SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [X] Definitive Proxy Statement
[ ] Definitive Additional Materials [ ] Soliciting Materials
[ ] Confidential, for use of the Pursuant to Sec. 240.14a-11(c)
Commission Only (as permitted or Sec. 240.14a-12
by Rule 14a-6(e)(2))
PARAMOUNT FINANCIAL CORPORATION
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(Name of Registrant as Specified in its Charter)
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and 0-11.
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computed pursuant to Exchange Act Rule 0-11 (Set forth
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PARAMOUNT FINANCIAL CORPORATION
ONE JERICHO PLAZA
JERICHO, NEW YORK 11753
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-----------------------
JUNE 4, 1997
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To the Stockholders of
PARAMOUNT FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Paramount Financial Corporation (the "Corporation") will be held at 10:00
a.m., local time, on June 4, 1997, at the 395 North Service Building in the
Media Room -- Lower Level at 395 North Service Road, Melville, New York
11747, for the following purposes:
1. To elect three directors of the Corporation to serve until the
next annual meeting of stockholders and until the election and
qualification of their respective successors;
2. To vote upon a proposal to amend the Corporation's 1995 Stock
Option Plan to increase the number of shares of the Corporation's
Common Stock for which options may be granted under such Plan;
3. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Corporation for fiscal 1997; and
4. To transact such other business as may properly come before the
Annual Meeting.
Only holders of record of the Corporation's Common Stock at the close
of business on April 15, 1997 are entitled to notice of, and to vote at,
the Annual Meeting and any adjournments thereof.
A copy of the Corporation's Annual Report for the fiscal year ended
December 31, 1996 is enclosed.
YOU ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING
FORM OF PROXY IN THE ENCLOSED ENVELOP PROVIDED FOR THAT PURPOSE (TO WHICH
NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES) WHETHER OR NOT
YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON. THE PROXY IS REVOCABLE
BY YOU AT ANY TIME PRIOR TO ITS EXERCISE AND WILL NOT AFFECT YOUR RIGHT TO
VOTE IN PERSON IN THE EVENT YOU ATTEND THE ANNUAL MEETING. THE PROMPT
RETURN OF THE PROXY WILL BE OF ASSISTANCE IN PREPARING FOR THE ANNUAL
MEETING AND YOUR COOPERATION IN THIS RESPECT WILL BE GREATLY APPRECIATED.
By Order of the Board of Directors
GLENN NORTMAN,
Secretary
April 24, 1997
=========================================================================
YOUR VOTE IS IMPORTANT. TO VOTE YOUR SHARES,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE.
=========================================================================
<PAGE>
PARAMOUNT FINANCIAL CORPORATION
ONE JERICHO PLAZA
JERICHO, NEW YORK 11753
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PROXY STATEMENT
FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD
ON JUNE 4, 1997
-----------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Paramount Financial Corporation (the
"Corporation") of proxies to be used at the Annual Meeting of Stockholders
of the Corporation to be held at 10:00 a.m., local time, on June 4, 1997,
at the 395 North Service Building in the Media Room -- Lower Level at 395
North Service Road, Melville, New York 11747, and any adjournment thereof.
This Proxy Statement and the accompanying proxy, together with a copy of
the Annual Report of the Corporation for the fiscal year ended December 31,
1996, including financial statements, are first being mailed or delivered
to stockholders on or about April 25, 1997.
If proxy cards in the accompanying form are properly executed and
returned, the shares of Common Stock represented thereby will be voted as
instructed on the proxy. If no instructions are given, such shares will be
voted (1) for the election as directors of the nominees of the Board of
Directors named below, (2) in favor of the proposal to amend the 1995 Stock
Option Plan, (3) to ratify the appointment of Arthur Andersen LLP as the
Corporation's independent auditors for fiscal 1997, and (4) in the
discretion of the proxies named in the proxy card on any other proposals to
properly come before the Annual Meeting or any adjournment thereof. Any
proxy may be revoked by a stockholder prior to its exercise upon written
notice to the Secretary of the Corporation, or by the vote of a stockholder
cast in person at the Annual Meeting.
Holders of record of the Corporation 's Common Stock on April 15, 1997
will be entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof. As of that date, there were 7,990,000 shares of
Common Stock outstanding and entitled to vote, and a majority of these
shares will constitute a quorum for the transaction of business at the
Annual Meeting. Each share of Common Stock entitles the holder thereof to
one vote on all matters to come before the Annual Meeting, including
election of directors. Only votes cast "for" a motion constitute
affirmative votes. Votes "withheld" or abstentions (including broker non-
votes) are included in determining the existence of a quorum, but since
they are not votes "for" a motion, they will have the same effect as
negative votes or votes "against" such matters.
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SECURITY OWNERSHIP BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of
Common Stock beneficially owned, as of the Record Date, by (i) all persons
known by the Corporation to be the beneficial owner of more than 5% of the
outstanding Common Stock; (ii) each director and nominee for director of
the Corporation; (iii) each of the "named executive officers" as defined
under the rules and regulations of the Securities Act of 1933, as amended;
and (iv) all directors and executive officers of the Corporation as a
group.
NAME AND ADDRESS AMOUNT OF PERCENT OF COMMON
OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP STOCK
------------------- -------------------- -----------------
Glenn Nortman . . . . . . 1,500,943 19.7%
Jeffrey Nortman . . . . . 1,500,943 19.7
Paul Vecker . . . . . . . 198,114 2.6
All directors and
executive officers as a
group (3 persons) . . . 3,200,000 42.0%
_____________________
(1) The address of each listed person is c/o Paramount Financial
Corporation, One Jericho Plaza, Jericho, New York 11753.
PROPOSAL ONE: ELECTION OF DIRECTORS
GENERAL
A board of three (3) directors is to be elected at the Annual Meeting.
Unless otherwise instructed, the persons named in the enclosed proxy will
vote the proxies received by them for management's three (3) nominees named
below, all of whom are presently directors of the Corporation. In the
event that any management nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for
any nominee who shall be designated by the present Board of Directors to
fill the vacancy. The Corporation is not aware of any nominee who will be
unable or will decline to serve as a director. The term of office for each
person elected as a director will continue until the Corporation's next
Annual Meeting of Stockholders or until his or her successor has been
elected and qualified.
VOTE REQUIRED
The three (3) nominees for director receiving a plurality of the votes
cast at the Annual Meeting in person or by proxy shall be elected. Shares
present in person at the Annual Meeting that are not voted for a particular
nominee, and shares represented by proxy as to which authority to vote for
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such nominee is properly "withheld," will not be counted either "for" or
"against" in determining a plurality for such nominee.
NOMINEES
The following information is supplied with respect to the nominees for
election as directors of the Corporation:
NAME AGE POSITION WITH THE CORPORATION
---- --- -----------------------------
Glenn Nortman 39 Co-Chief Executive Officer, Secretary and a
Director
Jeffrey Nortman 38 Co-Chief Executive Officer and a Director
Paul Vecker 37 Senior Vice President, Chief Financial Officer,
Treasurer and a Director
Certain biographical information regarding each nominee for director
is set forth below:
Glenn Nortman is the Co-Chief Executive Officer, Secretary and a
director of the Corporation. Prior to becoming Co-Chief Executive Officer,
Mr. Nortman served as the Executive Vice President of the Corporation from
June 1992. From 1987 to 1992, Mr. Nortman served as the National Accounts
Manager for Pacificorp Capital, a wholly-owned computer leasing subsidiary
of PacifiCorp, the public utility in Portland, Oregon. Prior to 1987, Mr.
Nortman was a leading equipment trader for Thomas Nationwide Computer
Corporation ("Thomas Nationwide"), which in 1987 was acquired by
Pacificorp. Mr. Nortman is the brother of Jeffrey Nortman.
Jeffrey Nortman is the Co-Chief Executive Officer and a director of
the Corporation. Prior to becoming Co-Chief Executive Officer, Mr. Nortman
served as the President and a director of the Corporation from its
inception in July 1991. From 1987 to 1991, Mr. Nortman was the Manager of
Peripheral Trading for Pacificorp Capital. Mr. Nortman is the brother of
Glenn Nortman.
Paul Vecker has been the Senior Vice President, Chief Financial
Officer, Treasurer and a director of the Corporation since March 1993.
From 1987 to 1993, Mr. Vecker was instrumental in founding and served as
the Senior Vice President and Chief Financial Officer of COS Computer
Systems Inc. ("COS"), a foreign controlled computer leasing and trading
company. Prior to joining COS, Mr. Vecker was the Controller at Unilease
Computer Corporation, a British owned computer leasing company. Mr. Vecker
is a certified public accountant.
MEETINGS OF THE BOARD
Since the Corporation's Board of Directors is currently comprised of
only Glenn Nortman, Jeffrey Nortman and Paul Vecker, each of whom is an
executive officer of the Corporation and resident at the Corporation's
executive offices, the Board of Directors effectively holds numerous formal
and informal meetings every business day. Messrs. Nortman and Mr. Vecker
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keep each other continuously apprised of material corporate events and, to
the extent required, meet formally to deliberate on issues. In addition to
these meetings of the Board of Directors, the Board of Directors acted by
unanimous written consent in lieu of meeting on two occasions in 1996.
The Board of Directors does not have any committees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Corporation does not currently have a compensation committee, and
instead the entire Board of Directors of the Corporation, comprised of
Glenn Nortman, Jeffrey Nortman and Paul Vecker, determined the levels of
executive officer compensation during 1996. No executive officer of the
Corporation had any relationship reportable under the Compensation
Committee Interlock regulations during 1996.
PROPOSAL TWO: APPROVAL TO AMEND 1995 STOCK OPTION PLAN
GENERAL
The Board of Directors proposes that the Corporation's 1995 Stock
Option Plan (the "Plan") be amended to increase the aggregate number of
shares of Common Stock subject to issuance under the Plan by 750,000
shares, from 750,000 shares to 1,500,000 shares. As of the Record Date,
there were 219,762 shares of Common Stock subject to issuance pursuant to
outstanding options, and the Corporation had contractual obligations to
issue options for an additional aggregate 390,000 shares of Common Stock to
certain employees in the future to the extent such employees remain
employed by the Corporation. To date, no executive officer or director of
the Corporation has been granted options under the Plan.
The closing sales price of the Corporation's Common Stock, as reported
by the Nasdaq SmallCap Market, was $0.344 per share on April 21, 1997.
The Board of Directors believes that, as a result of the Corporation's
anticipated growth, it will be necessary to hire additional personnel. In
view of these personnel needs, together with the Corporation's intentions,
commencing in fiscal 1997, of utilizing options as a component of the
remuneration paid to management, the Board of Directors is of the opinion
that it is appropriate that stock options be available to attract and
retain well qualified executive and other personnel and to furnish an
additional incentive to those persons. Accordingly, the Board of Directors
proposes to increase the number of shares of Common Stock available for
issuance under the Plan by an additional 750,000 shares, from 750,000
shares to 1,500,000 shares.
A detailed summary description of the Plan is set forth in Annex A to
this Proxy Statement.
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REQUIRED AFFIRMATIVE VOTE
The affirmative vote of a majority of votes cast at the Annual Meeting
in person or by proxy is required to approve the amendment to the Plan.
Since an abstention does not count as an affirmative vote cast, it has the
same effect as a vote "against" this proposal.
RECOMMENDATION
THE CORPORATION'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE AMENDMENT TO THE PLAN.
PROPOSAL THREE: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
GENERAL
The Board of Directors has selected Arthur Andersen LLP, independent
auditors, to audit the consolidated financial statements of the Corporation
for the fiscal year ending December 31, 1997 and recommends that
stockholders vote for ratification of such appointment. Notwithstanding
the selection, the Board, in its discretion, may direct the appointment of
new independent auditors at any time during the year, if the Board feels
that such a change would be in the best interests of the Corporation and
its stockholders. In the event of a negative vote on ratification, the
Board of Directors will reconsider its selection.
Arthur Andersen LLP has audited the Corporation's financial statements
annually since 1994. Representatives of Arthur Andersen LLP are expected
to be present at the meeting with the opportunity to make a statement if
they desire to do so and are expected to be available to respond to
appropriate questions.
REQUIRED AFFIRMATIVE VOTE
The affirmative vote of a majority of votes cast at the Annual Meeting
in person or by proxy is required to ratify the appointment of independent
auditors. Since an abstention does not count as an affirmative vote cast,
it has the same effect as a vote "against" this proposal.
RECOMMENDATION
THE CORPORATION'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT AUDITORS.
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EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table summarizes all compensation earned by or paid to
the Corporation's Co-Chief Executive Officers and each of the Corporation's
other executive officers whose total annual salary and bonus exceeded
$100,000 for services rendered in all capacities to the Corporation during
the fiscal year ended December 31, 1996 (collectively, the "named executive
officers"), for services rendered in all capacities during the fiscal years
ended December 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------------------
NAME AND FISCAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
------------------ ------ ------ ----- ------------
Glenn Nortman . . . . . . 1996 $297,900 - $ 35,300(1)
Co-Chief Executive Officer 1995 250,000 - 422,500(2)
1994 250,000 - 232,244(3)
Jeffrey Nortman . . . . . 1996 $297,900 - $ 35,300(1)
Co-Chief Executive Officer 1995 270,000 - 422,500(2)
1994 270,000 - 232,038(3)
Paul Vecker . . . . . . . 1996 $184,200 - -
Senior Vice President and 1995 165,000 - $ 32,800(4)
Chief Financial Officer 1994 156,000 $17,000 -
_______________
(1) Represents payments of approximately $18,000 for automobile expenses,
$11,300 for country club dues, and $6,000 for split-dollar life
insurance premiums.
(2) Represents payments of approximately $18,000 for automobile expenses,
$11,300 for country club dues, and $6,100 for life insurance premiums,
an S-Corp dividend of approximately $125,000, and approximately
$262,100 for the payment of Federal, state and local taxes.
(3) Represents payments of approximately $14,900 for automobile expenses,
$11,300 for country club dues, $6,100 for life insurance premiums, and
$199,900 for the payment of Federal, state and local income taxes.
(4) Represents payments for Federal, state and local taxes.
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All directors of the Corporation are reimbursed for all
reasonable expenses incurred by them in acting as a director or as a member
of any committee of the Board of Directors.
EMPLOYMENT AGREEMENTS
Messrs. Glenn and Jeffrey Nortman and Mr. Vecker have employment
agreements with the Corporation described below. Each of these employment
agreements terminate on January 21, 1999.
The Corporation's employment agreements with Messrs. Nortman provide
for an annual base salary of $300,000 for the first year of the term. The
Nortmans' base salaries rise to $330,000 each in the second year of the
term, and will be set by the Board of Directors for the third year of the
term (at a rate no less than $330,000). As part of their compensation
package, Messrs. Nortman receive the use of an automobile and certain other
fringe benefits commensurate with their duties and responsibilities. In
addition, Messrs. Nortman will be entitled to receive a severance payment
equal to 2.99 times their respective five year average salary if, among
other things, without their consent, their duties, responsibilities or
position are materially diminished, if there is any material breach of
their employment agreements by the Corporation at any time during the term
thereof of if the Corporation experiences a "Change of Control" (as
defined).
The Corporation's employment agreement with Mr. Paul Vecker provides
for an annual base salary of $185,000 for the first year of its term and
$203,500 for the second year. The base salary for the third year of the
term will be set by the Board of Directors (at a rate no less than
$203,500). Mr. Vecker's agreement also provides for the use of an
automobile and other fringe benefits commensurate with his duties and
responsibilities. In addition, Mr. Vecker will be entitled to receive a
severance payment equal to 1.5 times his five year average salary if, among
other things, without Mr. Vecker's consent, his duties, responsibilities or
position is materially diminished, if there is any material breach of the
employment agreement by the Corporation at any time during the term thereof
or if the Corporation experiences a "Change of Control" (as defined).
KEY-MAN AND SPLIT-DOLLAR LIFE INSURANCE
The Corporation maintains key-man/split-dollar life insurance policies
on the lives of each of Glenn and Jeffrey Nortman. The death benefits
under these policies are allocated $1,000,000 towards the key-man component
and $4,000,000 towards the split-dollar component. The Corporation also
maintains a $1,000,000 split-dollar life insurance policy on the life of
Paul Vecker.
DIRECTOR OPTION PLAN
On October 1, 1995, the Board of Directors of the Corporation adopted,
and the Corporation's stockholders approved, the Corporation's 1995
Director Option Plan (the "Director Plan"), pursuant to which 50,000 shares
of Common Stock of the Corporation were reserved for issuance upon the
exercise of options granted to non-employee directors of the Corporation.
The purpose of the Director Plan is to encourage ownership of the
Corporation's Common Stock by non-employee directors of the Corporation
whose initial retention and then continued services are considered
essential to the Corporation's future and to provide them with a further
incentive to remain as directors of the Corporation. As of the Record
Date, no such options have been granted and the Corporation does not have
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any non-employee directors. However, the Corporation believes that the
Director Plan will encourage, in the future, retaining non-employee
directors.
The Directors Plan is administered by the Board of Directors.
Directors of the Corporation who are not employees of the Corporation or
any subsidiary of the Corporation are eligible to participate in the Plan.
The Director Plan expires in August 2005. The Board of Directors may
award, alter or discontinue the Director Plan, subject to certain
limitations.
Under the Director Plan, an eligible director of the Corporation will,
after having served as a director for one year, automatically receive non-
qualified stock options to purchase 2,000 shares of Common Stock per annum
at an exercise price equal to the fair market value of such shares at the
time of grant of such option. Each such option is immediately exercisable
for a period of 10 years from the date of grant but generally may not be
exercised more than 90 days after the date an optionee ceases to serve as a
director of the Corporation. Options granted under the Director Plan are
not transferable by the optionee other than by will, laws of descent and
distribution or as required by law.
Common Stock may be purchased from the Corporation upon the exercise
of an option by payment in cash or cash equivalent, through the delivery of
shares of Common Stock having a fair market value equal to the cash
exercise price of the option, or any combination of the above, subject to
the discretion of the Board of Directors.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Corporation does not currently have a compensation committee, and
instead the entire Board of Directors of the Corporation, comprised of
Glenn Nortman, Jeffrey Nortman and Paul Vecker, make determinations
regarding the levels of executive compensation. Currently, Messrs. Nortman
and Mr. Vecker are the only executive officers of the Corporation.
In 1996, the only compensation paid to the Corporation's executive
officers was as set forth in each of Messrs. Nortman's and Mr. Vecker's
respective employment agreements. Insofar as the 1996 levels of
compensation for all of the Corporation's executive officers (including
those of Messrs. Nortman, the Corporation's Co-Chief Executive Officers)
was limited to the base salaries (and other compensation) established in
the executives' employment agreements, the Board of Directors in 1996 did
not determine the levels of such executives' compensation. The Board of
Directors continues to believe, however, that the base salaries set forth
in these employment agreements are appropriate in light of each executive's
level of responsibilities, individual performance and time in position, as
well as in relation to the Corporation's overall financial circumstances
and performance during 1996.
With respect to 1997, the Board of Directors has determined to
potentially award both commission-based and stock option-based compensation
to its executives, in both cases in conformity with the policies and
procedures set forth below. The Board's determination to potentially award
such additional compensation is based upon its belief that it is in the
Corporation's best interests to provide incentives to its executives to
realize the Corporation's overall strategies and objectives and to
compensate them to the extent that such strategies and objectives are met.
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Potential Commission-Based Compensation. The Board of Directors
believes that, in appropriate instances, commission-based compensation can
be an effective means of providing incentive to its executives. The Board
of Directors intends to look at numerous factors in determining in which
circumstances to award commission-based compensation, which factors will
include the extent of the executive's role in bringing a transaction to the
Corporation and in closing the transaction, the profitability to the
Corporation of the transaction and the perceived long-term benefits of the
transaction to the Corporation's overall strategies and objectives. In
this regard, the Board of Directors does not currently intend to establish
minimum performance levels or other pre-determined benchmarks for the award
of commission-based compensation, but instead plans to review each
circumstance on its own merits to determine the level, if any, of
commission-based compensation which the Corporation will pay.
Potential Stock-Option Based Compensation. Consistent with the
purposes of the Corporation's 1995 Stock Option Plan of ensuring the
retention of existing executive personnel and providing additional
incentive to such personnel by permitting such individuals to increase
their ownership interest in the Corporation (among the other purposes of
this Plan), the Board of Directors has determined to commence issuing
options to its executive officers. Initially, the Board of Directors has
determined to established a flexible formula to determine the number of
stock options to be granted to its executive officers. Pursuant to this
formula, an executive officer would receive a base number of options equal
to one share of Common Stock for every $100.00 of such officer's annual
base salary. In order to permit the Board of Directors to most accurately
reward stock options, the formula then requires that the base number of
options be subject to a "merit multiplier," the size of which will depend
upon the overall performance of the Corporation during the year in
question, the executive's performance in that year and other factors.
BOARD OF DIRECTORS
------------------
Glenn Nortman
Jeffrey Nortman
Paul Vecker
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PERFORMANCE GRAPH
Displayed below is a graph which compares the cumulative total
stockholder returns (including reinvestment of dividends) from the period
from January 23, 1996 (the date the Corporation became a public company)
through December 31, 1996 on an investment of $100 in (i) the Corporation's
Common Stock, (ii) the Russell 2000 Index (an index of small capitalization
companies), and (iii) the NASDAQ Non-Financial Index (an index of all
NASDAQ-traded companies, excluding financial companies). Stockholders are
advised that historical results are not necessarily indicative of future
performance.
January 23, 1996 December 31, 1996
---------------- -----------------
The Corporation . . . . . . . . 100 19
Russell 2000 Index . . . . . . 100 116
NASDAQ Non-Financial Index . . 100 128
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's directors and executive officers, and persons
who own more than 10% of a registered class of the Corporation's equity
securities, to file with the Securities and Exchange Commission and the
Nasdaq Stock Market reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Corporation
and to furnish the Corporation with copies of all Section 16(a) forms they
file.
Based on a review of the copies of such reports furnished to the
Corporation, the Corporation believes that, during the 1996 fiscal year,
all filing requirements applicable to its executive officers, directors and
greater than 10% stockholders were complied with.
1998 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1998 Annual Meeting of
Stockholders to be eligible for inclusion in the Corporation's 1998 Proxy
Statement, they must be received by the Corporation at its principal
executive offices One Jericho Plaza, Jericho, New York 11753 (Attn:
Secretary), prior to December 23, 1997. The Board of Directors will review
any stockholder proposals that are filed as required and will determine
whether such proposals meet applicable criteria for inclusion in the
Corporation's 1998 Proxy Statement for the Annual Meeting.
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OTHER MATTERS
The Board of Directors does not know of any other matters that are to
be presented for consideration at the Annual Meeting. Should any other
matters properly come before the Annual Meeting, it is the intention of the
persons named in the accompanying proxy to vote such proxy on behalf of the
stockholders they represent in accordance with their best judgment.
SOLICITATION OF PROXIES
Proxies are being solicited by and on behalf of the Board of
Directors. The Corporation will bear the costs of preparing and mailing
the proxy materials to its stockholders in connection with the Annual
Meeting. The Corporation will solicit proxies by mail and the directors
and certain officers and employees of the Corporation may solicit proxies
personally or by telephone or telegraph. These persons will receive no
additional compensation for such services but will be reimbursed for
reasonable out-of-pocket expenses. The Corporation also will request
brokers, dealers, banks and their nominees to solicit proxies from their
clients, where appropriate, and will reimburse them for reasonable out-of-
pocket expenses related thereto.
THE CORPORATION SHALL PROVIDE, WITHOUT CHARGE, TO ANY STOCKHOLDER,
UPON THE WRITTEN REQUEST THEREFOR, ADDITIONAL COPIES OF THE CORPORATION'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
ANY SUCH REQUEST SHALL BE DIRECTED TO PARAMOUNT FINANCIAL CORPORATION,
ATTENTION: PAUL VECKER, CHIEF FINANCIAL OFFICER, AT THE FOLLOWING ADDRESS:
ONE JERICHO PLAZA, JERICHO, NEW YORK 11753.
GLENN NORTMAN,
Secretary
April 24, 1997
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ANNEX A
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1995 STOCK OPTION PLAN
As of August 28, 1995, the Board of Directors adopted and the
Corporation's stockholders approved the 1995 Stock Option Plan for all
senior executive officers, key employees and consultants of the Corporation
pursuant to which 750,000 shares of Common Stock were reserved for
issuance. As of the Record Date, there were 219,762 shares of Common Stock
subject to issuance pursuant to outstanding options, and the Corporation
had contractual obligations to issue options for an additional aggregate
390,000 shares of Common Stock to certain employees in the future to the
extent such employees remain employed by the Corporation. Options granted
under the 1995 Stock Option Plan, which expires in August 2005, may be
either incentive stock options ("ISOs"), which are intended to meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as
amended, or non-qualified stock options ("NSOs"). The purposes of the 1995
Stock Option Plan are to ensure the retention of existing executive
personnel, key employees, directors, consultants and advisors and to
provide additional incentive by permitting such individuals to participate
in the ownership of the Corporation, and the criteria to be utilized by the
Board of Directors or the committee in granting options pursuant to the
1995 Stock Option Plan will be consistent with these purposes.
Under the 1995 Stock Option Plan, the Board of Directors (or a
designated committee thereof) may grant (i) ISOs at an exercise price per
share which is not less than the fair market value of a share of Common
Stock on the date on which such ISOs are granted (and not less than 110% of
the fair market value in the case of any optionee who beneficially owns
more than 10% of the total combined voting power of the Corporation), and
(ii) NSOs at an exercise price per share which is determined by the Board
of Directors (and which may be less than the fair market value of a share
of Common Stock on the date on which such NSOs are granted). The 1995 Stock
Option Plan further provides that the maximum period in which options may
be exercised will be determined by the Board of Directors (or a designated
committee thereof), except that ISOs may not be exercised after the
expiration of ten years from the date the ISOs were initially granted (and
five years in the case of any optionee who beneficially owns more than 10%
of the total combined voting power of the Corporation). To the extent that
the aggregate fair market value, as of the date of grant, of the shares of
which an ISO become exercisable for the first time by an optionee during
the calendar year exceeds $100,000, the portion of such ISO which is in
excess of the $100,000 limitation will be treated as an NSO. Options
granted under the 1995 Stock Option Plan to officers, directors or
employees of the Corporation may be exercised only while the optionee is
employed or retained by the Corporation or within 90 days of the date of
termination of the employment relationship or directorship, unless such
termination is for cause or attributable to certain other reasons, in which
events options will expire immediately upon termination. However, options
which are exercisable at the time of termination by reason of death or
permanent disability of the optionee may be exercised within 12 months of
the date of termination of the employment relationship or directorship. Any
option granted under the 1995 Stock Option Plan will be nontransferable,
except by will or by the laws of descent and distribution, and may be
exercised upon payment of the option price in cash, a cash equivalent,
Common Stock or any other form of consideration which is acceptable to the
Board of Directors.
Options may be granted only to such employees, officers and directors
of, and consultants and advisors to, the Corporation or any subsidiary of
the Corporation as the Board of Directors or the committee shall select
from time to time in its sole discretion, provided that only employees of
A-1
<PAGE>
the Corporation or a subsidiary of the Corporation shall be eligible to
receive ISOs. The number of consultants and advisors to the Corporation
eligible to receive grants under the Plan is not determinable. The Board of
Directors or the committee will, in its discretion, determine (subject to
the terms of the 1995 Stock Option Plan) who will be granted options, the
time or times at which options shall be granted, and the number of shares
subject to each option, whether the options are ISOs or NSOs, and the
manner in which options may be exercised. In making such determination,
consideration may be given to the value of the services rendered by the
respective individuals, their present and potential contributions to the
success of the Corporation and its subsidiaries and such other factors
deemed relevant in accomplishing the purposes of the 1995 Stock Option
Plan.
The Board of Directors may amend or terminate the 1995 Stock Option
Plan, except that stockholder approval is required to effect a change so as
to increase the aggregate number of shares that may be issued under the
1995 Stock Option Plan (unless adjusted to reflect such changes as a result
of a stock dividend, stock split, recapitalization, merger or consolidation
of the Corporation), to modify the requirements as to eligibility to
receive options, to increase materially the benefits accruing to
participants or as otherwise may be required by the Exchange Act or Section
422 of the Code. No action taken by the Board may materially and adversely
affect any outstanding option grant without the consent of the optionee.
Under the current tax law, there are no Federal income tax
consequences to either the employee or the Corporation on the grant of NSOs
if granted under the terms set forth in the 1995 Stock Option Plan. Upon
exercise of an NSO, the excess of the fair market value of the shares
subject to the option over the option price (the "Spread") at the date of
exercise is taxable as ordinary income to the optionee in the year it is
exercised and is deductible by the Corporation as compensation for Federal
income tax purposes, if Federal income tax is withheld on the Spread.
However, if the shares are subject to vesting restrictions conditioned on
future employment or the holder is subject to the short-swing profits
liability restrictions of Section 16(b) of the Exchange Act (i.e., is an
executive officer, director or 10% stockholder of the Corporation), then
taxation and measurement of the Spread is deferred until such restrictions
lapse, unless a special election is made under Section 83(b) of the Code to
report such income currently without regard to such restrictions. The
optionee's basis in the shares will be equal to the fair market value on
the date taxation is imposed and the holding period commences on such date.
ISO holders incur no regular Federal income tax liability at the time
of grant or upon exercise of such option, assuming that the optionee was an
employee of the Corporation from the date the option was granted until 90
days before such exercise. However, upon exercise, the Spread must be added
to regular Federal taxable income in computing the optionee's "alternative
minimum tax" liability. An optionee's basis in the shares received on
exercise of an ISO will be the option price of such shares for regular
income tax purposes. No deduction is allowable to the Corporation for
Federal income tax purposes in connection with the grant or exercise of
such option.
If the holder of shares acquired through exercise of an ISO sells such
shares within two years of the date of grant of such option or within one
year from the date of exercise of such option (a "Disqualifying
Disposition"), the optionee will realize income taxable at ordinary rates.
Ordinary income is reportable during the year of such sale equal to the
difference between the option price and the fair market value of the shares
at the date the option is exercised, but the amount includable as ordinary
income shall not exceed the excess, if any, of the proceeds of such sale
A-2
<PAGE>
over the option price. In addition to ordinary income, a Disqualifying
Disposition may result in taxable income subject to capital gains treatment
if the sales proceeds exceed the optionee's basis in the shares (i.e., the
option price plus the amount includable as ordinary income). The amount of
the optionee's taxable ordinary income will be deductible by the
Corporation in the year of the Disqualifying Disposition.
At the time of sale of shares received upon exercise of an option
(other than a Disqualifying Disposition of shares received upon the
exercise of an ISO), any gain or loss is long-term or short-term capital
gain or loss, depending upon the holding period. The holding period for
long-term capital gain or loss treatment is more than one year.
The foregoing is not intended to be an exhaustive analysis of the tax
consequences relating to stock options issued under the 1995 Stock Option
Plan. For instance, the treatment of options under state and local tax
laws, which is not described above, may differ from the treatment for
Federal income tax purposes.
A-3
<PAGE>
APPENDIX TO
PROXY STATEMENT
PARAMOUNT FINANCIAL CORPORATION
1995 STOCK OPTION PLAN
1. PURPOSE.
-------
The purpose of this plan (the "Plan") is to secure for
PARAMOUNT FINANCIAL CORPORATION (the "Company") and its
stockholders the benefits arising from capital stock ownership by
employees, officers and directors of, and consultants or advisors
to, the Company and its subsidiary corporations who are expected
to contribute to the Company's future growth and success. Those
provisions of the Plan which make express reference to Section
422 of the Internal Revenue Code of 1986, as amended or replaced
from time to time (the "Code"), shall apply only to Incentive
Stock Options (as that term is defined in the Plan).
2. TYPE OF OPTIONS AND ADMINISTRATION.
----------------------------------
(a) Types of Options. Options granted pursuant to the
----------------
Plan shall be authorized by action of the Board of Directors (the
"Board") of the Company (or a committee designated by the Board)
and may be either incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Code or
non-statutory options which are not intended to meet the
requirements of Section 422 of the Code.
(b) Administration. The Plan will be administered by
--------------
the Board or by a committee (the "Committee") appointed by the
Board of Directors of the Company, in each case whose
construction and interpretation of the terms and provisions of
the Plan shall be final and conclusive. If the Board determines
to create a Committee to administer the Plan, the delegation of
powers to the Committee shall be consistent with applicable laws
or regulations (including, without limitation, applicable state
law and Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or any successor rule
("Rule 16b-3")). The Board or Committee may in its sole
discretion grant options to purchase shares of the Company's
Common Stock, $0.01 par value per share ("Common Stock"), and
issue shares upon exercise of such options as provided in the
Plan. The Board or Committee shall have authority, subject to
the express provisions of the Plan, to construe the respective
option agreements and the Plan; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the
terms and provisions of the respective option agreements, which
need not be identical; and to make all other determinations in
the judgment of the Board or Committee necessary or desirable for
the administration of the Plan. The Board or Committee may
correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the
manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such
expediency. No director or person acting pursuant to authority
<PAGE>
delegated by the Board of Directors shall be liable for any
action or determination under the Plan made in good faith.
(c) Applicability of Rule 16b-3. Those provisions of
---------------------------
the Plan which make express reference to Rule 16b-3 shall apply
to the Company only at such time as the Company's Common Stock is
registered under the Exchange Act, subject to the second sentence
of Section 3(b)(i), and then only to such persons as are required
to file reports under Section 16(a) of the Exchange Act (a
"Reporting Person").
3. ELIGIBILITY.
-----------
(a) General. Options may be granted to persons who
-------
are, at the time of grant, employees, officers or directors of,
or consultants or advisors to, the Company or any subsidiaries of
the Company as defined in Sections 424(e) and 424(f) of the Code
(collectively, "Participants"), provided, that Incentive Stock
--------
Options may only be granted to individuals who are employees of
the Company (within the meaning of Section 3401(c) of the Code).
A person who has been granted an option may, if he or she is
otherwise eligible, be granted additional options if the Board or
Committee shall so determine.
(b) Grant of Options to Reporting Persons.
-------------------------------------
(i) To the extent that grants of options
hereunder are made in accordance with subparagraph (ii) below, it
is the intent that such grants shall satisfy Rule 16b-3(c) of the
Exchange Act as exempt grants to Reporting Persons under Section
16(b) of the Exchange Act. In all other cases, grants of options
hereunder to Reporting Persons are intended to be subject to
Section 16(b) of the Exchange Act.
(ii) To qualify as an exempt grant under Section
16(b) of the Exchange Act, the selection of a director or an
officer who is a Reporting Person (as the terms "director" and
"officer" are defined for purposes of Rule 16b-3) as a recipient
of an option, the timing of the option grant, the exercise price
of the option and the number of shares subject to the option
shall be determined either (A) by the Board, of which all members
shall be "disinterested persons" (as hereinafter defined), or (B)
by a committee consisting of two or more directors having full
authority to act in the matter, each of whom shall be a
"disinterested person". For the purposes of the Plan, a director
shall be deemed to be a "disinterested person" only if such
person qualifies as a "disinterested person" within the meaning
of Rule 16b-3, as such term is interpreted from time to time.
(iii) If the grant of an option hereunder is
not made in accordance with Section 3(b)(ii), then the granting
of options to officers and directors who are Reporting Persons
under the Plan shall not be determined in accordance with Section
3(b)(ii), but shall be determined in accordance with the other
provisions of the Plan; and the grant of any such option shall be
subject to Section 16(b) of the Exchange Act.
2
<PAGE>
4. STOCK SUBJECT TO PLAN.
---------------------
The stock subject to options granted under the Plan
shall be shares of authorized but unissued or reacquired Common
Stock. Subject to adjustment as provided in Section 15 below,
the maximum number of shares of Common Stock of the Company which
may be issued and sold under the Plan is 750,000. If an option
granted under the Plan shall expire, terminate or is cancelled
for any reason without having been exercised in full, the
unpurchased shares subject to such option shall again be
available for subsequent option grants under the Plan.
5. FORMS OF OPTION AGREEMENTS.
--------------------------
As a condition to the grant of an option under the
Plan, each recipient of an option shall execute an option
agreement in such form not inconsistent with the Plan as may be
approved by the Board. Such option agreements may differ among
recipients.
6. PURCHASE PRICE.
--------------
(a) General. The purchase price per share of stock
-------
deliverable upon the exercise of an option shall be determined by
the Board or the Committee at the time of grant of such option,
provided, however, that in the case of an Incentive Stock Option,
-------- -------
the exercise price shall not be less than 100% of the Fair Market
Value (as hereinafter defined) of such stock at the time of grant
of such option, or less than 110% of such Fair Market Value in
the case of options described in Section 11(b). "Fair Market
Value" of a share of Common Stock of the Company as of a
specified date for the purposes of the Plan shall mean the
closing price of a share of the Common Stock on the principal
securities exchange (including The Nasdaq SmallCap Market or The
Nasdaq National Market) on which such shares are traded on the
day immediately preceding the date as of which Fair Market Value
is being determined, or on the next preceding date on which such
shares are traded if no shares were traded on such immediately
preceding day, or if the shares are not traded on a securities
exchange, Fair Market Value shall be deemed to be the average of
the high bid and low asked prices of the shares in the over-the-
counter market on the day immediately preceding the date as of
which Fair Market Value is being determined or on the next
preceding date on which such high bid and low asked prices were
recorded. If the shares are not publicly traded, Fair Market
Value of a share of Common Stock (including, in the case of any
repurchase of shares, any distributions with respect thereto
which would be repurchased with the shares) shall be determined
in good faith by the Board. In no case shall Fair Market Value
be determined with regard to restrictions other than restrictions
which, by their terms, will never lapse.
(b) Payment of Purchase Price. Options granted under
-------------------------
the Plan may provide for the payment of the exercise price by
delivery of cash or a check to the order of the Company in an
3
<PAGE>
amount equal to the exercise price of such options, or by any
other means which the Board determines are consistent with the
purpose of the Plan and with applicable laws and regulations
(including, without limitation, the provisions of Rule 16b-3 and
Regulation T promulgated by the Federal Reserve Board).
7. EXERCISE OPTION PERIOD.
----------------------
Subject to earlier termination as provided in the Plan,
each option and all rights thereunder shall expire on such date
as determined by the Board or the Committee and set forth in the
applicable option agreement, provided, that such date shall not
--------
be later than ten (10) years after the date on which the option
is granted.
8. EXERCISE OF OPTIONS.
-------------------
Each option granted under the Plan shall be exercisable
either in full or in installments at such time or times and
during such period as shall be set forth in the option agreement
evidencing such option, subject to the provisions of the Plan.
Subject to the requirements in the immediately preceding
sentence, if an option is not at the time of grant immediately
exercisable, the Board may (i) in the agreement evidencing such
option, provide for the acceleration of the exercise date or
dates of the subject option upon the occurrence of specified
events, and/or (ii) at any time prior to the complete termination
of an option, accelerate the exercise date or dates of such
option.
9. NONTRANSFERABILITY OF OPTIONS.
-----------------------------
No option granted under this Plan shall be assignable
or otherwise transferable by the optionee, except by will or by
the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder.
An option may be exercised during the lifetime of the optionee
only by the optionee. In the event an optionee dies during his
employment by the Company or any of its subsidiaries, or during
the three (3) month period following the date of termination of
such employment, his option shall thereafter be exercisable
within a period of one (1) year after the date of death (or
within such lesser period specified in the applicable option
agreement), by his executors or administrators to the full extent
to which such option was exercisable by the optionee at the time
of his death during the periods set forth in Section 10 or 11(d).
4
<PAGE>
10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
---------------------------------------------------------
Except as provided in Section 11(d) with respect to
Incentive Stock Options and except as otherwise determined by the
Board or Committee at the date of grant of an option, and subject
to the provisions of the Plan, an optionee may exercise an option
at any time within three (3) months following the termination of
the optionee's employment or other relationship with the Company
or within one (1) year if such termination was due to the death
or disability of the optionee but in no event later than the
expiration date of the option. If the termination of the
optionee's employment is for cause or is otherwise attributable
to a breach by the optionee of an employment or confidentiality
or non-disclosure agreement, the option shall expire immediately
upon such termination. The Board shall have the power to
determine what constitutes a termination for cause or a breach of
an employment or confidentiality or non-disclosure agreement,
whether an optionee has been terminated for cause or has breached
such an agreement, and the date upon which such termination for
cause or breach occurs. Any such determinations shall be final
and conclusive and binding upon the optionee.
11. INCENTIVE STOCK OPTIONS.
-----------------------
Options granted under the Plan which are intended to be
Incentive Stock Options shall be subject to the following
additional terms and conditions:
(a) Express Designation. All Incentive Stock Options
-------------------
granted under the Plan shall, at the time of grant, be
specifically designated as such in the option agreement covering
such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an
---------------
Incentive Stock Option is to be granted under the Plan is, at the
time of the grant of such option, the owner of stock possessing
more than 10% of the total combined voting power of all classes
of stock of the Company (after taking into account the
attribution of stock ownership rules of Section 424(d) of the
Code), then the following special provisions shall be applicable
to the Incentive Stock Option granted to such individual:
(i) the purchase price per share of the Common
Stock subject to such Incentive Stock Option shall not be
less than 110% of the Fair Market Value of one share of
Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed
five (5) years from the date of grant.
(c) Dollar Limitation. For so long as the Code shall
-----------------
so provide, options granted to any employee under the Plan (and
any other incentive stock option plans of the Company) which are
intended to constitute Incentive Stock Options shall not
5
<PAGE>
constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first time
in any one calendar year for shares of Common Stock with an
aggregate Fair Market Value, as of the respective date or dates
of grant, of more than $100,000.
(d) Termination of Employment, Death or Disability.
----------------------------------------------
No Incentive Stock Option may be exercised unless, at the time of
such exercise, the optionee is, and has been continuously since
the date of grant of his or her option, employed by the Company,
except that:
(i) an Incentive Stock Option may be exercised
within the period of three (3) months after the date the
optionee ceases to be an employee of the Company (or within
such lesser period as may be specified in the applicable
option agreement), PROVIDED, that the agreement with respect
to such option may designate a longer exercise period and
that the exercise after such three (3) month period shall be
treated as the exercise of a non-statutory option under the
Plan,
(ii) if the optionee dies while in the employ of
the Company, or within three (3) months after the optionee
ceases to be such an employee, the Incentive Stock Option
may be exercised by the person to whom it is transferred by
will or the laws of descent and distribution within the
period of one (1) year after the date of death (or within
such lesser period as may be specified in the applicable
option agreement), and
(iii) if the optionee becomes disabled (within the
meaning of Section 22(e)(3) of the Code or any successor
provisions thereto) while in the employ of the Company, the
Incentive Stock Option may be exercised within the period of
one (1) year after the date the optionee ceases to be such
an employee because of such disability (or within such
lesser period as may be specified in the applicable option
agreement).
For all purposes of the Plan and any option granted hereunder,
"employment" shall be defined in accordance with the provisions
of Section 1.421-7(h) of the Income Tax Regulations (or any
successor regulations). Notwithstanding the foregoing
provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. ADDITIONAL PROVISIONS.
---------------------
(a) Additional Option Provisions. The Board or the
----------------------------
Committee may, in its sole discretion, include additional
provisions in option agreements covering options granted under
the Plan, including without limitation, restrictions on transfer,
repurchase rights, rights of first refusal, commitments to pay
cash bonuses or to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of options, or
such other provisions as shall be determined by the Board or the
Committee, provided, that such additional provisions shall not be
--------
inconsistent with any other term or condition of the Plan and
6
<PAGE>
such additional provisions shall not cause any Incentive Stock
Option granted under the Plan to fail to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
(b) Acceleration, Extension, Etc. The Board or the
----------------------------
Committee may, in its sole discretion (i) accelerate the date or
dates on which all or any particular option or options granted
under the Plan may be exercised, or (ii) extend the dates during
which all, or any particular, option or options granted under the
Plan may be exercised, provided, however that no such extension
--------
shall be permitted if it would cause the Plan to fail to comply
with Section 422 of the Code or with Rule 16b-3 (if applicable to
such option).
13. GENERAL RESTRICTIONS.
--------------------
(a) Investment Representations. The Company may
--------------------------
require any person to whom an option is granted, as a condition
of exercising such option or award, to give written assurances in
substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option
or award for his or her own account for investment and not with
any present intention of selling or otherwise distributing the
same, and to such other effects as the Company deems necessary or
appropriate in order to comply with federal and applicable state
securities laws, or with covenants or representations made by the
Company in connection with any public offering of its Common
Stock, including any "lock-up" or other restriction on
transferability.
(b) Compliance With Securities Law. Each option shall
------------------------------
be subject to the requirement that if, at any time, counsel to
the Company shall determine that the listing, registration or
qualification of the shares subject to such option or award upon
any securities exchange or automated quotation system or under
any state or federal law, or the consent or approval of any
governmental or regulatory body, or that the disclosure of non-
public information or the satisfaction of any other condition, is
necessary as a condition of, or in connection with the issuance
or purchase of shares thereunder, such option or award may not be
exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval or satisfaction
of such condition shall have been effected or obtained on
conditions acceptable to the Board of Directors or the Committee.
Nothing herein shall be deemed to require the Company to apply
for or to obtain such listing, registration or qualification, or
to satisfy such condition,
14. RIGHTS AS A STOCKHOLDER.
-----------------------
The holder of an option shall have no rights as a
stockholder with respect to any shares covered by the option
(including, without limitation, any rights to receive dividends
or non-cash distributions with respect to such shares) until the
effective date of exercise of such option and then only to the
extent of the shares of Common Stock so purchased. No
7
<PAGE>
adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is
issued.
15. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS,
REORGANIZATIONS AND RELATED TRANSACTIONS.
----------------------------------------
(a) Recapitalizations and Related Transactions. If,
------------------------------------------
through or as a result of any recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other similar
transaction (i) the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind
of shares or other securities of the Company, or (ii) additional
shares or new or different shares or other non-cash assets are
distributed with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment shall be
made in (x) the maximum number and kind of shares reserved for
issuance under or otherwise referred to in the Plan, (y) the
number and kind of shares or other securities subject to any
then-outstanding options under the Plan, and (z) the price for
each share subject to any then-outstanding options under the
Plan, without changing the aggregate purchase price as to which
such options remain exercisable. Notwithstanding the foregoing,
no adjustment shall be made pursuant to this Section 15 if such
adjustment (i) would cause the Plan to fall to comply with
Section 422 of the Code or with Rule 16b-3 (if applicable to such
option), or (ii) would be considered as the adoption of a new
plan requiring stockholder approval.
(b) Reorganization, Merger and Related Transactions.
-----------------------------------------------
All outstanding options under the Plan shall become fully
exercisable for a period of sixty (60) days following the
occurrence of any Trigger Event, whether or not such options are
then exercisable under the provisions of the applicable
agreements relating thereto. For purposes of the Plan, a
"Trigger Event" is any one of the following events:
(i) the date on which shares of Common Stock are
first purchased pursuant to a tender offer or exchange offer
(other than such an offer by the Company, any subsidiary of
the Company, any employee benefit plan of the Company or of
any subsidiary of the Company or any entity holding shares
or other securities of the Company for or pursuant to the
terms of such plan), whether or not such offer is approved
or opposed by the Company and regardless of the number of
shares purchased pursuant to such offer;
(ii) the date the Company acquires knowledge that
any person or group deemed a person under Section 13(d)-3 of
the Exchange Act (other than the Company, any subsidiary of
the Company, any employee benefit plan of the Company or of
any subsidiary of the Company or any entity holding shares
of Common Stock or other securities of the Company for or
pursuant to the terms of any such plan or any individual or
entity or group or affiliate thereof which acquired its
beneficial ownership interest prior to the date the Plan was
8
<PAGE>
adopted by the Board), in a transaction or series of
transactions, has become the beneficial owner, directly or
indirectly (with beneficial ownership determined as provided
in Rule 13d-3, or any successor rule, under the Exchange
Act), of securities of the Company entitling the person or
group to 30% or more of all votes (without consideration of
the rights of any class or stock to elect directors by a
separate class vote) to which all stockholders of the
Company would be entitled in the election of the Board of
Directors were an election held on such date;
(iii) the date, during any period of two (2)
consecutive years, when individuals who at the beginning of
such period constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election,
or the nomination for election by the stockholders of the
Company, of each new director was approved by a vote of at
least a majority of the directors then still in office who
were directors at the beginning of such period; and
(iv) the date of approval by the stockholders of
the Company of an agreement (a "reorganization agreement")
providing for:
(A) The merger of consolidation of the Company
with another corporation (x) where the stockholders of
the Company, immediately prior to the merger or
consolidation, do not beneficially own, immediately
after the merger or consolidation, shares of the
corporation issuing cash or securities in the merger or
consolidation entitling such stockholders to 80% or
more of all votes (without consideration of the rights
of any class of stock to elect directors by a separate
class vote) to which all stockholders of such
corporation would be entitled in the election of
directors, or (y) where the members of the Board of
Directors of the Company, immediately prior to the
merger or consolidation, do not, immediately after the
merger or consolidation, constitute a majority of the
Board of Directors of the corporation issuing cash or
securities in the merger or consolidation, or
(B) The sale or other disposition of all or
substantially all the assets of the Company.
(c) Board Authority to Make Adjustments. Any
-----------------------------------
adjustments under this Section 15 will be made by the Board or
the Committee, whose determination as to what adjustments, if
any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under the
Plan on account of any such adjustments.
16. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
---------------------------------------------------
(a) General. In the event of any sale, merger,
-------
transfer or acquisition of the Company or substantially all of
the assets of the Company in which the Company is not the
9
<PAGE>
surviving corporation, and provided that after the Company shall
have requested the acquiring or succeeding corporation (or an
affiliate thereof), that equivalent options shall be substituted
and such successor corporation shall have refused or failed to
assume all options outstanding under the Plan or issue
substantially equivalent options, then any or all outstanding
options under the Plan shall accelerate and become exercisable in
full immediately prior to such event. The Board or Committee
will notify holders of options under the Plan that any such
options shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the options will terminate
upon expiration of such notice.
(b) Substitute Options. The Company may grant options
------------------
under the Plan in substitution for options held by employees of
another corporation who become employees of the Company, or a
subsidiary of the Company, as the result of a merger or
consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by
the Company, or one of its subsidiaries, of property or stock of
the employing corporation. The Company may direct that
substitute options be granted on such terms and conditions as the
Board of Directors considers appropriate in the circumstances.
17. NO SPECIAL EMPLOYMENT RIGHTS.
----------------------------
Nothing contained in the Plan or in any option shall
confer upon any optionee any right with respect to the
continuation of his or her employment by the Company or interfere
in any way with the right of the Company at any time to terminate
such employment or to increase or decrease the compensation of
the optionee.
18. OTHER EMPLOYEE BENEFITS.
-----------------------
Except as to plans which by their terms include such
amounts as compensation, the amount of any compensation deemed to
be received by an employee as a result of the exercise of an
option or the sale of shares received upon such exercise will not
constitute compensation with respect to which any other employee
benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing,
life insurance or salary continuation plan, except as otherwise
specifically determined by the Board.
19. AMENDMENT OF THE PLAN.
---------------------
(a) The Board may at any time, and from time to time,
modify or amend the Plan in any respect, provided, however, that
-------- -------
if at any time the approval of the stockholders of the Company is
required under Section 422 of the Code or any successor
10
<PAGE>
provision with respect to Incentive Stock Options, or under Rule
16b-3, the Board of Directors may not effect such modification or
amendment without such approval.
(b) The modification or amendment of the Plan shall
not, without the consent of an optionee, affect his or her rights
under an option previously granted to him or her. With the
consent of the optionee affected, the Board or the Committee may
amend outstanding option agreements in a manner not inconsistent
with the Plan. The Board shall have the right to amend or modify
(i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent
necessary to qualify any or all such options for such favorable
federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under
Section 422 of the Code, and (ii) the terms and provisions of the
Plan and of any outstanding option to the extent necessary to
ensure the qualification of the Plan under Rule 16b-3.
20. WITHHOLDING.
-----------
(a) The Company shall have the right to deduct from
payments of any kind otherwise due to the optionee any federal,
state or local taxes of any kind required by law to be withheld
with respect to any shares issued upon exercise of options under
the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the
optionee may elect to satisfy such obligations, in whole or in
part (i) by causing the Company to withhold shares of Common
Stock otherwise issuable pursuant to the exercise of an option,
or (ii) by delivering to the Company shares of Common Stock
already owned by the optionee. The shares so delivered or
withheld shall have a Fair Market Value equal to such withholding
obligation as of the date that the amount of tax to be withheld
is to be determined. An optionee who has made an election
pursuant to this Section 20(a) may only satisfy his or her
withholding obligation with shares of Common Stock which are not
subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements.
(b) The acceptance of shares of Common Stock upon
exercise of an Incentive Stock Option shall constitute an
agreement by the optionee (i) to notify the Company if any or all
of such shares are disposed of by the optionee within two (2)
years from the date the option was granted or within one (1) year
from the date the shares were issued to the optionee pursuant to
the exercise of the option, and (ii) if required by law, to remit
to the Company, at the time of and in the case of any such
disposition, an amount sufficient to satisfy the Company's
federal, state and local withholding tax obligations with respect
to such disposition, whether or not, as to both (i) and (ii), the
optionee is in the employ of the Company at the time of such
disposition.
(c) Notwithstanding the foregoing, in the case of a
Reporting Person whose options have been granted in accordance
with the provisions of Section 3(b)(ii) herein, no election to
use shares for the payment of withholding taxes shall be
effective unless made in compliance with any applicable
requirements of Rule 16b-3.
11
<PAGE>
21. CANCELLATION AND NEW GRANT OF OPTIONS, ETC..
-------------------------------------------
The Board or the Committee shall have the authority to
effect, at any time and from time to time, with the consent of
the affected optionees (i) the cancellation of any or all
outstanding options under the Plan and the grant in substitution
therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option
exercise price per share which may be lower or higher than the
exercise price per share of the cancelled options, or (ii) the
amendment of the terms of any and all outstanding options under
the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of
such outstanding options.
22. EFFECTIVE DATE AND DURATION OF THE PLAN.
---------------------------------------
(a) Effective Date. The Plan shall become effective
--------------
when adopted by the Board, but no Incentive Stock Option granted
under the Plan shall become exercisable unless and until the Plan
shall have been approved by the Company's stockholders. If such
stockholder approval is not obtained within twelve (12) months
after the date of the Board's adoption of the Plan, no options
previously granted under the Plan shall be deemed to be Incentive
Stock Options and no Incentive Stock Options shall be granted
thereafter. Amendments to the Plan not requiring stockholder
approval shall become effective when adopted by the Board of
Directors and amendments requiring stockholder approval (as
provided in Section 19) shall become effective when adopted by
the Board, but no Incentive Stock Option granted after the date
of such amendment shall become exercisable (to the extent that
such amendment to the Plan was required to enable the Company to
grant such Incentive Stock Option to a particular optionee)
unless and until such amendment shall have been approved by the
Company's stockholders. If such stockholder approval is not
obtained within twelve (12) months of the Board's adoption of
such amendment, any Incentive Stock Options granted on or after
the date of such amendment shall terminate to the extent that
such amendment to the Plan was required to enable the Company to
grant such option to a particular optionee. Subject to this
limitation, options may be granted under the Plan at any time
after the effective date and before the date fixed for
termination of the Plan.
(b) Termination. The Plan shall terminate upon the
-----------
earlier of (i) the close of business on the day next preceding
the tenth anniversary of the date of its adoption by the Board of
Directors, or (ii) the date on which all shares available for
issuance under the Plan shall have been issued pursuant to the
exercise or cancellation of options granted under the Plan. If
the date of termination is determined under (i) above, then
options outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments
evidencing such options.
12
<PAGE>
23. PROVISION FOR FOREIGN PARTICIPANTS.
----------------------------------
The Board of Directors may, without amending the Plan,
modify awards or options granted to participants who are foreign
nationals or employed outside the United States to recognize
differences in laws, rules, regulations or customs of such
foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
24. GOVERNING LAW.
-------------
The provisions of this Plan shall be governed and
construed in accordance with the laws of the State of Delaware
without regard to the principles of conflicts of laws.
Adopted by the Board of Directors and Stockholders on August
28, 1995.
13
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PARAMOUNT FINANCIAL CORPORATION
The undersigned hereby appoints Glenn Nortman and Jeffrey
Nortman as proxies, with power to act without the other and with
power of substitution and re-substitution, and hereby authorizes
them to represent and vote, as designated on the other side, all
the shares of stock of Paramount Financial Corporation standing
in the name of the undersigned with all powers which the
undersigned would possess if present at the Annual Meeting of
Stockholders of the Company to be held June 4, 1997 or any
adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
-------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS Please mark [X]
1, 2 AND 3. your votes
as indicated
in this
example
Item 1-ELECTION OF DIRECTORS Nominees: Glenn Nortman, Jeffrey
Nortman, Paul Vecker
FOR all nominees WITHHOLD WITHHELD FOR: (Write that nominee's
listed to the AUTHORITY name in the space
right (except as to vote for all provided below).
marked to the nominees listed
contrary) to the right
-----------------------------------
[ ] [ ]
Item 2-APPROVAL OF AN AMENDMENT Item 3-RATIFICATION OF INDEPENDENT
1995 STOCK OPTION PLAN AUDITORS
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
SIGNATURE SIGNATURE DATE
------------------ ----------------- ---------
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINIDTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
---------------------------------------------------------------------
FOLD AND DETACH HERE
