SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14A INFORMATION
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14a-6(e)(2))
PARAMOUNT FINANCIAL CORPORATION
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<PAGE> PARAMOUNT FINANCIAL CORPORATION
ONE JERICHO PLAZA
JERICHO, NEW YORK 11753
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------------
MAY 15, 1998
------------------------------
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 (i)
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, and (ii)
in connection with such Reverse Stock Split, reduce the
authorized number of shares of the Corporation's capital stock
from 40,000,000 shares to 22,500,000 shares;
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,
April 20, 1998 Secretary
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
--------------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD
ON MAY 15, 1998
------------------------------
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 23, 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
7,914,000 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.
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
of Beneficial Owner(1) Beneficial Ownership Percent of Common 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%
---------------------------
(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.
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.
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.
PROPOSAL TWO
AUTHORIZE THE BOARD OF DIRECTORS TO AMEND THE RESTATED AND AMENDED
CERTIFICATE OF INCORPORATION OF THE CORPORATION TO (i) 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, AND (ii) IN CONNECTION WITH SUCH REVERSE
STOCK SPLIT, REDUCE THE AUTHORIZED NUMBER OF SHARES OF THE CORPORATION'S
CAPITAL STOCK FROM 40,000,000 SHARES TO 22,500,000 SHARES.
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.
In connection with the Reverse Stock Split, the Corporation will also
reduce the authorized number of shares of its capital stock from 40,000,000
shares to 22,500,000 shares, of which 17,500,000 shares will be Common
Stock (reduced from 35,000,000 shares) and 5,000,000 will be Preferred
Stock (no change will be effected in the number of shares of Preferred
Stock authorized). The intent of the reduction of the authorized number of
shares of Common Stock is to reduce the Corporation's annual franchise
taxes which are based on the Corporation's authorized capital stock.
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 reduction in the Corporation's authorized Common Stock will only occur
if the Reverse Stock Split is effected. The procedures for the
consummation of the Reverse Stock Split and reducing the authorized number
of shares of the Corporation's capital stock 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.
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 $.46875 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 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.
The amendment would also amend Article IV of the Corporation's present
Restated and Amended Certificate of Incorporation to reduce the number of
authorized shares of the Corporation's capital stock from 40,000,000 shares
to 22,500,000 shares.
PRINCIPAL EFFECTS OF THE REVERSE STOCK SPLIT
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 April 17, 1998 was approximately
38. 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)(2)
----------- ----------------- ------------------------------
1 for 3 2,638,000 14,862,000
1 for 4 1,978,500 15,521,500
1 for 5 1,582,800 15,917,200
1 for 6 1,319,000 16,181,000
---------------------------
(1) Gives effect to the reduction in the number of authorized shares of
Common Stock from 35,000,000 shares to 17,500,000 shares.
(2) Excludes reserved shares.
Consummation of the Reverse Stock Split will not have any federal tax
consequences to stockholders.<PAGE>
If the Reverse Stock Split is effected, in connection with which the
authorized number of shares of Common Stock would be reduced from
35,000,000 shares to 17,500,000 shares, the Corporation will have a surplus
of unissued shares which it can utilize for a wide range of purposes. The
Corporation does not presently have any specific plans to issue any of the
Corporation's authorized but unissued shares of Common Stock. However, the
Corporation's ability to issue such authorized but unissued shares of
Common Stock may enable the Company in the future to defend itself against
unsolicited change of control proposals although the Corporation is not
currently aware of any such proposal.
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.
-------------------------------
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, 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.
<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 ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
------------------ ------ ------ ----- ------------
Glenn Nortman . . . . 1997 $332,717 $100,00 $ 39,580(1)
Chief Executive 1996 297,900 0 35,300(2)
Officer 1995 250,000 - 422,500(3)
-
Jeffrey Nortman . . . 1997 $332,924 - $ 39,290(4)
Chief Operating 1996 297,900 - 35,300(2)
Officer 1995 270,000 - 422,500(3)
Paul Vecker . . . . . 1997 $204,095 - -
Senior Vice 1996 184,200 - -
President and 1995 165,000 - $ 32,800(5)
Chief
Financial Officer
David Dinin . . . . . 1997 $121,314 - -
Senior Vice President
===========================================================================
Name and Total Annual
Principal Position Compensation
------------------ ------------
Glenn Nortman . . . . . . . . . . $472,297
Chief Executive Officer 333,200
672,500
Jeffrey Nortman . . . . . . . . . $372,214
Chief Operating Officer 333,200
692,500
Paul Vecker . . . . . . . . . . . $204,095
Senior Vice President and 184,200
Chief 197,800
Financial Officer
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 $20,890 for country club dues and personal use.
(5) Represents payments for Federal, state and local taxes on S-
Corporation income.
All directors of the Corporation are reimbursed for all
reasonable expenses incurred by them in acting as a director or as a member
of any committee of the Board of Directors.
STOCK OPTION GRANT TABLE
The following table sets forth information with respect to
options to purchase shares of Common Stock awarded during fiscal year 1997
to the named executive officers pursuant to plans approved by the
Corporation's stockholders.
OPTIONS GRANTED TO EXECUTIVE OFFICERS IN FISCAL YEAR 1997
Percentage of
Number of Total Options
Securities Granted to
Underlying Employees Exercise
Options during the Price Expiration
Name Granted Fiscal Year ($/Sh) Date (1)
---- --------- ------------ -------- ----------
Glenn Nortman 25,000 11.90% $0.4125 3/31/01
Jeffrey Nortman 25,000 11.90% 0.4125 3/31/01
Paul Vecker 18,000 8.57% 0.3750 3/31/01
===========================================================================
Present Value as of
the Date of Grant
using Black-Scholes
Name Pricing Model
---- ------------------
Glenn Nortman $5,500
Jeffrey Nortman 5,500
Paul Vecker 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 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 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.
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
<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 RELATIONSIPS 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 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 13, 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
<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 and Amended
Articles of Incorporation be amended by addition of the following
provisions:
Paragraph (A) of Article Fourth shall be deleted in its entirety and
replaced with the following:
FOURTH: (A) The total number of shares of all classes
of stock which the Corporation shall have authority to
issue is 22,500,000 shares divided into the following
classes: (i) 17,500,000 shares of Common Stock with a
par value of $0.01 per share; and (ii) 5,000,000 shares
of Preferred Stock with a par value of $0.01 per share.
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.
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.
<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:
<box> FOR all nominees listed below <box> WITHHOLD AUTHORITY
(except as indicated) to 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:
<box> FOR <box> AGAINST <box> ABSTAIN
3. The ratification of the appointment of Arthur Andersen LLP as the
Corporation's independent auditors for fiscal 1998:
<box> FOR <box> AGAINST <box> 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.
