SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ X / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PAULSON CAPITAL CORP.
- --------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ X / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials
* Set forth the amount on which the filing fee is calculated and state
how it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
PRELIMINARY PROXY MATERIALS
PAULSON CAPITAL CORP.
May 10, 1996
Dear Stockholder:
The 1996 Annual Meeting of Stockholders of Paulson Capital Corp. (the
"Company") will be held at the Company's headquarters, 811 S.W. Front
Avenue, Portland, Oregon 97204 in the third-floor conference room on
Thursday, June 13, 1996 at 3:00 p.m. (PDT).
The attached material includes the Notice of Annual Meeting and the
Proxy Statement, which describes the business to be transacted at the
meeting. We ask that you give them your careful attention.
As in the past, we will be reporting on your Company's activities and
you will have an opportunity to ask questions about its operations.
We hope that you are planning to attend the Annual Meeting personally,
and we look forward to seeing you. It is important that your shares be
represented at the meeting whether or not you are able to attend in person.
Accordingly, the return of the enclosed proxy as soon as possible will be
greatly appreciated and will ensure that your shares are represented at the
Annual Meeting. If you do attend the Annual Meeting, you may, of course,
withdraw your proxy if you wish to vote in person.
On behalf of the Board of Directors of Paulson Capital Corp., I would
like to thank you for your continued support and confidence.
Sincerely,
Chester L.F. Paulson
Chairman of the Board
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<PAGE>
PRELIMINARY PROXY MATERIALS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 13, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Paulson Capital Corp. (the "Company") will be held at the Company's
headquarters, 811 S.W. Front Avenue, Portland, Oregon in the third-floor
conference room on Thursday, June 13, 1996 at 3:00 p.m. (PDT) for the
following purposes:
1. To elect three Directors whose term of office will expire in
1997.
2. To approve a proposal to authorize an amendment to the Articles
of Incorporation of the Company to effect a 1-for-4 reverse split
of the Common Stock of the Company upon the occurrence of certain
events.
3. To transact any other business that properly comes before the
Annual Meeting and any adjournments thereof.
Holders of Common Stock of record as of the close of business on
May 10, 1996 are entitled to receive notice of and vote at the Annual Meeting.
It is important that your shares be represented at the Annual Meeting.
For that reason, we ask that you promptly sign, date and mail the enclosed
proxy card in the return envelope provided. Stockholders who attend the
Annual Meeting may revoke their proxies and vote in person.
By order of the Board of Directors
Jacqueline M. Paulson
Secretary
Portland, Oregon
May 10, 1996
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<PAGE>
PRELIMINARY PROXY MATERIALS
PAULSON CAPITAL CORP.
811 S.W. FRONT AVENUE
PORTLAND, OREGON 97204
----------------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS JUNE 13, 1996
This Proxy Statement and the accompanying Notice of Annual Meeting and
form of proxy are being furnished to the stockholders of Paulson Capital
Corp. (the "Company") in connection with the solicitation of proxies by the
Board of Directors of the Company for use at the 1996 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held in the
third-floor conference room of the Company's headquarters, 811 S.W. Front
Avenue, Portland, Oregon on Thursday, June 13, 1996 at 3:00 p.m. (PDT) and
any adjournments thereof. These proxy materials are being mailed on or
about May 10, 1996 to holders of record on May 10, 1996 of the Company's
Common Stock.
A proxy may be revoked by a stockholder prior to its exercise by
written notice to the Secretary of the Company, by submission of another
proxy bearing a later date or by voting in person at the Annual Meeting.
Such notice or later proxy will not affect a vote on any matter taken prior
to the receipt thereof by the Company. The mere presence at the Annual
Meeting of the stockholder appointing the proxy will not revoke the
appointment. If not revoked, the proxy will be voted at the Annual Meeting
in accordance with the instructions indicated on the proxy by the
stockholder or, if no instructions are indicated, will be voted FOR the
slate of directors, the proposal to authorize the filing of the amendment
to the Company's Articles of Incorporation described herein and, as to any
other matter of business that may properly be brought before the Annual
Meeting, in accordance with the judgment of the person or persons voting
the proxy.
All expenses of the Company in connection with this solicitation will
be borne by the Company. In addition to solicitation by mail, proxies may
be solicited by directors, officers and other employees of the Company and
its subsidiary, by telephone, telegraph, telex, fax, in person or
otherwise, without additional compensation. The Company will also request
brokerage firms, nominees, custodians and fiduciaries to forward proxy
material to the beneficial owners of shares held of record by such persons
and will reimburse such persons for their reasonable out-of-pocket expenses
in forwarding such material.
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THE COMPANY
The Company, which was incorporated under the laws of the State of
Oregon in 1970, is a holding company which, through its wholly owned
subsidiary, Paulson Investment Company, Inc. ("PIC"), engages in a full
service brokerage business, including the purchase and sale of securities
from and to the public and for its own account and in investment banking
activities.
VOTING SECURITIES
Holders of record at the close of business on May 10, 1996 of the
Company's Common Stock, no par value, ("Common Stock") are entitled to
notice of and to vote at the Annual Meeting and any adjournments thereof.
Each outstanding share of Common Stock entitles the holder to one vote. The
Company's Articles of Incorporation do not provide for cumulative voting.
On March 31, 1996, 4,324,539 shares of Common Stock were outstanding.
The presence in person or by proxy at the Annual Meeting of the holders of
a majority of these shares constitutes a quorum.
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STOCK OWNERSHIP OF PRINCIPAL OWNERS AND MANAGEMENT
The following table provides information concerning persons known to
the Company to be the beneficial owners of more than 5 percent of the
Company's outstanding Common Stock as of March 31, 1996, and sets forth the
number of shares of Common Stock beneficially owned by each director of the
Company and by all directors of the Company and executive officers of the
Company or PIC as a group:
<TABLE>
<CAPTION>
Name and Address Shares Percent
of Beneficial Relationship Beneficially of
Owner to Company Owned Class
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Chester L.F. and President and 1,574,717 36 %
Jacqueline M. Chairman of the (2)
Paulson, as Board of Directors
joint tenants (1) of the Company,
officer and director
of PIC (Mr. Paulson);
Secretary-Treasurer
and Director of the
Company and officer
and director of PIC
(Ms. Paulson)
Kenneth T. LaMear (1) Director, Officer 67,399 2 %
and Director of PIC (2)
Steven T. Newby 280,820 6 %
Newby & Company
6116 Executive Blvd.,
Suite 701
Rockville, MD 20852
Charles P.A. and Amy Paulson, 324,560 8 %
as joint tenants
1001 S.W. Fifth Avenue
Portland, OR 97204
All Directors and Executive Officers 1,642,116 38 %
as a group (3 persons)
(1) Address is 811 S.W. Front Avenue, Portland, OR 97204.
(2) Includes 14,285 shares for each of Messrs. Paulson and LaMear
and 34,285 shares for Ms. Paulson that are subject to
currently exercisable options.
</TABLE>
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services in all capacities to the Company and its
subsidiary for the fiscal years ended December 31, 1995, 1994 and 1993 of
those persons who were, at December 31, 1995, the Chief Executive Officer
of the Company and the only other executive officer of the Company whose
total 1995 salary and bonus exceeded $100,000 (the "Named Executive
Officers").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------ ------------------
Securities Under- All
Name and Prin- lying Options Other
cipal Position Year Salary(1) Bonus(2) (# Shares) Compensation(3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Chester L.F. 1995 $ 269,430 $ 75,000 14,285 $ 903,968
Paulson, Pres- 1994 $ 224,830 $ 0 1,500 $ 1,500
ident 1993 $ 671,770 $ 42,000 0 $ 7,342
Kenneth T. 1995 $ 128,061 $ 75,000 14,285 $ 8,644
LaMear, CEO 1994 $ 99,174 $ 0 1,500 $ 1,500
of PIC 1993 $ 96,592 $ 42,000 0 $ 3,870
</TABLE>
(footnotes on next page)
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<PAGE>
(1) Mr. Paulson is not paid any salary. The amounts included in the
"Salary" column above for Mr. Paulson consist of amounts paid contingent
upon the completion of PIC's corporate finance transactions. The amounts
included in "Salary" for Mr. LaMear include retail commissions from Mr.
LaMear's service as a registered representative of PIC as well as a salary
of $20,400, $20,400 and $20,400 in 1995, 1994 and 1993, respectively. No
Named Executive Officer received any perquisites or other personal benefits
the aggregate amount of which exceeded the lesser of either $50,000 or 10
percent of the total annual salary and bonus reported for 1995 in the
Summary Compensation Table.
(2) Bonus amounts are based upon a percentage (fixed by the Board of
Directors) of a bonus pool based upon profits, if any. Prior to 1993 under
PIC's Director and Officer Bonus Plan, twenty percent of PIC's pretax
income (before accounting for the bonus plan) up to $1 million in pretax
income and 15 percent of pretax income thereafter was paid on an annual
basis to certain of PIC's officers and directors. For years beginning in
1994, the Board lowered these amounts to 15 percent of PIC's pretax income
up to $1 million and 10 percent of pretax income thereafter. In 1993, the
Board allocated an amount pursuant to the plan which was less than the
previous formula but more than the formula which was applied beginning in
1994. For 1995, the bonus pool calculation would be $587,296, but the Board
of Directors reduced actual bonus payments to officers and directors to
$525,000.
(3) Amounts shown for 1995 and 1994 include contributions of $1,500
for each of Messrs. Paulson and LaMear relating to PIC's match of employee
contributions pursuant to PIC's 401(k) retirement plan. Amounts shown for
1995 include contributions of $8,215 and $7,144, respectively, for Mr.
Paulson and Mr. LaMear to PIC's tax qualified profit sharing plan. Amounts
shown for 1993 include contributions of $7,342 and $3,870, respectively,
for Mr. Paulson and Mr. LaMear to the profit sharing plan. No contributions
were made to the profit sharing plan based upon 1994 financial results. The
profit sharing plan provides for annual contributions at the discretion of
PIC's board of directors which are allocated to participants' accounts in
proportion to their compensation. Of the amount allocated to an individual,
20 percent, 40 percent, 60 percent, 80 percent and 100 percent is vested
after two, three, four, five and six years of service, respectively. In the
event of death, retirement at or after age 59, or termination of employment
because of disability, the participant immediately becomes entitled to 100
percent of his or her account. No portion of the Company's contributions to
the plan became vested during fiscal 1995 with respect to any executive
officer or director. Retirement benefits are based on the investment
performance of each participant's account under the plan. There was no
other annual compensation, restricted stock awards, or long term incentive
plan payouts during the periods shown. The amount shown for Mr. Paulson in
1995 also includes $894,253 representing the net gain received from the
7
<PAGE>
exercise of underwriter warrants allocated to him, based upon the
difference in the price of the security on the date of the exercise of the
warrant and the exercise price of the warrant. Underwriter warrants are
received by PIC upon the completion of corporate finance transactions for
its clients.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options
granted to the Named Executive Officers pursuant to the Company's 1983
Stock Option Plan during the year ended December 31, 1995.
<TABLE>
<CAPTION>
Number of
Shares % of Total
Underlying Options Granted Exercise
Options to Employees in Price per Expiration
Name Granted Fiscal Year Share Date
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Chester 14,285 14.3 % $ .90625 6/29/98
L.F. Paulson
Kenneth T. 14,285 14.3 % $ .90625 6/29/98
LaMear
</TABLE>
No options were exercised by any employee during 1995. On June 29,
1995, the date the options were granted, the Company's common stock, as
reported on the Nasdaq SmallCap Market, had a closing bid price of $
.84375, a closing asked price of $1.00 and a closing trading price of $
.875. Unless otherwise determined by the Board of Directors, in the event
the employment of any optionee by the Company or a subsidiary terminates by
retirement or for any reason other than because of death or physical
disability, the term of any exercisable option shall end not later than
three months after the date of the termination of employment.
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<PAGE>
FISCAL YEAR-END OPTION VALUES TABLE
Shown below is information with respect to the unexercised options to
purchase the Company's common stock granted under the Company's 1983 Stock
Option Plan to the Named Executive Officers. Neither of the Named Executive
Officers exercised any stock options during 1995.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Options Held At In-the-Money Options at
Fiscal Year-End Fiscal Year-End (1)
----------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Chester L.F.
Paulson 15,785 -- $1,480 $ --
Kenneth T.
LaMear 15,785 -- $1,480 $ --
</TABLE>
(1) Options are "in-the-money" at the fiscal year-end if the fair
market value of the underlying securities on such date exceeds the exercise
price of the option. The amounts set forth represent the difference between
the fair market value of the securities underlying the options on December
31, 1995 based on the last sale price of $1.00 per share of Common Stock on
that date (as reported on the Nasdaq SmallCap Market) and the exercise
price of the options, multiplied by the applicable number of options.
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<PAGE>
The Company has no employment agreements with any of its executive
officers.
COMPENSATION OF DIRECTORS. Under the 1991 Directors' Meeting Stock
Incentive Plan (the "1991 Plan"), the Company pays its directors and
certain officers invited to the meetings of the Board of Directors $500 per
meeting, up to a maximum of six meetings per year, payable in Common Stock
of the Company based upon the stock price on the day prior to the meeting.
The 1991 Plan was adopted by the Company's stockholders at the 1991 annual
meeting of stockholders in June 1991. The 1991 Plan was amended to also
cover participants at meetings of the board of directors of any subsidiary
of the Company at the 1993 annual meeting of stockholders in June 1993.
Similar payments were made to directors prior to the adoption of the 1991
Plan. Three members of the Board of Directors, three officers of PIC and
one non-officer director of PIC were issued a total of 10,338 shares in
1995 (552 shares at $.90625, 500 shares at $1.00, 471 shares at $1.0625 and
400 shares at $1.25). Messrs. Paulson and LaMear and Ms. Paulson each
received 1,923 shares and directors and executive officers as a group
received 5,769 shares.
I. ELECTION OF DIRECTORS
The Board of Directors has nominated and recommends the election of
each of the nominees set forth below in the table as a director to serve
until the next Annual Meeting of Stockholders or until his or her successor
is duly elected and qualified. Each nominee is currently a director of the
Company.
<TABLE>
<CAPTION>
Principal Occupa-
Position(s) tion(s) During Director
Name Age With Company Past Five Years Since
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Chester L.F. 60 President and Director of Corporate 1970
Paulson Director Finance of PIC (Pres-
ident of PIC until 7/92)
Jacqueline M. 57 Secretary- Secretary-Treasurer 1976
Paulson Treasurer and of PIC (Chief Exec-
Director utive Officer of PIC
from 7/92 to 8/93)
Kenneth T. 61 Director Chief Executive 1994
LaMear Officer of PIC (Senior
Vice President of PIC
prior to 8/93)
</TABLE>
11
<PAGE>
If any nominee becomes unable or unwilling to accept nomination or
election, it is intended that the persons named in the enclosed proxy will
vote the shares that they represent for the election of a nominee
designated by the Board of Directors, unless the board reduces the number
of directors. The board of directors has voted to decrease the number of
directors from six to three.
The affirmative vote of a plurality of the votes cast by holders of
shares of Common Stock is required for the election of directors.
Abstentions and broker non-votes are counted for purposes of determining
whether a quorum exists at the Annual Meeting, but are not counted and have
no effect on the determination of whether a plurality exists with respect
to a given nominee.
Chester L.F. Paulson and Jacqueline M. Paulson are husband and wife.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held four meetings during 1995. Each director
nominated for reelection attended 75 percent or more of the aggregate
number of meetings of the Board of Directors that were held during the
period in which he or she was a director.
The Company has an audit committee consisting of Ms. Paulson and Mr.
LaMear. The committee met twice during 1995. Among other matters, the Audit
Committee reviews the Company's expenditures, reviews the Company's
internal accounting controls and financial statements, reviews with the
Company's independent certified public accountants the scope of their
audit, their report and their recommendations, and recommends the selection
of the Company's independent certified public accountants.
The Board of Directors does not have executive, compensation or
nominating committees.
12
<PAGE>
II. PROPOSAL TO AUTHORIZE THE BOARD OF DIRECTORS TO FILE AN
AMENDMENT TO THE ARTICLES OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
This proposal is intended to enable the Company to expeditiously
effect a reverse split of the Company's Common Stock in the event that a
decline in the Company's stock price would result in the Common Stock being
delisted from the Nasdaq SmallCap Market. An identical proposal was
approved by the Company's stockholders at the Company's 1992, 1993, 1994
and 1995 annual Meetings.
In 1990, the Company's Common Stock was listed on the Nasdaq SmallCap
Market. On August 30, 1991 the SEC approved a rule change regarding the
criteria for initial and continued inclusion on the Nasdaq SmallCap Market.
Pursuant to the rule change, to continue listing on the Nasdaq SmallCap
Market, a company must have and maintain (i) minimum total assets of
$2,000,000, (ii) minimum stockholders' equity of $1,000,000, (iii) a
minimum bid price per share of $1.00, (iv) a minimum market value of the
public float for the company's securities of $200,000, and (v) a minimum of
two market makers for the company's securities. Companies failing to meet
the minimum bid requirement continue to qualify if they have a minimum $1
million value of public market float and a minimum $2 million in
stockholders' equity.
As of the date of this Proxy Statement, the Company is in compliance
with all of the foregoing requirements. The Board of Directors has
determined that continued listing of the Company's Common Stock on the
Nasdaq SmallCap Market is in the best interests of the holders of the
Common Stock. If the Common Stock were to be disqualified for listing on
the Nasdaq SmallCap Market, the Common Stock would continue to be traded
only in the "pink sheets" maintained by the National Quotation Bureau,
Inc., which is generally considered to be a less efficient market than the
Nasdaq SmallCap Market. While not necessarily related to listing of the
Common Stock on the Nasdaq SmallCap Market, the price of the Company's
Common Stock and, the Board of Directors believes, the volume of trading in
the Common Stock have increased significantly since the Common Stock has
been listed on the Nasdaq SmallCap Market. In addition, much more stringent
initial requirements would have to be met in the future to relist the
Common Stock on the Nasdaq SmallCap Market.
To prevent the Common Stock from being delisted from the Nasdaq
SmallCap Market, the Board of Directors has determined to ask that the
Company's stockholders approve a proposal that would authorize the Board of
Directors to cause to be filed an amendment to the Articles of
Incorporation to effect a reverse 1-for-4 stock split ("Reverse Stock
Split") without further stockholder approval at any time prior to the
Company's next annual meeting if:
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<PAGE>
(1) the closing bid price for the shares of Common Stock, as reported
on the Nasdaq SmallCap Market, falls below $1.00 per share for at
least one trading day; and
(2) the Board of Directors determines that filing such amendment to
the Articles of Incorporation would be in the best interests of
the stockholders of the Company.
The complete proposal and amendment to the Articles of Incorpora tion are
set forth in Appendix A to this Proxy Statement.
In the Board of Directors' view, the proposal will greatly simplify
the process necessary to effect a reverse split and decrease the chances
that the Nasdaq SmallCap Market would delist the Common Stock due to a
decline in the bid price of the shares of Common Stock below $1.00 per
share, assuming the Company also did not meet the higher requirements for
public market float and stockholders' equity for companies with a stock bid
price below $1.00 per share. The alternative to the proposal authorizing
the Board of Directors to cause to be filed the amendment to the Articles
of Incorporation would be to prepare and distribute proxies to approve such
an amendment to effect a reverse split of the Common Stock after the price
per share of Common Stock has fallen below the minimum price. The Board of
Directors believes that the Nasdaq SmallCap Market would be unlikely to
delist the Common Stock if it were clear that a reverse split could be
effected to bring the price per share of Common Stock to above the required
minimum. The proposal allows the Company to effect the reverse split
without the time delay, expense and uncertainty of calling a special
shareholders meeting to approve a reverse split. In addition, the magnitude
of a 1-for-4 reverse split would help to minimize the chances that an
additional reverse split would subsequently be necessary to maintain
listing on the Nasdaq SmallCap Market due to further declines in the market
price of the Company's Common Stock.
The Board of Directors recognizes that reverse stock splits are
commonly believed to result in a decrease in the aggregate market value of
an issuer's common stock. The Board of Directors believes, however, that
this possible negative impact is outweighed by what it perceives to be a
greater negative impact upon aggregate market valuation of delisting the
Common Stock from the Nasdaq SmallCap Market. A vote for the proposal will
include authorization of the Company's Board of Directors not to file the
amendment to effect the Reverse Stock Split in the event the Board of
Directors determines that filing the amendment would not be in the best
interests of the Company's stockholders. Factors leading to such a
determination could include, without limitation, the Company's failure to
meet other applicable requirements for continued listing on the Nasdaq
SmallCap Market or the Company's
14
<PAGE>
ability to meet alternative listing requirements of the Nasdaq SmallCap
Market without effecting the Reverse Stock Split.
Certain Effects of a Reverse Stock Split.
- -----------------------------------------
The Company is currently authorized to issue 10,000,000 shares of
Common Stock, of which 4,324,539 were outstanding at the close of business
on March 31, 1996. If a reverse 1-for-4 stock split is effected, the number
of authorized shares would remain the same, but the number of shares
outstanding would be decreased to approximately 1,101,635 shares. With the
exception of the number of outstanding shares, the rights and preferences
of the shares of Common Stock of the Company before and after the Reverse
Stock Split will remain the same. If the Reverse Stock Split is effected,
it is not anticipated that the financial condition of the Company, the
percentage ownership of management, the number of stockholders of the
Company, or any other aspect of the Company's business would materially
change as a result of the Reverse Stock Split.
The result of any Reverse Stock Split effected due to the proposed
amendment would be that stockholders of the Company who own four or more
shares of Common Stock will receive one share of new Common Stock for each
four shares of Common Stock held at the time of the Reverse Stock Split,
and one additional share in lieu of the issuance of fractional shares of
new Common Stock. Stockholders of the Company who own fewer than four
shares of Common Stock on the date the Reverse Stock Split is effected will
be entitled to receive one Share of new Common Stock in lieu of receiving
fractional shares resulting from the Reverse Stock Split.
Federal Income Tax Consequences.
- -------------------------------
THE FOLLOWING DISCUSSION SUMMARIZING CERTAIN FEDERAL INCOME TAX AND
OREGON STATE TAX CONSEQUENCES IS BASED ON CURRENT LAW AND IS INCLUDED FOR
GENERAL INFORMATION ONLY. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX EFFECTS OF THE
REVERSE STOCK SPLIT IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES.
The receipt of New Common Stock solely in exchange for Common Stock
will not result in recognition of gain or loss to the stockholder. The
adjusted tax basis of the stockholder's New Common Stock will be the same
as the stockholder's adjusted tax basis in the exchanged Common Stock. The
holding period of New Common Stock received solely in exchange for Common
Stock will include the stockholder's holding period in the exchanged Common
Stock. No gain or loss will be recognized by the Company upon the Reverse
Stock Split.
15
<PAGE>
Exchange of Certificates in the Event of a Reverse Stock Split
- --------------------------------------------------------------
If the proposal is approved by the stockholders, the conditions for
authorizing the Board of Directors to effect a Reverse Stock Split are met
and the Board of Directors determines that a Reverse Stock Split is
advisable, the Company will file an amendment to its Articles of
Incorporation with the Oregon Secretary of State. The Reverse Stock Split
would become effective on the date of that filing (the "Effective Date").
The Company intends to act as its own exchange agent in effecting the
exchange of certificates in the event of a Reverse Stock Split.
As soon as practicable after the Effective Date, stockholders will be
notified and requested to surrender their certificates representing their
shares of Common Stock to the Company in exchange for certificates
representing shares of new Common Stock. Commencing with the Effective
Date, each certificate representing shares of Common Stock will be deemed,
for all corporate purposes, to evidence ownership of shares of new Common
Stock. If a stockholder owns fewer than 4 shares of Common Stock or holds a
number of shares not evenly divisible by 4, that shareholder will receive
an additional share of new Common Stock in lieu of receiving fractional
shares of new Common Stock.
For the purpose of determining ownership of Common Stock at the
Effective Date, shares will be considered to be held by the person in whose
name those shares are registered on the stock records of the Company,
regardless of the beneficial ownership of those shares. For example, if
certain shares are registered in the name of a husband, and certain other
shares are registered in the name of the husband and his wife, those two
amounts of shares will be treated separately and as held by two different
stockholders for the purpose of determining ownership of Common Stock at
the Effective Date.
No service charges will be payable by stockholders in connection with
the exchange of certificates, all expenses of which will be borne by the
Company.
Required Stockholder Approval.
------------------------------
If a quorum is present, the proposal to authorize the Board of
Directors to effect a Reverse Stock Split upon the occurrence of certain
conditions will be approved if the votes cast for the proposal exceed the
votes cast against the proposal. Abstentions and broker non-votes are
counted for purposes of determining whether a quorum exists at the Annual
Meeting but are not counted and have no effect on the determination of
whether the votes cast for the proposal exceed the votes cast against the
proposal.
A vote for the proposal will include authorization of the Company's
Board of Directors not to effect the Reverse Stock Split
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if the Board of Directors determines that the Reverse Stock Split will not
be in the best interests of the stockholders.
The enclosed proxy will be voted with respect to the proposal in
accordance with the instructions specified in the space provided on the
proxy form. If no instructions are given, proxies will be voted FOR
approval of the proposal. The Board of Directors recommends a vote FOR the
proposal.
III. OTHER MATTERS
At the date of this Proxy Statement, the Company has no knowledge of
any business other than that described above that will be presented at the
Annual Meeting. If any other business comes before the Annual Meeting, it
is intended that the persons named in the enclosed proxy will have
discretionary authority to vote the shares that they represent.
The Board of Directors has selected Grant Thornton as the Company's
independent auditors for 1996. Representatives of Grant Thornton will be
present at the annual meeting, will have the opportunity to make a
statement if they desire and will be available to respond to appropriate
questions.
Any stockholder who wishes to submit a proposal for inclusion in the
proxy materials to be distributed by the Company in connection with its
Annual Meeting of Stockholders to be held in 1997 must do so not later than
January 11, 1997. To be eligible for inclusion in the 1996 proxy materials
of the Company, proposals must conform to the requirements set forth in
Regulation 14A under the Securities Exchange Act of 1934.
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UPON THE RECEIPT OF A WRITTEN REQUEST FROM ANY STOCKHOLDER, THE
COMPANY WILL MAIL, AT NO CHARGE TO THE STOCKHOLDER, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 13A-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934, FOR THE
COMPANY'S MOST RECENT FISCAL YEAR. WRITTEN REQUESTS FOR SUCH REPORT SHOULD
BE DIRECTED TO:
JACQUELINE M. PAULSON, SECRETARY
PAULSON CAPITAL CORP.
811 S.W. FRONT AVENUE, SUITE 200
PORTLAND, OREGON 97204
You are urged to sign and return your proxy promptly in the enclosed
return envelope to make certain your shares will be voted at the Annual
Meeting.
By Order of the Board of Directors
Jacqueline M. Paulson
Secretary
Portland, Oregon
May 10, 1996
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APPENDIX A
PROPOSAL TO AUTHORIZE THE COMPANY'S BOARD OF DIRECTORS
TO FILE AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
TO EFFECT A 1-FOR-4 REVERSE SPLIT
OF THE COMPANY'S COMMON STOCK
RESOLVED, that the Board of Directors is authorized to file an
amendment to the Company's Articles of Incorporation following this
proposal to effect a reverse 1-for-4 stock split without further
stockholder approval at any time if:
(1) the closing bid price for the shares of Common Stock, as reported
on the Nasdaq SmallCap Market, falls below $1.00 per share for at
least one trading day; and
(2) the Board of Directors determines that filing such amendment to
the Articles of Incorporation would be in the best interests of
the stockholders of the Company.
This authorization will expire upon the occurrence of the Company's next
annual meeting.
AMENDMENT TO ARTICLE III OF THE
COMPANY'S ARTICLES OF INCORPORATION:
1. (a) The aggregate number of shares which the corporation shall have
authority to issue is ten million five hundred thousand (10,500,000)
shares, divided into ten million (10,000,000) shares of Common Stock,
without par value, and 500,000 shares of Preferred Stock, without par
value.
(b) Upon the filing of this amendment with the office of the Secretary
of State of the State of Oregon, each share of common stock, without par
value, of the corporation issued and outstanding at such time shall, by
virtue of this amendment to the corporation's articles of incorporation, be
changed into one-fourth (1/4) of one share of fully paid and nonassessable
common stock of the corporation.
(c) In lieu of the issuance of any fractional shares that would
otherwise result from the reverse stock split effected by paragraph (b) of
this Section 1 of Article III, the corporation shall issue to any
stockholder that would otherwise receive fractional shares one additional
share.
(d) Following the effectiveness of this amendment, certificates for
the shares of common stock to be outstanding after
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the reverse stock split shall be issued pursuant to procedures adopted by
the corporation's board of directors and communicated to those who are to
receive new certificates.
(e) Following issuance of certificates pursuant to paragraph (d)
hereof, the board of directors of the corporation may restate the
corporation's articles of incorporation pursuant to ORS 60.451 to eliminate
paragraphs (b), (c), (d) and (e) hereof without approval of the
stockholders of the corporation.
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PRELIMINARY PROXY MATERIALS
PAULSON CAPITAL CORP. -- REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF PAULSON CAPITAL CORP.
THE UNDERSIGNED stockholder(s) of PAULSON CAPITAL CORP. (the
"Company"), 811 S.W. Front Avenue, Portland, Oregon 97204, hereby appoints
Chester L.F. Paulson and Jacqueline M. Paulson as their designees and each
of them, with full powers of substitution, proxies of the undersigned to
cast all votes which undersigned would be entitled to vote at the Annual
Meeting of Stockholders of the Company, to be held June 13, 1996 at 3:00
p.m. (PDT) in the third-floor conference room at the Company's offices, and
all adjournments thereof, with all powers undersigned would possess if
personally present, and particularly (without limiting the generality of
the foregoing) to vote and act.
Item 1. Election of Directors. List of Nominees: Chester L.F. Paulson,
Jacqueline M. Paulson,
Kenneth T. LaMear.
[ ] For all nominees [ ] Withhold all nominees
[ ] Withhold nominees indicated: _______________________
The Board of Directors recommends a vote FOR all nominees.
Item 2. Proposal to Authorize Amendment to Articles of Incorporation
Effecting 1-for-4 Reverse Stock Split Upon Occurrence of Certain
Conditions.
[ ] For Proposal [ ] Against Proposal [ ] Abstain
The Board of Directors recommends a vote FOR approval of the Proposal.
The Company knows of no other business to come before the meeting. THE
PROXY HOLDERS INTEND TO VOTE FOR THE DIRECTORS AND FOR APPROVAL OF THE
PROPOSAL TO AUTHORIZE AMENDMENT TO ARTICLES OF INCORPORATION EFFECTING
1-FOR-4 REVERSE STOCK SPLIT UPON OCCURRENCE OF CERTAIN CONDITIONS, UNLESS
THIS PROXY IS MARKED TO THE CONTRARY. If any other business comes before
the meeting, this Proxy will be voted in accordance with the best judgment
of the Proxy Holders. This Proxy will be used only at the June 13, 1996
Annual Meeting or any adjournment(s) thereof.
Undersigned hereby acknowledge(s) receipt of the accompanying Notice
of Annual Meeting and Proxy Statement dated May 10, 1996 prior to signing
this Proxy. Please sign, date and return this proxy in the envelope
provided. PLEASE SIGN EXACTLY AS SHOWN ON THIS PROXY. ONLY ONE SIGNATURE IS
NEEDED FOR JOINT OWNERSHIP.
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