SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
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.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the 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)(1) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: Set forth the amount on which
the filing fee is calculated and state how it was determined.
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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
[ ] 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 14, 1999
Dear Stockholder:
The 1999 Annual Meeting of Stockholders of Paulson Capital Corp. (the
"Company") will be held at the Company's headquarters, 811 SW Naito Parkway,
Portland, Oregon 97204 in the third-floor conference room on Tuesday, June 15,
1999 at 2:00 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 15, 1999
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 SW
Naito Parkway, Portland, Oregon in the third-floor conference room on Tuesday,
June 15, 1999 at 2:00 p.m. (PDT) for the following purposes:
1. To elect seven Directors whose term of office will expire in 2000.
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 14,
1999 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 14, 1999
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<PAGE>
PRELIMINARY PROXY MATERIALS
PAULSON CAPITAL CORP.
811 SW Naito Parkway
Portland, Oregon 97204
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
JUNE 15, 1999
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 1999 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 SW Naito Parkway, Portland, Oregon on
Tuesday, June 15, 1999 at 2:00 p.m. (PDT) and any adjournments thereof. These
proxy materials are being mailed on or about May 14, 1999 to holders of record
on May 14, 1999 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.
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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<PAGE>
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 14, 1999 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, 1999, 3,746,852 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, 1999, 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 of Relationship Shares Beneficially Percent of
Beneficial Owner to Company Owned Class
------------------- ------------ ------------------- ----------
<S> <C> <C> <C>
Chester L.F. and President and Chairman of 1,580,521 42.2%
Jacqueline M. Paulson, the Board of Directors of
as joint tenants (1) 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 and 54,951 1.5%
director of PIC
Glen Davis (1) Officer and director of PIC 3,632 0.1%
Shannon P. Pratt Director 416 -
7412 SW Beaverton-
Hillsdale Highway
Portland, OR 97225
Paul Shoen Director 15,416 0.4%
PO Box 524
Glenbrook, NV 89413
John Westergaard Director 416 -
560 West 43rd Street
New York, NY 10036
Steven Kleemann Shareholder 355,000 9.5
526 Via Sinuosa
Santa Barbara, CA 93110
All Directors and Executive 1,656,352 44.2%
Officers as a group (7 persons)
(1) Address is 811 SW Naito Parkway, Suite 200, Portland, OR 97204
</TABLE>
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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, 1998, 1997 and 1996 of those persons who
were, at December 31, 1998, the Chief Executive Officer of the Company and the
only other executive officers of the Company whose total annual compensation
exceeded $100,000 in 1998 (the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Long Term All Other
Compensation Compensation Compensation
------------------------------------- --------------------- ------------
Name and Principal Securities Underlying
Position Year $ Salary (1) $ Bonus (2) Options (# Shares) $ (3)
<S> <C> <C> <C> <C> <C>
Chester L.F. Paulson, 1998 226,011 1,667 -- 1,500
President 1997 562,234 200,000 -- 24 956
1996 551,672 200,000 -- 1,118,095
Kenneth T. LaMear, Senior 1998 71,064 1,667 -- 1,500
Vice President of PIC 1997 107 657 115,000 -- 24,956
1996 71,004 120,000 -- 25,121
Glen Davis, President of PIC 1998 239,318 1,667 -- 1,500
1997 298,465 75,000 -- 24,956
1996 239,258 75,000 10,000 25,767
Jacqueline M. Paulson, 1998 36,472 1,667 -- 1,500
Secretary-Treasurer 1997 131,849 75,000 -- 24,956
1996 120,497 75,000 -- 7,270
(footnotes on next page)
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<PAGE>
(1) Neither Mr. Paulson nor Mrs. Paulson is 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 Mrs. Paulson consists of retail commissions
from Mrs. Paulson's service as a registered representative of PIC. 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 $16,073,
$20,400 and $20,400 in 1998, 1997 and 1996, respectively. The amounts included
in "Salary" for Mr. Davis are retail commissions from Mr. Davis's service as a
registered representative of PIC as well as a salary of $36,000 per year. 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 1998 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. The Board has authorized
15 percent of PIC's pretax income up to $1 million and 10 percent of pretax
income thereafter to be placed into the bonus pool. For 1996, the bonus pool
calculation was $1,116,466, but the Board of Directors reduced actual bonus
payments to officers and directors to $760,000. For 1997, the bonus pool
calculation was $869,738, but the Board of Directors reduced actual bonus
payments to officers and directors to $820,000. For 1998, the bonus pool
calculation was $20,000.
(3) Amounts shown for 1998, 1997 and 1996 include contributions of $1,500
for each of Messrs. Paulson, LaMear and Davis and Ms. Paulson relating to PIC's
match of employee contributions pursuant to PIC's 401(k) retirement plan. There
was no profit sharing contribution for 1998. Amounts shown for 1997 include
contributions of $23,456 for each of Mr. Paulson, Mr. LaMear, Mr. Davis and Ms.
Paulson to PIC's tax qualified profit sharing plan. Amounts shown for 1996
include contributions of $18,497, $23,621, $24,267 and $5,770, respectively, for
Mr. Paulson, Mr. LaMear, Mr. Davis and Ms. Paulson to the profit sharing plan.
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 1998 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 amounts shown for Mr. Paulson in 1998, 1997 and 1996 also include $0,
$0 and $1,161,098, respectively, representing the net gain received from the
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.
</TABLE>
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<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
There were no stock options granted to the Named Executive Officers in
1998.
OPTION EXERCISES AND YEAR-END OPTION VALUES
There were no stock options exercised during 1998 or outstanding at
December 31, 1998 for any of the Named Executive Officers.
The Company has no employment agreements with any of its executive
officers.
Compensation of Directors. 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. This arrangement
also covers participants at meetings of the board of directors of any subsidiary
of the Company. Six members of the Board of Directors, four officers of PIC and
one non-officer director of PIC were issued a total of 4,283 shares in 1998
(1,050 shares at $4.75, 1,160 shares at $4.31, 903 shares at $3.87 and 1,170
shares at $2.56). Messrs. Paulson and LaMear and Ms. Paulson each received 545
shares, Mr. Davis received 350 shares and directors and executive officers as a
group received 3,233 shares.
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<PAGE>
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>
Name, Age, Principal Occupations and Public
Directorships During Past Five Years Director Since
<S> <C>
Chester L.F. Paulson, Age 63 1970
President of the Company; Director of Corporate Finance of PIC
Jacqueline M. Paulson, Age 60 1976
Secretary-Treasurer of the Company; Secretary-Treasurer
of PIC
Kenneth T. LaMear, Age 64 1994
Senior Vice President of PIC since 2/98
(Chief Executive Officer of PIC from 8/93 to 2/98)
Glen Davis, Age 43 --
President of PIC since 2/98 (Senior Vice President of PIC
prior to 2/98)
Shannon P. Pratt, Age 65 1998
Managing Director, Founder - Willamette Management
Associates, a business valuation firm
Paul Shoen, Age 42 1998
Chairman of the Board of Directors and Chief Executive
Officer of Panetechnicon Aviation, an operator and lessor
of aircraft; private investor; Director - AMERCO, the
parent company of U-Haul Trucking Rental, and Telepartner
A/S, a long distance telephone provider
John Westergaard, Age 67 1998
Publisher/Editor of Westergaard Online Systems, Inc.,
an Internet publisher of financial "webzines"
</TABLE>
9
<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.
If a quorum of shareholders is present at the annual meeting, the seven
nominees for election as directors who receive the greatest number of votes cast
at the meeting will be elected directors.
Chester L.F. Paulson and Jacqueline M. Paulson are husband and wife.
Board and Committee Meetings
The Board of Directors held three meetings during 1998. 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, which consisted of Ms. Paulson, Dr.
Pratt and Mr. Shoen. The committee met three times during 1998. 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.
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<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 if 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 annual meetings each year from 1992 through 1998.
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 capital and surplus.
On January 28, 1997, Nasdaq and the NASD approved changes to strengthen
both the quantitative and qualitative standards for issuers listing on Nasdaq,
which were subsequently approved by the Securities and Exchange Commission.
Under the new standards, the public float and capital and surplus alternative
test to the $1.00 minimum bid price requirement were eliminated. Accordingly,
after the new standards became effective, if the minimum bid price of the Common
Stock falls below $1.00, the Common Stock may be delisted from the Nasdaq
SmallCap Market.
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 nonetheless be eligible for quotation on the OTC Bulletin Board and
for trading in the "pink sheets" maintained by the National Quotation Bureau,
Inc., each of 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 Incorporation 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. 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 many some people believe reverse
stock splits 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, if the decline in bid price occurs before the
effectiveness of the new Nasdaq standards, the Company's ability to meet
alternative listing requirements of the Nasdaq SmallCap Market without effecting
the Reverse Stock Split.
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<PAGE>
Certain Effects of a Reverse Stock Split.
- -----------------------------------------
The Company is authorized to issue 10,000,000 shares of Common Stock, of
which 3,746,852 were outstanding at the close of business on March 31, 1999. 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 936,713 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.
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.
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<PAGE>
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 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.
14
<PAGE>
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.
Discretionary Authority
The enclosed proxy, however, gives discretionary authority to the proxy
holders to vote in accordance with their judgment if any other matters are
presented.
For this year's annual meeting of shareholders, if notice of a shareholder
proposal to be raised at the annual meeting of shareholders was received at the
principal executive offices of the Company after date 45 days before the
anniversary of the date on which the Company first mailed its proxy materials
for the prior year annual meeting, proxy voting on that proposal when and if
raised at the annual meeting will be subject to the discretionary voting
authority of the designated proxy holders. For the 2000 annual meeting of
shareholders, if notice of a shareholder proposal to be raised at the meeting is
received at the principal executive offices of the Company after March 30, 2000,
proxy voting on that proposal when and if raised at the annual meeting will be
subject to the discretionary voting authority of the designated proxy holders.
The Board of Directors has selected Grant Thornton as the Company's
independent auditors for 1999. 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 2000 must do so not later than January 15, 2000.
To be eligible for inclusion in the 2000 proxy materials of the Company,
proposals must conform to the requirements set forth in Regulation 14A under the
Securities Exchange Act of 1934.
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 SW Naito Parkway, Suite 200
Portland, Oregon 97204
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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 14, 1999
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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 share one additional share.
(d) Following the effectiveness of this amendment, certificates for the
shares of common stock to be outstanding after 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.
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(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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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 SW Naito Parkway, 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 15, 1999 at 2:00 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, Glen Davis, Kenneth T. LaMear, Shannon P. Pratt, Paul
Shoen, John Westergaard
[ ] 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 15, 1999 Annual Meeting or any adjournment(s)
thereof.
Undersigned hereby acknowledge(s) receipt of the accompanying Notice of
Annual Meeting and Proxy Statement dated May 14, 1999 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.
_________________ ____________________________ ____________________________
Date Signature Signature
