As filed with the Securities and Exchange Commission on April 3, 1995
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
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PAUL HARRIS STORES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
PAUL HARRIS STORES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(2).
[ ] $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:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
- --------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE>
PAUL HARRIS STORES, INC.
6003 GUION ROAD
INDIANAPOLIS, INDIANA 46254
________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 21, 1995
________________
To the Shareholders of Paul Harris Stores, Inc.:
The annual meeting of shareholders of Paul Harris
Stores, Inc. (the "Company") will be held on Wednesday, June 21,
1995, 9:00 o'clock a.m., local time, at the offices of the
Company, 6003 Guion Road, Indianapolis, Indiana, for the
following purposes:
1. To elect two directors to the Board
of Directors of the Company;
2. To ratify the selection of Price
Waterhouse LLP as the Company's
independent auditors for the 1995
fiscal year; and
3. To transact such other business as
may properly come before the
meeting or any adjournments
thereof.
Only shareholders of record at the close of business on
May 12, 1995 are entitled to notice of, and to vote at, the
meeting or any adjournments thereof.
By Order of the Board of Directors
Keith L. Himmel, Jr.
Secretary
Indianapolis, Indiana
May 19, 1995
SHAREHOLDERS UNABLE TO ATTEND THE MEETING IN PERSON ARE
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE IN THE SELF-ADDRESSED, STAMPED
RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF IT IS
MAILED IN THE UNITED STATES.
<PAGE>
PAUL HARRIS STORES, INC.
6003 GUION ROAD
INDIANAPOLIS, INDIANA 46254
(317) 293-3900
______________
PROXY STATEMENT
______________
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed Proxy is solicited by the Board of Directors of Paul Harris
Stores, Inc. (the "Company") for use at the Annual Meeting of Shareholders to be
held on Wednesday, June 21, 1995, at 9:00 a.m., local time, at the offices of
the Company, 6003 Guion Road, Indianapolis, Indiana, or at any adjournment
thereof (the "Annual Meeting"), for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Shareholders. Proxies will be voted in
accordance with the directions specified therein. Any Proxy on which no
directions are specified will be voted for the nominees for election to the
Board of Directors named herein and for ratification of the selection of the
Company's independent public accountants for fiscal 1995. These proxy
solicitation materials and the accompanying Annual Report for the fiscal year
ended January 28, 1995 are first being sent to shareholders on or about May 19,
1995.
As of May 12, 1995, the record date fixed for the determination of
shareholders of the Company entitled to notice of, and to vote at, the Annual
Meeting, 7,146,704 shares of the Company's Voting Common Stock, the only class
of capital stock of the Company entitled to vote at the Annual Meeting, were
outstanding. Each share of Voting Common Stock entitles the holder thereof on
the record date to one vote with respect to each matter to be acted upon at the
Annual Meeting.
A majority of the outstanding shares of Voting Common Stock present in
person or by proxy at the Annual Meeting will constitute a quorum for the
purpose of electing directors, ratifying the selection of the Company's
independent public accountants and such other business as may properly come
before the Meeting. Shares registered in the names of brokers or other "street
name" nominees for which proxies containing voting instructions (either for,
against or abstain) on at least one matter will be considered to be represented
at the Annual Meeting for quorum purposes, but will be counted for voting
purposes only as to those matters on which they are actually voted. If a quorum
is present, the two nominees for election as directors receiving the greatest
number of votes will be elected. Ratification of the selection of the Company's
independent public auditors for fiscal 1995 will require the affirmative vote of
a majority of the votes cast with respect thereto; abstentions will not count as
votes for this purpose.
<PAGE>
Any Proxy given pursuant to this solicitation may be revoked at any time
prior to its use by delivering to the principal office of the Company either a
written notice of revocation or a duly executed Proxy bearing a later date, or
by attending the Annual Meeting and voting in person.
PRINCIPAL SHAREHOLDERS
The following table provides certain information as to each person known to
the Company to be a beneficial owner on May 12, 1995 of more than five percent
of the outstanding shares of the Company's Voting Common Stock or Nonvoting
Common Stock. Shares of Nonvoting Common Stock are convertible into Voting
Common Stock under certain circumstances set forth in the Company's Amended and
Restated Articles of Incorporation. Among these is the right of any holder of
shares of Nonvoting Common Stock other than The Prudential Insurance Company of
America ("Prudential"), Prudential Capital Corporation, any entity or fund
controlled by, controlling or under common control with Prudential, or any trust
or similar entity managed by any of the foregoing, to demand conversion of such
shares at any time.
Number of
Shares
Name and Address Beneficially Percent
of Beneficial Owner Title of Class Owned of Class
------------------- -------------- ---------- --------
Gerald Paul Voting 444,864(1) 6.2%
6003 Guion Road Common Stock
Indianapolis, IN 46254
The Prudential Insurance Nonvoting 2,850,912(2) 100%
Company of America Common Stock
Prudential Plaza
Newark, NJ 07102
Elliot Associates, L.P.(3) Voting 428,562 6.0%
Westgate International, L.P.(3) Common Stock
712 Fifth Avenue
New York, New York 10019
_______________________
(1) Includes 70,931 shares of Voting Common Stock held either by Mr. Paul as
trustee or custodian for the benefit of his children or by his wife as a
trustee or custodian. Mr. Paul disclaims beneficial ownership of such
70,931 shares.
(2) According to a Schedule 13G filed by Prudential. In addition, Prudential
beneficially owns 15,000 shares of Voting Common Stock.
(3) According to a Schedule 13D filed with the Securities and Exchange
Commission (the "SEC") by such persons, Elliot Associates, L.P., a Delaware
limited partnership, together with and its wholly-owned subsidiaries
(collectively, "Elliot"), have sole voting and dispositive power with
respect to 328,562 shares of Voting Common Stock, and Westgate
International, L.P., a Cayman Islands limited partnership ("Westgate"), has
shared voting and dispositive powers with respect to an additional 100,000
shares of Voting Common Stock. The Schedule 13D states that Elliot's
principal business is to purchase, sell, trade and invest in securities,
and that its general partners are Paul E. Singer ("Singer") and Braxton
Associates, L.P., a New Jersey limited partnership. The general partners
of Braxton Associates, L.P., in turn, are Singer and Braxton Associates,
Inc., a corporation of which Singer is an officer and director. The
Schedule 13D also states that Westgate's principal business is to purchase,
sell, trade and invest in securities, and that its general partner is
Humbledon, Inc., a corporation of which Singer is the sole officer and
director. According to a separate Schedule 13D, Singer is also the sole
officer and director of the corporation which exercises shared voting and
dispositive powers with respect to Westgate's shares.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
Based upon information provided by such individuals, the following table
shows, as of May 12, 1995, the shares of the Company's Voting Common Stock
beneficially owned by each of the Company's directors and nominees for election
to the Board, each executive officer of the Company, and all directors and
executive officers as a group.
Number of Shares of
Voting Common Stock
Name Beneficially Owned (1) Percent of Class
---- ------------------ ----------------
Roger D. Blackwell, Ph.D. 23,000 *
Charlotte G. Fischer 140,800 1.9%
Rudy Greer 13,000 *
Stig A. Kry 14,000 *
Robert I. Logan 15,000 *
Gerald Paul 444,864 6.2%
Sally M. Tassani -- *
Eloise Paul 160,985 2.2%
John H. Boyers 15,000 *
All directors and executive officers
as a group (9) individuals 826,629 11.3%
___________________________________
* Less than one percent
(1) Each person has sole voting and investment power with respect to all shares
of Voting Common Stock shown as beneficially owned by him or her except:
(i) 70,931 shares included as being owned by Mr. Paul which are discussed
in footnote (1) on page 2; (ii) the following shares subject to currently
exercisable options under the Company's 1992 Non-Qualified Stock Option
Plan: Ms. Fischer, 11,000 shares; each of Dr. Blackwell, Mr. Greer, Mr. Kry
and Mr. Logan, 12,000 shares; Ms. Paul, 5,000 shares; and all directors and
executive officers as a group, 64,000 shares; and (iii) 100,000 shares
subject to currently exercisable options held by Ms. Fischer.
3
<PAGE>
ELECTION OF DIRECTORS
Pursuant to the Company's Amended and Restated Articles of Incorporation,
the Board of Directors is divided into three classes, with the term of office of
one class expiring each year. One class consists of two members whose current
terms of office will expire at the 1995 Annual Meeting; the second class
consists of three members whose current terms of office will expire at the 1996
Annual Meeting; and the third class consists of two members whose current terms
of office will expire at the 1997 Annual Meeting.
Stig A. Kry and Robert I. Logan are serving as directors in the class whose
current term of office expires at the 1995 Annual Meeting, and each has been
nominated by the Board of Directors for re-election for a three-year term
expiring at the 1998 Annual Meeting. The following table sets forth certain
information with respect to Mr. Kry and Mr. Logan. In the event either nominee
unexpectedly becomes unavailable for election, the enclosed Proxy will be voted
for such person as may be designated by the present Board of Directors.
Director
Name of Nominee Age Since
--------------- --- -----
Stig A. Kry 66 1992
Robert I. Logan 76 1992
The Board of Directors recommends a vote FOR each of the above nominees.
The following table contains certain information with respect to each
member of the Board of Directors whose term will continue after the Annual
Meeting:
Director Term Expires
Name of Director Age Since In
---------------- --- ----- ---------
Roger D. Blackwell, Ph.D 54 1992 1996
Charlotte G. Fischer 45 1993 1997
Rudy Greer 70 1992 1996
Gerald Paul 70 1952 1996
Sally M. Tassani 47 1995 1997
Charlotte G. Fischer became the Chairman of the Board, President and Chief
Executive Officer of the Company on January 29, 1995. From September 1994 until
January 1995, Ms. Fischer was Vice Chairman of the Board, President and Chief
Executive Officer Designate, and prior thereto had been Vice Chairman of the
Board and Chief Executive Officer Designate since April 1994. In August 1993,
Ms. Fischer became a consultant to the Company until April 1994, and first
joined the Board of Directors in September 1993. In November 1992, Ms. Fischer
established and was President of C.G.F., Inc., an independent retail consulting
firm. Ms. Fischer was, from September 1989 until October 1991, President and
Chief Executive Officer of Claire's Boutiques, Inc. She had been President and
Chief Operating Officer of the company since October 1986 and was on the Board
of Directors of Claire's Stores, Inc., the publicly held parent company. Ms.
Fischer is currently a director of Trans World Entertainment Corp., Inc.
4
<PAGE>
Gerald Paul, a co-founder of the Company, is currently a director, Chairman
Emeritus of the Board and a part-time consultant of the Company. Mr. Paul was
Chairman of the Board and Chief Executive Officer of the Company from June 1985
until his retirement in January 1995, and prior thereto had been President and
Chief Executive Officer of the Company since its incorporation in 1952. Mr.
Paul was also Chief Executive Officer of the Company from May 1980 until his
retirement.
Roger D. Blackwell, Ph.D. has been a professor of marketing at Ohio State
University for more than the past five years.
Rudy Greer has been an independent consultant in the retail and marketing
fields for more than the past five years.
Stig A. Kry has been a director and chairman emeritus of Kurt Salmon
Associates, Inc., a management consulting firm, since 1987. Prior thereto he
was a director, chairman and chief executive officer of such firm.
Robert I. Logan was a director and executive vice president of Cole Taylor
Bank and Cole Taylor Financial Group, a commercial bank and its parent bank
holding company, respectively, until 1989. Since that time, he has served on
the boards of directors of several private companies.
Sally M. Tassani has been the chief executive officer of Tassani & Paglia,
Inc., a Chicago-based marketing consulting firm that she founded, for more than
the past five years. Ms. Tassani was elected to the Board in March 1995 to fill
a vacancy on the Board of Directors.
The Board of Directors has a Finance and Audit Committee (the "Audit
Committee") which is currently composed of Messrs. Logan and Greer. The Audit
Committee meets periodically with management and the Company's independent
accountants to determine the adequacy of internal controls and other financial
reporting matters. The Audit Committee met four times during the Company's 1994
fiscal year.
The Board of Directors also has a Compensation and Stock Option Committee
(the "Compensation Committee") which is currently composed of Messrs. Blackwell
and Kry. The Compensation Committee considers and authorizes remuneration
arrangements for senior management, including the grant of options under the
Option Plan. The Compensation Committee met twice in Fiscal 1994. Charlotte G.
Fischer was a member of the Committee until April 1994.
During the Company's 1994 fiscal year, the Board of Directors held six
meetings. Each director other than Dr. Blackwell attended at least 75% of the
total meetings of the Board and all committees of the Board of which he or she
was a member.
Directors who are not officers of the Company receive fees of $20,000 per
annum, plus expenses. The Chair of the Audit Committee and the Chair of the
Compensation Committee are each entitled to additional fees of $3,000 per annum,
and each member of such committees receives $500 for each committee meeting that
he or she attends that is held on a date other than the date of a meeting of the
Board. Mr. Logan receives fees at the rate of $2,500 a month for consulting
services provided to the Company and does not receive the $3,000 amount that he
would otherwise be entitled to receive as Chair of the Audit Committee.
5
<PAGE>
STOCK PRICE PERFORMANCE GRAPHS
The first graph below compares cumulative total returns to shareholders,
assuming reinvestment of dividends, if any, of the Company, the S&P Apparel
Index and the S&P 500 Index. It assumes an investment of $100 on
February 3, 1990, the date immediately prior to the commencement of the
Company's last five complete fiscal years, in the Company, the Standard &
Poor's Apparel Index and the Standard & Poor's 500 Index. The second graph
below compares such cumulative total returns assuming an investment date of
September 15, 1992, the effective date of the Company's Plan of Reorganization
under Chapter 11 of the United States Bankruptcy Code.
<TABLE><CAPTION>
COMPARISON OF 5 YR CUMULATIVE RETURNS*
OF THE COMPANY, S&P-APPAREL, S&P 500 INDEX**
Total Shareholder Returns -- Fiscal Year Basis
Return Return Return Return Return
Company/Index Name FY 1990 FY 1991 FY 1992 FY 1993 FY 1994
<S> <C> <C> <C> <C> <C>
PAUL HARRIS STORES, INC. -71.88 -75.00 131.41 90.74 -53.40
S&P APPAREL INDEX 37.31 70.36 -12.95 -16.05 -21.17
S&P 500 INDEX 4.50 18.87 7.34 9.10 -1.74
<CAPTION>
Indexed/Cumulative Returns
Base
Period Return Return Return Return Return
Company/Index Name FY 1989 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994
<S> <C> <C> <C> <C> <C>
PAUL HARRIS STORES, INC. 100 28 7 16 31 14
S&P APPAREL INDEX 100 137 234 204 171 135
S&P 500 INDEX 100 104 124 133 145 143
ASSUMES $100 INVESTED ON SEPTEMBER 3, 1990 * TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
IN PAUL HARRIS STORES, S&P APPAREL INDEX ** FISCAL YEAR ENDING SATURDAY NEAREST JANUARY 31
AND S&P 500 INDEX *** NOT COMPARABLE DUE TO SIGNIFICANT CHANGE OF THE
CAPITAL STRUCTURE AS PART OF THE REORGANIZATION PLAN
[REFERS TO VERTICAL BLACK LINE IN CHART AT 9/15/92]
</TABLE>
6
<PAGE>
<TABLE><CAPTION>
COMPARISON OF CUMULATIVE RETURNS SINCE SEPTEMBER 15 1992*
OF THE COMPANY, S&P-APPAREL, S&P 500 INDEX**
Total Shareholder Returns -- Fiscal Quarter Ended
Return Return Return Return Return
Company/Index Name Oct 1992 Jan 1993 Apr 1993 Jul 1993 Oct 1993
<S> <C> <C> <C> <C> <C>
PAUL HARRIS STORES, INC. 124.67 0.15 92.59 -34.62 17.65
S&P APPAREL INDEX 7.35 6.06 -15.30 -6.32 11.09
S&P 500 INDEX -1.54 4.80 0.32 1.80 4.40
<CAPTION>
Indexed/Cumulative Returns
Base
Period Return Return Return Return Return
Company/Index Name 9/15/92 Oct 1992 Jan 1993 Apr 1993 Jul 1993 Oct 1993
<S> <C> <C> <C> <C> <C>
PAUL HARRIS STORES, INC. 100 225 225 433 283 333
S&P APPAREL INDEX 100 107 114 96 90 100
S&P 500 INDEX 100 98 103 104 105 110
<CAPTION>
Total Shareholder Returns -- Fiscal Quarter Ended
Return Return Return Return Return
Company/Index Name Jan 1994 Apr 1994 Jul 1994 Oct 1994 Jan 1995
<S> <C> <C> <C> <C> <C>
PAUL HARRIS STORES, INC. 28.75 -6.80 -20.83 -18.42 -22.58
S&P APPAREL INDEX -4.75 5.29 -8.88 -11.32 -7.34
S&P 500 INDEX 2.32 -5.81 1.63 3.38 -0.71
<CAPTION>
Indexed/Cumulative Returns
Base
Period Return Return Return Return Return
Company/Index Name 9/15/92 Jan 1994 Apr 1994 Jul 1994 Oct 1994 Jan 1995
<S> <C> <C> <C> <C> <C>
PAUL HARRIS STORES, INC. 100 429 400 317 258 200
S&P APPAREL INDEX 100 96 101 92 81 75
S&P 500 INDEX 100 113 106 108 111 111
ASSUMES $100 INVESTED ON SEPTEMBER 15, 1992 * TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
IN PAUL HARRIS STORES, S&P APPAREL INDEX ** FISCAL YEAR ENDING SATURDAY NEAREST JANUARY 31
AND S&P 500 INDEX
</TABLE>
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation from
the Company and its subsidiaries to each individual who served as an executive
officer of the Company during the fiscal year ended January 28, 1995 (the "1994
fiscal year") for services rendered during the Company's 1994, 1993 and 1992
fiscal years.
<TABLE><CAPTION>
Summary Compensation Table
Long-Term
Compen-
sation
-----------
Securities
Annual Compensation Underlying All Other
------------------- Stock Compen-
Name and Principal Position Fiscal Salary Bonus Options sation
During the 1994 Fiscal Year Year ($) ($)(1) (#) ($)(2)
- -------------------------------------- ---- --------- ---------- ------- ------
<S> <C> <C> <C> <C> <C>
Charlotte G. Fischer (3) 1994 243,519 -- 350,000 --
Vice Chairman of the 1993 -- -- -- --
Board, President and Chief Executive 1992 -- -- -- --
Officer Designate
Gerald Paul(4) 1994 265,000 -- -- 389,282
Chairman of the Board and 1993 265,000 64,269 -- 204,885
Chief Executive Officer 1992 270,530 31,800 -- 189,138
Eloise Paul 1994 155,036 -- 10,000 167,817
Senior Vice President- 1993 130,962 32,560 15,000 88,325
Merchandising 1992 111,713 23,600 -- 81,510
Rex Steffey(5) 1994 142,308 -- -- 167,817
President and Chief Operating 1993 162,019 76,147 75,000 88,325
Officer 1992 134,852 23,600 -- 81,510
William L. Lawrence, Jr.(6) 1994 130,000 -- 10,000 46,982
Senior Vice President, Chief 1993 97,692 39,174 25,000 24,728
Financial
Officer and Secretary 1992 88,629 13,500 -- 22,827
</TABLE>
____________________________________
(1) Represents bonuses earned in the fiscal year indicated and paid or payable
during the subsequent fiscal year.
(2) Represents the fair market value on the respective dates of issuance of
certain shares of Voting Common Stock issued in connection with the
Company's Plan of Reorganization.
(3) Charlotte G. Fischer became the Chairman of the Board, President and Chief
Executive Officer of the Company on January 29, 1995. She is employed
pursuant to an April 1994 employment agreement which provided for a salary
at the rate of $335,000 per annum through January 28, 1995 and $360,000 per
annum thereafter. The term of the employment agreement expires, subject to
extension, in April 1997, but Ms. Fischer may terminate it at any time
after January 1996 upon at least 180 days prior written notice. The
employment agreement also provides that Ms. Fischer is entitled to
participate in any bonus or other incentive plan maintained by the Company
for its senior executive officers during the term. See also "Option Grants
in Fiscal 1994".
8
<PAGE>
(4) Gerald Paul retired as the Chairman of the Board and Chief Executive
Officer of the Company on January 29, 1995 as contemplated by a March 1994
amendatory and supplemental employment agreement (the "supplemental
employment agreement"). The supplemental employment agreement provides
that Mr. Paul will serve as Chairman Emeritus of the Board and a part-time
senior consultant through the end of the Company's 1996 fiscal year at a
base salary of $132,500 per annum. The supplemental employment agreement
also provides that Mr. Paul is entitled to participate in any bonus program
created for employees during its term. It also provides that the Company
will use its best efforts to include Mr. Paul as a nominee in the 1996
election of directors so long as Mr. Paul owns 2% of the Company's
outstanding equity securities at that time. See also "Certain
Transactions."
(5) Rex Steffey resigned as the Company's President and Chief Operating Officer
in September 1994.
(6) William L. Lawrence, Jr. resigned as the Company's Senior Vice President,
Chief Financial Officer and Treasurer effective as of the end of the 1994
fiscal year.
9
<PAGE>
The following table sets forth certain information concerning the number
of shares and the terms and conditions of the stock options granted by the
Company during the Company's 1994 fiscal year to the individuals named in the
Summary Compensation Table:
<TABLE><CAPTION>
Option Grants in Fiscal 1994
Potential Realizable Value at
Individual Grants Assumed Annual Rates of Stock
----------------------------------------------- Price Appreciation for Option
Number of % of Total Terms($)(4)
Securities Options Exercise -----------------------------
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted(#)(1) Fiscal Year ($/Sh)(2) Date(3) 5%($) 10%($)
---- ------------- ------------ --------- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Charlotte G. 350,000 61.2% 5.68 4/29/04 $1,250,243 $3,168,360
Gerald Paul -- -- -- -- -- --
Eloise Paul 10,000 1.8% $3.12 12/6/04 $19,622 $49,725
</TABLE>
____________________________________
(1) Rex Steffey was not granted options in the fiscal year 1994. William L.
Lawrence, Jr. was granted options in the 1994 fiscal year, but these
options expired unexercised as a result of his resignation.
(2) The exercise price is the closing price per share of the Company's Voting
Common Stock on the date of grant.
(3) All option grants to the named individuals in fiscal 1994 expire on the
tenth anniversary of the date of grant, subject to earlier expiration in
the event of the termination of such individual's employment with the
Company.
(4) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the SEC and are not intended to forecast the
possible future appreciation, if any, of the Company's Common Stock.
(5) Charlotte G. Fischer's option, which was granted on April 29, 1994 pursuant
to her employment agreement, became exercisable as to 100,000 shares on
April 29, 1995, and will become exercisable as to an additional 116,666
shares on each of April 29, 1996 and 1997 and as to the final 16,667
shares on April 29, 1998; provided, however, that if Ms. Fischer's
employment is not extended by the Company beyond April 29, 1997, the
option will become exercisable as to the final 16,667 shares on
April 19, 1997.
(6) These options were granted on December 6, 1994 and provided that they
become exercisable in three equal installments on the first three
anniversaries of the grant date.
10
<PAGE>
Pension Plan
The following table sets forth the estimated annual benefits payable upon
normal retirement under the Company's non-contributing defined benefit pension
plan (the "Pension Plan"), as straight annuity payments, to persons who were in
the applicable covered compensation and years of credited service
classifications specified as of December 31, 1994. Covered compensation for any
fiscal year consists of all compensation actually received in such fiscal year,
regardless of the fiscal year for which it was accrued, subject to a maximum
amount established pursuant to the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"). For 1994, such limit was $150,000. Effective
December 31, 1994, the Company ceased benefit accruals under the Pension Plan,
which had provided that each participant was entitled to a monthly retirement
benefit equal to the product of (i) .8% of the participant's average monthly
covered compensation (including bonuses) during the five consecutive calendar
year periods in which such compensation was highest and (ii) such participant's
years of credited service, with a minimum monthly retirement benefit equal to $4
multiplied by years of credited service, without any reduction for the receipt
of social security benefits. As a result of the Company's actions, benefits
under the Pension Plan are limited to those accrued by plan participants as of
December 31, 1994.
Pension Plan Table
Average Years of Credited Service
Annual Covered ---------------------------------------------------
Remuneration 15 20 25 30 35 40
------------ ------ ------- ------- ------- ------- -------
$75,000 $9,000 $12,000 $15,000 $18,000 $21,000 $24,000
100,000 12,000 16,000 20,000 24,000 28,000 32,000
125,000 15,000 20,000 25,000 30,000 35,000 40,000
150,000 18,000 24,000 30,000 36,000 42,000 48,000
175,000 21,000 28,000 35,000 42,000 49,000 56,000
200,000 24,000 32,000 40,000 48,000 56,000 64,000
225,000 27,000 36,000 45,000 54,000 63,000 72,000
250,000 30,000 40,000 50,000 60,000 70,000 80,000
Gerald Paul's annual pension benefit is fixed at $87,260. Eloise Paul's
annual pension benefit upon normal retirement is estimated to be $10,775.
William L. Lawrence, Jr.'s annual pension benefit upon normal retirement is
estimated to be $18,780. Because the Company ceased benefit accruals as of
December 31, 1994, Charlotte G. Fischer will be entitled to no or only a nominal
annual pension benefit under the Pension Plan. Rex Steffey elected to take a
lump sum distribution of $56,710 under the Pension Plan in connection with his
resignation.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee believes that the Company's compensation
arrangements should be designed to enable the Company to attract and retain
qualified executives, to reward individual performances, and to provide
incentives for the achievement of targeted Company performance goals.
Accordingly, compensation arrangements consist of base salary, cash incentive
bonuses and long-term incentive compensation consisting of stock grants or stock
options. The Committee believes that long-term stock options provide incentives
to the recipients to maximize shareholder values and to continue in the employ
of the Company.
During the 1994 fiscal year, the Board of Directors approved, on the
recommendation of the Compensation Committee, Charlotte G. Fischer's employment
agreement and Gerald Paul's supplemental employment agreement (see notes to
"Summary Compensation Table"). The Board also approved, upon such
recommendation, base salary increases for the Company's other executive officers
because the Company's financial performance in fiscal 1993 exceeded targeted
goals and in order to bring the base salaries of these individuals closer to the
median levels paid to executives holding comparable positions at similar sized
companies. As a result of shareholder action taken at the 1994 Annual Meeting,
the Company's 1992 Non-Qualified Stock Option Plan and the option granted to
Charlotte G. Fischer under her employment agreement satisfy the requirements of
Section 162(m) of the Internal Revenue Code, thereby helping to preserve the
Company's ability to take tax deductions in connection with option exercises.
For the 1994 fiscal year, the Board of Directors also adopted, at the
recommendation of the Compensation Committee, a 1994 Corporate Incentive Program
for the Company's executive officers and other key members of the Company's
management team. As the Company did not achieve the targeted level of pre-tax
income, no bonuses were paid thereunder. For the Company's 1995 fiscal year,
the Compensation Committee has recommended, and the Board has adopted, a 1995
Corporate Incentive Program applicable to the Company's executive officers and
other members of the Company's management team. As applicable to the Company's
executive officers, the program provides for cash bonuses equal to approximately
29% of base salary if the targeted level of pre-tax income and/or gross margins
for fiscal 1995 are realized by the Company.
No member of the Committee is a former or current officer or employee of
the Company or any of its subsidiaries.
Roger D. Blackwell, Chair
Stig A. Kry
Members of the Compensation
Committee
12
<PAGE>
CERTAIN TRANSACTIONS
Mr. Paul and the Company are parties to a Stock Transfer Agreement under
which, as amended, Mr. Paul's personal representative, together with members of
his immediate family, have the option for a period of eight months after Mr.
Paul's death, to offer some or all of their shares of Voting Common Stock to the
Company at a price per share equal to 90% of the average market price of the
Voting Common Stock for the 60-day period immediately prior to the date of Mr.
Paul's death; provided, however, that such price will not be less than the sum
of the full per share book value of the Voting Common Stock plus an amount equal
to the quotient obtained by dividing (i) that portion of the proceeds, if any,
received by the Company from any insurance policies maintained by it on Mr.
Paul's life that is in excess of the cash surrender values of such policies
reflected on the Company's financial statements by (ii) the total number of
shares of Voting Common Stock outstanding. If such option is exercised and the
Company receives insurance proceeds, the Company must purchase that number of
shares offered by Mr. Paul's representative as shall have an aggregate purchase
price not less than such net insurance proceeds amount. If such net insurance
proceeds, if any, are more than enough to purchase all of the shares of Mr.
Paul's stock offered for sale to the Company, then the Company must use the
remainder to purchase the stock offered for sale by the members of Mr. Paul's
immediate family. The Company is not required to maintain any life insurance on
Mr. Paul's life, but currently holds policies in an aggregate face amount of
$1,935,000 on which no further premiums are required to be paid.
In connection with his employment with the Company and relocation to
Indianapolis in July 1991, the Company loaned $150,000 to Rex Steffey, the
Company's President and Chief Operating Officer until his resignation in August
1994. The outstanding principal amounts of the loan bears interest at a rate
per annum, adjusted each month, equal to the prime rate, as calculated as
provided in the promissory note evidencing the loan. In accordance with the
terms of the loan, Mr. Steffey made payments of $50,000 of principal and accrued
interest on each of June 30, 1993 and 1994, and remaining principal amount and
accrued interest is due on June 30, 1995.
INDEPENDENT ACCOUNTANTS
Upon recommendation of the audit committee and the Board of Directors, the
Company has engaged Price Waterhouse LLP, an international accounting firm, as
the Company's principal accountants for its 1995 fiscal year. Price Waterhouse
LLP will be responsible for auditing the Company's annual financial statements.
A representative of Price Waterhouse LLP is expected to be present at the Annual
Meeting and will be given an opportunity to make a statement, if he or she
desires, and will respond to appropriate questions.
DEADLINE FOR RECEIPT OF SHAREHOLDERS'
PROPOSALS FOR THE 1996 ANNUAL MEETING
Proposals of shareholders that are intended to be presented by such
shareholders at the Company's 1996 Annual Meeting must be received by the
Company no later than January 19, 1996 in order to be included in the Company's
Proxy Statement and form of Proxy relating to that meeting.
13
<PAGE>
MISCELLANEOUS
The Annual Report to Shareholders for the fiscal year ended January 28,
1995 accompanies this Proxy Statement. The Annual Report is not used as part of
this solicitation material and no action will be taken with respect to it at the
Annual Meeting.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who beneficially own more than 10%
of the Company's Voting Common Stock to file initial reports of ownership and
reports of changes in ownership with the SEC. Such persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that during fiscal 1994 all Section 16(a) filing
requirements applicable to its executive officers, directors and greater than
10% beneficial owners were timely satisfied, except that Charlotte G. Fischer
and Eloise Paul each inadvertently filed one late report.
The cost of this Proxy solicitation will be borne by the Company. Proxies
will be solicited by mail, telegram or telephone, and may be personally
solicited by directors, officers and other employees of the Company and by
Corporate Investor Communications, Inc. for a fee not to exceed $2,500, plus
expenses. Arrangements will be made with brokerage houses and other nominees,
custodians and fiduciaries to forward soliciting material to beneficial owners
of the voting Common Stock. The Company will reimburse brokerage firms and
other persons representing beneficial owners for their expenses in forwarding
solicitation materials to such beneficial owners.
_______________________
14
<PAGE>
PAUL HARRIS STORES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
R
O
X
Y
Charlotte Fischer and Keith Himmel and each of them, with full
power of substitution, are hereby authorized to represent and to vote
the stock of the undersigned in Paul Harris Stores, Inc. (the
"Company") at the Annual Meeting of Shareholders to be held on June
21, 1995 and at any adjournment thereof a set forth on the reverse
side.
SEE
REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE>
<TABLE><CAPTION>
Please mark
votes as in
[X] this example.
This proxy will be voted as specified and unless otherwise specified, this proxy will be voted FOR the election of directors and FOR
proposal 2.
<S> <C>
1. ELECTIONS OF DIRECTORS FOR AGAINST ABSTAIN
2. Proposal to ratify the selection of Price
Waterhouse LLP as independent auditors for
Nominees: STIG A. KRY and ROBERT I. LOGAN the fiscal year 1995. [ ] [ ] [ ]
FOR WITHHELD 3. Upon or in connection with the transaction of such other business as
[ ] [ ] may properly come before the meeting or any adjournment thereof.
MARK HERE
FOR ADDRESS
CHANGE AND [ ]
NOTE AT LEFT
- ---------------------------------------
To withhold authority to vote for
other nominee, write that nominee's
name in the space provided above.
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Please mark, sign, date and return the Signature: Date
proxy card promptly using the enclosed -------------------------------------
envelope. Signature: Date
-------------------------------------
</TABLE>
