SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ] Filed by
a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials [ ] Soliciting Materials
[ ] Confidential, for use of the Pursuant to Section
Commission Only (as permitted 240.14a-11(c) or
by Rule 14a-6(e)(2)) Section 240.14a-12
PARAMOUNT FINANCIAL CORPORATION
(Name of Registrant as Specified in its Charter)
(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: ___________________
2) Aggregate number of securities to which transaction
applies: ______________________
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):
_________________________________________________________________
4) Proposed maximum aggregate value of transaction: ___________________
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: ______________________________________
2) Form, Schedule or Registration Statement No: _________________
3) Filing Party: ________________________________________________
4) Date Filed: __________________________________________________
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PARAMOUNT FINANCIAL CORPORATION
ONE JERICHO PLAZA
JERICHO, NEW YORK 11753
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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JUNE 18, 1999
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To the Stockholders of
PARAMOUNT FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Paramount Financial Corporation (the "Corporation") will be held at 10:00 a.m.,
local time, on June 18, 1999, at The Melville Marriott at 1350 Old Walt Whitman
Road, Melville, New York 11747, for the following purposes:
1. To elect four directors of the Corporation to serve until the
next annual meeting of stockholders and until the election and
qualification of their respective successors;
2. To vote upon a proposal to amend the Corporation's 1995 Stock
Option Plan to increase the number of shares of the
Corporation's Common Stock for which options may be granted
under such Plan;
3. To ratify the appointment of BDO Seidman, LLP as independent
auditors of the Corporation for fiscal 1999; 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 May 21, 1999 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, 1998 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,
May 27, 1999 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
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PROXY STATEMENT
FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD
ON JUNE 18, 1999
-------------------------------
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 June 18,
1999, 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, 1998, including financial statements, are first
being mailed or delivered to stockholders on or about May 28, 1999.
If proxy cards in the accompanying form are properly executed and
returned, the shares of Common Stock represented thereby will be voted as
instructed on the proxy. If no instructions are given, such shares will be voted
(1) for the election as directors of the nominees of the Board of Directors
named below, (2) in favor of the proposal to amend the 1995 Stock Option Plan,
(3) to ratify the appointment of BDO Seidman, LLP as the Corporation's
independent auditors for fiscal 1999, 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 May 21, 1999
(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 2,160,000 shares
of Common Stock outstanding and entitled to vote, and a majority of these shares
will constitute a quorum for the transaction of business at the Annual Meeting.
Each share of Common Stock entitles the holder thereof to one vote on all
matters to come before the Annual Meeting, including election of directors. Only
votes cast "for" a motion constitute affirmative votes. Votes "withheld" or
abstentions (including broker non-votes) are included in determining the
existence of a quorum, but since they are not votes "for" a motion, they will
have the same effect as negative votes or votes "against" such matters.
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SECURITY OWNERSHIP BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of
Common Stock beneficially owned, as of the Record Date, by (i) all persons known
by the Corporation to be the beneficial owner of more than 5% of the outstanding
Common Stock; (ii) each of the current directors and nominees to serve as
directors of the Corporation; and (iii) all directors and executive officers of
the Corporation as a group.
NAME AND ADDRESS AMOUNT OF
OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) PERCENT OF COMMON STOCK
- ------------------- -------------------- -----------------------
Glenn Nortman.................. 375,236 17.37%
Jeffrey Nortman................ 375,236 17.37%
William H. Kelly............... 11,588 0.54%
Larry Austin................... 0 -
All directors and executive
officers as a group
(5 persons).................. 762,060 35.28%
- ---------------------------
(1) The address of each listed person is c/o Paramount Financial Corporation,
One Jericho Plaza, Jericho, New York 11753.
(2) All share information has been adjusted to give effect to a one-for-four
stock split consummated by the Corporation in August 1998.
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
A board of four (4) 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 four (4) 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 four (4) 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 41 Chief Executive Officer, Secretary and a Director
Jeffrey Nortman 40 Chief Operating Officer and a Director
Larry Austin 68 Director
William H. Kelly 58 Director
Certain biographical information regarding each director and executive
officer 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 beginning in
1996 and as the Executive Vice President from June 1992. Mr. Nortman runs the
day-to-day operations of the Corporation's lease finance business and systems
integration and consulting business. 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 beginning in 1996 and as
the President from the Corporation's inception in July 1991. Mr. Nortman runs
the day-to-day operations of the Corporation's staffing services business. From
1987 to 1991, Mr. Nortman was the Manager of Peripheral Trading for Pacificorp
Capital. Mr. Nortman is the brother of Glenn Nortman.
Larry Austin has been a director of the Corporation since 1998. Mr.
Austin is Chairman and 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,
WLIW/Channel 21, CW Post School of Business, is President of the Long Island
Philharmonic and Chairman of the Travel Management Alliance, a $1 billion group
of travel management corporations.
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<PAGE>
William H. Kelly has been a director of the Corporation since 1998. The
Honorable William H. Kelly is a prominent member of the Long Island community
serving as Mayor of Asharoken since 1982. In addition, since 1976 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 met
one time, but the members of the Board had regular contact with the
Corporation's senior management in order to remain fully apprised of the
Corporation's activities. In addition to these meetings of the Board of
Directors, the Board of Directors acted by unanimous written consent in lieu of
meeting on six occasions in 1998. 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 and William H. Kelly. The Audit
Committee met one time in 1998 in connection with its review of the
Corporation's 1999 audited financial statements. 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 determined the levels
of executive officer compensation during 1998. No executive officer of the
Corporation had any relationship reportable under the Compensation Committee
Interlock regulations during 1998.
PROPOSAL TWO: APPROVAL TO AMEND 1995 STOCK OPTION PLAN
The Board of Directors proposes that the Corporation's 1995 Stock
Option Plan (the "Plan") be amended to increase the aggregate number of shares
of Common Stock subject to issuance under the Plan by 125,000 shares, from
375,000 shares to 500,000 shares. As of the Record Date, there were 173,900
shares of Common Stock subject to issuance pursuant to outstanding options, of
which 35,063 were vested options.
The closing sales price of the Corporation's Common Stock, as reported
by the Nasdaq SmallCap Market, was $2 3/32 per share on May 25, 1999.
The Board of Directors believes that, as a result of the Corporation's
anticipated growth, it will be necessary to hire additional personnel. In view
of these personnel needs, together with the Corporation's intentions of
continuing to utilize options as a component of the remuneration paid to
management, the Board of Directors is of the opinion that it is appropriate that
stock options be available to attract and retain well qualified executive and
other personnel and to furnish an additional incentive to those persons.
Further, the Corporation has utilized options as a purchase price component in
certain
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<PAGE>
of its acquisitions in the past and intends, in appropriate circumstances, to do
so in the future. Accordingly, the Board of Directors proposes to increase the
number of shares of Common Stock available for issuance under the Plan by an
additional 125,000 shares, from 375,000 shares to 500,000 shares.
A detailed summary description of the Plan is set forth in Annex A to
this Proxy Statement.
REQUIRED AFFIRMATIVE VOTE
The affirmative vote of a majority of votes cast at the Annual Meeting
in person or by proxy is required to approve the amendment to the Plan. Since an
abstention does not count as an affirmative vote cast, it has the same effect as
a vote "against" this proposal.
RECOMMENDATION
THE CORPORATION'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE AMENDMENT TO THE PLAN.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
GENERAL
The Board of Directors has selected BDO Seidman, LLP, independent
auditors, to audit the consolidated financial statements of the Corporation for
the fiscal year ending December 31, 1999 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.
Representatives of BDO Seidman, 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.
Prior to the Board of Directors' selection of BDO Seidman, LLP to audit
the consolidated financial statements of the Corporation for the fiscal year
ending December 31, 1999, Arthur Andersen LLP audited the Corporation's
financial statements since 1994. Arthur Andersen LLP was dismissed as the
Corporation's accounting firm based on the Board of Directors decision to
involve new accountants in the Corporation's affairs and thereby obtain a newly
invigorated level of services. None of Arthur Andersen LLP's reports on the
Corporation's financial statements for any year contained an adverse opinion or
a disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope or accounting principles.
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REQUIRED AFFIRMATIVE VOTE
The affirmative vote of a majority of votes cast at the Annual Meeting
in person or by proxy is required to 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 BDO SEIDMAN, LLP AS INDEPENDENT
AUDITORS.
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<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
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, 1998,
1997 and 1996.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
------------------------------------------
NAME AND FISCAL
PRINCIPAL POSITION YEAR SALARY BONUS
- -------------------- ------- ------------- -------------
Glenn Nortman....................... 1998 $340,182 $ 73,00
Chief Executive Officer 1997 332,717 0
1996 297,900 100,000
-
Jeffrey Nortman..................... 1998 $365,112 -
Chief Operating Officer 1997 332,924 -
1996 297,900 -
Paul Vecker(6)...................... 1998 $226,378 -
Senior Vice President and Chief 1997 204,095 -
Financial Officer 1996 184,200 -
David Dinin(7)...................... 1998 $252,389 -
Senior Vice President 1997 121,314 -
===============================================================================
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
---------------------------
NAME AND FISCAL ALL OTHER TOTAL ANNUAL
PRINCIPAL POSITION YEAR COMPENSATION COMPENSATION
- -------------------- ---- ------------ ------------
Glenn Nortman....................... 1998 $ 45,541(1) $458,723
Chief Executive Officer 1997 39,580(2) 472,297
1996 35,300(3) 333,200
Jeffrey Nortman..................... 1998 $ 45,258(1) $410,370
Chief Operating Officer 1997 39,290(4) 372,214
1996 35,300(3) 333,200
Paul Vecker(6)...................... 1998 $ 7,200(5) $233,578
Senior Vice President and Chief 1997 - 204,095
Financial Officer 1996 - 184,200
David Dinin(7)...................... 1998 $ 7,200(5) $259,589
Senior Vice President 1997 - 121,314
===============================================================================
(1) Represents payments of approximately $18,700 for automobile expenses
and $26,841 for country club dues for Mr. Glenn Nortman, and
approximately $18,400 for automobile expenses and $26,858 for country
club dues for Mr. Jeffrey Nortman.
(2) Represents payments of approximately $18,700 for automobile expenses
and $20,880 for country club dues and personal use.
(3) Represents payments of approximately $18,000 for automobile expenses,
$11,300 for country club dues and $6,000 for split-dollar life
insurance premiums.
(4) Represents payments of approximately $18,400 for automobile expenses
and $20,890 for country club dues and personal use.
(5) Represents automobile expenses.
(6) Mr. Vecker resigned from the Corporation on January 31, 1999.
(7) Mr. Dinin resigned from the Corporation on March 31, 1999.
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.
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EMPLOYMENT AGREEMENTS
Messrs. Glenn and Jeffrey Nortman have employment agreements with the
Corporation described below. Each of these employment agreements automatically
renews for successive one year terms unless either the Corporation or the
employee notifies the other of its intention not to renew the employment
agreement within 90 days of each anniversary date of the agreements (i.e., by
October 6 of each year such notice must be given.
The Corporation's employment agreements with Messrs. Nortman provide
for an annual base salary of $300,000 for the first year of the term, $330,000
each in the second year of the term and an annual base salary of $360,000 for
the third year of the term. 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).
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.
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 12,500 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.
To date, no such options have been granted under the director Plan.
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 500 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.
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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 1998 the entire Board of Directors of the
Corporation made determinations regarding the levels of executive compensation.
Currently, Messrs. Glenn and Jeffrey Nortman are the only executive officers of
the Corporation.
In 1998, the only compensation paid to the Corporation's executive
officers was as set forth pursuant to each of Messrs. Nortman's respective
employment agreements and, with respect to Messrs. Vecker and Dinin (who are no
longer with the Corporation), their respective prior agreements with the
Corporation. Insofar as the 1998 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, the Board of Directors in 1998
determined the levels of such executives' compensation in accordance with the
respective terms and provisions of their agreements. The Board of Directors
continues to believe, however, that the base salaries set forth in the
respective employment agreements are appropriate in light of each executive's
level of responsibilities, individual performance and time in position, as well
as in relation to the Corporation's overall financial circumstances and
performance during 1998.
With respect to 1999, 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 continue, in appropriate circumstances, issuing options to its
executive officers. The Board of Directors generally
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has established a flexible formula to determine the number of stock options to
be granted to its executive officers. Pursuant to this formula, an executive
officer would receive a base number of options equal to one share of Common
Stock for every $100.00 of such officer's annual base salary. In order to permit
the Board of Directors to most accurately reward stock options, the formula then
requires that the base number of options be subject to a "merit multiplier," the
size of which will depend upon the overall performance of the Corporation during
the year in question, the executive's performance in that year and other
factors.
BOARD OF DIRECTORS
------------------
Glenn Nortman
Jeffrey Nortman
Larry Austin
William H. Kelly
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PERFORMANCE GRAPH
Displayed below is a graph which compares the cumulative total
stockholder returns (including reinvestment of dividends) from the period from
January 23, 1996 (the date the Corporation became a public company) through
December 31, 1998 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 35 MONTH CUMULATIVE TOTAL RETURN*
AMOUNG PARAMOUNT FINANCIAL CORPORATION, THE RUSSELL 2000 INDEX
AND THE NASDAQ NON-FINANCIAL INDEX
(IN DOLLARS)
---------------------------------------------------------
1/23/96 12/96 12/97 12/98
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PARAMOUNT FINANCIAL
CORPORATION 100 60 60 20
---------------------------------------------------------
RUSSELL 2000 100 120 145 145
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NASDAQ NON-
FINANCIAL 100 135 200 195
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* $100 INVESTED ON 1/23/96 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS. FISCAL
YEAR ENDING DECEMBER 31.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF THE CORPORATION WITH
MANAGEMENT
Since the beginning of the Corporation's fiscal year ending December
31, 1998, there were no relationships or transactions to be disclosed.
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 1998
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, 1998.
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1999 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 2000 Annual Meeting of
Stockholders to be eligible for inclusion in the Corporation's 2000 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 January 29, 1999. 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 2000 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, 1998. ANY SUCH
REQUEST SHALL BE DIRECTED TO PARAMOUNT FINANCIAL CORPORATION, ATTENTION: ANTHONY
FERNANDEZ, THE CORPORATION'S DIRECTOR OF FINANCE AT THE FOLLOWING ADDRESS:
ONE JERICHO PLAZA, JERICHO, NEW YORK 11753.
GLENN NORTMAN,
Secretary
May 27, 1999
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<PAGE>
ANNEX A
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1995 STOCK OPTION PLAN
As of August 28, 1995, the Board of Directors adopted and the
Corporation's stockholders approved the 1995 Stock Option Plan for all senior
executive officers, key employees and consultants of the Corporation pursuant to
which 187,500 shares of Common Stock were reserved for issuance. On June 4,
1997, the Company's stockholders approved an amendment to the 1995 Stock Option
Plan which increased the number of shares of Common Stock for which options may
be granted under the Plan to 375,000 shares. In August 1998, the Company's
stockholders approved a one-for-four stock split, and, therefore, the number of
shares of common stock described herein has been adjusted to reflect such
reverse stock split.
As of the Record Date, there were 35,963 shares of Common Stock subject
to issuance pursuant to outstanding options, of which 35,063 were vested
options. Options granted under the 1995 Stock Option Plan, which expires in
August 2005, may be either incentive stock options ("ISOs"), which are intended
to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended, or non-qualified stock options ("NSOs"). The purposes of the 1995 Stock
Option Plan are to ensure the retention of existing executive personnel, key
employees, directors, consultants and advisors and to provide additional
incentive by permitting such individuals to participate in the ownership of the
Corporation, and the criteria to be utilized by the Board of Directors or the
committee in granting options pursuant to the 1995 Stock Option Plan will be
consistent with these purposes.
Under the 1995 Stock Option Plan, the Board of Directors (or a
designated committee thereof) may grant (i) ISOs at an exercise price per share
which is not less than the fair market value of a share of Common Stock on the
date on which such ISOs are granted (and not less than 110% of the fair market
value in the case of any optionee who beneficially owns more than 10% of the
total combined voting power of the Corporation), and (ii) NSOs at an exercise
price per share which is determined by the Board of Directors (and which may be
less than the fair market value of a share of Common Stock on the date on which
such NSOs are granted). The 1995 Stock Option Plan further provides that the
maximum period in which options may be exercised will be determined by the Board
of Directors (or a designated committee thereof), except that ISOs may not be
exercised after the expiration of ten years from the date the ISOs were
initially granted (and five years in the case of any optionee who beneficially
owns more than 10% of the total combined voting power of the Corporation). To
the extent that the aggregate fair market value, as of the date of grant, of the
shares of which an ISO become exercisable for the first time by an optionee
during the calendar year exceeds $100,000, the portion of such ISO which is in
excess of the $100,000 limitation will be treated as an NSO. Options granted
under the 1995 Stock Option Plan to officers, directors or employees of the
Corporation may be exercised only while the optionee is employed or retained by
the Corporation or within 90 days of the date of termination of the employment
relationship or directorship, unless such termination is for cause or
attributable to certain other reasons, in which events options will expire
immediately upon termination. However, options which are exercisable at the time
of termination by reason of death or permanent disability of the optionee may be
exercised within 12 months of the date of termination of the employment
relationship or directorship. Any option granted under the 1995 Stock Option
Plan will be nontransferable, except by will or by the laws of descent and
distribution, and may be exercised upon payment of the option price in cash, a
cash equivalent, Common Stock or any other form of consideration which is
acceptable to the Board of Directors.
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Options may be granted only to such employees, officers and directors
of, and consultants and advisors to, the Corporation or any subsidiary of the
Corporation as the Board of Directors or the committee shall select from time to
time in its sole discretion, provided that only employees of the Corporation or
a subsidiary of the Corporation shall be eligible to receive ISOS. The number of
consultants and advisors to the Corporation eligible to receive grants under the
Plan is not determinable. The Board of Directors or the committee will, in its
discretion, determine (subject to the terms of the 1995 Stock Option Plan) who
will be granted options, the time or times at which options shall be granted,
and the number of shares subject to each option, whether the options are ISOs or
NSOS, and the manner in which options may be exercised. In making such
determination, consideration may be given to the value of the services rendered
by the respective individuals, their present and potential contributions to the
success of the Corporation and its subsidiaries and such other factors deemed
relevant in accomplishing the purposes of the 1995 Stock Option Plan.
The Board of Directors may amend or terminate the 1995 Stock Option
Plan, except that stockholder approval is required to effect a change so as to
increase the aggregate number of shares that may be issued under the 1995 Stock
Option Plan (unless adjusted to reflect such changes as a result of a stock
dividend, stock split, recapitalization, merger or consolidation of the
Corporation), to modify the requirements as to eligibility to receive options,
to increase materially the benefits accruing to participants or as otherwise may
be required by the Exchange Act or Section 422 of the Code. No action taken by
the Board may materially and adversely affect any outstanding option grant
without the consent of the optionee.
Under the current tax law, there are no Federal income tax consequences
to either the employee or the Corporation on the grant of NSOs if granted under
the terms set forth in the 1995 Stock Option Plan. Upon exercise of an NSO, the
excess of the fair market value of the shares subject to the option over the
option price (the "Spread") at the date of exercise is taxable as ordinary
income to the optionee in the year it is exercised and is deductible by the
Corporation as compensation for Federal income tax purposes, if Federal income
tax is withheld on the Spread. However, if the shares are subject to vesting
restrictions conditioned on future employment or the holder is subject to the
short-swing profits liability restrictions of Section 16(b) of the Exchange Act
(i.e., is an executive officer, director or 10% stockholder of the Corporation),
then taxation and measurement of the Spread is deferred until such restrictions
lapse, unless a special election is made under Section 83(b) of the Code to
report such income currently without regard to such restrictions. The optionee's
basis in the shares will be equal to the fair market value on the date taxation
is imposed and the holding period commences on such date.
ISO holders incur no regular Federal income tax liability at the time
of grant or upon exercise of such option, assuming that the optionee was an
employee of the Corporation from the date the option was granted until 90 days
before such exercise. However, upon exercise, the Spread must be added to
regular Federal taxable income in computing the optionee's "alternative minimum
tax" liability. An optionee's basis in the shares received on exercise of an ISO
will be the option price of such shares for regular income tax purposes. No
deduction is allowable to the Corporation for Federal income tax purposes in
connection with the grant or exercise of such option.
If the holder of shares acquired through exercise of an ISO sells such
shares within two years of the date of grant of such option or within one year
from the date of exercise of such option (a "Disqualifying Disposition"), the
optionee will realize income taxable at ordinary rates. Ordinary income is
reportable during the year of such sale equal to the difference between the
option price and the fair market value of the shares at the date the option is
exercised, but the amount includable as ordinary
A-2
<PAGE>
income shall not exceed the excess, if any, of the proceeds of such sale over
the option price. In addition to ordinary income, a Disqualifying Disposition
may result in taxable income subject to capital gains treatment if the sales
proceeds exceed the optionee's basis in the shares (i.e., the option price plus
the amount includable as ordinary income). The amount of the optionee's taxable
ordinary income will be deductible by the Corporation in the year of the
Disqualifying Disposition.
At the time of sale of shares received upon exercise of an option
(other than a Disqualifying Disposition of shares received upon the exercise of
an ISO), any gain or loss is long-term or short-term capital gain or loss,
depending upon the holding period. The holding period for long-term capital gain
or loss treatment is more than one year.
The foregoing is not intended to be an exhaustive analysis of the tax
consequences relating to stock options issued under the 1995 Stock Option Plan.
For instance, the treatment of options under state and local tax laws, which is
not described above, may differ from the treatment for Federal income tax
purposes.
A-3
<PAGE>
PARAMOUNT FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
JUNE 18, 1999
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 May 27, 1999, and 1998
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 June 18, 1999 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 four (4) directors nominated by the Board of
Directors:
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY to vote
(except as indicated) for all nominees listed
below
Glenn Nortman, Jeffrey Nortman,
Larry Austin, 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 amendment to the Corporation's 1995 Stock Option Plan to
increase the number of shares of Common Stock for which
options may be granted under the Plan:
|_| FOR |_| AGAINST |_| ABSTAIN
3. The ratification of the appointment of BDO Seidman, LLP as the
Corporation's independent auditors for fiscal 1999:
|_| 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: , 1999.
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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.
