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 reg 240.14a-11(c) or reg 40.14a-12
PAUL HARRIS STORES, INC.
- ------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than 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.:
_____________________________________________________________________
3) Filing Party:
_____________________________________________________________________
4) Date Filed:
_____________________________________________________________________
<PAGE>
PAUL HARRIS STORES, INC.
6003 GUION ROAD
INDIANAPOLIS, INDIANA 46254
________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 19, 1996
________________
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 19, 1996, 9:00 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 appointment of Price Waterhouse LLP as the Company's
independent auditors for the 1996 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 9, 1996 are
entitled to notice of, and to vote at, the meeting or any adjournments thereof.
By Order of the Board of Directors
/s/Keith L. Himmel, Jr.
Keith L. Himmel, Jr.
Secretary
Indianapolis, Indiana
May 16, 1996
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 19, 1996, 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 appointment of the
Company's independent auditors for fiscal 1996. These proxy solicitation
materials and the accompanying Annual Report for the fiscal year ended
February 3, 1996 are first being sent to shareholders on or about May 16, 1996.
As of May 9, 1996, the record date fixed for the determination of
shareholders of the Company entitled to notice of, and to vote at, the Annual
Meeting, 7,173,037 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 appointment of the Company's
independent auditors 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 auditors will require the affirmative vote of a majority
of the votes cast with respect thereto; abstentions will not count as votes for
this purpose.
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.
1
<PAGE>
The Board of Directors knows of no matters, other than those described in
the attached Notice of Annual Meeting, which are to be brought before the
Annual Meeting. If other matters properly come before the Annual Meeting, it
is the intention of the persons named in the enclosed Proxy to vote such Proxy
in accordance with their judgment on such matters.
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.
PRINCIPAL SHAREHOLDERS
The following table provides certain information as to each person known
to the Company to be a beneficial owner on May 9, 1996 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"), any entity or fund controlled by,
controlling or under common control with Prudential, 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
- ------------------- -------------- ------------ --------
Kirr, Marbach & Company, LLC (1) Voting Common 540,000 7.5%
621 Washington Street Stock
Columbus, IN 47201
The Prudential Insurance Nonvoting 2,850,912(2) 100.0%
Company of America Common Stock
Prudential Plaza
Newark, NJ 07102
________________________
(1) According to a Schedule 13D, as amended, filed by Kirr, Marbach & Company,
LLC, David M. Kirr and Gregg T. Summerville share voting and investment
power of the reported shares.
(2) According to a Schedule 13G filed by Prudential, Prudential has sole
voting and investment power of the reported shares.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
Based upon information provided by such individuals, the following table shows,
as of May 9, 1996, 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 (2)
- ---- ---------------------- --------------------
Roger D. Blackwell, Ph.D. 29,000 *
Charlotte G. Fischer 269,466 3.6%
Rudy Greer 21,000 *
Stig A. Kry 20,000 *
Robert I. Logan 22,000 *
Gerald Paul 238,666 3.3%
Sally M. Tassani --- *
Eloise Paul 169,318 2.4%
John H. Boyers 61,666 *
All directors and executive
officers as a group (9 individuals) 831,116 11.1%
___________________________________
* 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) 2,000 included as being owned by Ms. Fischer which are held
by members of her family (Ms. Fischer disclaims beneficial ownership of
such shares); (ii) 16,000 shares included as being owned by Mr. Paul which
are held by Mr. Paul either as trustee or by his spouse as a trustee or
custodian (Mr. Paul disclaims beneficial ownership of such shares); (iii)
the following shares subject to options under the Company's 1992
Non-Qualified Stock Option Plan (the "Option Plan"): Ms. Fischer, 11,000
shares; each of Dr. Blackwell, Mr. Greer, Mr. Kry and Mr. Logan, 18,000
shares; Ms. Paul, 13,333 shares; and Mr. Boyers, 16,666 shares; and all
directors and executive officers as a group, 112,999 shares; and
(iv) 216,666 shares subject to options held by Ms. Fischer.
(2) The percentages do not reflect the effect of any future conversion of the
Nonvoting Common Stock into Voting Common Stock.
3
<PAGE> ELECTION OF DIRECTORS
Effective as of the Annual Meeting, the Board of Directors will consist of
six members. 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 1996 Annual Meeting;
the second class consists of members whose current terms of office will expire
at the 1997 Annual Meeting; and the third class consists of members whose
current terms of office will expire at the 1998 Annual Meeting.
Rudy Greer and Gerald Paul are serving as directors in the class whose
current term of office expires at the 1996 Annual Meeting, and each has been
nominated by the Board of Directors for re-election to a three-year term
expiring at the 1999 Annual Meeting. The following table sets forth certain
information with respect to the nominees. In the event any 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
--------------- --- --------
Rudy Greer 71 1992
Gerald Paul 71 1952
Pursuant to a March 1994 agreement with Mr. Paul, the Company agreed to
use its best efforts to include Mr. Paul as a nominee in this election provided
that Mr. Paul owns 2% of the Company's securities. As of May 9, 1996, Mr. Paul
owned 3.3% of the Company's Voting Common Stock.
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
---------------- --- -------- ------------
Charlotte G. Fischer 46 1993 1997
Stig A. Kry 67 1992 1998
Robert I. Logan 77 1992 1998
Sally M. Tassani 48 1995 1997
Charlotte G. Fischer became the Chairman of the Board, President and Chief
Executive Officer of the Company in January 1995. From April 1994 until
January 1995, Ms. Fischer was Vice Chairman of the Board and Chief Executive
Officer Designate. She was a consultant to the Company from September 1993,
when she first joined the Board, until April 1994. From October 1991 to March
1994, Ms. Fischer was an independent retail consultant. In addition she was
the President of C.G.F., Inc., a specialty company, which she founded in
November 1992. Ms. Fischer was employed by Claire's Boutiques, Inc., a
specialty retailer, from 1986 to 1991, serving as its president and chief
operating officer from October 1986 to September 1989 and its president and CEO
thereafter. She was also a director of its parent corporation, Claire's
Stores, Inc. Ms. Fischer is a director of Trans World Entertainment Corp.,
Inc.
4
<PAGE>
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.
Gerald Paul, a co-founder of the Company, is currently Chairman Emeritus,
a director and part-time consultant of the Company. Mr. Paul was Chairman of
the Board of the Company from June 1985 until his retirement in January 1995,
and prior thereto had been President of the Company since its incorporation in
1952. Mr. Paul was also Chief Executive Officer of the Company from May 1980
until his retirement.
Sally M. Tassani has been Senior Vice President and Director of Operations
for Leo Burnett, Inc., an advertising agency since October 1995. From August
to September 1995, she was Senior Vice President of Bender, Browning, Dolly &
Sanderson, an advertising agency. Prior to August 1995, she was the chief
executive officer of Tassani & Paglia, Inc., a Chicago-based marketing
consulting firm that she founded, for more than five years.
In addition to the foregoing persons, Roger D. Blackwell, Ph.D., whose
term of office expires at the Annual Meeting, is currently a director.
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
1995 fiscal year.
The Board of Directors also has a Compensation and Stock Option Committee
(the "Compensation Committee") which is currently composed of Ms. Tassani and
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 during the
Company's 1995 fiscal year.
The Board of Directors also has a Nominating Committee which is currently
composed of Ms. Fischer, and Messrs. Greer and Paul. The Nominating Committee
nominates persons to serve as directors. In considering the persons to
nominate, the Nominating Committee will consider candidates recommended by
shareholders. Suggestions for candidates should be addressed to the Secretary,
Paul Harris Stores, Inc., 6003 Guion Road, Indianapolis, IN 46254. The
Nominating Committee met once during the Company's 1995 fiscal year.
During the Company's 1995 fiscal year, the Board of Directors held four
meetings. Each director 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.
5
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 $3,000
amount that he would otherwise be entitled to receive as Chair of the Audit
Committee.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth the annual and long-term compensation from
the Company and its subsidiaries to each individual who served as an executive
officer of the Company during the fiscal year ended February 3, 1996 (the "1995
fiscal year") for services rendered during the Company's 1995, 1994 and 1993
fiscal years.
<TABLE><CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compen-
sation
------
Awards
------
Securities All Other
Annual Compensation Underlying Compen-
-------------------
Fiscal Bonus Options sation
Name and Principal Position Year Salary ($) ($)(1) (#) ($)(2)
- ---------------------------- ------ ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Charlotte G. Fischer 1995 $ 359,327 $ -0- 75,000 $ 23,702 (3)
Chairman of the Board, President and 1994 243,519 -0- 350,000 870
Chief Executive Officer 1993 --- --- --- ---
Eloise Paul 1995 155,000 -0- 15,000 1,150 (4)
Senior Vice President- 1994 155,036 -0- 10,000 168,580 (4)(5)
Merchandising 1993 130,962 32,560 15,000 88,611 (5)
John H. Boyers (6) 1995 105,231 15,000 50,000 15,912 (7)
Senior Vice President - Finance 1994 --- --- --- ---
and Treasurer 1993 --- --- --- ---
___________________
(1) Represents bonuses earned in the fiscal year indicated and paid or payable during the subsequent
fiscal year.
(2) Unless otherwise indicated, all amounts are compensation related to group term life insurance
premiums.
(3) Of the amount shown, $20,839 represents reimbursement for relocation expenses and income taxes on
reimbursed amounts. In addition, $1,558 represents Company-paid contributions to the 401(k)
retirement plan. Company-paid contributions are fully vested upon contribution.
(4) Of the amounts shown, $864 for 1995 and $477 for 1994 represent Company-paid contributions to the
401(k) retirement plan.
(5) Of the amounts shown, $167,817 for 1995 and $88,325 for 1994 represent 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.
(6) Mr. Boyers became the Senior Vice President - Finance and Treasurer of the Company in March, 1995.
The amounts disclosed in the table do not include consulting fees accrued with respect to Mr. Boyers
prior to his being employed by the Company of $10,000 in 1995 and $4,000 in 1994.
(7) Of the amount shown, $15,000 represents reimbursement for relocation expenses and income taxes on
reimbursed amount
6
</TABLE>
<PAGE>
OPTION GRANTS
The following table sets forth certain information concerning the number
of shares and the terms and conditions of the stock options granted by the
Company under the Option Plan during the Company's 1995 fiscal year to the
individuals named in the Summary Compensation Table:
<TABLE><CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------------------
Number of % of Total Potential Realizable Value at
Securities Options Assumed Annual Rates of
Underlying Granted to Exercise or Stock Price Appreciation for
Options Employees in Base Price Expiration Option Term($)(3)
Name Granted(#) Fiscal Year ($/Sh)(1) Date(2) 5%($) 10%($)
- ------------------- ----------- ------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Charlotte G. Fischer 75,000 19.5% $ 1.31 10/17/05 $ 61,789 $ 156,585
Eloise Paul 15,000 3.9 1.31 10/17/05 12,358 31,317
John H. Boyers 50,000 13.0 1.63 4/29/05 51,255 129,890
_________________________________
(1) The exercise price is the closing price per share of the Company's Voting Common Stock on the date of
grant.
(2) All option grants to the named individuals in fiscal 1995 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. The options granted to Ms. Fischer and Ms. Paul become exercisable one year from the grant
date. The options granted to Mr. Boyers become exercisable in three equal installments on the first three
anniversaries of the grant date.
(3) The dollar amounts under these columns are the result of calculations at the 5% and 10% rates required by
applicable regulation are not intended to forecast the possible future appreciation, if any, of the
Company's Voting Common Stock.
</TABLE>
Option Exercises and Year-End Values
The following table sets forth certain information concerning the
unexercised stock options held by the individuals named in the Summary
Compensation Table as of February 3, 1996. None of the individuals exercised
any options during the Company's 1995 fiscal year:
<TABLE><CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-The_Money
Options at Fiscal Year-End Options at Fiscal Year-End
-------------------------- --------------------------
Shares Acquired Value
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------ --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charlotte G. Fischer -- -- 111,000 325,000 $ 0 $ 75,000
Eloise Paul -- -- 13,333 26,667 0 15,000
John H. Boyers -- -- 0 50,000 0 34,000
(1) The closing sale price of the Voting Common Stock as reported on the Nasdaq National Market on February 3,
1996 was $2.31. Value is calculated on the basis of the difference between the exercise price and $2.31,
multiplied by the number of "in-the-money" shares of Voting Common Stock underlying the options.
7
</TABLE>
<PAGE>
PENSION PLAN
The following table sets forth the estimated annual benefits payable upon
normal retirement under the Company's non-contributory 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.
<TABLE><CAPTION>
PENSION PLAN TABLE
Years of Service
-------------------------------------------------------------------
Remuneration 15 20 25 30 35 40
------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$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
</TABLE>
Eloise Paul's annual pension benefit upon normal retirement is estimated
to be $10,775. Because the Company ceased benefit accruals as of December 31,
1994, Charlotte G. Fischer and John H. Boyers will be entitled to no annual
pension benefit under the Pension Plan.
OTHER RETIREMENT PLANS
The Company maintains a tax-qualified retirement savings plan for eligible
employees which contains a cash or deferred arrangement described in section
401(k) of the Internal Revenue Code of 1986, as amended (the "401(k) Plan").
The 401(k) Plan permits participants to defer up to a maximum of 15% of their
compensation (as defined in the 40l(k) Plan), subject to certain limits imposed
by the Internal Revenue Code of 1986, as amended. Participants' salary
deferrals will be matched by the Company in an amount equal to 25% up to a
maximum of 4% of the participant's compensation. All amounts in the plan are
fully vested when contributed.
8
<PAGE>
EMPLOYMENT AGREEMENTS
Charlotte G. Fischer is employed by the Company pursuant to an April 1994
employment agreement which provided for a base salary at the rate of $335,000
per annum through January 28, 1995 and $360,000 per annum thereafter. The
agreement requires the Compensation Committee to review Ms. Fischer's
performance on an annual basis and consider an increase to base salary that
would be retroactive to the beginning of the fiscal year; however, base salary
may not be reduced from the prior year's amount. The term of the agreement
expires, subject to extension, in April 1997, but Ms. Fischer may terminate the
agreement at any time after January 1996 upon at least 180 days prior written
notice. The 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.
On March 2, 1995, John H. Boyers was offered employment for his current
positions with the Company at a base salary of $120,000 with a guaranteed
minimum bonus of $15,000 for fiscal 1995. The offer also included options to
purchase a minimum of 50,000 shares of Voting Common Stock and reimbursement of
up to $15,000 in relocation expenses. The offer also specified a minimum
severance benefit in the event his employment is terminated without cause equal
to six months salary, continuation of medical and dental benefits for six
months and relocation costs.
Gerald Paul is employed as a part-time consultant through the end of the
Company's 1996 fiscal year pursuant to a March 1994 agreement. The agreement
provides for Mr. Paul to receive a base salary of $132,500 per annum. The
agreement also provides that Mr. Paul is entitled to participate in any bonus
program created for employees during its term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal year 1995 were
Stig A. Kry, Sally M. Tassani and Roger D. Blackwell. None of the Compensation
Committee members were involved in a relationship requiring disclosure as an
interlocking executive or director under Item 404 of Regulation S-K or as a
former officer or employee of the Company.
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 1995 fiscal year, the Board of Directors took no action with
respect to the compensation paid to the Company's Chief Executive Officer,
Charlotte G. Fischer. Ms. Fischer's compensation was determined by her
April 1994 employment agreement. See "EXECUTIVE COMPENSATION -- Employment
Agreements." As a result of shareholder action taken at the 1994 Annual
Meeting, the Company's 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.
9
<PAGE>
For the 1995 fiscal year, the Board of Directors adopted, at the
recommendation of the Compensation Committee, a 1995 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 under the program, although Mr. Boyers
was paid the guaranteed bonus contemplated in his offer of employment.
Members of the Compensation Committee
Stig A. Kry, Chair
Sally M. Tassani
Roger D. Blackwell
STOCK PRICE PERFORMANCE GRAPHS
The first graph below compares cumulative total returns to shareholders,
assuming reinvestment of dividends, if any, of the Company, the Standard &
Poor's Apparel Index and the Standard & Poor's 500 Index. It assumes an
investment of $100 on February 2, 1991, 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 of $100 on September 15, 1992, the effective date of the Company's
Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code.
COMPARISON OF 5 YEAR CUMULATIVE RETURNS OF
THE COMPANY, S&P-APPAREL INDEX, S&P 500 INDEX
FISCAL YEAR ENDING
-------------------
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------
Paul Harris Stores, Inc. 100.00 24.98 57.87 110.31 51.47 36.44
S&P Apparel Index 100.00 172.17 151.51 128.87 103.25 122.96
S&P 500 Index 100.00 122.71 135.72 153.20 154.01 213.56
10
<PAGE>
COMPARISON OF CUMULATIVE RETURNS SINCE SEPTEMBER 15, 1992
OF THE COMPANY, S&P-APPAREL INDEX, S&P 500 INDEX
FISCAL YEAR ENDING
-------------------
1992 1993 1994 1995 1996
------ ------ ------ ------ ------
Paul Harris Stores, Inc. 100.00 250.00 429.20 200.00 141.67
S&P Apparel Index 100.00 118.97 101.19 81.08 96.55
S&P 500 Index 100.00 105.93 119.57 120.20 166.69
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. Although the Company is not required to maintain any life
insurance on Mr. Paul's life, the Company currently owns paid-up policies with
an aggregate face amount of $1,935,000.
11
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The appointment of Price Waterhouse LLP as independent auditors for the
Company during its 1996 fiscal year will be submitted to the meeting in order
to permit the shareholders to express their approval or disapproval. In the
event of a negative vote, a selection of other auditors will be made by the
Board upon recommendation of the Audit Committee. A representative of Price
Waterhouse LLP is expected to be present at the meeting, will be given an
opportunity to make a statement if he desires and will respond to appropriate
questions. Notwithstanding approval by the shareholders, the Board of
Directors reserves the right to replace the auditors at any time upon the
recommendation of the Audit Committee of the Board of Directors.
The Board of Directors recommends that shareholders vote FOR the
ratification of the appointment of Price Waterhouse LLP as the Company's
independent auditors during fiscal 1996.
DEADLINE FOR RECEIPT OF SHAREHOLDERS'
PROPOSALS FOR THE 1997 ANNUAL MEETING
Proposals of shareholders that are intended to be presented by such
shareholders at the Company's 1997 Annual Meeting must be received by the
Company no later than January 16, 1997 in order to be included in the Company's
Proxy Statement and form of Proxy relating to that meeting.
INCORPORATION BY REFERENCE
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that may incorporate future
filings (including this Proxy Statement, in whole or in part), the Stock Price
Performance Graphs and Compensation Committee Report on Executive Compensation
included herein shall not be incorporated by reference in any such filings.
MISCELLANEOUS
The Annual Report to Shareholders for the fiscal year ended February 3,
1996 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. In addition, a copy of the Company's Annual Report on
Form 10-K for fiscal 1995 as filed with the Securities and Exchange Commission,
including financial statements but excluding exhibits, may be obtained without
charge upon written request to John H. Boyers, Senior Vice President - Finance
and Treasurer, Paul Harris Stores, Inc., 6003 Guion Road, Indianapolis, Indiana
46254.
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 1995
all Section 16(a) filing requirements applicable to its executive officers,
directors and greater
12
<PAGE>
than 10% beneficial owners were timely satisfied. However, Mr. Greer
inadvertently filed one late report for the Company's 1996 fiscal year.
13
<PAGE>
PAUL HARRIS STORES, INC.
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting June 19, 1996
The undersigned hereby constitutes and appoints Charlotte G. Fischer and
Keith L. Himmel, Jr. and each of them, his or her true and lawful agents and
proxies with full power of substitution in each, to represent the undersigned
at the Annual Meeting of Shareholders of Paul Harris Stores, Inc. to be held at
the Paul Harris Corporate Headquarters in Indianapolis, Indiana on Wednesday,
June 19, 1996 and at any adjournment thereof, on all matters coming before said
meeting.
You are encouraged to specify your choice by marking the appropriate box,
SEE REVERSE SIDE, but you need not mark any box 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.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE) SEE REVERSE
SIDE
=========
Please mark votes
X as in 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.
FOR AGAINST ABSTAIN
1-ELECTION OF DIRECTORS 2. Proposal to ___ _______ _______
Nominees: Rudy Greer ratify the
Gerald Paul selection of
Price Waterhouse
LLP as independent
auditors for the
FOR WITHHELD fiscal year 1996.
___ ________ 3. Upon or in connection with the
transaction of such other business
as may properly come before the meeting
or any adjournment thereof.
____________________________________
To withhold authority to vote for any nominee, write the 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 Signature:__________________ Date__________
return the proxy card Signature:__________________ Date__________
promptly using the enclosed
envelope.
