<PAGE>
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
HOUSE OF FABRICS, INC.
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
HOUSE OF FABRICS, INC.
13400 RIVERSIDE DRIVE
LOGO SHERMAN OAKS, CALIFORNIA 91423-2598
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 28, 1995
----------------
TO THE STOCKHOLDERS OF HOUSE OF FABRICS, INC.
The Annual Meeting of Stockholders of HOUSE OF FABRICS, INC. (the "Company")
will be held on June 28, 1995 at 10:30 A.M., Pacific Daylight Time, at the
Sportsmen's Lodge, Starlight Room,12833 Ventura Boulevard, Studio City,
California for the purpose of:
1. Electing two directors for three-year terms ending in 1998.
2. Ratifying the appointment of Deloitte & Touche as the Company's
independent auditors.
3. Transacting such other business as may properly come before the
meeting or any adjournments thereof.
Pursuant to the By-Laws, the Board of Directors has fixed the close of
business on May 1, 1995 as the time and date for the determination of
stockholders entitled to notice of, and to vote at, the meeting. Accordingly,
only stockholders of record on such date and at such time will be entitled to
vote at the meeting, notwithstanding the transfer of any stock on the books of
the Company thereafter.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE REQUESTED
TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE.
A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
MARVIN S. MALTZMAN
Secretary
Sherman Oaks, California
May 16, 1995.
<PAGE>
HOUSE OF FABRICS, INC.
13400 RIVERSIDE DRIVE
SHERMAN OAKS, CALIFORNIA 91423-2598
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 28, 1995
----------------
SOLICITATION OF PROXIES
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company for use only at the Annual Meeting of Stockholders to
be held on June 28, 1995 and at any and all adjournments thereof. The shares
represented by the proxies received will be voted at the meeting in accordance
with the directions contained in the proxies. Any stockholder giving a proxy
may revoke it at any time prior to its use by filing with the Secretary of the
Company a written revocation of the proxy or another proxy bearing a later
date, or if, personally present at the meeting, by electing to vote in person.
The costs of solicitation of proxies will be borne by the Company. Directors,
officers and other employees of the Company may, without additional
compensation (except for customary overtime pay, when applicable), solicit
proxies by mail, in person or by telecommunication. The Company will reimburse
brokers, fiduciaries, custodians and other nominees for reasonable out-of-
pocket expenses incurred in sending this Proxy Statement and other proxy
materials to, and obtaining instructions relating to such materials from,
beneficial owners of its stock. If the Board of Directors determines it is
advisable it may employ the services of individuals or companies for
solicitation of proxies.
VOTING RIGHTS
All voting rights are vested exclusively in the holders of the common stock
of the Company. Stockholders of record at the close of business on May 1, 1995
are eligible to vote on all matters presented to the meeting and are entitled
to one vote (except as set forth under "Election of Directors") for each share
of stock held of record on the record date. As of May 1, 1995 there were
13,697,107 shares of common stock outstanding. A majority of the outstanding
shares constitutes a quorum for the transaction of business at the meeting.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the number of common shares beneficially owned
on January 31, 1995 by (i) owners of more than five percent of outstanding
common stock, based solely on schedules 13G filed by such beneficial owners
with the Securities and Exchange Commission; (ii) each Director or Nominee for
Director, (iii) each of the Executive Officers named in the Summary
Compensation Table at page 5; and(iv) all Directors, Nominees and Executive
Officers as a group. All individuals listed in the table have sole voting and
investment power over the shares reported as owned, except as otherwise stated.
<TABLE>
<CAPTION>
SHARES OPTION
BENEFICIALLY SHARES PERCENTAGE
OWNED, EXERCISABLE OF
EXCLUDING WITHIN OUTSTANDING
NAME OPTIONS 60 DAYS SHARES
---- ------------ ----------- -----------
<S> <C> <C> <C>
FMR Corp. ............................... 1,000,000 -0- 7.3%
82 Devonshire Street
Boston, Massachusetts 02109
Donald R. Ardemagni...................... 6,000 71,666 (1)
Gary L. Larkins.......................... 25,340 -0- (1)
Marvin S. Maltzman....................... 3,250 -0- (1)
Doyle W. Parker.......................... 4,787 -0- (1)
William W. Pennell....................... -0- -0- (1)
Phillip G. Samovar....................... 10,000 2,500 (1)
Barney Sofro............................. 766,308(2) -0- 5.6%
All Directors, Nominees and Executive Of-
ficers as a Group (17).................. 824,247 78,166 6.6%
</TABLE>
- --------
(1) Less than 1%.
(2) Includes 28,441 shares held of record by Barney Sofro's wife, Victoria Ann
Sofro, and 177,829 shares held by Barney Sofro as custodian for his three
children under the California Uniform Gifts to Minors Act.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and By-Laws provide that there are
ten (10) authorized directors divided into three classes. Two directors are to
be elected at this meeting to serve for a three-year term expiring at the
Company's annual meeting in 1998 or until a successor is duly elected and
qualified. Proxies may not be voted for more than the two nominees. There
currently are five vacancies on the Board of Directors. The Board of Directors
does not intend to fill any vacancies at this time but may consider filling
vacancies in the future. The election will be conducted under cumulative voting
procedures. Accordingly, each stockholder will be entitled to cast a vote for
each share of stock entitled to vote as of the record date, and such vote may
be cast for a single nominee or, distributed among any or all of the nominees
as such stockholder chooses. All proxies will be voted for the election of the
nominees listed below in the discretion of the proxy if no direction to the
contrary is given. In the event a nominee is unable or declines to serve, the
proxies may be voted for the election of a substitute nominee. The Company
knows of no reason to anticipate that any nominee will decline or refuse to
serve.
2
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" MARVIN S.
MALTZMAN AND BARNEY SOFRO AS DIRECTORS TO HOLD OFFICE UNTIL THE 1998 ANNUAL
MEETING OF STOCKHOLDERS AND UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS
SPECIFY IN THEIR PROXY A CONTRARY CHOICE.
INFORMATION CONCERNING NOMINEES AND DIRECTORS
NOMINEES FOR ELECTION AT THE 1995 ANNUAL MEETING
CLASS I DIRECTORS WITH TERM EXPIRING IN 1998
Marvin S. Maltzman (58) has been the Senior Vice President--Administration,
Secretary and General Counsel since 1993. From 1982 to 1993 he was Vice
President, Secretary and General Counsel. He has been a Director since 1991.
Barney Sofro (53) has been the Chairman of the Board since 1986. He has been a
Director since 1970.
INCUMBENT DIRECTORS WHOSE TERMS EXPIRE SUBSEQUENT TO THE 1995 ANNUAL MEETING
CLASS II DIRECTORS WITH TERM EXPIRING IN 1996
Gary L. Larkins (52) has been the President and Chief Executive Officer since
1986. He has been a Director since 1978.
Phillip G. Samovar (52) is an attorney engaged in the private practice of law.
He has been a Director since 1992.
CLASS III DIRECTOR WITH TERM EXPIRING IN 1997
William W. Pennell (65) is retired from The Seidler Companies (a regional
investment banking firm) as its Managing Director. He also serves on the Board
of Directors of Davis Wire Corp. & Dolco Packaging Corp. He has been a
Director since November 2, 1994.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended January 31, 1995, the Board of Directors held
fourteen meetings and acted by written consent on four occasions. All of the
directors attended at least 75% of the aggregate number of Board and Board
Committee meetings on which they served.
The Company has an Executive Committee currently composed of Barney Sofro,
Chair, and Gary L. Larkins. Between meetings of the Board of Directors, the
Executive Committee has all powers which may be delegated to it under Delaware
law. Actions taken by the Executive Committee are subsequently presented for
ratification at the next meeting of the full Board of Directors. The Executive
Committee acted five times in fiscal 1995 by written consent.
3
<PAGE>
The Company's Audit Committee is currently composed of William W. Pennell,
Chair, and Phillip G. Samovar. The primary function of the committee is to
recommend to the Board of Directors the firm of independent public accountants
to be selected as auditors for the year and to consult with the accountants
regarding the scope of their engagement, the audit report and management letter
issued upon the completion of their examination and the adequacy of the
Company's internal accounting controls. The committee also provides an
independent forum for open and candid discussions concerning the Company's
financial statements and related disclosures and the adoption and review of
accounting policies and procedures. While the committee is concerned with the
accuracy and completeness of the Company's financial statements and matters
relating thereto, the committee's role is not designed to provide stockholders
or others with any special assurances with regard thereto, nor involve the
review (in any sense of professional evaluation) of the quality of the
Company's independent audit. It is believed that the committee's activities
serve a useful function in providing ongoing oversight on behalf of the Board
of Directors, but they in no way alter the traditional roles and
responsibilities of the Company's management and independent public accountants
with respect to the accounting and control functions and the financial
statements presentation. The Audit Committee met three times in fiscal 1995.
The Company's Compensation Committee is currently composed of Phillip G.
Samovar, Chair, and William W. Pennell. The committee is primarily responsible
for the review and recommendation of officers' salaries, bonuses and other
forms of compensation and for the periodic review and evaluation of new and
existing forms of employee benefit programs. The members also serve as the
Stock Option Committee of the Compensation Committee and are responsible for
the administration of the Stock Option Plan and to make recommendations to the
Board of Directors regarding stock option awards. The Compensation Committee
and the Stock Option Committee met twice in fiscal 1995.
The Company does not have a Nominating Committee.
Directors who are not employees of the Company are compensated for their
services. Each such director received an annual fee of $7,800, plus $2,500 for
each committee chair held, and a meeting fee of $800 for each board or
committee meeting attended. Directors who are employees of the Company do not
receive any additional compensation for their services as a director. During
fiscal year ended January 31, 1995, Mr. Samovar received $14,833 for his
services as a member of the Company's real estate review and evaluation
committee.
4
<PAGE>
EXECUTIVE COMPENSATION
The information in the Summary Compensation Table sets forth the compensation
paid to the Chief Executive Officer and the four most highly compensated
executive officers at the end of the last completed fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------- -------------
FISCAL OTHER
YEAR ANNUAL SECURITIES
NAME AND PRINCIPAL ENDED COMPENSATION UNDERLYING
POSITION JANUARY 31 SALARY BONUS (3)(4)(5) STOCK OPTIONS
- ------------------ ---------- -------- ------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Gary L. Larkins 1995 $224,254 $18,600(1) $38,891 271,000
President and 1994 $229,525 $ -0- $70,009 -0-
Chief Executive Officer 1993 $230,004 $32,257(2) $62,210 -0-
Barney Sofro 1995 $136,504 -0- $23,127 187,850
Chairman of the Board 1994 $139,234 -0- $49,549 -0-
1993 $140,004 $32,257(2) $42,449 -0-
Donald R. Ardemagni(6) 1995 $128,593 -0- $19,551 -0-
Executive Vice Presi-
dent--Buying 1994 $125,248 $ -0- $42,469 3,500
1993 $125,508 $24,193(2) $37,537 -0-
Marvin S. Maltzman 1995 $114,124 $17,400(1) $14,990 73,523
Senior Vice President--
Administration, 1994 $113,261 $ -0- $24,415 -0-
Secretary and General
Counsel 1993 $113,496 $ 9,677(2) $21,717 -0-
Doyle W. Parker 1995 $113,130 $39,600(1) $ 4,360 85,000
Executive Vice Presi-
dent--Buying and 1994 $ 98,097 $20,000(2) -0- -0-
Merchandising 1993(7)
</TABLE>
- --------
(1) The Board of Directors adopted a Special Bonus Plan ("Plan") effective this
last fiscal year. The Plan is designed to help retain executive officers
and key employees ("Employees") of the Company during the period of the
Chapter 11 bankruptcy restructuring. This Plan is designed to offer
Employees the incentive and reward required to maintain their support,
enthusiasm and loyalty through the restructuring process. In the event new
employees are hired they may also be included in the Plan upon
recommendation of the President of the Company. The Plan provides for the
payment of the bonus in three stages. The first payment was made upon
adoption of the Plan with each participant receiving 20% of the total
amount designated. The second payment of 20% will be made upon the
Company's having secured approval from the Bankruptcy Court to present a
Plan of Reorganization for approval. The final payment, 60%, due under the
Plan shall be made upon confirmation of the Plan of Reorganization. All
amounts paid shall be deemed to be fully earned provided the Employee
remains in the employ of the Company for at least ninety (90) days
following the second payment date, and one-hundred and eighty (180) days
following the last payment date. The payments shall be deemed earned
prorata for each day worked by the Employee during the ninety (90) and one-
hundred and eighty (180) day periods.
(2) Bonuses are accrued during a fiscal year but paid in the next fiscal year.
(3) The aggregate value of the perquisites and other personal benefits received
by each named executive is not reflected because the amount was below the
reporting threshold.
5
<PAGE>
(4) The Company adopted a Qualified Profit Sharing Plan (the "Qualified Plan")
in 1970 which is designed to encourage long range savings, to meet
financial emergencies and retirement needs. The Qualified Plan covers full-
time employees twenty-one years of age who have been employed by the
Company for at least twelve months. An employee may contribute up to a
maximum of 16% of monthly earnings. The Company, subject to its
profitability, will match 1% for each year of employment up to a maximum of
6%. The Company also makes an excess contribution of 5.7% of the amount by
which each participant's annual compensation exceeds the maximum taxable
wage base of the Social Security Act. In 1990, the Company adopted a Non-
Qualified Profit Sharing Plan (the "Non Qualified Plan") for all highly
compensated officers and employees ("HCG") of the Company. The HCG is no
longer eligible to participate in the Qualified Plan. The Non-Qualified
Plan has the same basic terms and conditions as the Qualified Plan, except
that participation in the Non-Qualified Plan is limited to the HCG. The
Non-Qualified Plan is designed to offer the HCG the same benefits as
afforded under the Qualified Plan. The amounts in this column include: (a)
the Company's matching contributions to the Non-Qualified Plan as follows:
Gary L. Larkins--$22,480; Barney Sofro--$13,541; Donald R. Ardemagni--
$11,302; Marvin S. Maltzman--$8,665; and Doyle W. Parker--$2,520 and (b) an
amount for income tax reimbursement which results from Company
contributions made to each employee's account for the calendar year ended
January 31, 1995. The amounts paid were Gary L. Larkins--$16,413; Barney
Sofro-- $9,887; Donald R. Ardemagni--$8,252; Marvin S. Maltzman--$6,336;
and Doyle W. Parker, $1,840.
(5) Profit sharing matching contributions are earned in the prior year but paid
in the following year. Thus, there were no company matching contributions
earned for the fiscal year ended January 31, 1995.
(6) Mr. Ardemagni has been on a medical leave of absence since December 17,
1994.
(7) Mr. Parker was not employed by the Company during 1993 and resigned from
the Company on April 30, 1995.
6
<PAGE>
The following information is furnished for the fiscal year ended January 31,
1995 with respect to the Chief Executive Officer and the four most highly
compensated executive officers and a grant to a newly appointed director.
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
PERCENTAGE POTENTIAL REALIZABLE
NUMBER OF OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS GRANTED STOCK APPRECIATION
UNDERLYING TO EMPLOYEES EXERCISE FOR OPTION TERM(3)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
GRANTED(2) YEAR ($/SHARE) DATE 5%($) 10%($)
---------- --------------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gary L. Larkins......... 271,000 27.2% $2.00 09/27/03 882,861 1,405,808
Barney Sofro............ 187,850 18.8% $2.00 09/27/03 611,976 974,469
Donald R. Ardemagni..... 0 0.0% $0.00 0 0
Marvin S. Maltzman...... 73,525 7.4% $2.00 09/27/03 239,529 381,410
Doyle W. Parker......... 85,000 8.5% $2.00 09/27/03 276,912 440,936
William W. Pennell(4)... 2,500 100.0% $1.88 11/01/03 7,635 12,158
</TABLE>
- --------
(1) The option grants in the last fiscal year resulted from the cancellation
and reissuance of new options. The cancelled options are described in the
Option Repricing Schedule on page 8 of this Proxy.
(2) Options were granted for a term of ten years at 100% of fair market value
on the date of grant. The options vest over a three year period so that
one-third of the grant is vested at the end of year one, two-thirds at the
end of year two, and 100% of the options are fully vested at the end of
year three.
(3) "Potential realizable value" is disclosed in response to SEC rules which
require such disclosure for illustration only. The values disclosed are not
intended to be, and should not be interpreted by stockholders as
representations or projections of the future value of the Company's stock
or of the stock price.
(4) Mr. Pennell's options were granted under the Non-Employee Directors' Stock
Option Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON VALUE AS OF JANUARY 31, 1995 AS OF JANUARY 31, 1995
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Gary L. Larkins......... -0- -0- -0-/271,000 -0-/-0-
Barney Sofro............ -0- -0- -0-/187,500 -0-/-0-
Donald R. Ardemagni..... -0- -0- 70,499/2,333 -0-/-0-
Marvin S. Maltzman...... -0- -0- -0-/73,525 -0-/-0-
Doyle W. Parker......... -0- -0- -0-/85,000 -0-/-0-
</TABLE>
7
<PAGE>
OPTION REPRICING
The following table sets forth certain information with respect to repricing
of options through the fiscal year ended January 31, 1995, for all executive
officers of the Company who elected to have their options repriced, including
those listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE
UNDERLYING OF STOCK AT EXERCISE PRICE
OPTIONS TIME OF AT TIME OF NEW LENGTH OF ORIGINAL OPTION
REPRICED OR REPRICING OR REPRICING OR EXERCISE TERM REMAINING AT DATE OF
DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) REPRICING OR AMENDMENT
-------- ----------- ------------ ----------------- -------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gary L. Larkins......... 09/28/94 271,000 $2.00 $5.00 to $18.3125 $2.00 1 yr. 7 mos. to 9 yrs. 8 mos.
President and CEO
Barney Sofro............ 09/28/94 221,000 $2.00 $5.00 to $18.3125 $2.00 1 yr. 7 mos. to 9 yrs. 8 mos.
Chairman of the Board
Marvin S. Maltzman...... 09/28/94 86,500 $2.00 $5.00 to $18.3125 $2.00 1 yr. 7 mos. to 9 yrs. 8 mos.
Senior Vice President--
Administration,
Secretary
and General Counsel
Doyle W. Parker......... 09/28/94 49,500 $2.00 $5.00 to 11.00 $2.00 8 yrs. 6 mos. to 9 yrs. 8 mos.
Executive Vice
President--
Buying and
Merchandising
L. Jay Bowen............ 09/28/94 28,000 $2.00 $5.00 to 18.3125 $2.00 5 yrs. 3 mos. to 9 yrs. 8 mos.
Vice President--
Merchandise Support
Michael Brown........... 09/28/94 6,000 $2.00 $5.00 to $10.75 $2.00 8 yrs. 8 mos. to 9 yrs. 8 mos.
Senior Vice President--
Store Operations
Mary Deaver 09/28/94 7,000 $2.00 $5.00 to $10.75 $2.00 8 yrs. 8 mos. to 9 yrs. 8 mos.
Vice President--
Home Merchandise
Norman L. Salvesen 09/28/94 5,000 $2.00 $3.375 $2.00 9 yrs. 9 mos.
Vice President-
Controller
Richard H. Shelton III 09/28/94 26,502 $2.00 $5.00 to $10.3125 $2.00 5 yrs. 3 mos. to 9 yrs. 8 mos.
Senior Vice President--
Warehousing and
Distribution
James C. Webb 09/28/94 42,500 $2.00 $5.00 to $18.3125 $2.00 5 yrs. 3 mos. to 9 yrs. 8 mos.
Senior Vice President--
Real Estate
Rita M. West 09/28/94 10,167 $2.00 $5.00 to $10.75 $2.00 5 yrs. 3 mos. to 9 yrs. 8 mos.
Vice President--
Fashion Merchandising
</TABLE>
8
<PAGE>
CORPORATE LOAN PROGRAM
The Board of Directors adopted the 1990 Corporate Loan Program, which is
designed to permit officers of the Company to borrow funds in order to assist
them in the purchase of Company stock through the exercise of their stock
options, and to permit emergency loans for employees of the Company. The
program is administered by a committee composed of the Chairman of the Board,
President and General Counsel. No loans may be approved unless the committee is
assured that there is adequate security to guarantee repayment of the loan in
the form of either the stock purchased by the employee, a pledge of the
employee's salary, bonus or any vested profit sharing interest. Interest to be
charged on such loans is at the average applicable Federal interest rate
published by the Internal Revenue Service (the "Federal Rate"), which interest,
at the option of the borrower, may be paid quarterly or allowed to accrue into
the principal amount of the loan. There are currently no outstanding loans to
any officers.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee ("Committee") is appointed by the Board of
Directors and currently consists of the Company's two outside directors,
Phillip G. Samovar, Chair, and William W. Pennell. Phillip G. Samovar, was
formerly a Director, Vice President, Secretary and Corporate Counsel of the
Company. He resigned from that position in 1979 and currently is an attorney
engaged in private practice. Prior to November 2, 1994, the Compensation
Committee consisted of Daniel Greenberg, Chair, and Phillip G. Samovar.
The Committee annually reviews the compensation of all corporate officers,
including the Chief Executive Officer and makes recommendations to the Board of
Directors based upon the criteria which follows.
The Company's overall compensation philosophy has the objective of (1)
competitiveness, (2) reasonableness, (3) performance, and (4) consistency and
equity. The Committee also believes that the Company's bonus program should
incorporate a philosophy that a substantial portion of the total annual
compensation be "at risk" through short term incentives relating to measured
financial performance and individual incentive during the fiscal year.
The Committee also believes that compensation programs should reflect the
principles of long term value for shareholders, achievement of significant
short term and long term strategic goals for the Company, and significant
individual achievement.
At House of Fabrics, for many years officers' compensation has been directly
linked to performance through a base salary and a bonus percentage based upon
the financial performance of the Company. The bonus portion of officers'
compensation, when the Company has achieved increased operating results, can
constitute a significant percentage of each officer's total compensation, and
conversely, when operating results decline, so do officers' bonuses.
For the last three years, because of competitive conditions and the declining
performance of the Company, base salaries have remained relatively unchanged
and bonus awards have dropped substantially from year to year.
9
<PAGE>
The long term component of officers' compensation is the award of stock
options, which are designed to establish an effective link between the
Company's long term performance and the officer's long term compensation.
Effective June 1, 1994, the Stock Option Committee of the Compensation
Committee approved a grant of options to four of the Executive Officers listed
on the Summary Compensation Table, including a grant of 10,000 options to the
Chief Executive Officer. On September 28, 1994, the Stock Option Committee of
the Compensation Committee approved the cancellation of all outstanding stock
options, and in the vast majority of cases, a lesser number (85%) of new
options were granted as replacement for the cancelled stock options. The
Committee believed that the outstanding options would no longer provide
sufficient incentives to, or encourage continued service from key employees who
are intricately involved in the restructuring of the Company. Two Executive
Officers received an increased number of options as a result of their increased
responsibilities. The number of options granted to the Chief Executive Officer
was equal to the number that he cancelled. In granting the options during the
last fiscal year, the Committee considered the number of options previously
granted to each officer but not the number of shares owned by each officer.
During fiscal year ended January 31, 1995, the base compensation of four of
the Executive Officers, including the Chief Executive Officer, in the Summary
Compensation Table was reduced. This reduction was effective February 1, 1994.
On June 1, 1994, one of the Executive Officers received an increase in his base
compensation as a result of additional responsibilities, and one Executive
Officer received a salary adjustment. Four of the Executive Officers in the
Summary Compensation Table received the first installment of their retention
bonus.
In 1993 Congress adopted legislation that prohibits publicly held companies
from deducting certain compensation that exceeds $1,000,000 in any tax year. In
view of the Company's compensation levels, it has not modified its incentive
plans to comply with this legislation. Should circumstances change, the
Committee will consider a modification of Company plans to comply with the
legislation where practical.
Phillip G. Samovar, Chair
William W. Pennell
10
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG HOUSE OF FABRICS, INC.,
NYSE MARKET INDEX AND PEER GROUP INDEX*
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
PEER NYSE
Measurement Period HOUSE OF GROUP MARKET
(Fiscal Year Covered) FABRICS, INC. INDEX INDEX
- --------------------- ------------- ------- -------
<S> <C> <C> <C>
Measurement Pt-1990 $100 $100 $100
FYE 1991 $190.46 $152.03 $106.20
FYE 1992 $261.88 $183.49 $130.06
FYE 1993 $162.19 $113.97 $138.63
FYE 1994 $ 86.30 $ 84.54 $162.81
FYE 1995 $ 11.16 $ 74.46 $155.30
</TABLE>
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* The Peer Group Index is a self-constructed group consisting of House of
Fabrics, Inc., Fabri-Centers of America, Inc. and Hancock Fabrics, Inc.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee, the Board of Directors has
appointed Deloitte & Touche to serve as the Company's independent auditors for
the fiscal year ending January 31, 1996, subject to ratification by the holders
of a majority of the shares represented either in person or by proxy at the
Annual Meeting of Stockholders. If the appointment is not ratified, the Board
of Directors will appoint another firm as the Company's independent auditors
for the fiscal year ending January 31, 1996. Deloitte & Touche was first
appointed independent auditors for the Company in 1962 and has conducted the
examination of the Company's financial statements for the past 33 years.
11
<PAGE>
Services rendered by Deloitte & Touche during the last fiscal year consisted
of the examination of the financial statements for the year ended January 31,
1995, review of the Company's annual report, registration statements on Form
S-8, proxy soliciting materials and periodic filings with the Securities and
Exchange Commission, audit of the Company's Profit Sharing Plans and
consultations with senior management and the Audit Committee regarding various
accounting and financial matters.
Representatives of Deloitte & Touche are expected to attend the Annual
Meeting of Stockholders and will have the opportunity to make a statement, if
they so desire, and to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE AS INDEPENDENT AUDITORS OF THE COMPANY FOR
THE FISCAL YEAR ENDING JANUARY 31, 1996.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers and directors and persons who own more than ten
percent of the Company's common stock file initial reports of ownership of
common stock and reports of changes of ownership with the Securities and
Exchange Commission and the New York Stock Exchange.
Executive officers, directors, and stockholders are required to furnish the
Company with copies of all Section 16(a) forms they file. Based on a review of
such copies and other records available to the Company, the Company believes
that all of its officers, directors and persons who own more than ten percent
of the Company's common stock have complied with all filing requirements
except for one former officer, who failed to file a Form 4 in a timely manner.
When the oversight was brought to her attention, a Form 4 was immediately
filed.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1996 Annual Meeting of
Stockholders must be received at the Company's executive offices at 13400
Riverside Drive, Sherman Oaks, California 91423-2598 no later than January 17,
1996.
OTHER MATTERS
The management does not know of any other matters to be acted upon at the
meeting. If any other matters should properly come before the meeting or any
adjournment thereof, the proxies solicited hereby will be voted by the holders
thereof in accordance with their discretion.
By Order of the Board of Directors
MARVIN S. MALTZMAN
Secretary
Sherman Oaks, California
May 16, 1995
12
<PAGE>
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HOUSE OF FABRICS, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Gary L. Larkins and Philip
G. Samovar, or any one of them, (With full power to act alone), with full power
of substitution, to vote all of the common stock of House of Fabrics, Inc. which
the undersigned has the full power to vote at the Annual Meeting of Stockholders
of House of Fabrics, Inc. to be held at Sportmens' Lodge, Starlight Room, 12833
Ventura Blvd., Studio City, California on June 28, 1995 at 10:30 a.m., local
time, and at any adjournments.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES. SEE REVERSE SIDE. YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
THE PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN, IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF
DIRECTORS, AND FOR THE APPROVAL OF THE APPOINTMENT OF INDEPENDENT AUDITORS.
HOUSE OF FABRICS, INC. (TO BE SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[X] PLEASE MARK YOU _ ---
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD
1. Election of Directors. [_] [_]
NOMINEES: Marvin S. Maltzman
Barney Sofro
FOR EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEES.
- -----------------------------------------------------
FOR AGAINST ABSTAIN
2. Appointment of Deloitte & Touche as the
Company's independent Auditors. [_] [_] [_]
3. The transaction of such other business as may properly come before the
Meeting or any adjournments thereof.
I hereby revoke all proxies previously given by me to vote at said meeting or
any adjournments thereof.
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY.
SIGNATURE(S)__________________________________________ DATE_____________________
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
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