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:
[ X ] Preliminary Proxy Statement [ ] Definitive Proxy Statement
[ ] Definitive Additional Materials [ ] Soliciting Materials Pursuant
[ ] Confidential, for use of the to Section 240.14a-11(c) or
Commission Only (as Section 240.14a-12
permitted 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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(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
amount on which the filing fee is calculated and state how
it was determined):
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
PARAMOUNT FINANCIAL CORPORATION
ONE JERICHO PLAZA
JERICHO, NEW YORK 11753
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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MAY 15, 1998
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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 May 15, 1998, at The Melville Marriott at 1350 Old
Walt Whitman Road, Melville, New York 11747, for the following purposes:
1. To elect five 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 authorize the Board of Directors to amend the Restated and
Amended Certificate of Incorporation of the Corporation to effect
a Reverse Stock Split (any one falling within a range between and
including a one-for-three and a one-for-six Reverse Stock Split)
of the Corporation's outstanding Common Stock, depending upon a
determination of the Board that a Reverse Stock Split is in the
best interests of the Corporation and the stockholders in order
to increase the bid price of Corporation's Common Stock above the
$1.00 per share minimum required for continued listing on the
Nasdaq SmallCap Stock Market;
3. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Corporation for fiscal 1998; and
4. To transact such other business as may properly come before the
Annual Meeting.
Only stockholders of record of the Corporation's Common Stock at the
close of business on April 15, 1998 are entitled to notice of, and to vote
at, the Annual Meeting and any adjournments thereof. All stockholders are
cordially invited to attend the Annual Meeting in person.
A copy of the Corporation's Annual Report for the fiscal year ended
December 31, 1997 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 20, 1998
<PAGE>
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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.
=================================================
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 MAY 15, 1998
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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 (the "Annual Meeting") of the
Corporation to be held at 10:00 a.m., local time, on May 15,
1998, at The Melville Marriott at 1350 Old Walt Whitman 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, 1997, including financial statements, are first
being mailed or delivered to stockholders on or about April 20,
1998.
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 authorization of the Board of
Directors to amend the Restated and Amended Certificate of
Incorporation to effect a reverse stock split (the "Reverse Stock
Split"), (3) to ratify the appointment of Arthur Andersen LLP as
the Corporation's independent auditors for fiscal 1998, 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, 1998 (the "Record Date") will be entitled to notice of,
and to vote at, the Annual Meeting or any adjournment thereof.
As of that date, there were shares of Common Stock
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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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<PAGE>
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.
AMOUNT OF
NAME AND ADDRESS BENEFICIAL PERCENT OF COMMON
OF BENEFICIAL OWNER(1) OWNERSHIP STOCK
------------------- ---------- ---------------
Glenn Nortman . . . . . . . 1,500,943 18.96%
Jeffrey Nortman . . . . . . 1,500,943 18.96
Paul Vecker . . . . . . . . 198,114 2.5
David Dinin . . . . . . . . 0 -
Larry Austin . . . . . . . 0 -
William H. Kelly . . . . . 0 -
All directors and executive
officers as a group
(6 persons) . . . . . . . 3,200,000 40.42%
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(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 five (5) 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 five (5) 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 and until his or her successor has been
elected and qualified.
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VOTE REQUIRED
The five (5) 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
proxies as to which authority to vote for 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 40 Chief Executive Officer,
Secretary and a Director
Jeffrey Nortman 39 Chief Operating Officer and a
Director
Paul Vecker 38 Senior Vice President, Chief
Financial Officer,
Treasurer and a Director
Larry Austin 67 Director
William H. Kelly 57 Director
Certain biographical information regarding each nominee for
director is set forth below:
Glenn Nortman is the Chief Executive Officer, Secretary and
a director of the Corporation. Prior to becoming Chief Executive
Officer in 1997, Mr. Nortman had served as the Corporation's Co-
Chief Executive Officer since 1996 and as the Executive Vice
President 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. Mr. Nortman is the brother
of Jeffrey Nortman.
Jeffrey Nortman is the Chief Operating Officer and a
director of the Corporation. Prior to becoming Chief Operating
Officer in 1997, Mr. Nortman served as the Corporation's Co-Chief
Executive Officer since 1996 and as the President from the
Corporation's 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.
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<PAGE>
Larry Austin has been a director of the Corporation since
January 22, 1998. Mr. Austin is Chief Executive Officer of Austin
Travel Corporation, the 50th largest travel management company in
the United States. In addition, he is Chairman of Austin
Associates, LLC, a group of four hundred independent travel
agents to whom Austin Travel Corporation provides contract
management services, education services and technology
procurement services. Mr. Austin also serves as a member of the
Board of Directors of the Long Island Association, Long Island
Philharmonic and WLIW/Channel 21.
William H. Kelly has been a director of the Corporation
since January 22, 1998. The Honorable William H. Kelly is a
prominent member of the Long Island community serving as Mayor of
Asharoken since 1982. In addition, Mr. Kelly has been the owner
of WHK Leasing, a high technology equipment leasing company since
1976. Mr. Kelly has served as past President of the New York
State Conference of Mayors and as Chairman Tri-County Village
Officials Association.
MEETINGS OF THE BOARD
During the last fiscal year, the Corporation's Board of
Directors was comprised of 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.
As such, the Board of Directors effectively held numerous formal
and informal meetings every business day. Messrs. Nortman and
Mr. Vecker kept each other continuously apprised of material
corporate events and, to the extent required, met 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 ten (10) occasions in 1997. There
is one standing committee of the Board of Directors as described
below.
AUDIT COMMITTEE
The Board of Directors formed an Audit Committee on January
22, 1998. The Audit Committee consists of Larry Austin, William
H. Kelly and Paul Vecker. Since its formation, the Audit
Committee met once on March 20, 1998. The Audit Committee
reviews the scope and results of the Corporation's annual audit,
receives reports of the Corporation's independent public
accountants and chief internal auditor, and prepares a report of
the committee's findings and recommendations to the Board of
Directors.
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 1997. No executive officer of the Corporation had any
relationship reportable under the Compensation Committee
Interlock regulations during 1997.
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<PAGE>
PROPOSAL TWO
AUTHORIZE THE BOARD OF DIRECTORS TO AMEND THE RESTATED AND
AMENDED CERTIFICATE OF INCORPORATION OF THE CORPORATION TO EFFECT
A REVERSE STOCK SPLIT (ANY ONE FALLING WITHIN A RANGE BETWEEN AND
INCLUDING A ONE-FOR-THREE AND A ONE-FOR-SIX REVERSE STOCK SPLIT)
OF THE CORPORATION'S OUTSTANDING COMMON STOCK, DEPENDING UPON A
DETERMINATION BY THE BOARD THAT A REVERSE STOCK SPLIT IS IN THE
BEST INTERESTS OF THE CORPORATION AND THE STOCKHOLDERS IN ORDER
TO INCREASE THE BID PRICE OF CORPORATION COMMON STOCK ABOVE THE
$1.00 PER SHARE MINIMUM REQUIRED FOR CONTINUED LISTING ON THE
NASDAQ SMALLCAP STOCK MARKET
GENERAL
As of March 31, 1998, the Board of Directors authorized,
subject to stockholder approval, a Reverse Stock Split (any one
falling within a range between and including a one-for-three and
a one-for-six Reverse Stock Split) of the Corporation's
outstanding Common Stock that may be effected by the Board
depending on market conditions. The intent of the Reverse Stock
Split is to prevent the delisting of the Corporation's shares of
Common Stock from the Nasdaq SmallCap Stock Market.
If the Reverse Stock Split is approved by the stockholders
at the Meeting, it will be effected only upon a determination by
the Board of Directors that it is required to effect the Reverse
Stock Split in order for the Common Stock to remain listed on the
Nasdaq SmallCap Market. If the Board of Directors makes such a
determination, the Board will select in its discretion the ratio
for the Reverse Stock Split, falling within a range between and
including a one-for-three and a one-for-six Reverse Stock Split,
which in the Board's judgment would result in the greatest
marketability, stability and liquidity of the Common Stock.
If approved by the stockholders, the Reverse Stock Split
would become effective on any date (the "Effective Date")
selected by the Board of Directors on or prior to the
Corporation's next Annual Meeting of Stockholders. If no Reverse
Stock Split is effected by such date, the Board of Directors will
take action to abandon the Reverse Stock Split. The procedures
for the consummation of the Reverse Stock Split are attached
hereto as Annex A.
The primary reasons for the Reverse Stock Split are to
facilitate trading activity of the Common Stock and to maintain
listing of the Corporation's shares of Common Stock on the Nasdaq
SmallCap Stock Market.
Assuming the Reverse Stock Split is approved by the
Corporation's stockholders at the Annual Meeting, each
stockholder's percentage ownership interest in the Corporation
and proportional voting power will remain unchanged, except for
minor differences resulting from adjustments for fractional
shares. The rights and privileges of the holders of shares of
Common Stock will be substantially unaffected by the Reverse
Stock Split.
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<PAGE>
REASONS FOR THE REVERSE STOCK SPLIT
The Corporation's shares of Common Stock and Class A
Warrants have been listed, and have traded on the Nasdaq SmallCap
Stock Market under the symbols "PARA" AND "PARAW," respectively,
since January 22, 1996, when the Corporation completed its
initial public offering. The Nasdaq Stock Market, the National
Association of Securities Dealers, Inc., and the Securities and
Exchange Commission have approved substantial changes in Nasdaq
SmallCap Stock Market initial listing and maintenance
requirements which became effective on February 23, 1998. These
changes require that in order to remain listed on the Nasdaq
SmallCap Stock Market, companies must maintain $2,000,000 in net
tangible assets (total assets less total liabilities and
goodwill) or market capitalization of $35,000,000 or $500,000 in
net income for two of the last three years; a $1,000,000 market
value for the public float; two market-makers; and a minimum bid
price of $1.00 per share. If a listed company is deemed non-
compliant with the minimum bid requirement, it will be provided
90-calendar days in order to regain compliance with this
standard. According to the new maintenance requirements, a
listed company will have regained compliance if its security
trades at or above the minimum requirement for at least 10-
consecutive trade days.
On numerous occasions, and for protracted periods, the bid
price of the Corporation's shares of Common Stock has fallen and
remained below $1.00. On the Record Date, the reported closing
price of the Common Stock on the Nasdaq SmallCap Stock Market was
$____ per share. As a result, the Corporation's shares of Common
Stock are in danger of being delisted from the Nasdaq SmallCap
Stock Market. The Corporation received notice from Nasdaq on
February 27, 1998 that the Corporation is non-compliant with the
minimum bid requirement, and that the Corporation has until May
28, 1998 to regain compliance and prevent delisting of the
Corporation's securities. The Board of Directors believes that if
the Reverse Stock Split is approved by the stockholders at the
Annual Meeting, and the Reverse Stock Split is effectuated if
necessary, the Corporation's shares of Common Stock will have a
minimum bid price in excess of $1.00 per share and, therefore,
continue to be listed and traded on the Nasdaq SmallCap Stock
Market. However, no assurance can be given that the market price
of the Common Stock will rise in proportion to the reduction in
the number of outstanding shares resulting from any Reverse Stock
Split, or that if the Common Stock does rise that the price would
not thereafter decline (including below the $1.00 minimum listing
level), or that the Corporation would meet the other eligibility
standards for the Nasdaq SmallCap Market, or if so listed would
later meet the maintenance requirements for continued listing.
If the Reverse Split is not approved by the stockholders at
the Annual Meeting, it is highly likely that the Corporation's
shares of Common Stock will cease to be listed and traded on the
Nasdaq SmallCap Stock Market. In such an event, the shares of
Common Stock will likely be quoted in the "pink sheets"
maintained by the National Quotation Bureau, Inc. or on the
"Electronic Bulletin Board," as a result of which, among other
things, the spread between the bid and ask price of the shares of
Common Stock is likely to be greater than at present and
stockholders may experience a greater degree of difficulty in
engaging in trades of shares of Common Stock.
IMPLEMENTATION OF THE REVERSE STOCK SPLIT
If the stockholders approve this proposal and the Board of
Directors of the Corporation believes it is in the best interest
of the Corporation to give effect to a Reverse Stock Split, such
a Reverse Stock Split would be formally implemented by amending
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<PAGE>
Article IV of the Corporation's present Restated and Amended
Certificate of Incorporation to add language in or substantially
in the form annexed hereto as Annex A, and then by filing such an
amendment with the Secretary of State of the State of Delaware.
PRINCIPAL EFFECTS OF THE REVERSE SPLIT
Consummation of the Reverse Stock Split will not alter the
number of authorized shares of Common Stock, which will remain
35,000,000 shares. Consummation of the Reverse Stock Split will
not have any federal tax consequences to stockholders.
The Board believes that the current per share price of the
Common Stock may limit the effective marketability of the Common
Stock because of the reluctance of many brokerage firms and
institutional investors to recommend lower-priced stocks to their
clients or to hold them in their own portfolios. Certain
policies and practices of the securities industry may tend to
discourage individual brokers within those firms from dealing in
lower-priced stocks. Some of those policies and practices
involve time-consuming procedures that make the handling of
lower-priced stocks economically unattractive. The brokerage
commission on a sale of lower-priced stock may also represent a
higher percentage of the sale price than the brokerage commission
on a higher-priced issue. Any reduction in brokerage commissions
resulting from the Reverse Stock Split may be offset, however, in
whole or in part, by increased brokerage commissions required to
be paid by stockholders selling "odd lots" created by such
Reverse Stock Split. The Reverse Stock Split may result in some
stockholders owning "odd-lots" of less than 100 shares of Common
Stock. Brokerage commissions and other costs of transactions in
odd-lots are generally somewhat higher than the costs of
transactions in "round-lots" of even multiples of 100 shares.
The par value of the Common Stock will be reclassified
following any Reverse Stock Split based upon the inverse ratio to
the ratio selected in the Reverse Stock Split, and the number of
shares of Common Stock outstanding will be reduced based upon
such split ratio. The number of record holders of the Common
Stock as of the Record Date was approximately [____]. The
Corporation does not anticipate that any Reverse Stock Split
would result in a significant reduction in the number of record
holders of the Common Stock.
The Reverse Stock Split would have the following effects
upon the number of shares of Common Stock outstanding (7,914,000
shares as of the Record Date) and the number of authorized and
unissued shares of Common Stock (assuming that no additional
shares of Common Stock are issued by the Corporation after the
Record Date).
Reverse Common Unissued and
Stock Split Stock Outstanding Authorized Common Stock*
----------- ----------------- ------------------------
1 for 3 2,638,000 32,362,000
1 for 4 1,978,500 33,021,500
1 for 5 1,582,800 33,417,200
1 for 6 1,319,000 33,681,000
* Excludes reserved shares.
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<PAGE>
EXCHANGE OF STOCK CERTIFICATES
Assuming the Reverse Split is approved by the stockholders
and effectuated, stockholders will be required to exchange their
stock certificates for new certificates representing the post-
split number of shares of Common Stock. At the Effective Date,
each share of the Common Stock issued and outstanding immediately
prior thereto (the "Old Common Stock") will be reclassified as
and changed into the appropriate fraction of a share of the
Corporation's Common Stock (the "New Common Stock"), subject to
the treatment of fractional share interests as described below.
Shortly after the Effective Date, the Corporation will send
transmittal forms to the holders of the Old Common Stock to be
used in forwarding their certificates formerly representing
shares of Old Common Stock for surrender and exchange for
certificates representing whole shares of New Common Stock. No
certificates or scrip representing fractional share interests in
the New Common Stock will be issued, and no such fractional share
interest will entitle the holder thereto to vote or to any rights
of a stockholder of the Corporation. Any fractional share
interest will result in the adjustment of the number of shares
either upward or downward to the nearest whole share. All
fractional shares of one-half share or more will be increased to
the next higher whole number of shares, and all fractional shares
of less than one-half share will be decreased to the next lower
whole number of shares, respectively.
Stockholders will be furnished with the necessary materials
and instructions for the surrender and exchange of stock
certificates at the appropriate time by the Corporation's
transfer agent. Stockholders will not be required to pay a
transfer or other fee in connection with the exchange of
certificates. STOCKHOLDERS SHOULD NOT SUBMIT ANY CERTIFICATES IF
--------------------------------------------------
AND UNTIL REQUESTED TO DO SO.
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REQUIRED AFFIRMATIVE VOTE
The affirmative vote of the holders of a majority of shares
present in person or represented by proxy at the meeting and
entitled to vote on the subject matter is required to approve the
Reverse Stock Split. 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 proposal to approve the Reverse Stock Split.
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, 1998 and recommends that stockholders vote for ratification
of such appointment. Notwithstanding the selection, the Board,
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<PAGE>
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 Annual 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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<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table summarizes all compensation earned by or
paid to the Corporation's Chief Executive Officer and each of the
Corporation's other executive officers whose total annual salary
and bonus exceeded $100,000 (collectively, the "named executive
officers"), for services rendered in all capacities to the
Corporation during the fiscal years ended December 31, 1997, 1996
and 1995.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------
NAME AND FISCAL
PRINCIPAL POSITION YEAR SALARY BONUS
------------------ ----- ------ -----
Glenn Nortman . . . . . . 1997 $332,717 $100,000
Chief Executive Officer 1996 297,900 -
1995 250,000 -
Jeffrey Nortman . . . . . 1997 $332,924 -
Chief Operating Officer 1996 297,900 -
1995 270,000 -
Paul Vecker . . . . . . . 1997 $204,095 -
Senior Vice President 1996 184,200 -
and Chief Financial 1995 165,000 -
Officer
David Dinin . . . . . . . 1997 $121,314 -
Senior Vice President
ANNUAL
COMPENSATION
-------------
NAME AND ALL OTHER TOTAL ANNUAL
PRINCIPAL POSITION COMPENSATION COMPENSATION
------------------ ------------ ------------
Glenn Nortman . . . . . . . $ 39,580(1) $472,297
Chief Executive Officer 35,300(2) 333,200
422,500(3) 672,500
Jeffrey Nortman . . . . . . $ 39,290(4) $372,214
Chief Operating Officer 35,300(2) 333,200
422,500(3) 692,500
Paul Vecker . . . . . . . . - $204,095
Senior Vice President and - 184,200
Chief Financial Officer $ 32,800(5) 197,800
David Dinin . . . . . . . . - $121,314
Senior Vice President
===================================================================
(1) Represents payments of approximately $18,700 for automobile
expenses, and approximately $20,880 for country club dues
and personal use.
(2) Represents payments of approximately $18,000 for automobile
expenses, approximately $11,300 for country club dues, and
approximately $6,000 for split-dollar life insurance
premiums.
(3) Represents payments of approximately $18,000 for automobile
expenses, approximately $11,300 for country club dues,
approximately $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
on S-Corporation income.
(4) Represents payments of approximately $18,400 for automobile
expenses, and approximately $20,890 for country club dues
and personal use.
(5) Represents payments for Federal, state and local taxes on S-
Corporation income.
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<PAGE>
All directors of the Corporation are reimbursed for all
reasonable expenses incurred by them in acting as a director or
as a member of any committee of the Board of Directors.
STOCK OPTION GRANT TABLE
The following table sets forth information with respect to
options to purchase shares of Common Stock awarded during fiscal
year 1997 to the named executive officers pursuant to plans
approved by the Corporation's stockholders.
OPTIONS GRANTED TO EXECUTIVE OFFICERS IN FISCAL YEAR 1997
PRESENT
VALUE AS
PERCENTAGE OF THE
OF TOTAL DATE OF
OPTIONS GRANT
NUMBER OF GRANTED TO USING
SECURITIES EMPLOYEES EXPIRA- BLACK-
UNDERLYING DURING THE EXERCISE TION SCHOLES
OPTIONS FISCAL PRICE DATE PRICING
NAME GRANTED YEAR ($/SH) (1) MODEL
-------------- --------- --------- -------- ------- -------
Glenn Nortman 25,000 11.90% $0.4125 3/31/01 $5,500
Jeffrey Nortman 25,000 11.90 0.4125 3/31/01 5,500
Paul Vecker 18,000 8.57 0.3750 3/31/01 4,860
==================================================================
(1) Options vest ratably over five years.
EMPLOYMENT AGREEMENTS
Messrs. Glenn and Jeffrey Nortman and Mr. Vecker have
employment agreements with the Corporation described below. Each
of these employment agreements terminates 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 rose to $330,000 each
in the second year of the term. The Nortmans are presently in
the third and final year of the term of their respective
employment agreements, and the Board of Directors set an annual
base salary of $360,000 for each of the Nortmans, pursuant to the
terms and provisions of their respective employment agreements.
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. Mr. Vecker is
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<PAGE>
presently in his third and final term of his employment
agreement. The base salary for the third year of the term was set
by the Board of Directors at $223,850. 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).
Pursuant to a letter agreement between Mr. David Dinin and
the Corporation dated July 1, 1997, Mr. Dinin's term of
employment as Senior Vice President of the Corporation commenced
on July 7, 1997. Mr. Dinin receives a salary of $20,833.33 per
month, payable in accordance with the Corporation's normal
payroll practices. Additionally, Mr. Dinin's letter agreement
provides for the use of an automobile and other fringe benefits
commensurate with his duties and responsibilities. In addition,
Mr. Dinin will be entitled to receive a severance payment in the
aggregate amount of (i) $62,500.00 if the Corporation terminates
his employment "without cause" during the period January 7, 1998
to July 6, 1998, and (ii) $125,000.00 if the Corporation
terminates his employment "without cause" on or after July 7,
1998.
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 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
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<PAGE>
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, during fiscal year 1997 the entire Board
of Directors of the Corporation, comprised of Glenn Nortman,
Jeffrey Nortman and Paul Vecker, made determinations regarding
the levels of executive compensation. Currently, Messrs.
Nortman, Mr. Vecker and Mr. Dinin are the only executive officers
of the Corporation.
In 1997, the only compensation paid to the Corporation's
executive officers was as set forth pursuant to each of Messrs.
Nortman's and Mr. Vecker's respective employment agreements and
Mr. Dinin's letter agreement with the Corporation, except for an
additional payment of $100,000 to Mr. Glenn Nortman, representing
commission-based compensation as described below. Insofar as the
1997 levels of compensation for all of the Corporation's
executive officers were limited to base salaries (and other
compensation) falling within the respective salary ranges
established in the executives' respective employment agreements
and letter agreement, the Board of Directors in 1997 determined
the levels of such executives' compensation in accordance with
the respective terms and provisions of their respective
agreements. The Board of Directors continues to believe,
however, that the base salaries set forth in the respective
employment agreements and letter agreement 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 1997.
With respect to 1998, 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.
-13-
<PAGE>
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 establish 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
Larry Austin
William H. Kelly
-14-
<PAGE>
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, 1997 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.
COMPARISON OF 23 MONTH CUMULATIVE TOTAL RETURN*
AMONG PARAMOUNT FINANCIAL CORPORATION, THE RUSSELL 2000 INDEX
AND THE NASDAQ NON-FINANCIAL INDEX
Cumulative Total Return
----------------------------------
1/23/96 12/96 12/97
PARAMOUNT FINANCIAL
CORPORATION PARA 100 15 18
RUSSELL 2000 IR20 100 116 143
NASDAQ FINANCIAL INFN 100 128 197
* $100 INVESTED ON 1/23/96 IN STOCK OR ON 12/31/95
IN INDEX - INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF THE CORPORATION
WITH MANAGEMENT
Mr. William Kelly purchased DEC Equipment from Paratech
Resources, Inc., a wholly owned subsidiary of the Corporation,
for $83,592.11 on behalf of his leasing business, WHK Leasing.
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 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 solely 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 in a timely fashion during the fiscal year ended
-15-
<PAGE>
December 31, 1997, except that Larry Austin and William H. Kelly
did not timely file their respective Form 3 upon each of their
appointments as directors of the Corporation. However, Mr.
Austin and Mr. Kelly did report their appointments as directors
of the Corporation on April 1, 1998. In addition, Mr. David
Dinin did not timely file his Form 3 upon his appointment as an
executive officer of the Corporation. However, Mr. Dinin did
report his appointment as an executive officer on April ___,
1998.
1999 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1999 Annual
Meeting of Stockholders to be eligible for inclusion in the
Corporation's 1999 Proxy Statement, they must be received by the
Corporation at its principal executive offices of One Jericho
Plaza, Jericho, New York 11753 (Attn: Secretary), prior to
December 23, 1998. 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 1999 Proxy Statement for the
Annual Meeting.
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, 1997. 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 20, 1997
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<PAGE>
ANNEX A
-------
THE REVERSE STOCK SPLIT
RESOLVED, that, prior to the Corporation's next Annual Meeting of
Stockholders, upon the determination by the Board of Directors
that effecting a reverse stock split of the Common Stock is in
the Corporation's best interests, Article IV of the Corporation's
Restated Articles of Incorporation be amended by addition of the
following provision:
Simultaneously with the effective date of this amendment
(the "Effective Date"), each share of the Corporation's
Common Stock, par value $0.01 per share, issued and
outstanding immediately prior to the Effective Date (the
"Old Common Stock") shall, automatically and without any
action on the part of the holder thereof, be reclassified as
and changed, pursuant to a reverse stock split, into any
fraction thereof falling within a range between and
including one-for-three and one-for-six of a share of the
Corporation's outstanding Common Stock (the "New Common
Stock"), subject to the treatment of fractional share
interests as described below. Each holder of a certificate
or certificates which immediately prior to the Effective
Date represented outstanding shares of Old Common Stock (the
"Old Certificates," whether one or more) shall be entitled
to receive upon surrender of such Old Certificates to the
Corporation's Transfer Agent for cancellation, a certificate
or certificates (the "New Certificates," whether one or
more) representing the number of whole shares of the New
Common Stock into and for which the shares of the Old Common
Stock formerly represented by such Old Certificates so
surrendered, are reclassified under the terms hereof. From
and after the Effective Date, Old Certificates shall
represent only the right to receive New Certificates
pursuant to the provisions hereof. No certificates or scrip
representing fractional share interests in New Common Stock
will be issued, and no such fractional share interest will
entitle the holder thereof to vote, or to any rights of a
stockholder of the Corporation. Any fraction of a share of
New Common Stock to which the holder would otherwise be
entitled will be adjusted upward or downward to the nearest
whole share. If more than one Old Certificate shall be
surrendered at one time for the account of the same
stockholder, the number of full shares of New Common Stock
for which New Certificates shall be issued shall be computed
on the basis of the aggregate number of shares represented
by the Old Certificates so surrendered. In the event that
the Corporation's Transfer Agent determines that a holder of
Old Certificates has not tendered all his certificates for
exchange, the Transfer Agent shall carry forward any
fractional share until all certificates of that holder have
been presented for exchange such that payment for fractional
shares to any one person shall not exceed the value of one
share. If any new Certificate is to be issued in a name
other than that in which the Old Certificates surrendered
for exchange are issued, the Old Certificates so surrendered
shall be properly endorsed and otherwise in proper form for
transfer, and the person or persons requesting such exchange
shall affix any requisite stock transfer tax stamps to the
Old Certificates surrendered, or provide funds for their
purchase, or establish to the satisfaction of the Transfer
Agent that such taxes are not payable. From and after the
Effective Date, the amount of capital represented by the
shares of the New Common Stock into which and for which the
shares of the Old Common Stock are reclassified under the
terms hereof shall be the same as the amount of capital
represented by the shares of Old Common Stock so
reclassified, until thereafter reduced or increased in
accordance with applicable law.
A-1
<PAGE>
FURTHER RESOLVED, that at any time prior to the filing of the
foregoing amendment to the Corporation's Restated and Amended
Certificate of Incorporation effecting a Reverse Stock Split,
notwithstanding authorization of the proposed amendment by the
stockholders of the Corporation, the Board of Directors may
abandon such proposed amendment without further action by the
stockholders.
A-2
<PAGE>
PARAMOUNT FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Paramount Financial Corporation,
a Delaware corporation (the "Company"), acknowledges receipt of the
Notice of Annual Meeting of Stockholders, Proxy Statement, dated
April 20, 1998, and 1997 Annual Report, and hereby constitutes and
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 May 15, 1998
or any adjournment thereof.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS WHICH RECOMMENDS
A VOTE "FOR" PROPOSALS NO. 1, 2, AND 3.
1. The election of five (5) directors nominated by the Board of
Directors:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
(except as indicated) vote for all nominees
listed below
Glenn Nortman, Jeffrey Nortman, Paul Vecker
Larry Austin and William H. Kelly.
(Instruction: To withhold authority to vote for any individual
nominee or nominees write such nominee's or nominees' names in
the space provided below)
---------------------------------------------------------------
2. The approval of the authorization of the Board of Directors
to amend the Restated and Amended Certificate of
Incorporation to effect the Reverse Stock Split:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The ratification of the appointment of Arthur Andersen LLP as
the Corporation's independent auditors for fiscal 1998:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Other matters as may properly come before the Meeting or any
adjournment or adjournments thereof.
This Proxy, when properly executed, will be voted as directed. If
no direction is indicated, the Proxy will be voted FOR each of the
above proposals.
Dated: , 1998
---------------------
--------------------------------
--------------------------------
Please sign your name exactly as
it appears hereon. When signing
as attorney, executor,
administrator, trustee or
guardian, please give your full
title as it appears hereon. When
signing as joint tenants, all
parties in the joint tenancy must
sign. When a proxy is given by a
corporation, it should be signed
by an authorized officer and the
corporate seal affixed. No
postage is required if returned in
the enclosed envelope and mailed
in the United States.
