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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] 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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PAULSON CAPITAL CORP.
May 12, 1997
Dear Stockholder:
The 1997 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 12,
1997 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
1
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD June 12, 1997
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 12, 1997 at 3:00 p.m. (PDT) for the following purposes:
1. To elect three Directors whose term of office will expire in 1998.
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 12,
1997 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 12, 1997
2
PAULSON CAPITAL CORP.
811 S.W. Front Avenue
Portland, Oregon 97204
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS JUNE 12, 1997
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 1997 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 12, 1997 at 3:00 p.m. (PDT) and any adjournments thereof. These
proxy materials are being mailed on or about May 12, 1997 to holders of record
on May 12, 1997 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.
3
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 12, 1997 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 18, 1997, 3,977,115 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.
4
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 18, 1997, 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:
Name and Address of Relationship to Shares Beneficially Percent of Class
Beneficial Owner Company Owned
Chester L.F. and President and Chairman of 1,576,035(2) 39%
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 68,058 2%
director of PIC
Charles P.A. and Amy 273,649 7%
Paulson, as joint tenants
1001 SW Fifth Ave.
Portland, OR 97204
All Directors and Executive 1,644,093 41%
Officers as a group (3
persons)
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(1) Address is 811 SW Front Avenue, Portland, OR 97204
(2) Includes 14,285 shares for Mr. Paulson and 34,285 shares for Ms. Paulson
that are subject to currently exercisable options.
5
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, 1996, 1995 and 1994 of those persons who
were, at December 31, 1996, the Chief Executive Officer of the Company and the
only other executive officers of the Company whose total annual compensation
exceeded $100,000 in 1996 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
------ ------------ ---------------------
Name and Principal Securities Underlying $ All Other
Position Year $ Salary(1) $ Bonus(1) Options (# Shares) Compensation (3)
Chester L.F. Paulson, 1996 626,672 200,000 -- 1,118,095
President 1995 269,430 75,000 14,285 903,968
1994 224,830 0 1,500 1,500
Kenneth T. LaMear, CEO of PIC 1996 146,004 125,000 -- 25,121
1995 128,061 75,000 14,285 8,644
1994 99,174 0 1,500 1,500
Jacqueline M. Paulson, 1996 195,497 75,000 -- 7,270
Secretary-Treasurer 1995 21,599 75,000 14,285 1,652
1994 36,697 0 1,500 1,159
(footnotes on next page)
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(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 1996, 1995 and 1994, 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 1996 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 1995, the bonus pool
calculation was $587,296, but the Board of Directors reduced actual bonus
payments to officers and directors to $525,000. 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.
(3) Amounts shown for 1996 and 1995 include contributions of $1,500 for
each of Messrs. Paulson and LaMear and Ms. Paulson relating to PIC's match of
employee contributions pursuant to PIC's 401(k) retirement plan. Amounts shown
for 1994 include contributions of $1,500 for each of Messrs. Paulson and LaMear
and $1,159 for Ms. Paulson relating to 401(k) plan matching. Amounts shown for
1996 include contributions of $18,497, $23,621 and $5,770, respectively, for Mr.
Paulson, Mr. LaMear and Ms. Paulson to PIC's tax qualified profit sharing plan.
Amounts shown for 1995 include contributions of $8,215, $7,144 and $152,
respectively, for Mr. Paulson, Mr. LaMear and Ms. Paulson 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 1996 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 1996 and 1995 also include
$1,161,098 and $894,253, 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.
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STOCK OPTION GRANTS IN LAST FISCAL YEAR
There were no stock options granted to the Named Executive Officers in
1996.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table indicates for each Named Executive Officer (i) stock
options exercised during the year ended December 31, 1996, including the value
realized on the date of exercise, (ii) the number of shares subject to
exercisable (vested) and unexercisable (unvested) stock options as of December
31, 1996 and (iii) the value of "in-the-money" options, which represents the
positive difference between the exercise price of existing stock options and the
year-end price of the Common Stock.
Number of Shares Subject to $ Value of Unexercised
Unexercised Options at In-the-Money Options at
Fiscal Year-End Fiscal Year-End(2)
Number of Shares --------------------------- ---------------------------
Name Acquired on Exercise $ Value Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- -------------------- -------------------- ----------- ------------- ----------- -------------
Chester L.F. Paulson 0 0 14,285 0 26,338 0
Kenneth T. LaMear 14,285 26,338 0 0 0 0
Jacqueline M. Paulson 0 0 34,285 0 58,838 0
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(1) The amount set forth representing the value realized represents the
difference between the last sale price of $2.75 per share of Common Stock on
August 28, 1996, the date of exercise, and $.90625, the exercise price of the
options exercised. Options to purchase 24,285 shares of the Company's Common
Stock were exercised by employees of PIC other than Mr. LaMear during 1996.
(2) 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, 1996 based
on the last sale price of $2.75 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.
8
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,
two officers of PIC and one non-officer director of PIC were issued a total of
3,432 shares in 1996 (1,650 shares at $1.8125, 1,260 shares at $2.375 and 522
shares at $2.875). Messrs. Paulson and LaMear and Ms. Paulson each received 659
shares and directors and executive officers as a group received 3,432 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.
Principal
Position(s) With Occupations(s) During
Name Age Company Past Five Years Director Since
Chester L.F. Paulson 61 President and Director of Corporate 1970
Director Finance of PIC
(President of PIC
until 7/92)
Jacqueline M. Paulson 58 Secretary-Treasurer Secretary-Treasurer 1976
and Director of PIC (Chief
Executive Officer of
PIC from 7/92 to 8/93)
Kenneth T. LaMear 62 Director Chief Executive 1994
Officer of PIC
(Senior Vice
President of PIC
prior to 8/93
9
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 three
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.
Mr. LaMear failed to file on a timely basis one report required by Section
16(a) of the Securities Exchange Act of 1934 with respect to the exercise of
options for 14,285 shares of the Company's common stock in August 1996.
Board and Committee Meetings
The Board of Directors held three meetings during 1996. 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 1996. 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.
10
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 1992, 1993, 1994, 1995 and 1996 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 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.
These changes will become effective upon approval by the Securities and Exchange
Commission, which is expected within the next six months. Under the new
standards, the public float and capital and surplus alternative test to the
$1.00 minimum bid price requirement will be eliminated. Accordingly, after the
new standards become 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.
11
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:
(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 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, if the decline in bid price occurs before the
effectiveness of the new Nasdaq standards, the Company's ability to meet
12
alternative listing requirements of the Nasdaq SmallCap Market without effecting
the Reverse Stock Split.
Certain Effects of a Reverse Stock Split.
- -----------------------------------------
The Company is authorized to issue 10,000,000 shares of Common Stock, of
which 3,977,115 were outstanding at the close of business on March 18, 1997. 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 994,279 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
13
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 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
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 1997. 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 1998 must do so not later than January 12, 1998.
To be eligible for inclusion in the 1998 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 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 12, 1997
15
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 a 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.
(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.
16
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 12, 1997 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 12, 1997 Annual Meeting or any adjournment(s)
thereof.
Undersigned hereby acknowledge(s) receipt of the accompanying Notice of
Annual Meeting and Proxy Statement dated May 12, 1997 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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Date Signature Signature