery has been allowed pursuant to the terms of the Stipulation .

1 .2 "Bankruptcy Court Order" means the order of approval to disburse

insurance proceeds rendered by the Bankruptcy Court, as required by ~ 7.1(a) below.

l l

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13 "Claimant" means any Class Member who tiles a Proof of Claim in such

form and manner, and within such time, as the l:ourt shal I prescribe.

1 .4 "Claim- Adtl7inist_mtni" ?nagng Valley Forge Achninistrative Services,

Inc.

1 .5 "Class" means a class consisting of all Persons who purchased or

acquired in any manner shares of Maxim conunon stock during the period beginning

June 2, 1998 through July 13, 1999, inclusive. Excluded from the Class are

Defendants, members of the immediate families of the Defendants, any entity in

which any Defendant has or had a controlling interest, present or former directors and

officers of Maxim and the legal representatives, heirs, successors, or assigns of any

such Defendant. Also excluded from the Class are those Persons who timely and

validly request exclusion .

1 .6 "Class Member" or "Member of the Class" means a Person who falls

within the definition of the Class as set forth in T1 .5 of the Stipulation .

1 .7 "Class Period" means the period commencing on June 2, 1998 through

and including July 13, 1999 .

1 .8 "Defendants" means A.J . Nassar, Gary Bivgliera and Richard A . Kaplan .

19 "Effective Date" means the first date by which all of the events and

conditions specified in X7 .1 of the Stipulation have been met and have occurred .

1 .10 "Escrow Agent" means the law firm of Kirby McInerney & Squire, LLP,

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or its successor(s) .

! .I1 "Final" means : ti) the date of final affirmance on an. appeal of the

?Judgment or o f .h eBaBankruptcy r Court Or, de: , .heexpiration o fthet : :r e for kpet :t :o i ;

'.'or or a denial a: 'a writ o: certiorari tc review t" e Judgment or the Ban1ULlPtCy Court

Order and, if certiorari is granted, the date of final aftirmance of the Judgment or the

Bankruptcy Court Order following review pursuant to that grant; or (ii) the date of

final dismissal of any appeal from the Judgment or the Bankruptcy Court Order or the

final dismissal of any proceedings on certiorari to review the Judgment or the

Bankruptcy Court Order; or (iii) if no appeal is tiled, the expiration date of the time

for the filing or noticing of any appeal from the Judgment or the Bankruptcy Court

Order, i. e . , thirty (30) days after entry of the Judgment or the Bankruptcy Court Order,

such that the Judgment or the Bankruptcy Court Order represents a final and binding

judgment with respect to the Class Action . Any proceeding or order, or any appeal

or petition for a writ of certiorari pertaining solely to any plan of allocation and/or

application for attorneys' fees or expenses, shall not in any way delay or preclude the

Judgment or the Bankruptcy Court Order from becoming Final .

1 .12 "Judgment" means the judgment to be rendered by the Court,

substantially in the form attached hereto as Exhibit B.

1 .13 "Person" means an individual, corporation, limited liability corporation,

professional corporation, lunited IiabiGtypartnership,partnerskip, limited partnership,

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association, joint stock company, estate, legal representative, trust, unincorporated

association, government or any political subdivision or money thereof and any

bus iness or legal entity anal their spouses he i rs predecesso rs, successors,

representatives, or assignees .

1 .14 "Lead Counsel" means Kirby McInerney & Squire, LLP, Jeffrey H.

Squire, Ira M. Press, Pamela E. Kulsrud, 830 Third Avenue, 10th Floor, New York,

New York 10022 ; and " Local Counsel" means Linda A . Klein, Gambrell & Stolz,

L.L .P ., 3414 Peachtree Road, N .E., Suite 1600, Monarch Plaza, Atlanta, Georgia

30326 .

1 .15 "Plan of Allocation" means a plan or formula of allocation of the

Settlement Fund whereby the Settlement Fund shall be distributed to Authorized

Claimants after payment of expenses of notice and administration of the settlement,

Taxes and Tax Expenses and such attorneys' fees, expenses and interest as may he

awarded by the Court. Any Plan of Allocation is not part of the Stipulation, and

Defendants shall have no responsibility or liability with respect thereto .

1 . 16 "Related Persons" means each of a Defendant's or Maxim's pastor

present directors, officers, managers, employees, partners, members, principals,

agents, underwriters, insurers, co-insurers, reinsurers, controlling shareholders,

venture capital investors, attorneys, banks or investment banks, financial advisors,

associates, personal or legal representatives, predecessors, successors, parents

II

subsidiaries, divisions, joint ventures, assigns, spouses, heirs, related or affiliated

entices, any entity in which a 1JeYendant leas a controlling interest, any members of

their immediate families ; or any trust of which 3 Defendant ;s the setrlor or which

is for the benefit of any Defendant and/or member(s) of his or her family.

1 .17 "Released Claims" shall collectively mean all claims (including

Unknown Claims as defined in X1 .23, hereof, demands, rights, liabilities and

causes of action of every nature and description whatsoever, known or unknown,

whether or not concealed or hidden, asserted or that might have been asserted,

including, without limitation, claims for negligence, gross negligence, breach of

duty of care and/or breach of duty of loyalty, fraud, breach of fiduciary duty, or

violations of any state or federal statutes, rules or regulations, by any

Representative Plaintiff or Class Member against the Defendants and Released

Persons arising out of, based upon or related to the purchase or other acquisition of

Maxim common stock during the Class Period or the acts, facts, transactions,

events, occurrences, disclosures, statements, onussions or failures to act that were

or could have been alleged in the Class Action and includes any and all claims

arising out of, relating to or in connection with the settlement or resolution of the

Class Action .

1 .18 "Released Persons" means each and all of the Defendants, Maxim, all

insureds under policies issued by the Insurers and the Related Persons .

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1 .19 "Representative Plaintiffs"means Lead PIaintiffRudmanParmers.L .P .,

A ilGliy v incubi, .iaaucs T. Meadows, Jr. and john 1J . Meadows. 111 .

1 .20 "Representative Plaintiffs' Counsel" means Counsel who have appeared

for any of the Representative Plaintiffs in the Class Action .

1 .21 "Settlement Fund" means the principal amount of Three Million Dollars

($3,000,000) in cash to be funded and held by St . Paul subject to the provisions of this

Stipulation and which shall accrue interest pursuant to the terms set forth in ~2 . l .

l?? "Settling Parties" means, collectively, each of the Defendants and the

Representative Plaintiffs on behalf of themselves and the Members of the Class.

1 .23 "Unknown Claims" means any Released Claims which anv

Representative Plaintiff or Class Member does not know or suspect to exist in his, her

or its favor at the time of the release of the Released Persons which, if known by him,

her or it, might have affected his, her or its settlement with and release of the Released

Persons, or might have affected his, her or its decision not to object to this settlement

or not to exclude himself, herself or itself from the Class . With respect to any and all

Released Claims, the Settling Parties stipulate and agree that, upon the Effective Date,

the Representative Plaintiffs shall expressly and each of the Class Members shall be

deemed to have and by operation of the Judgment shall have, expressly waived the

provisions, rights and benefits of California Civil Code ti 1542, which provides :

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN

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HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED riiS SE i i LEMr,N l W I T H I H H . DEBTOR .

The Representative PJa:nt :f±S shall expressly and each of the Class ~Ilen-ibers

shall be deemed ?o have and by operation of the Judgment shall have, expressly

waived any and all provisions, rights and benefits conferred by any law of any state

or territory of the United States, or principle of common law, which is similar,

comparable or equivalent to California Civil Code X1542 . The Representative

Plaintiffs and Class Members may hereafter discover facts in addition to or different

from those which he, she, or it now knows or believes to be true with respect to the

subject matter of the Released Claims, but each Representative Plaintiff shall

expressly and each Class Member, upon the Effective Date, shall be deemed to have

and by operation of the Judgment shall have, fully, finally and forever settled and

released any and all Released Claims, known or unknown, suspected or unsuspected,

contingent or non-contingent, whether or not concealed or hidden, which now exist,

or heretofore have existed upon any theory of law or equity now existing or coming

into existence in the future, including, but not limited to, conduct which is negligent,

intentional, with or without malice, or a breach of any duty, law or rule, without

regard to the subsequent discovery or existence of such different or additional facts .

The Representative Plaintiffs acknowledge and the Class Members shall be deemed

by operation of the Judgment to have acknowledged, that the foregoing waiver was

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separately bargained for and a key element of the settlement of which this release is

n Pai i .

2 . The Settlement

a . The Settlement Fund

2 .1 The principal amount of $3,000,000 (plus any accrued interest) shall

constitute the Settlement Fund . Subject to the provisions of this Stipulation,

particularly including those set forth in ~T 2 .6, and 2.7 below, the Settlement Fund

shall be funded and maintained by St . Paul and will begin to accrue interest five

business days after preliminary approval of the Settlement by the Court.

b. The Escrow Agent

2 .2 Upon disbursement of the Settlement Fund pursuant to '~2 .7 below, the

Escrow Agent shall invest the Settlement Fund in instruments backed by the bill faith

and credit of the United States Government or fully insured by the United States

Government or an agency thereof and shall reinvest the proceeds of these instruments

as they mature in similar instruments at their then current market rates . "The Escrow

Agent shall bear all risks related to investment of the Settlement Fund, subject to

T 2.7 .

? .3 The Escrow Agent shall not disburse the Settlement Fund except as

provided in the Stipulation or by an order of the Court.

2 .4 Subject to further order and/or directions as may be made by the Cow-t,

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the Escrow Agent is authorized to execute such transactions on behalf of the Class

Members as are consistent with the terms of the Stipulation-

2.5 All funds held by the Escrow Agent shall be deemed and considered to

he in ct!s!oclia legis of the Court and shall remain subject to the jurisdiction of the

Court, until such times as such funds shall he distributed pursuant to the Stipulation

and/or further order(s) of the Court.

2.6 After the Court has granted preliminary approval of the Settlement and

after the Bankruptcy Court Order is Final, the Escrow Agent may establish a "Notice

and Administration Fund," and St. Paul will deposit up to $100,000 from the

Settlement Fund in it . The Notice and Administration Fund tray be used by Lead

Counsel to pay costs and expenses reasonably and actually incurred in connection

with providing notice to the Class, locating Class Members, soliciting Class claims,

assisting with the filing of claims, administering and distributingthe Settlement Fund

to Authorized Claimants, processing Proof of Clavn and Release forms and paying

escrow fees and costs, if any.

2 .7 Within thirty (30) days after the Effective Date, the remaining amount

of the Settlement Fund shall be disbursed by St . Paul to Lead Counsel as Escrow

Agent for distribution to the Class and to Representative Plaintiffs' Counsel, as

provided for in the Judgment .

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C. Taxes

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2 .K I he Settling Parties end the Escrow Agent agree to treat the Settlement

Fund as being 2r all times a "qualified settlement fund" within the f:l°3. .̂ . . .̂g off,-as.

Reg. ~ 1 .468B-1 . In addition, the Escrow ,gent shall timely make such elections as

necessary or advisable to carry out the provisions of this X2 .8, including the

"relation-back election" (as defined in Treas . Reg. §1 .468B-1) back to the earliest

permitted date . Such elections shall be made in compliance with the procedures and

requirements contained in such regulations . It shall be the responsibility of the

Escrow Agent to timely and properly prepare and deliver the necessary documentation

for signature by all necessary parties and thereafter to cause the appropriate tiling to

occur.

(a) For the purpose of §468B of the Internal Revenue Code of 1986,

as amended and the regulations promulgated thereunder, the "administrator" shall he

the Escrow Agent. The Escrow Agent shall timely and properly file all informational

and other tax returns necessary or advisable with respect to the Settlement Fund

(including, without limitation the returns described in Treas.Reg .§ 1 .46B-2(k)) . Such

returns (as well as the election described in this X2.8) shat I be consistent with this X2 .3

and in all events shall reflect that all Taxes as defined in subsection (b) of the

Settlement Fund shall be paid out of the Settlement Fund as provided in ~2 .8(b)

hereof.

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(b) AI I (i) Taxes (including any estimated Taxes, interest or penalties)

at 1~I iig with respect to one income earned by the Settlement Fund. includingarly Taxes

or tax detriments that may he imposed upon the Defendants, the Insurers, n!- their

counsel with respect to any income earned by the Settlement Fund for any period

during which the Settlement Fund does not qualify as a "qualified settlement t~und' for

federal or state income tax purpose ("Taxes") and (ii) expenses and costs incurred in

connection with the operation and implementation of this X2.8 (including, without

limitation, expenses of tax attorneys and/or accountants and mailing end distribution

costs and expenses relating to filing (or failing to file) the returns described in this

T?.8) ("Tax Expenses"), shall be paid out of the Settlement Fund; in all events neither

the Defendants, their Insurers, nor their counsel shall have any liability or

responsibility for the Taxes or the Tax Expenses. The Escrow Agent shall indemnify

and hold each of the Defendants, their Insurers and their counsel harmless for Taxes

and Tax Expenses (including, without limitation, Taxes payable by reason of any such

indemnification) . Further, Taxes and Tax Expenses shall be treated as and considered

to be, a cost of administration of the Settlement Fund and shall be timely paid by the

Escrow Agent out of the Settlement Fund without prior order from the Court and the

Escrow Agent shall be obligated (notwithstanding anything herein to the contrary) to

withhold from distribution to Authorized Claimants any fund necessary to pay such

amounts including the establishment of adequate reserves for any Taxes and Tax

18

f, l

Expenses (as well as any amounts that may be required to be withheld under Treas .

iceg. ~1 .4biSt5-!( I ,1(',I,1 : neither the Defendants, the Insurers, 'lot- their rniinsel are

responsihlenor shall they liavP any I_iahil_iryrl,erPfnr. The Settling Parties hereto agree

to cooperate with theEscrow Aj Pnr~ each other andtheir tax attor neysardaccountant

to the extent reasonably necessary to carry out the provisions of this ~ 2.3 .

(c) For the purpose of this X2 .8, references to the Settlement Fund

shall include both the Settlement Fund and the Class Notice and Administration Fund

and shall also include any earnings thereon .

d. Termination of the Settlement

29 In the event that the Stipulation is not approved, or is terminated,

canceled, or fails to become effective for any reason, including, without limitation, in

the event the Judgment is reversed, vacated, or modified in any material respect

following any appeal taken therefrom, the Settlement Fund (including accrued

interest) less expenses actually incurred or due and owing in connection with the

Notice and Administration Fund shall be refunded to St . Paul .

3. Notice Order and Settlement Hearing

3 .1 Promptly after execution of the Stipulation, the Settling Parties shall

submit the Stipulation, together with its Exhibits, to the Court and shall apply for entry

of an order (the "Notice Order"), substantially in the form and content of Exhibit A

attached hereto, requesting, inter nlia, the preliminary approval of the settlement set

19

forth in the Stipulation and approval for the mailing and publication of a settlement

ounce (ine "iJouce -

1, sunstantiaiiV in the form and content ot h:xhihrt A- I and .A-3

attached hereto, which shall include the general terms of thesettlement set forth in the

Stipulation, the proposed Plan of Allocation, the general teens of the Fee and Expense

Application as defined in X6.1 below and the date of the Settlement Hearing as

defined below.

3 .2 Plaintiffs are responsible for the mailing and publication of the Notice

to the Class promptly after the Bankruptcy Court Order becomes final, and Defendants

will cooperate as reasonably necessary in that regard .

3 .3 The Settling Patties shall request that after Notice is given, the Court hold

a hearing (the "Settlement Rearing") and approve the settlement of the Class Action

as set forth herein . At or after the Settlement Hearing, Lead Counsel also will request

that the Court approve the proposed Plan of Allocation and Fee and Expense

Application.

4. Releases

4.1 Upon the Effective Date, as defined in T 1 .9, the Representative Plaintiffs

shall expressly, and each of the Class Members shall be deemed to have, and by

operation of the Judgment shall have, fully, finally and forever released, relinquished

and discharged all Released Claims and any and all claims arising out of, relating to,

or in connection with the settlement or resolution of the Class Action against the

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20

Released Persons, whether or not such Class Member executes and delivers a Proof

.- � . ol %-iaim and Release .

4.2 The Proof of Claim and Release to be executed by Class Members shall

release all Released Claims against the Released Persons and shall be substantially in

the form and content contained in Exhibit A-2 attached hereto .

4 .3 Upon the Effective Date, as defined in ~ 1 .9, each of the Released Persons

shall be deemed to have and by operation of the Judgment shall have, fully, finally and

forever released, relinquished and discharged each and all of the Class Members and

counsel to the Representative Plaintiffs from all claims (including Unknown Claims),

arising out of, in any way relating to, or in connection with the institution,

prosecution, assertion, settlement or resolution of the Class Action, or the Released

Claims .

5. Administration and Calculation of Claims and

Supervision and Distribution of Settlement Fund

5 .1 Valley Forge Administrative Services, Inc., subject to such supervision

and direction of the Court and/or Lead Counsel as may he necessary or as

circumstances may require, shall administer and calculate the claims submitted by

Clays Members and shall oversee distribution of the Net Settlement (defined below)

to Authorized Claimants.

5? The Settlement Fund shall be applied as follows :

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(a) to pay all the costs and expenses reasonably and actually incurred

in connection with providing Notice, locating Class Member=, so! ici?ing Class claims,

ass ICL1I1pJ With the filing (fit (_'lall?l5, administering 8. .̂L~ ~:S~l'1F'U : : . .̂s~~~iP. Settlement Fund

to Authorized Claimants, processing Proof of Maim and Release -forms and paying

escrow tees and costs, if any;

(b) to pay the Taxes and Tax Expenses described in $2 .8 above;

(c) to pay the Representative Plaintiffs' Counsel's attorneys' fees and

expenses with interest thereon (the "Fee and Expense Award"), if and to the extent

allowed by the Court ; and

(d) to distribute the balance of the Settlement Fund (the "Net

Settlement Fund") to Authorized Claimants as allowed by the Stipulation, the Plan of

Allocation and the Court .

5 .3 Upon the Effective Date and thereafter, and in accordance with the terms

of the Stipulation, the Plan of Allocation, or such further approval and further order(s)

of the Court as may be necessary or as circumstances may require, the Net Settlement

Fund shall be distributed to Authorized Claimants, subject to and in accordance with

the following :

5 .4 Within ninety (90) days after the mailing of the Notice or such other time

as may be set by the Court, each Person claiming to be an Authorized Claimant shall

be required to submit to the Valley Forge Administrative Services, Inc. a completed

1) 1)

i

Proof of Claim and Release, substantially in the form of Exhibit A-2 attached hereto,

signed under penalty of perjury end supporrcd by such documents as specified in the

Proof of Claim and Release and as are reasonably available to the Authorized

Claimant.

5 .5 Except as otherwise ordered by the Court, all Class Members who tail to

timely submit a Proof of Claim and Release within such period, or such other period

as may be ordered by the Court, or otherwise allowed, shall be forever barred from

receiving any payments pursuant to the Stipulation and the settlement set forth therein,

but will in all other respects be subject to and bound by the provisions of the

Stipulation, the releases contained therein and the Judgment.

5 .6 The Net Settlement Fund shall be distributed to the Authorized Claimants

substantially in accordance with the Plan of Allocation to be described in the Notice

and approved by the Court . However, if there is any balance remaining in the Net

Settlement Fund after six (6) months from the date of distribution of the Net

Settlement Fund (whether by reason of tax refunds, uncashed checks or otherwise),

Lead Counsel shall reallocate such balance among Authorized Claimants in an

equitable and economic fashion . Thereafter, any balance which still remains in the

Net Settlement Fund shall be donated to an appropriate non-profit organization .

5 .7 The Defendants shall have no responsibility for, interest in, or liability

whatsoever with respect to the investment or distribution of the Net Settlement Fund,

?3

f

the Plan of Allocation, the determination, administration, or calculation of claims, the

payment or withholding of 1 aces . or any losses incurred in connection therewith .

5 .8 Tin Person Shall have any claim against Representative Plaintiffs'

Counsel, Valley Forge Administrative Services, Inc . or Defendants or their Counsel

based on the distribution made substantially in accordance with the Stipulation and

the settlement contained therein, the Plan of Allocation, or further orders of the Court .

59 It is understood and agreed by the Settling Parties that any proposed Plan

of Allocation of the Net Settlement Fund including, but not limited to, any

adjustments to an Authorized Claimant's claim set forth therein, is not a part of the

Stipulation and is to be considered by the Court separately from the Court's

consideration of the fairness, reasonableness and adequacy of die settlement set forth

in the Stipulation, and any order or proceedings relating to the Plan of Allocation shall

not operate to terminate or cancel the Stipulation or affect the finality of the Court's

Judgment approving the Stipulation and the settlement set forth therein, or any other

orders entered pursuant to the Stipulation.

6. Representative Plaintiffs' Counsel's Attorneys' Fees And Reimbursement of Expenses.

6 .1 The Representative Plaintiffs or their counsel may submit an application

or applications (the "Fee and Expense Application") for distributionsto them from the

Settlement Fund for : (a) an award of attorneys' tees ; plus (b) reimbursement of

expenses, including the tees of any experts or consultants incurred in connection with

24

prosecuting the Class Action, plus any interest on such attorneys' tees and expenses

ac the same rate and for the same periods as earned by the Settlement Fund (until paid)

as may he awarded by the Court- RP~i P~ _ . P_ . n?alive Plaintiffs' Counsel reserve the right _r .

to make additional applications for }mss and expenses incurred .

6 .2 The attorneys' tee and expenses, including the tees of experts and

consultants, as awarded by the Court, shall be paid to Lead Counsel from the

Settlement Fund, within thirty (30) days after the Effective Date. Lead Counsel shall

thereafter allocate the attorneys' tees among Representative Plaintiffs' Counsel in a

manner in which they in good faith believe reflects the contributions of such counsel

to the prosecution and settlement of the Class Action . In the event that the order

making the Fee and Expense Award is reversed or modified, and in the event that the

Fee and Expense Award has been paid to any extent, then each Representative

Plaintiffs' Counsel shall within five (5) business days from receiving notice from

Defendants' counsel or from a court of appropriate jurisdiction jointly and severally

refund to the Settlement Fund the fees, expenses and costs previously paid to them

from the Settlement Fiend (excluding any amounts paid in connection with providing

Notice to the Class) plus interest thereon at the same rate as earned on the Settlement

Fund in an amount consistent with such reversal or modification . Each such

Representative Plaintiffs' Counsel's law firm, as a condition of receiving such tees

and expenses, on behalf of itself and each partner and/or shareholder of it, agrees that

25

f l

the law firm and its partners and/or shareholders are subject to the jurisdiction of the

('curt for the ramose ot entorcing the Provisions of this paragraph.

(7,3 The 'procedure for and the allowance pr dicgl,l,pwanr_e hX/ the Court of anv

applications b~ any of the counsel :e the Representative Plaintiffs for t.orreys' ±ees,

costs and expenses, including the fees of experts and consultants, to be paid out of the

Settlement Fund, are not part of the settlement set forth in the Stipulation, and are to

be considered by the Court separately from the Court's consideration of the fairness,

reasonableness and adequacy of the settlement set forth in the Stipulation, and any

order or proceeding relating to the Fee and Expense Application, or any appeal from

any order relating thereto or reversal or modification thereof, shall not operate to

terminate or cancel the Stipulation, or affect or delay the finality of the Judgment

approving the Stipulation and the settlement of the Class Action set forth herein .

6 .4 Defendants and their Related Persons shall have no responsibility for and

no liability whatsoever with respect to, any payment of attorneys' fees and expenses

to Representative Plaintiffs' Counsel .

6.5 Defendants and their Related Persons shall have no responsibi I ityfor and

no liability whatsoever with respect to the allocation among Representative Plaintiffs'

Counsel, and/or any other Person who may assert some claim thereto, of any Fee and

Expense Award that the Court may make in the Class Action, and Defendants and

their respective Related Persons take no position with respect to such matters .

i

26

7. Conditions of Settlement, Effect of Disapproval, Cancellation or Termination.

7.1 The Effective Date of the Stipulation shall be conditioned on the

occurrence of all of the following events :

(a) Within five (5) court days after preliminary approval of the

Settlement by the Court, the Insurers shall the a motion and request a hearing before

the Bankruptcy Court to obtain approval for the Insurers to pay or cause to be paid

from the proceeds of the applicable Maxim directors and officers insurance policies

an amount equal to the Settlement Fund and all defense costs (the "Insurance

Proceeds") ;

(v) Bankruptcy Court Order granting approval for the Insurers to

disburse the Insurance Proceeds has become Final, as defined in ~ 1 .1 1 above;

(c) St . Paul's receipt of policy releases for all St . Paul policies issued

to Maxim executed by each of A.J . Nassar, Richard A . Kaplan, Gary Brugliera, Herb

Woll< and David CicchinelG (the "Insureds") ; and Royal's receipt of claim releases for

all Royal policies with respect to the Class Action, executed by each of the Insureds ;

(d) The Court has entered the Notice Order substantially in the form

annexed hereto as Exhibit A;

(e) The Court has entered the Judgment, substantially in the form

annexed hereto as Exhibit B;

(f) The Judgment has become Final, as defined in ~l .11 above; and

r

27

(g) The Court has entered a bar order in the Class Action .

? .2 Upon the occurrence of al! of the events .eferenced in ~7 .1 above, any

ui~Ci a . . itainin- interest or rig 2i l i

fund, if wry, shall be absolutely and forever extinguished .

7.3 If all of the conditions specified in X7 .1 are not met, then the Stipulation

shall be canceled and terminated subject to X7 .5, unless Lead Counsel and Defendants

counsel and the Insurers mutually agree in writing to proceed with the Stipulation .

7 .4 It; prior to the Settlement Hearing, Class Members who otherwise would

be members of the settlement class in accordance with the provisions of the Notice

Order and the notice given pursuant thereto choose to opt out of this Settlement and

if the aggregate number of shares of Maxim conunon stock purchased by such Class

Members during the Class Period equals or exceeds the amount specified in a separate

supplemental agreement contained in a letter by Defendants' counsel,Smith, Gambrell

& Russell, LLP, dated June 24, 2003 and agreed to by Lead Counsel ("Supplemental

Agreement"), then the Stipulation may be terminated by a majority of the Defendants .

The Supplemental Agreement and all of its terms are hereby incorporated into this

Stipulation (and vice versa) ; however, the Supplemental Agreement will not be tiled

with the Court unless and until a dispute among the parties concerning its

interpretation or application arises . Copies of all Requests for Exclusion received and

copies of all written revocations of Requests for Exclusion received shall be delivered

28

f t

to counsel for Defendants within five (5) business days of receipt by Lead Counsel or

their agents but in no event later than five (5) court days before the Settlement

Hearing.

/ .5 In the event the Stipulation shall terminate, or be canceled, or shall not

become effective for any reason, within five (5) business days after written

notification of such event is sent by Defendants' counsel or by either of the Insurers

to Lead Counsel (as Escrow Agent), the Notice and Administration Fund (including

accrued interest), less expenses and any costs which lave either been disbursed

pursuant to ~~ 2 .6 and 2 .7 hereto from the Notice and Administration Fund, or are

determined to be chargeable to the Notice and Administration Fund, shall be refunded

to St . Paul by the Escrow Agent pursuant to written instructions from Defendants'

counsel . At the request of Defendants' counsel or the Insurers, the Escrow Agent or

its designee shall apply for any tax refund owed to the Settlement Fund and pay the

proceeds, after deduction of any tees or expenses incurred in connection with such

application(s) for refund, to St . Paul .

7 .6 In the event that the Stipulation is not approved by the Court, the release

of the Insurance Proceeds is not approved by the Bankruptcy Court, or the settlement

set forth in the Stipulation is terminated or fails to become effective in accordance

with its terms, the Settling Parties shall be restored to their respective positions in the

Class Action as of June 18, 2003 . 2003 . In such event, the terms and provisions of the

29

Stipulation, with the exception of ~T 1 .1-1 .23,221-22 .7,73-7 .6, 8.2-8 .4,8 .9-8 . 13 herein,

shall have no further force and effect with respect to the Settling Parties and shall not

be used ;n the Class Action, or :r, any ether proceeding :a: any purpose and any

JUdgmert or order entered by the Court in accordance with the terms o: the Stipulation

shall be treated as vacated, nunc pro tunc. No order to the Court or modification or

reversal on appeal of any order to the Court concerning the Plan of Allocation or the

amount of any attorneys' tees, expenses and interest awarded by the Court to the

plaintiffs or any of their counsel shall constitute grounds for cancellation or

termination of the Stipulation. If the Effective Date does not occur, or if the

Stipulation is terminated pursuant to its terms, neither the plaintiffs nor any of their

counsel shall have any obligation to repay any amounts actually and properly

disbursed from the Notice and Administration Fund. In addition, any expenses

already intoned and properly chargeable to the Notice and Administration Fund

pursuant to X2 .6 hereof at the time of the such termination or cancellation but which

have not been paid, shall be paid by the Escrow Agent in accordance with the terms

of the Stipulation prior to the balance being refunded in accordance with X7 .5 above.

7 .7 If a trustee, receiver, or conservator is appointed under the United States

Bankruptcy Code and in the event of the entry of a final order of a court of competent

jurisdiction determining the transfer of the Settlement Fund, or any portion thereof;

by or on behalf of Defendant to be a preference, voidable transfer, fraudulent transfer,

.0

or similar transaction, then the releases given and Judgment entered pursuant to this

Stipulation snail be null and void, as to that lleTendant .

8. Miscellaneous Previsions

R . I The Settling Parties (a) acknowledge that it is their intent to consummate

this ajreement; and (b) agree to cooperate to the extent reasonably necessary to

effectuate and implement all terms and conditions of the Stipulation and to exercise

their best efforts to accomplish the foregoing terms and conditions of the Stipulation .

8 .2 The Settling Parties intend this Settlement to he a final and complete

resolution of all disputes between them with respect to the Class Action . The

settlement compromises claims that were contested and shall not be deemed an

admission by any of the Settling Parties as to the merits of any claim or defense . The

final judgment will contain a statement that during the course of the Class Action, the

parties and their respective counsel at all times complied with the requirements of

Federal Rule of Civil Procedure 11 . The Settling Parties agree that the amount paid

to the Settlement Fund and the other terms of the settlement were negotiated in good

faith by the Settling Parties and reflect a settlement that was reached voluntarily after

consultation with competent legal counsel . The Settling Parties each agree to retrain

from making public disclosure through press release or public statement of the terms

of this Settlement, with the exception of the required notices to the Class Members,

attached as Exhibits to this Stipulaion .

l t

£ .3 Neither the Stipulation nor the settlement, nor any act performed or

document executed pursuant to or in furtherance of the stipulation or the settlement :

(a) is or may be deemed to be or may be i-used as an admission of, or evidence o!; die

validity of airy Released Claim, or of any wrongdoing or liability of the Defendants

and Released Persons ; or (b) is or may be deemed to be or may he used as an

admission of, or evidence of, any fault or omission of any of the Defendants and

Released Persons in any civil, criminal or administrative proceeding in any cow-t,

administrative agency or other tribunal . Defendants and Released Persons may file

the Stipulation and/or the Judgment in any action that may be brought against them

in order to support a defense or counterclaim based on principles of res jurfrcuta,

collateral estoppel, release, good faith settlement, judgment bar or reduction, or any

other theory of claim preclusion or issue preclusion or similar defense or

counterclaim .

8 .4 All of the E ;cltibits to this Stipulation are material and integral parts

hereof and are fully incorporated herein by reference .

8 .5 All agreements made and orders entered during the course of the Class

Action relating to the confidentiality of information shall survive this Stipulation .

8 .6 The Stipulation may be amended or modified only by a written

instrument signed by or on behalf of all Settling Parties or their respective successors-

in-interest .

t

8.7 The Stipulation and the Exhibits attached hereto and the Supplemental

Agreement constitute the entire a;reemert between !he plaintiffs acid Defendants and

no representations, 'vVBiiuiiiiP.S or inducements have been made to 31:~ F),°. . :' :}~

i,OI1C0Cilillb ill0 Stipulation or its Exhibits or the Supplemental Agreement other thai~

the representations, warranties and covenants contained and memorialized in such

documents .

8 .8 Lead Counsel, on behalf of the Class, are expressly authorized by the

Representative Plaintiffs to take all appropriate action required or permitted to be

taken by the Class pursuant to the Stipulation to effectuate its terms and also are

expressly authorized to enter into any modifications or amendments to the Stipulation

nn behalf of the Class that they deem appropriate .

8 .9 Each counsel or other Person executing this Stipulation or any of its

Exhibits on behalf of any party hereto hereby warrants that such Person has the full

authority to do so .

8 .10 The Stipulation may be executed in one or more Counterparts . All

executed counterparts and each of them shall be deemed to he one and the same

instrument . A complete set of original executed counterparts shall be tiled with the

Court .

8 .11 The Stipulation shall be binding upon and inure to the benefit of; the

successors and assigns of the parties hereto .

f r

8 .1? The Court shall retain jurisdiction with respect to implementation and

enforcement of the terms of this Stipulation and all parties hereto submit to the

IIIfIJUICtIUIl of Li10 Court 'for purposes Oi`LiIpiEITici~iiIIQ and entiorcing tile settlement

embodied in this Stipulation .

8.13 This Stipulation and the Exhibits hereto shall be considered to have been

negotiated, executed and delivered and to be wholly performed, in the State of

Georgia and the rights and obligations of the parties to the Stipulation shall be

construed and enforced in accordance with and governed by, the internal, substantive

laws of the State of Georgia without giving effect to that state's choice of law

principles .

IN WITNESS WHEREOF, the parties hereto have caused the

Stipulation to be executed, by their duly authorized attorneys, dated as of March ~1

2004.

KIRBY McINERNEY .Yc SQUIRE, LLP

BY : Jeffrey H. Squire Pamela E . Kulsrud 830 Third Avenue 10th Floor New York, New York 10022 (212)317-2300

Lead Counsel for Plaintiffs

Counsel for Royal Indemnity Co.

Counsel for St . Paul Mercury Insurance Co.

34

f

CMTTN GAMRRFTJ R RIICRF.I .I . . LLP

By : John G . Despriet David C. Newman 1230 Peachtree Street, N.E . Suite 3 100 Atlanta, Georgia 30309-3592 (404) 815-3500

Counsel for Defendants A.J . Nassar and Richard A. Kaplan

KAUFMAN, BORGEEST & RYAN, LLP

By : Wayne Borgeest 747 Third Avenue, 27'h Floor New York, New York 10017 (212) 980-9600

LEONARD & SWENSON. LLP

By : William G. Leonard 2115 East Lake Road Atlanta, Georgia 30307 (404) 371-0630

Kathryn A, Swenson 1121 Vinings Falls Drive Smyrna, Georgia 30080 (770) 437-9525

Counsel for Defendant Gary Brugliera

THOMPSON, LOSS & JUDGE, LLP

By : ~ -Thomas J. Judge Thompson, Loss & Judge, LLP 1919 Pennsylvania Avenue, N.W . Suite M-2U0 Washington, D.C . 20006-3458 Tel : (202) 772-5173

e 34

f

OrRimiT 4(` ~ TR12DCi 7 R. RiiCCF.T .I civil 111~ Vt-uaaiau~u~ w

LLP

By: Jo . Despriet //i'I~uL 9 f064 David C . Newman 1230 Peachtree Street, N.E. Suite 3 100 Atlanta, Georgia 30309-3592 (404) 815-3500

Counsel for Defendants A .J . Nassar and Richard A. Kaplan

KAUFMAN, BORGEEST & RYAN, LLP

By : Wayne Borgeest 747 Third Avenue, 270'Floor New York, New York 10017 (212) 980-9600

Counsel for Royal Indemnity Co .

LEONARD & SWENSON, LLP

By : William U. Leonard 2115 East Lake Road Atlanta, Georgia 30307 (404) 371-0630

Kathryn A. Swenson 1121 Vinings Falls Drive Smyrna, Georgia 30080 (770) 437-9525

Counsel for Defendant Gary Brugliera

THOMPSON, LOSS & JUDGE, LLP

By : Thomas J . Judge Thompson, Loss & Judge, LLP 1919 Pennsylvania Avenue, N.W . Suite M-200 Washington, D.C . 20006-3458 Tel : (202) 772-5173

Counsel for St . Paul Mercury Insurance Co .

Counsel for Royal Indemnity Co.

Counsel for St . Paul Mercury Insurance Co .

34

f

SMITH, GAMBRELL & RUSSELL, LLP

By : John G. Despriet David C. Newman 1230 Peachtree Street, N.E . Suite 3 100 Atlanta, Georgia 30309-3592 (404) 815-3500

Counsel for Defendants A.J . Nassar and Richard A. Kaplan

KAUFMAN, BORGEEST & RYAN, LLP

By : Wayne Borgeest 747 Third Avenue, 27'h Floor New York, New York 10017 (212) 980-9600

LEONARD & SWENSON, LLP

By~~ William G. Leonard-~ 2115 East Lake Road Atlanta, Georgia 30307 (404) 371-0630

Kathryn A. Swenson 1121 Vinings Falls Drive Smyrna, Georgia 30080 (770) 437-9525

Counsel for Defendant Gary Brugliera

THOMPSON, LOSS & JUDGE, LLP

By: - Thomas J . Judge Thompson, Loss & Judge, LLP 1919 Pennsylvania Avenue, N.W . Suite M-200 Washington, D .C . 20006-3458 Tel : (202) 772-5173

p .02

34

TOTAL P .02

MAR-09-2004 17 :14 KRUFMRN~ BORGEEST & RYAN

SMITH, GAMBRET.L & RUSSELL, I.Y,P

By : john G. Despriet David C. Newman 1230 Peachtree Street, N,E. Suite 3 100 Atlanta, Georgia 30309-3592 (404) 815-3500

Counsel for Defendants A.J . Nassar and Richard A. Kaplan

KAUFMAN, BORGEESx & RYAN, I.I,P

sy: Wayne

11

org ~f 747 Thud Av nue, 27 ' loot New York, N~w York ~0017 (212) 980-9600

Counsel for Royal Indemnity Co.

LEONARD & SWEPISON, LY.P

By: William G. Leonard 2115 East Lake Road Atlanta, Georgia 30307 (404) 371-0630

Kathryn A. Swenson 1121 Vinings Falls Drive Smyrna, Georgia 30080 (770) 437-9525

Counsel for Defendant Gary Brugliera

THOMPSON, LOSS & JUDGE, LLP

By: Thomas J. Judge 2001 K Street, NW Washington, DC 20006-1040 (202) 662-2000

Counsel for St. Paul Mercury Insurance Co.

(ro be scanea in p1we of tab)

EXHIBIT / ATTACHMENT

A

~r SA Q~A~88RB

anther homs~Clerlt

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT Or GEORGIA

ATLANTA DIVISION

IN RE : THE MAXIM GROUP, INC . Case No. 1 :99-CV-1280-CAP SECURITIES LITIGATION

PRELIMINARY ORDER IN CONNECTION WITH SETTLEMENT PROCEEDINGS

WHEREAS, the parties to the above-captioned consolidated class action,

having applied pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, for an

Order preliminarily approving the proposed settlement of the Class Action, in

accordance with the Stipulation of Settlement entered into by the parties dated as of

March 10, 2004, which would provide for dismissal of the Class Action with

prejudice, and the Court having read and considered the Stipulation and

accompanying documents, and all parties having consented to the entry of this Order,

NOW, THEREFORE, IT IS HEREBY ORDERED that :

1 . This Order incorporates by reference the definitions in the

Stipulation . All capitalized terms used herein shall have the same meanings as set

forth in the Stipulation .

2 . The teens of the settlement set forth in the Stipulation are

preliminarily approved.

7

3 . A hearing (the "Settlement Hearing") shall be held before the /1 czt /C~~ GCj 4 1

rionorahle Charles A. Pannell, Jr . on ~~,

2004 in CourtrooniL;~J ;rof the

Russell Federal Building, 75 Spring Street SW, Atlanta, Georgia 30303 (a) to

determine whether the Settlement ofthe Class Action is fair, reasonable, and adequate

and in the best interests of the Class and should be finally approved by the Court; (b)

to determine whether or not a Final Judgment and Order of Dismissal with Prej udice

substantially in the form attached to the Stipulation of Settlement as Exhibit B, should

be entered in the Class Action, inter alia, dismissing the Class Action with prejudice

against the Class and all of its individual members and extinguishing and releasing

all Released Claims as defined in the Stipulation ; (c) to determine whether the

proposed Plan of Allocation for the proceeds of the settlement is fair and reasonable

and should be approved by the Court; (d) to consider the application of

Representative Plaintiffs' Counsel for an award of attorneys' fees and reimbursement

of expenses to be paid from the Settlement Fund; and (e) to hear and rule on such

other matters as the Court may deem appropriate . Representative Plaintiffs'

Counsel's application for an award of attorneys' fees and reimbursement of expenses

may be heard by the Court at the Settlement Hearing or at suds other time as the

Court in its discretion deems appropriate .

E

4 . The Court reserves the right to adjourn the hearing by

announcement at the Settlement Hearing without further notice to the members of the

Class.

5 . The Coon reserves the right to approve the Settlement at or after

the Settlement Hearing with such modifications as may be consented to by the parties

to the Stipulation and without further notice to the members of the Class .

6 . In order to facilitate the mailing of Notice to the Class, Defendants

are directed to cooperate as reasonably necessary with Lead Counsel in obtaining a

list containing the names and last-known mailing addresses of each member of the

Class whom the Company can identify through reasonable effort . In order to

facilitate the mailing of the Notice to the Class, the Maxim transfer agent, EqiServe

Trust, Co ., N.A ., is ordered to provide to counsel for Plaintiffs and defendants, the

names and last known addresses of each member of the Class in the most efficient

usable format available . Such names and addresses shall be provided on a computer

diskette, it reasonable practicable.

7 . W ithin ten (10) days of the date this Order is entered by this Court,

the Insurers will file a motion and request a hearing before the Bankruptcy Court to

obtain approval for the Insurers to pay or cause to paid from the proceeds of the

4

applicable Maxim directors and officers insurance policies an amount equal to the

Settiement rund (the "Bankruptcy Court Order").

O . Piiriiipii- after iiic i3aniCl'iiFiC"y'COUrt OrUer becomes Final, Lead

Counsel shall cause to be mailed, by U .S . Mail, a Notice of Pendency and Proposed

Settlement of Class Action and Settlement Hearing (the "Notice") and Proof of Claim

and Release, substantially in the form attached hereto as Exhibit A-1 and A-2, to all

members of the Class of record who can be identified by Defendants as provided in

the preceding paragraph ; and within twenty (20) business days of the date the

Bankruptcy Court Order becomes final, Lead Counsel shall cause a summary notice

to be published in Investors Business Daily , substantially in the form attached hereto

as Exhibit A-3 . Copies of the Notice and Proof of Claim and Release shall he mailed

as soon as practicable to all persons who request them.

9 . The Court approves Lead Counsel's selection of Valley Forge

Administrative Services, Inc . as the Claims Administrator . The Claims Administrator

shall use reasonable efforts to give notice to nominee owners such as brokerage firms

and other persons or entities who purchased Maxim common stock during the Class

Period as record owners but not as beneficial owners. Such nominee purchasers are

directed to either forward copies of the Notice and Proof of Claim to their beneficial

owners within seven (7) days of their receipt of the Notice, or to provide the Claims

l

Administrator with lists of the names and addresses of the beneficial owners, and the

Ciauns Administrator is ordered to send the Notice and Proof of Claim promptly to

such beneficial owners. ",lomince purchasers who elect to send tile Notice and Proof'

of C-lann to their beneficial owners shall send a statement to the Claims Administrator

confirming that the mailing was made as directed . Additional copies of the Notice

shall be made available to any record holder requesting such for the purpose of

distribution to beneficial owners, and such record holders shall be reimbursed from

the Settlement Fund, upon receipt by the Claims Administrator of proper

documentation, for the reasonable expense of sending the Notices and Proofs of

Claim to beneficial owners .

10 . The form and content of the Notice, and the method set forth

herein of notifying the Class of the Settlement and its terms and conditions, meet the

requirements of Rule 23 of the Federal Rules of Civil Procedure, Section 21 D(a)(7)

of the Securities Exchange Act of 1934, IS U .S .C . 78u-4(a)(7) as amended by the

Private Securities Litigation Reform Act of 1995, and due process, constitute the vest

notice practicable under the circumstances, and shall constitute due and sufficient

notice to all persons and entities entitled thereto. Lead Counsel shall, at or before the

Settlement Hearing, file with the Court proof of marlin, of the Notice and Proof of

Claim.

6

11 . At the Settlement Hearing, any member of the Class who desires

to do so may appear personally or by counsel, provided that a notice of appearance

Cl fi era u$ ~iii~ii~li«i Nivvi ulll, and show cause, II t111~',

(a) why the Settlement should not be approved as fair, reasonable, and

in the best interests of the Class ;

(b) why the Plan of Allocation should not be approved as fair,

reasonable, and in the best interests of the Class ;

(c) why the Order and Final Judgment substantially in the form attached

hereto as Exhibit B, should not be entered ; or

(d) why the Court should not grant plaintiffs' petition for attorneys'

tees and expenses, to be paid from the Settlement Fund .

12 . Unless the Court in its discretion otherwise directs, no member of

the Class or any other person (excluding a party) shall be heard or shall be entitled

to contest any of these matters and no papers, briefs, pleadings, or other documents

submitted by any member of the Class or any other Person (excluding a party) shall

be received and considered, except by Order of the Court for good cause shown,

unless, no later than ten (10) business days prior to the Settlement Hearing die

following documents are served and filed in the manner provided below :

(a) a Notice of Intention to Appear ;

prior to the Settlement Hearing upon the following counsel for Plaintiffs :

John G . Despriet, Esq . David C . Newman, Esq . Smith, Gambrel) & Russell, LLP Suite 3100, Promenade I 1 1230 Peachtree Street, N.E . Atlanta, Georgia 30309-3592

7

(b) a detailed statement of such person's specific objections to any

matter before tile Court ;

~Cj (r.OCUlii~,IItS SuiilciElii i0 show all purchases and sales of 1Vl$Xllll

common stock made during the Class Period ; and

(d) the grounds for such objections and any reasons why such person

desires to appear and be heard, as well as all documents and writings which such

person desires the Court to consider .

13 . Such documents shall be served by hand or first-class mail,

postage prepaid, written objections and copies of any supporting papers and briefs in

manner that enables said counsel to receive the papers at least ten ( 10) business days

Jeffrey H . Squire, Esq . Pamela E. Kulsrud, Esq. Kirby McInerney & Squire, LLP 830 Third Avenue New York, New York 1002?

and upon counsel for Defendants :

Linda A . Klein, Esq . Kevin A. Stine, Esq. Gambrel) & Stolz, L .L .P. 3414 Peachtree Road, N.E . Suite 1600, Monarch Plaza Atlanta, Georgia 30326

William G . Leonard, Esq . Leonard & Swenson, LLP 2115 East Lake Road Atlanta, Georgia 30307

8

and has tiled said objections, papers and briefs, showing due proof of service upon

Lead Counsel and llefendants' counsel, with the Clerk of the United States District

Court for the T:OC: ::el'I: District Oi GCvibiB, Atlanta Division, 2=11 U.S . Courthouse,

i5 Spring Street SW, Atlanta, Georgia 30303 . All such objections, papers and briefs

shall expressly refer to the name of the case as it appears on the first page of this

Order, as well as the judge and case number . All written objections shall clearly

identity any and all witnesses, documents and other evidence of any kind that are to

be presented at the Settlement Hearing in connection with such objections and shall

further set forth the substance of any testimony to be given by such witnesses .

14 . Unless the Court otherwise directs, no member of the Class or

other person shall be entitled to object to the Settlement, or to the Final Judgment to

he entered herein, or otherwise to he heard, except by serving and filing written

objections as described above. Any person who tails to object in the manner

prescribed above shall be deemed to have waived such objection in this or any other

action or proceeding and shall be bound by all the terms and provisions of the

Stipulation and by all proceedings, orders, and judgments in the Class Action .

15 . Class Members shall be bound by all determinations and

judgments in the Class Action, whether favorable or unfavorable, unless such persons

request exclusion from the Class in a timely and proper manner, as hereinafter

9

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provided . A Class Member wishing to make such request shall mail the request in

written form by tirst class mail postmarked no later than ten (10) business days prior

to the Sett :~r;en. Hearing, to the address designated iii die Notice . Such request lot,

exclusion shall clearly indicate the name and address ofthe person seeking exclusion,

that the sender requests to he excluded from the Class in the Maxim Group, Inc .

Securities Litigation, and must be signed by such person . Such persons requesting

exclusion are also requested to state: their telephone number and the date(s), price(s),

and numbers) of shares of all purchases and sales of Maxim common stock during

the Class Period . The request for exclusion shall not be effective unless it provides

the required information and is made within the time stated above, or the exclusion

is otherwise accepted by the Court.

16 . Any Class Member who does not timely and validly request

exclusion from the Class shall be bound by all determinations and judgments in the

Class Action, whether favorable or unfavorable and regardless of whether such Class

Member submits a Proof of Claim .

17 . Lead Counsel shall provide Defendants' counsel with copies of

all requests for exclusion submitted by persons or entities who have properly

excluded themselves from the Class as provided above so that copies are actually

received, insofar as is practicable, upon receipt .

10

18 . Any Class Member who wishes to participate in the Settlement

must complete and submit a Proof of Claim in accordance with the instructions

contained therein . Unless uiherwise ordered by the Count, all Proof of Claim harms

must be completed and submitted no later than 120 days after the Notice date . Unless

otherwise ordered by the Court, any Class Member who does not complete and

submit a valid Proof of Claim within the time provided shall be barred from sharing

in the distribution of the Net Settlement Fund.

19 . Pending final determination of whether the Stipulation shall be

approved, Representative Plaintiffs, all Class members, and any of their respective

representatives, trustees, predecessors, successors, parents, subsidiaries, divisions,

heirs, and assigns are barred from commencing or prosecuting any action or

proceeding asserting any one or more of the Settled Claims against any defendant .

All proceedings in the Class Action relating to the claims against Defendants are

stayed and suspended until further order of the Court.

'0 . If the Settlement provided for in the Stipulation shall be approved

by the Court following the Settlement Hearing, an Order and Final Judgment shall be

entered as described in the Stipulation .

21 . If the Stipulation is not approved by the Court, or is terminated by

Defendants or plaintiffs in accordance with 17 .3 of the Stipulation or shall not

Il

become effective for any reason whatsoever, this Class Action shall proceed,

completely without prejudice to any party as to any matter of law or tact, as if the

Stipulation had not been made and had not been submitted to die Court (except as

provided in the Stipulation), and neither the Stipulation nor any provision contained

in the Stipulation nor any action undertaken pursuant thereto nor the negotiation

thereof by any party shall be deemed a presumption, concession or admission by any

defendant in the Class Action of any fault, liability, or wrongdoing as to the facts or

claims alleged or asserted in the Class Action, or any other actions or proceedings,

and shall not be offered or received in evidence or otherwise used by any person in

the Class Action or interpreted, construed, deemed, invoked in any other action or

proceeding, whether civil, criminal, or administrative .

12

22 . The Court hereby retains jurisdiction to consider all further

applications arising out of or connected with the proposed Settlement.

Dated:

ENTERED :

L

HON. CHARLES ANNELL, JR. UNITED STATES DISTRICT JUDGE

cro be wannea in p1we of tab)

EXHIBIT / ATTACHMENT

f

Action") and of the hearing to be held by the Court to consider the fairness,

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

IN RE: THE MAXIM GROUP, INC. Case No. 1 :99-CV-1280-CAP SECURITIES LITIGATION

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION

TO : ALL PERSONS WHO PURCHASED THE COMMON STOCK OF THE MAXIM GROUP, INC. N/K/A FLOORING AMERICA INC. ("MAXIM") DURING THE PERIOD JUNE 2, 1998 THROUGH JULY 13, 1999, INCLUSIVE.

PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS MAY BE AFFECTED BY PROCEEDINGS IN THIS LITIGATION . PLEASE NOTE THAT IF YOU ARE A CLASS MEMBER (DEFINED BELOW), YOU MAY BE ENTITLED TO SHARE IN THE PROCEEDS OF THE SETTLEMENT DESCRIBED IN THIS NOTICE . TO CLAIM YOUR SHARE OF THIS FUND, YOU MUST SUBMIT A VALID PROOF OF CLAIM POSTMARKED ON OR BEFORE 1 2004. IF YOU ARE A MEMBER OF THE CLASS AND DO NOT SUBMIT A TIMELY REQUEST FOR EXCLUSION, YOU WILL BE BOUND BY THE RELEASE WHETHER OR NOT YOU SUBMIT A CLAIM.

This Notice has been sent to you pursuant to Rule 23 of the Federal Rules of

Civil Procedure and an Order of the United States District Court for the Northern

District of Georgia, Atlanta Division (the "Court") . The purpose of this Notice is to

inform you of the proposed settlement of this class action litigation (the "Class

2

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reasonableness, and adequacy of the settlement . This Notice describes the rights you

may have in connection with the settlement and what steps you may take in relation

to the scitictueiii and this cuss action litigation .

1'he proposed settlement creates a fund in the amount of $3,000,000 (the

"Settlement Fund") and will include interest that accrues on the fund prior to

distribution . Based on Plaintiffs' Counsel's estimate of the number of shares entitled

to participate in the settlement and the anticipated number of claims to be submitted

by Class Members, the average distribution per share would be approximately $0.42

per share before deduction of court-approved fees and expenses. However, your

actual recovery from this fund will depend on a number of variables, including the

number of claimants, the number of shares you purchased or sold, the expense of

administering the claims process and the timing of your purchases and sales, if any.

Plaintiffs' Counsel believes that the proposed settlement provides significant

benefits to, and is in the best interest of, the Class . Because of the risks associated

with continuing to litigate and proceeding to trial, there was a danger that Plaintiffs

would not have prevailed on any of the claims, in which case the Class would receive

nothing . For example, Plaintiffs faced the possibility that all or many of the claims

in this case would be dismissed in response to motions by Defendants . In particular,

while on August 2, 2002, the Court granted Representative Plaintiffs' motion for class

3

certification, Defendants were granted discretionary leave of the Court of Appeals

to appeal that decision . There can be no assurance that the Eleventh Circuit Court of

Appeals would have affirmed the class certification decision . In the event that the

Court of Appeals were to reverse the class certification order, the litigation would no

longer proceed as a class action and therefore the Class would not obtain any

recovery . In addition, defendants Maxim and A.J. Nasser filed for bankruptcy

protection on June 15, 2000 and November 7, 2002 respectively, leaving only the

proceeds of an insurance policy to fund any settlement or judgment . At the same

time, the insurance proceeds were simultaneously funding defense costs for all of

Maxim's former officers and directors in this and other actions. It was entirely

possible that while Plaintiffs could obtain a larger judgment, there would be little or

no resources with which to fund any such result . Furthermore, litigation of the claims

through trial would only cause further diminution of the eroding insurance resources .

Finally, Defendants claimed that the restatement of Maxim's financial results

represented the Company's decision to recognize revenue more conservatively, but

was in no way an admission that prior financial results were improperly recorded .

Plaintiffs' Counsel have not received any payment for their services in

conducting the Class Action on behalf of Representative Plaintiffs and the Members

of the Class, nor have they been reimbursed for their out-of-pocket expenditures . If

4

the settlement is approved by the Court, Plaintiffs in this case will apply to the Court

for an award of attorneys' fees of no more than 33°,% of the Settlement proceeds and

reimbursement of out-of-pocket expenses to be paid from the Settlement Fund . if the

amount requested by counsel is approved by the Court, the average cost per share

would be approximately $0 .14 . The average cost per share could vary, depending on

the number of shares for which claims are filed .

This Notice is not an expression of any opinion by the Court about the merits

of any of the claims or defenses asserted by any party in this Class Action or the

fairness or adequacy of the proposed settlement .

For further information regarding this settlement, you may contact : Elaine Mui,

Kirby McInerney & Squire, LLP, 830 Third Avenue, 10th Floor, New York, NY

10022, Telephone (212) 317-2300 . Please do not call any representative of Maxim

or the Court.

I. NOTICE OF HEARING ON PROPOSED SETTLEMENT

A settlement hearing will be held on , 2004 at , -.m., before the

Honorable Charles A. Pannell, Jr., United States District Judge, at the United States

Courthouse, Northern District ofGeorgia, Atlanta Division, Russell Federal Building,

75 Spring Street SW, Atlanta, Georgia 30303 (the "Settlement Hearing"), to

determine : (1) whether the settlement consisting of $3,000,000 in cash plus accrued

5

interest should be approved as fair, reasonable and adequate to each of the parties; (2)

whether the proposed plan to distribute the settlement proceeds (the "Plan of

Allocation"') is fair, reasonable, and adequate, (3) whether the application by

Plaintiffs' Counsel for an award of attorneys' fees and expenses should be approved ;

and (4) whether the Class Action should be dismissed with prejudice. The Court may

adjourn the hearing by announcement at the Settlement Hearing without further notice

to the members of the Class .

II . DEFINITIONS USED IN THIS NOTICE

1 . "Class" means a class consisting of all Persons who purchased or

acquired in any manner shares of Maxim common stock during the period beginning

June 2, 1998 through July 13, 1999, inclusive . Excluded from the Class are

Defendants, members of the immediate families of the Defendants, any entity in

which any defendant has or had a controlling interest, present or former directors and

officers of Maxim and the legal representatives, heirs, successors, or assigns of any

such defendant. Also excluded from the Class are those Persons who timely and

validly request exclusion.

2 . "Defendants" means A.J . Nassar, Gary Brugliera and Richard Kaplan.

3 . "Lead Counsel" means Kirby McInerney & Squire, LLP.

4. "Local Counsel" means Gambrel] & Stolz, L.L .P .

f

6

5 . "Plaintiffs' Counsel" means Lead Counsel and Local Counsel .

6 . "Representative Plaintiffs" means Lead Plaintiff Rudman Partners, L.P.,

Anthony Viscusi, James T. Meadows, Jr . and John D. Meadows, III .

7 . "Representative Plaintiffs' Counsel" means counsel who have appeared

for any of the Representative Plaintiffs in the Class Action.

8. "Related Persons" means each of a Defendant's or Maxim's past or

present directors, officers, managers, employees, partners, members, principals,

agents, underwriters, insurers, co-insurers, reinsurers, controlling shareholders,

venture capital investors, attorneys, banks or investment banks, financial advisors,

associates, personal or legal representatives, predecessors, successors, parents

subsidiaries, divisions, joint ventures, assigns, spouses, heirs, related or affiliated

entities, any entity in which a defendant has a controlling interest, any members of

their immediate families, or any trust of which a defendant is the settlor or which is

for the benefit of any defendant and/or member(s) of his or her family .

9. "Released Claims" shall collectively mean all claims (including

Unknown Claims as set fort in California Civil Code §1542), demands, rights,

liabilities and causes of action of every nature and description whatsoever, known or

unknown, whether or not concealed or hidden, asserted or that might have been

asserted, including, without limitation, claims for negligence, gross negligence,

7

breach of duty of care and/or breach of duty of loyalty, fraud, breach of fiduciary

duty, or violations of any state or federal statutes, rules or regulations, by any

Representative Plaintiff or Class Member against the Defendants and Released

Persons arising out of, based upon or related to the purchase or other acquisition of

Maxim common stock during the Class Period or the acts, facts, transactions, events,

occurrences, disclosures, statements, omissions or failures to act that were or could

have been alleged in the Class Action and includes any and all claims arising out of,

relating to or in connection with the settlement or resolution of the Class Action.

10 . "Released Persons" means each and all of the Defendants, Maxim, all

insureds under policies issued by the Insurers and the Related Persons .

11 . "Unknown Claims" means any Released Claims which any

Representative Plaintiff or Class Member does not know or suspect to exist in his, her

or its favor at the time of the release of the Released Persons which, if known by him,

her or it, might have affected his, her or its settlement with and release of the

Released Persons, or might have affected his, her or its decision not to object to this

settlement or not to exclude himself, herself or itself from the Class. With respect to

any and all Released Claims, the Settling Parties stipulate and agree that, upon the

Effective Date, the Representative Plaintiffs shall expressly and each of the Class

Members shall be deemed to have and by operation of the Judgment shall have,

8

f

expressly waived the provisions, rights and benefits of California Civil Code § 1542,

which provides:

A vEivcRAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST 1N HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

The Representative Plaintiffs shall expressly and each of the Class Members

shall be deemed to have and by operation of the Judgment shall have, expressly

waived any and all provisions, rights and benefits conferred by any law of any state

or territory of the United States, or principle of common law, which is similar,

comparable or equivalent to California Civil Code § 1542. The Representative

Plaintiffs and Class Members may hereafter discover facts in addition to or different

from those which he, she, or it now knows or believes to be true with respect to the

subject matter of the Released Claims, but each Representative Plaintiff shall

expressly and each Class Member, upon the Effective Date, shall be deemed to have

and by operation of the Judgment shall have, fully, finally and forever settled and

released any and all Released Claims, known or unknown, suspected or unsuspected,

contingent or non-contingent, whether or not concealed or hidden, which now exist,

or heretofore have existed upon any theory of law or equity now existing or coming

i

Group, Inc. n/k/a Flooring America, Inc . ("Maxim" or the "Company") :

June 7, 1999 1 :99-CV-1455

9

into existence in the future, including, but not limited to, conduct which is negligent,

intentional, with or without malice, or a breach of any duty, law or rule, without

regard to the subsequent discovery or existence of such different or additional fads.

The Representative Plaintiffs acknowledge and the Class Members shall be deemed

by operation of the Judgment to have acknowledged, that the foregoing waiver was

separately bargained for and a key element of the settlement of which this release is

a part .

III. THE LITIGATION

On and after May 19, 1999, the following actions were filed in the United

States District Court for the Northern District of Georgia (the "Court") as securities

class actions on behalf of persons who purchased the common stock of The Maxim

Abbreviated Case Name

Stark v. The Maxim Group, Inc., et al

Best v. The Maxim Group, Inc., et al

Horton v. The Maxim Group, Inc., et al

Holsornback v. The Maxim Group, Inc., et al

Conti v . The Maxim Group, Inc., et al

Case No.

1 :99-CV-1280

1 :99-CV-1294

1 :99-CV-1372

1 :99-CV-1446

Date Filed

May 19, 1999

May 20, 1999

May 27, 1999

June 4, 1999

Kotivaleski v. The Maxim Group, Inc., et al. 1 :99-CV-1739 July 2, 1999

10

Knopler v. The Maxim Group, Inc., et al. 1 :99-CV-1520

Lee v. The Maxim Group, Inc., et al. 1 :99-CV-1554

uui-Ice 'v . The ivi~r=ii»t vtuup, Inc., el al . i :99-CV-16GS

Cunningham v. The Maxim Group, Inc., et al. 1 :99-CV-1679

Green v. The Maxim Group, Inc., et al . 1 :99-CV-1727

June 11, 1999

June 15, 1999

June 22, 1999

June 25, 1999

July 1, 1999

By Order dated August 17, 1999, the Court consolidated these actions for all

purposes as In re The Maxim Group, Inc., Securities Litigation, Case No . 1 :99-CV-

1280-CAP (collectively the "Class Action"). On February 8, 2000, the Court granted

the motion of Rudman Partners, L.P. to be appointed lead plaintiff under

§21D(a)(3)(B) of the Securities Exchange Act of 1934 (the "Exchange Act") and

approved Lead Plaintiffs' selection of Kirby McInerney & Squire, LLP as Lead

Counsel . The Court also appointed Gambrell & Stolz, L.L.P . as local counsel for

plaintiffs pursuant to §21D(a)(3)(B)(v) of the Exchange Act.

On April 10, 2000, plaintiffs filed an amended and consolidated class action

complaint (the "Complaint') . The Complaint alleges that Defendants and Maxim

violated Sections 10(b) and 20(a) ofthe Exchange Act, 15 U.S .C . §§ 78j(b) and 78t(a)

and Rule 10b-5 promulgated thereunder by the Securities and Exchange

Commission, 17 C.F .R. § 240. l Ob-5, by improperly accounting for vendor rebates and

11

misrepresenting the success of the Maxim acquisition of retail stores from Shaw

Industries in August 1998, thus resulting in an overstatement of Maxim's fiscal year

1999 financial results, as reported in its quarterly financial statements, and artificially

inflating Maxim's stock price.

On June 30, 2000, Maxim filed for bankruptcy in the United States Bankruptcy

Court for the Northern District of Georgia ("Bankruptcy Court"), pursuant to Chapter

11 of the Bankruptcy Code. The Court entered an order staying proceedings as to

Maxim on July 11, 2000 .

On November 14, 2000, Messrs. Nassar, Kaplan and Brugliera filed a motion

to dismiss the Complaint . On July 10, 2001, the Court granted in part that motion by

dismissing the Section 10(b) and Rule l Ob-5 claims against Mr. Kaplan, but denied

the remainder of that motion.

The Representative Plaintiffs filed a motion for class certification on November

26, 2001 . On August 2, 2002, the Court granted that motion, certified a class period

from June 2, 1998 to July 13, 1999 and appointed lead plaintiff Rudman Partners,

L.P ., Anthony Viscusi, James T. Meadows, Jr . and John D. Meadows, III as class

representatives .

On November 7, 2002, Defendant A.J . Nassar filed for bankruptcy in the

United States Bankruptcy Court for the Northern District of Georgia ("Bankruptcy

12

l

Court'), pursuant to Chapter 7 of the Bankruptcy Code. On March 25, 2003, the

Bankruptcy Court granted Defendant Nassar a discharge .

On 'November 27, 2002, the Eleventh Circuit granted Defendants' petition

pursuant to FRCP 23(t), to appeal the Court's August 2, 2002 order certifying the

Class . On July 14, 2003, the Eleventh Circuit granted the parties' Joint Motion To

Stay Proceedings in the appeal, up to and including January 6, 2004.

On June 18, 2003, the Settling Parties executed a Memorandum of

Understanding, which set forth the basic terms of a settlement agreement and

mandated negotiation and execution of this Stipulation .

IV. PLAINTIFFS' CLAIMS AND BENEFITS OF THE SETTLEMENT

Plaintiffs believe that the claims asserted in the Class Action have merit.

However, Plaintiffs' Counsel recognize and acknowledge the expense and length of

continued proceedings necessary to prosecute the Class Action against Defendants

through trial and through appeals . Plaintiffs' Counsel also have taken into account

the uncertain outcome and the risk of any litigation, especially in complex actions

such as this Class Action, as well as the difficulties and delays inherent in such

litigation and the risks involved in attempting to collect any judgment in the event the

claims were successful . Plaintiffs' Counsel are particularly mindful of the scarcity

of resources available to fund any settlement and judgment, as well as the inherent

13

i

problems of proof under and possible defenses to the violations asserted in the Class

Action. Plaintiffs' Counsel believe that the settlement set forth in the Stipulation

confers substantial benefits upon ine Class. Based on their evaluation, Plaintiffs'

Counsel have determined that the settlement set forth in the Stipulation is in the best

interests of the Representative Plaintiffs and the Class .

V. DEFENDANTS' STATEMENT AND DENIALS OF WRONGDOING AND LIABILITY

Defendants have denied and continue to deny each and all of the claims and

contentions alleged by Representative Plaintiffs in the Class Action . Defendants

expressly have denied and continue to deny all charges of wrongdoing or liability

against them arising out of any of the conduct, statements, acts or omissions alleged,

or that could have been alleged in the Class Action . Defendants also have denied and

continue to deny, inter- cilia, the allegations that plaintiffs have suffered damages, that

the price of Maxim common stock was artificially inflated by reason of the alleged

misrepresentations, non-disclosures or otherwise, or that the Representative Plaintiffs

or the Class were harmed by the conduct alleged in the Class Action .

Nonetheless, Defendants have concluded that further conduct of the Class

Action would be protracted and expensive, and that it is desirable that the Class

Action be fully and finally settled in the manner and upon the terms and conditions

14

set forth in the Stipulation. Defendants also have taken into account the uncertainty

and asks inherent in any litigation, especially in complex cases like this Class Action .

Defendants have therefore determined that it is desirable and beneficial to them that

the Class Action be settled in the manner and upon the terms and conditions set forth

in the Stipulation.

VI. TERMS OF THE PROPOSED SETTLEMENT

Defendants have paid or caused to be paid into an escrow account, pursuant to

the terms of the Stipulation of Settlement dated as of March 10, 2004 (the

"Stipulation"), cash in the amount of $3 million, which has been earning and will

continue to earn interest for the benefit of the Class. A portion of the settlement

proceeds will be used for certain administrative expenses, including costs of printing

and mailing this Notice, payment of any taxes assessed against the Settlement Fund

and costs associated with the processing of claims submitted . In addition, as

explained below, a portion of the Settlement Fund may be awarded by the Court to

Representative Plaintiffs' Counsel as attorneys' fees and for reimbursement of out-of-

pocket expenses. The balance of the Settlement Fund (the "Net Settlement Fund")

will be distributed according to the Plan of Allocation described below to Class

Members .

15

f t,

VII . PLAN OF ALLOCATION

The Net Settlement Fund will be distributed to Class Members who submit

valid, iinieiy Proof of Claim forms ("Authorized Claimants") under the Plan of

Allocation described below. The Plan of Allocation provides that you will be eligible

to participate in the distribution of the Settlement Fund only if you have a net loss on

all Class Period transactions in Maxim common stock.

To the extent that there are sufficient funds in the Net Settlement Fund, each

Authorized Claimant will receive an amount equal to the Authorized Claimant's

claim, as defined below . If, however, the amount in the Net Settlement Fund is not

sufficient to permit payment of the total claim of each Authorized Claimant, then each

Authorized Claimant shall be paid the percentage of the Net Settlement Fund that

each Authorized Claimant's claim bears to the total of the claims of all Authorized

Claimants . Payment in this manner shall be deemed conclusive against all

Authorized Claimants.

A Class Member's Recognized Loss will be calculated as follows :

For shares of Maxim common stock that were purchased or acquired on June

2, 1998 through July 13, 1999 and

a) sold prior to July 14, 1999, the claim per share is the difference

(if positive) between the purchase price and the sales price .

16

b) retained at the end of July 13, 1999, the claim per share is the

difference (if positive) between the purchase price(s), and $5 .863 .

Notwithstanding anything to the contrary immediately above, the maximum

Recognized Loss per share will be $8 .25 .

The date of purchase or sale is the "contract" or "trade" date as distinguished

from the "settlement" date . The determination of the price paid per share and the

pace received per share shall be exclusive of all commissions, taxes, fees and

charges .

For Class Members who made multiple purchases or multiple sales during the

Class Period, the earliest subsequent sale shall be matched with the earliest purchase

and chronologically thereafter for purposes of calculating the Recognized Loss.

The net Recognized Loss computation is not intended to be an estimate of what

an Authorized Claimant might have been able to recover at trial, and it is not an

estimate of the amount that will be paid pursuant to the Settlement.

No person shall have any claim against the named parties or their counsel or

the Claims Administrator for distributions made in accordance with the Plan of

Allocation . The parties and their counsel shall be given access to the Proofs of Claim

and related materials in order to ensure compliance with the terms of this agreement.

17

The Court has reservedjunsdichon to allow, disallow or adjust the clam of any

Class Member on equitable grounds.

VIII . PARTICIPATION IN THE CLASS

If you fall within the definition of the Class, you will remain a Class Member

unless you elect to be excluded from the Class. If you do not request to be excluded

from the Class, you will be bound by any judgment entered with respect to the

settlement in the Class Action whether or not you file a Proof of Claim.

If you wish to remain a Class Member, you need do nothing (other than

timely file a Proof of Claim and Release if you wish to participate in the

distribution of the Net Settlement Fund). Your interests will be represented by

Plaintiffs' Counsel If you choose, you may enter an appearance individually or

through your own counsel at your own expense.

TO PARTICIPATE IN THE DISTRIBUTION OF THE NET

SETTLEMENT FUND, YOU MUST TIMELY COMPLETE AND RETURN

THE PROOF OF CLAIM AND RELEASE FORM THAT ACCOMPANIES

THIS NOTICE . The Proof of Claim and Release must be postmarked on or before

2004, and delivered to the Claims Administrator at the address below . Unless

the Court orders otherwise, if you do not timely submit a valid Proof of Claim, you

18

will be barred from receiving any payment from the Net Settlement Fund, but will in

all other respects be bound by the provisions of the Stipulation and the Judgment .

IX. EXCLUSION FROM THE CLASS

You may request to be excluded from the Class. To do so, you must mail a

written request stating that you wish to be excluded from the Class to:

The Maxim Group, Inc. Securities Litigation c/o Claims Administrator Valley Forge Administrative Services, Inc. P.0 Box . 220 Villanova, PA 19085-0220

The request for exclusion must state : (1) your name, address, and telephone

number and (2) all purchases or other acquisitions, and sales of Maxim common stock

made during the Class Period, including the dates of purchase, acquisition or sale, the

number of shares of common stock, purchased, acquired or sold and the price or

consideration paid or the price received per share. YOUR EXCLUSION REQUEST

MUST BE POSTMARKED [WITHIN 45 DAYS OF THE MAILING OF THIS

NOTICE.] If you submit a valid and timely request for exclusion, you shall have no

rights under the Settlement, shall not share in the distribution of the Net Settlement

Fund and shall not be bound by the Stipulation or the Judgment . If the securities

were held jointly in two or more names, all names must be shown, and all joint

owners must sign the request for exclusion. Further, the request for exclusion by one

19

{, c`

of the joint holders shall nullify all joint owners from participating in the settlement

and/or receiving the proceeds of the Settlement Fund .

X. DISMISSAL AND RELEASES

If the proposed settlement is approved, the Court will enter a Final Judgment

and Order of Dismissal with Prejudice ("Judgment"). The Judgment will dismiss the

Released Claims with prejudice as to all Defendants .

XI. APPLICATION FOR FEES AND EXPENSES

At the Settlement Hearing, counsel for plaintiffs will request the Court to

award attorneys' fees in an amount not to exceed one-third of the Settlement Fund,

plus reimbursement of reasonable expenses, not to exceed $ , that were

advanced in connection with the Class Action, plus interest thereon, payable out of

the Settlement Fund . Class Members are not personally liable for any such fees,

expenses, or compensation .

To date, Plaintiffs' Counsel have not received any payment for their services

in conducting this Class Action on behalf of the Representative Plaintiffs and the

Class, nor have counsel been reimbursed for their out-of-pocket expenses. The fee

requested by Plaintiffs' Counsel is intended to compensate counsel for their efforts

in achieving the Settlement Fund for the benefit of the Class and for their risk in

undertaking this representation on a contingency basis.

20

XII. CONDITIONS FOR SETTLEMENT

The settlement is conditioned upon the occurrence of certain events described

in the Stipulation . Those events include, among other things : (1) approval by the

Bankruptcy Court to disburse Insurance Proceeds; (2) entry of the Judgment by the

Court, as provided for in the Stipulation ; and (3) expiration of the time to appeal from

or alter or amend the Judgment . If, for any reason, any one of the conditions

described in the Stipulation is not met, the Stipulation might be terminated and, if

terminated, will become null and void, and the parties to the Stipulation will be

restored to their respective positions as of June 18, 2003 .

XIII . THE RIGHT TO BE HEARD AT THE HEARING

Any Class Member who has not validly and timely requested to be excluded

from the Class, and who objects to any aspect of the settlement, Plan of Allocation,

or the application for attorneys' fees and expenses, may appear and be heard at the

Settlement Hearing. Any such person must submit a written notice of objection,

received on or before , by each of the following:

CLERK OF THE COURT UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION 2211 U.S . Courthouse 75 Spring Street SW Atlanta, Georgia 30303

r

LEONARD & SWENSON, LLP William G. Leonard 2115 East Lake Road Atlanta, Georgia 30307

SMITH, GAMBRELL & RUSSELL, LLP John G. Despriet David C. Newman Suite 3100, Promenade 11 1230 Peachtree Street, N.E. Atlanta, Georgia 30309-3592

21

OD behalf of Plaintiffs

KlIZ13Y MCINERNEY & SQUIRE, LLP Jeffrey H. Squire DI amzla E. Kuisrud 830 Third Avenue, 10th Floor New York, New York 10022

On behalf of Defendants :

r

GAMBRELL & STOLZ, L.L.P . Linda A. Klein J4I4 Peachtree Road, N .e . Suite 1600, Monarch Plaza Atlanta, Georgia 30326

The notice of objection must demonstrate the objecting Person's membership

in the Class, including the number of Maxim shares purchased and sold during the

Class Period, and contain a statement of the reasons for objection . Only Members of

the Class who have submitted written notices of objection in this manner will be

entitled to be heard at the Settlement Hearing, unless the Court orders otherwise.

XIV. SPECIAL NOTICE TO NOMINEES

If you hold any Maxim common stock purchased or acquired during the Class

Period as nominee for a beneficial owner, then, within ten (10) days after you receive

this Notice, you must either : (1) send a copy of this Notice and the Proof of Claim by

I

22

first class mail to all such Persons ; or (2) provide a list of the names and addresses of

such Persons to the Claims Administrator:

In re The jUaYim Group, inc. Securities Litigation c/o Claims Administrator Valley Forge Administrative Services, Inc. P.O. Box 220 Villanova, PA 19085-0220

If you choose to mail the Notice and Proof of Claim yourself, you may obtain

from the Claims Administrator (without cost to you) as many additional copies of

these documents as you will need to complete the mailing.

Regardless of whether you choose to complete the mailing yourself or elect to

have the mailing performed for you, you may obtain reimbursement for or

advancement of reasonable administrative costs actually incurred or expected to be

incurred in connection with forwarding the Notice and Proof of Claim and which

would not have been incurred or expected to be incurred in connection with

forwarding the Notice and Proof of Claim and which would not have been incurred

but for the obligation to forward the Notice and Proof of Claim, upon submission of

appropriate documentation to the Claims Administrator.

XV. EXAMINATION OF PAPERS

This Notice is a summary and does not describe all of the details of the

Stipulation. For full details of the matters discussed in this Notice, you may review

23

the Stipulation filed with the Court, which may be inspected during business hours,

at the office of the Clerk of the United States District Court, Northern District of

Georgia, Atlanta Division, 2211 U.S. Courthouse, 75 Spring Street SW, Atlanta,

Georgia 30303 . If you have any questions about the Class Action, you may contact

Plaintiffs' Counsel by writing:

KIRBY MCINERNEY & SQUIRE, LLP JEFFREY H. SQUIRE PAMELA E. KULSRUD 830 Third Avenue New York, New York 10022

DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE.

DATED: 12004 BY ORDER OF THE COURT UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION

24

F:\Files\PKUVIaxim\Notice of Settlement-FINAL.wpd

(Co be xaaoed in place of tab)

EXHIBIT / ATTACHMENT

0~*

l l

In re The Maxim Group, Inc. Securities Litigation c/o Claims Administrator Valley Forge Administrative Services, Inc . P.O. Box 220 Villanova, PA 19085-0220

UNITED S1'A f~5 DIS'I'KIC C C'UUK I FOR THE NORTHERN DISTRICT OF GEORGIA

ATLAI~Y M-PA DIVISION

IN RE : THE MAXIM GROUP, INC . Case No. 1 :99-CV-1280-CAP SECURITIES LITIGATION

PROOF OF CLAIM AND RELEASE

TO: ALL PERSONS WHO PURCHASED THE COMMON STOCK OF THE MAXIM GROUP, INC. N/K/A FLOORING AMERICA INC. ("MAXIM") DURING THE PERIOD JUNE 2, 1998 THROUGH JULY 13, 1999, INCLUSIVE.

IF YOU ARE A MEMBER OF THE CLASS, YOU MAY BE ELIGIBLE TO PARTICIPATE IN THE PROPOSED SETTLEMENT OF THIS LITIGATION AS DESCRIBED IN THE NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION AND SETTLEMENT HEARING WHICH IS ENCLOSED HEREWITH AND WHICH YOU ARE URGED TO READ.

IN ORDER TO RECEIVE ANY PAYMENTS TO WHICH YOU MAY BE ENTITLED AS A CLASS MEMBER, YOU MUST COMPLETE AND SIGN THIS PROOF OF CLAIM AND RELEASE FORM AND MAIL IT PREPAID, FIRST-CLASS MAIL, POSTMARKED NO LATER THAN 12004, TO THE FOLLOWING ADDRESS :

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2

IF YOU FAIL TO SUBMIT YOUR PROOF OF CLAIM AND RELEASE

hUKM UN OR BI-FORE , ZUU4, YUUK CLAIM MAYBE KEJE(; I ED

AND YOT T MAY BE PRECLI TIDED FROM RECEIVING ANY MONEY FROM

THE SETTLEMENT OF THIS LITIGATION . A Proof of Claim and Release form

will be deemed submitted when postmarked or, if submitted other than by first-class

mail, on the date actually received by the Claims Administrator.

I. IDENTITY OF CLAIMANT

Enter the name(s) of the beneficial purchaser(s) or acquirer(s) of Maxim

common stock; if the securities were held jointly in two or more names, all names

must be shown, and all joint owners must sign the Proof of Claim . If some securities

were held in one name (e.g., John Smith) and some in joint names (e.g., John and

Mary Smith, JT), you must file separate Proof of Claim forms, all these represent

different ownerships . A claimant whose securities were held in a custodial account

under a Gift of Minors Act ("UGMA") may file in his/her own name, if he/she is now

of age . In this event, the former custodian does not have to sign the Proof of Claim.

UGMA Custodians should identify themselves as follows: (e.g ., John Smith,

Custodian for Jack Smith UGMA). Corporate officers or partners filing for a

claimant corporation or partnership should file in the name of such entity, and sign

their names and titles on the signature page. Executors, Trustees, Administrators, and

the like should file in the name of the beneficial owner/seller, and sign their names

and titles on the signature page.

Name of Claimants) :

Address :

City :

Country :

State: Zip Code:

3

/ / Individual /-/ Corporation /-/ Estate /-/ Other (Specify)

Area Telephone No. Area Telephone No. Code (Day) Code (Evening)

II . SUBSTITUTE FORM W-9 REQUEST FOR TAXPAYER IDENTIFICATION NUMBER

Enter your taxpayer identification number below . For most individuals, this

is your Social Security number. The Internal Revenue Service requires your taxpayer

identification number. Failure to furnish your correct taxpayer identification number

may result in withholding of a portion of any distribution otherwise payable with

respect to your claim. UGMA Custodians should use the minor's social security

number.

III . PROOF OF CLAIM

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Social Security Number: _-

(for individuals)

OR

Employer Identification Number:

(for estates, trusts, corporations, etc .)

By submitting this Proof of Claim, I state that I believe in good faith that : (a)

I am a member of the Class as defined in the Notice, or am acting for such person; (b)

I have read and understood the contents of the Notice ; (c) I am not, and am not acting

for Maxim, any defendant, any entity in which any defendant has a controlling

interest, or the legal representative, heir, successor or assign of Maxim or any other

individual defendant ; (d) Neither I, nor any joint owners of the securities at issue,

have filed an effective Request for Exclusion (as defined in the Notice) seeking to be

excluded from the Class; (e) I am entitled to receive a share of the Settlement Fund ;

and (f) I desire to participate in the proposed Settlement described in the Notice .

I have enclosed photocopies of the stockbroker confirmation slips or broker

account statements, or an authorized statement from the broker containing the

transactional information found in a broker confirmation slip, or other documents

adequately evidencing each purchase and sale listed below in support of my claimed

5

loss . (IF ANY SUCH DOCUMENTS ARE NOT IN YOUR POSSESSION,

PLEASE OBTAIN A COPY OR EQUIVALENT CONTEMPORANEOUS

DOCUMENTS FROM YOUR BROKER ;S THESE DOCUMENTS ARE

NECESSARY TO PROVE AND PROCESS YOUR CLAIM.)

I understand that the information contained in this Proof of Claim is subject to

such verification as the Court may direct and I agree to cooperate in any such

verification . I further agree and understand that if the proposed Settlement is

approved by the Court and becomes effective, all claims or matters against Maxim or

certain other persons described in the Release below, which have been or could have

been asserted relating in any way to the subject matter of the litigation will be

released and discharged forever.

IV. SUPPORTING DOCUMENTS

Claimants must enclose copies of confirmation slips, monthly statements and/or

other documents (such as tax return schedules) evidencing each purchase, acquisition,

sale or holdings reported on this Proof of Claim form. IF ANY SUCH

DOCUMENTS ARE NOT IN YOUR POSSESSION, PLEASE OBTAIN COPIES

FROM YOUR BROKER. THESE DOCUMENTS ARE NECESSARY TO PROVE

AND PROCESS YOU CLAIM. FAILURE TO SUBMIT SUCH DOCUMENTS

MAY RESULT IN DISALLOWANCE OF YOUR CLAIM.

6

V. VERIFICATION OF CLAIMANTS)

I (We) understand that the information contained m this Proof of Claim and

Release is subject to such verification as the Claims ;dm~nistrata: may : eGui:e or as

the Court may aired, and I (We) agree to cooperate in any such verification .

VI . RELEASE AND COVENANT NOT TO SUE

For purposes of this Release and Covenant Not to Sue, the following terms

shall have the following meanings :

(a) "Released Person" means any or all of the following : Defendants A.J .

Nasser, Gary Brugliera and Richard Kaplan, their attorneys, Maxim's

past and present directors and officers (whether or not named as a

defendant in the Class Action), the insurers of those directors and

officers, Maxim's insurers, investment bankers, consultants and

advisors, and all of its his hr or their respective past and present

affiliates and associates (as such terms are defined in Rule 12b-2 under

the Securities Exchange Act of 1934); partners, agents, employees,

representatives shareholders and managers, and all if its heirs or their

other respective heirs, personal representatives, predecessors, successors

and assigns.

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(b) "Releasing Party" means any or all of the following: each Plaintiff, each

Class Member who has not timely submitted a proper Request for

Exclusion, and its, his, her or their affiliates and associates, and all of

their respective predecessors, successors and assigns .

(c) "Released Claims" shall collectively mean all claims (including

Unknown Claims) demands, rights, liabilities and causes of action of

every nature and description whatsoever, known or unknown, whether

or not concealed or hidden, asserted or that might have been asserted,

including, without limitation, claims for negligence, gross negligence,

breach of duty of care and/or breach of duty of loyalty, fraud, breach of

fiduciary duty, or violations of any state or federal statutes, rules or

regulations, by any Representative Plaintiff or Class Member against the

Defendants and Released Persons arising out of, based upon or related

to the purchase or other acquisition of Maxim common stock during the

Class Period or the acts, facts, transactions, events, occurrences,

disclosures, statements, omissions or failures to act that were or could

have been alleged in the Class Action and includes any and all claims

arising out of, relating to or in connection with the settlement or

resolution of the Class Action .

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As of the date the Court enters the Order and Final Judgment (as defined in the

5upulahon), each Releasing Party fully releases, revises and discharges each

Re,~-ased Persan from and against each of the Released Claims; and each Releasing

Party covenants not to and shall be enjoined and barred nom suing any Released

Person or otherwise asserting, directly or indirectly, any of the Released Claims

against any Released Person. As provided more fully in the Stipulation their release

includes unknown or unsuspected claims which, if known, might have affected the

release ; and each Releasing Party waives all rights under Section 1542 of the

California Civil Code (to the extent applicable) concerning such matters . In addition,

each Releasing Party agrees to be bound by the terms of the Stipulation of Settlement

and any final or interim orders and/or judgments entered by the Court.

In the event the settlement is not finally approved or the settlement is

terminated, all releases will be null and void.

VII . STATEMENT OF CLAIM

INSTRUCTIONS

1 . If you require additional space, attach extra schedules in the same format

as above. Sign and print your name and print your social security or employer

identification number on each additional page.

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2 . YOU MUST ATTACH DOCUMENTARY PROOF OF EACH

NUK(_'HASE AND SALE, AND HOLDINGS, AS DESCRIBED IN SECTION IV

ABOVE.

3 . All references to purchase and sale dates relate to trade dates, not

settlement dates.

4 . The amount of the settlement proceeds to which you are entitled, if any,

will be calculated pursuant to the proposed plan of distribution set forth in the notice,

or such other plan as may be approved by the Court.

5 . If you have acquired any Maxim common stock by gift, inheritance, or

operation of law, you are to report this transaction as if you acquired the security on

the same date as the person or entity who initially purchased the security .

IN COMPLETING SECTIONS A THROUGH C BELOW, USE

ADDITIONAL SHEETS OF PAPER IF NECESSARY. PLEASE

FILL IN EACH SECTION, WRITING "NONE" WHERE

APPROPRIATE.

A . Claimant(s) owned the following number of shares of Maxim common

stock as of the close of business on July 13, 1999 :

business ail July i 3, 11999 :

Purchase Price Per Share (exclude commissions and fees)

Date(s) of Purchase (List Chronologically) Month/Day/Year

Number of Shares Purchased

July 13, 1999:

Selling Price Per Share (exclude commissions and fees)

Date(s) of Sale (List Chronologically) Month/Day/Year

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B. SHARES PURCHASED: Claimant(s) made the following purchases of

Maxim common stock during the penod Nom June Z, 1998 through the close of

C. SHARES SOLD: Claimant(s) sold the following shares of Maxim

common stock during the period from June 2, 1998 through the close of business on

Number of Shares Sold

11

VII . COPIES

You are urged to make and retain a copy of the Yroot of l.'laim and lcelease and

of al l uvCiiiTiCCiYSli017 +that you submit-4 th it .

VIII. CERTIFICATION

UNDER THE PENALTIES OF PERJURY, I (WE) CERTIFY THAT ALL OF

THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND

COMPLETE . I (WE) certify that I am (we are) NOT subject to backup withholding

under the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code . If I am

signing on behalf of someone else, I hereby certify and warrant that I am authorized

to make this Proof of Claim and Release . I hereby certify and warrant that I have not

previously sold, transferred, assigned, or granted any interest in any of the claims

released hereby (as set forth at paragraph VI above) to any other person or entity .

NOTE : If you have been notified by the Internal Revenue Service that you are

subject to backup withholding, please strike out the word "NOT" in the Certification

above .

Date Signature of Claimant

Date Signature of Joint-Owner Claimant (if any)

12

If the claimant is other than an individual, or if the claimant is not the

person completing and signing this form, the following must also be provided :

Name of Person Signing Capacity of Person Signing (Executor, President, etc.)

Address and Telephone Number of Person Signing

THIS PROOF OF CLAIM AND RELEASE MUST BE SUBMITTED

BY PREPAID FIRST CLASS MAIL POSTMARKED NO LATER THAN

2004 TO, OR BE OTHERWISE RECEIVED BY THAT DATE

BY :

In re The Maxim Group, Inc. Securities Litigation c/o Claims Administrator Valley Forge Administrative Services, Inc. P.O. Box 220 Villanova, PA 19085-0220

13

Reminder Checklist :

Please sign the certification above .

2 . Remember to attach supposing documentation.

3 . Do not send original or copies of stock certificates .

4 . If you move, please send your new address to the address above.

5 . Please keep a copy of your claim form for your records .

EXHIBIT J ATTACHMENT

E~ cro be 9moea in place or,ob)

Plan of Allocation is fair, just, reasonable, and adequate and therefore should be

UN I I ED 5I Al E5 UI5 fKIC,°I' COUP, I FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

IN RE : THE MAXIM GROUP, INC . Case No. 1 :99-CV-1280-CAP SECURITIES LITIGATION

SUMMARY NOTICE OF CLASS ACTION SETTLEMENT

TO : ALL PERSONS WHO PURCHASED THE COMMON STOCK OF THE MAXIM GROUP, INC. N/K/A FLOORING AMERICA INC. ("MAXIM") DURING THE PERIOD JUNE 2, 1998 THROUGH JULY 13, 1999, INCLUSIVE .

YOU ARE HEREBY NOTIFIED, pursuant to an Order of the United States

District Court for the Northern District of Georgia, that a hearing will be held on

2004 at M., before the Honorable Charles A. Pannell, Jr., United

States District Judge, at the United States Courthouse, Northern District of Georgia,

Atlanta Division, Russell Federal Building, 75 Spring Street SW, Atlanta, Georgia

30303 (the "Settlement Hearing"), to determine: (1) whether the proposed settlement

of the claims in the Class Action for the sum of $3,000,000 in cash, plus accrued

interest should be approved by the Court as fair, just, reasonable and adequate ; (2)

whether, thereafter the Class Action should be dismissed with prejudice as set forth

in the Stipulation of Settlement dated as of March 10, 2004 ; (3 ) whether the proposed

2

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approved ; and (3) whether the application of Plaintiffs' Counsel for the payment of

attorneys' tees and reimbursement of costs and expenses incurred m connection with

this Class Action should bee approved.

If you purchased the common stock of Maxim curing the period beginning

June 2, 1998 through and including July 13, 1999, your rights may be affected by the

settlement of this Class Action . If you have not received a detailed Notice of

Pendency and Proposed Settlement of Class Action and a copy of the Proof of Claim

and Release, you may obtain copies by writing to In re The Maxim Group, Inc .

Securities Litigation c/o Claims Administrator, Valley Forge Administrative Services,

Inc-, P.O. Box 220, Villanova, PA 19085-0220, or by calling (610) 520-0856 . If you

are a Class Member, in order to share in the distribution of the Net Settlement Fund,

you must submit a Proof of Claim and Release no later than , establishing

that you are entitled to recovery. You will be bound by any judgment rendered in the

Class Action whether or not you make a claim.

If you desire to be excluded from the Class, you must file a request for

exclusion by in the manner and form explained in the detailed Notice referred

to above. All Members of the Class who have not requested exclusion from the Class

will be bound by any judgment entered in the Class Action pursuant to the

Stipulation.

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Counsel for Plaintiffs :

SMITH, GAMBRELL & RUSSELL, LLP John G. Despriet David C. Newman Suite 3100, Promenade 11 1230 Peachtree Street, N.E. Atlanta, Georgia 30309-3592

LEONARD & SWENSON, LLP William G. Leonard 2115 East Lake Road Atlanta, Georgia 30307

3

Any objection to the settlement must be mailed or delivered such that it is

received by each of the following no later than 12004 :

CLERIC OF THE COURT UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION 2211 U.S . Courthouse 75 Spring Street SW Atlanta, Georgia 30303

KIRBY MCINERNEY & SQUIRE, LLP Jeffrey H. Squire Pamela E. Kulsrud 830 Third Avenue, 10th Floor New York, New York 10022

Counsel for Defendants

GAMBRELL & STOLZ, L.L .P . Linda A. Klein 3414 Peachtree Road, N.e. Suite 1600, Monarch Plaza Atlanta, Georgia 30326

PLEASE DO NOT TELEPHONE THE COURT OR THE CLERK'S OFFICE REGARDING THIS NOTICE .

DATED: 12004 BY ORDER OF THE COURT UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA

(To be scaoea in p1= of tab)

EXHIBIT / ATTACHMENT

i

3 . Pursuant to Federal Rule of Civil Procedure 23, this Court approves the

UNITED STATES DISTRICT COURT FOR Tim NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

IN RE : THE MAXIM GROUP, INC . Case No . 1 :99-CV-1280-CAP SECURITIES LITIGATION

[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

This matter came before the Court for hearing pursuant to the Order of

this Court dated , on plaintiffs' application for approval of the settlement set

forth in the Stipulation of Settlement, dated as of March 10, 2004 (the "Stipulation") .

Due and adequate notice having been given to the Class as required in said Order and

the Court having considered all papers tiled and proceedings conducted herein and

good cause appearing therefore, IT IS HEREBY ORDERED, ADJUDGED AND

DECREED THAT :

This Judgment incorporates by reference the definitions in the

Stipulation, and all terms used herein shall have the same meanings as set forth in the

Stipulation .

2 . This Court has jurisdiction over the subject matter of the Class Action

and over all parties to the Class Action, including Members of the Class .

e f settlement set forth in the Stipulation and finds that said settlement and the related

rian of Allocation is, in all respects . fair, dust, reasonable and adequate to the Class .

~XCO].'~:?.S ~C «~i`y' ii~Cilvidual claim of ihOSC Persons k identified in Exhibit

1 hereto] who nave validly and timely requested exclusion from the Class, the Class

Action and all claims contained therein, as well as all of the Released Claims are

dismissed with prejudice as to the Representative Plaintiffs and the other Members

of the Class, and against Released Persons . Each of the parties are to bear their own

costs, except as otherwise provided in the Stipulation .

5 . The Court finds that the Stipulation and settlement are fair, just,

reasonable and adequate as to the Representative Plaintiffs, the Members of the Class

and Defendants, and the parties hereby directed to perform its teens.

6. Upon the Effective Date hereof, the Representative Plaintiffs and each

Member of the Class shall be deemed to have, and by operation of the J udgment shall

have, fully, foully, and forever released, relinquished and discharged all Released

Claims against the Released Persons, whether or not such Class Member executes and

delivers the Proof of Claim and Release.

7 . All Class Members are hereby forever barred and enjoined from

prosecuting the Released Claims against the Released Persons .

E

8 . Upon the Effective Date, each of the Released Persons shall be deemed

to have, anti by operation of this .lodgment shall have, fully, finally, and forever

released, relinquished and discharged each arid all of the Class Members and

Representative Plaintiffs' Counsel from all claims (including Unknown Claims),

arising out of, relating to, or in connection with the institution, prosecution, assertion,

settlement or resolution of the Class Action or the Released Claims .

9 . The Notice of Pendency and Proposed Settlement of Class Action given

to the Class was the best notice practicable under the circumstances, including the

individual notice to all Members of the Class who could be identified through

reasonable effort . Said notice provided the best notice practicable under the

circumstances of those proceedings and of the matters set forth therein, including the

proposed settlement set forth in the Stipulation, to all Persons entitled to such notice,

and said notice fully satisfied the requirements of Federal Rule of Civil Procedure 23

and the requirements of due process .

10. The Court hereby approves the Plan of Allocation set forth in the Notice .

11 . Any Notice Expenses and Administrative Expenses not heretofore paid

or provided for shall be paid out of the cash portion of the Settlement Fund, without

further order of the Court, but subject to Court review .

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12 . Representative Plaintiffs' Counsel are hereby awarded $-I as

attorneys' tees and $ as reimbursement of expenses . Payment of these

amounts to Lead Counsel ̀iiCrtil the SeUiemeni Fund snail be made within thirty (30)

days after the Effective Date of the Settlement . The Court finds that such award is

reasonable and appropriate in light of the quality of work performed, the result

achieved, and the complexity and difficulty of the Class Action .

13 . Approval of the Plan of Allocation submitted by Lead Counsel or any

order entered regarding the application for attorneys' fees or for reimbursement of

expenses shall in no way disturb or affect this Final Judgment.

14 . Neither the Stipulation nor the settlement contained therein, nor any act

performed or document executed pursuant to or in furtherance of the Stipulation or

the settlement: (i) is or may he deemed to he or used as an admission of, or

concession by Defendants as to any claim asserted in the Class Action or any other

action or proceeding, (b) are not and shall not be construed to be evidence of an

admission or concession by the Plaintiffs that claims asserted in the Class Action

against the Defendants lacks merit, and (c) shall not be offered or received in

evidence in any action or proceeding except in a proceeding to enforce the terns of

the Stipulation .

15 . Without affecting the finality of this Judgment in any way, the Court

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hereby retains continuing jurisdiction over : (a) implementation of this settlement and

any award or distribution of the Settlement Fund, including interest earned thereon ;

(b) disposition of the Settienteiit Fund end jcj all parties hereto for the purpose of

construing, enforcing and administering the Stipulation .

16 . The Court finds that during the course of the Class Action, the parties

and their respective counsel at all times complied with the requirements of Federal

Rule of Civil Procedure 11 .

17 . In the event that the settlement does not become effective in accordance

with the terms of the Stipulation, then this Judgment shall be rendered null and void

to the extent provided by and in accordance with the Stipulation and shall be vacated

and in such event, all orders entered and releases delivered in connection herewith

shall be null and void to extent provided by and in accordance with the Stipulation .

Dated : , 2004

ENTERED

THE HON. CHARLES A. PANNELL, JR.

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No . 1 :99-CV-1280-CAP.

Exhibit 1 to

Dismissal (;rdcr and Final Judgment

Persons and entities who timely submitted valid requests to be excluded

from the Class in In re The Maxim Group, Inc. Securities Litigation, Civ. Action