<PAGE> 1
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 sections 240.14a-11(c) or
sections 240.14a-12
PAUL HARRIS STORES, 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 ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
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> 2
PAUL HARRIS STORES, INC.
6003 GUION ROAD
INDIANAPOLIS, INDIANA 46254
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 1999
------------------------
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, May 19, 1999, 9:00 a.m., local time, at
the Paul Harris store at 11 South Meridian Street, Indianapolis, Indiana, for
the following purposes:
1. To elect two directors to the Board of Directors of the Company to
serve until the 2002 Annual Meeting of Shareholders and until their
successors are elected and have qualified;
2. To approve the proposed amendment to the Company's 1996 Stock Option
and Incentive Plan, which increases from 1,000,000 to 2,000,000 the
number of shares of the Company's common stock, without par value,
subject to issuance under the plan;
3. To approve an amendment of the Company's Amended and Restated
Articles of Incorporation to increase the number of authorized shares of
the Company's common stock, without par value, from 20,000,000 to
40,000,000;
4. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditors for the 1999 fiscal year; and
5. 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 March 11, 1999 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
April 14, 1999
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> 3
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, May 19, 1999, at 9:00 a.m., local time, at the Paul Harris
store at 11 South Meridian Street, 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 ELECTION AS DIRECTORS OF THE TWO
NOMINEES NAMED HEREIN AND FOR PROPOSALS 2, 3 AND 4. These proxy solicitation
materials and the accompanying Annual Report to Shareholders for the fiscal year
ended January 30, 1999 (the "1998 fiscal year") are first being sent to
shareholders on or about April 14, 1999.
As of March 11, 1999, the record date fixed for the determination of
shareholders of the Company entitled to notice of, and to vote at, the Annual
Meeting, there were outstanding 10,798,814 shares of the Company's Common Stock
(the "Common Stock"). Each share of 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.
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.
A majority of the outstanding shares of Common Stock present in person or
by proxy at the Annual Meeting will constitute a quorum for the purpose of
conducting business at the Annual Meeting. The election of Directors will be
determined by the vote of the holders of a plurality of the shares voting on
such election. The approval of Proposals 2 and 4 are subject to the vote of the
holders of a greater number of shares favoring approval than those opposing it.
The approval of Proposal 3 is subject to the affirmative vote of a majority of
the shares outstanding and entitled to vote on the matter. A proxy may indicate
that all or a portion of the shares represented by such proxy are not being
voted with respect to a specific proposal. This could occur, for example, when
broker is not permitted to vote shares held in street name on certain proposals
in the absence of instructions from the beneficial owner. Shares that are not
voted with respect to a specific proposal will be considered as not present and
entitled to vote on such proposal, even though such shares will be considered
present for purposes of determining a quorum and voting on other proposals.
Abstentions on a specific proposal will be considered as present, but not as
voting in favor of such proposal. As a result, neither broker non-votes nor
abstentions will affect the determination of whether a nominee will be elected
under Proposal 1 or whether Proposals 2 and 4 will be approved, but with respect
to Proposal 3, broker non-votes and abstentions would have the same effect as a
vote against such proposal.
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. To be considered at the Annual
Meeting, any matters proposed by shareholders must comply with the advance
notification requirements set forth in the Company's By-Laws. A copy of the
advance notification requirements may be obtained from Keith L. Himmel, Jr.,
Secretary, Paul Harris Stores, Inc., 6003 Guion Road, Indianapolis, Indiana
46254.
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
<PAGE> 4
Company and by Corporate Investor Communication, Inc., a proxy solicitation
firm, for a fee of $3,500, plus out-of-pocket expenses not to exceed $1,200. The
telephone number of Corporate Investor Communication, Inc. is (201) 896-1900.
Arrangements will be made with brokerage houses and other nominees, custodians
and fiduciaries to forward soliciting material to beneficial owners of the
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 March 11, 1999 of more than five percent
of the outstanding shares of the Company's Common Stock. Except as set forth
below, the shareholders named below have sole voting and investment power with
respect to all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------------------------ ------------------ --------
<S> <C> <C>
Charlotte G. Fischer........................................ 852,800(1) 7.35%
6003 Guion Road
Indianapolis, IN 46254
</TABLE>
- ---------------
(1) Includes 811,000 shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes 2,400 shares held by members of
Ms. Fischer's family, the beneficial ownership of which are disclaimed by
Ms. Fischer.
2
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT
Based upon information provided by such individuals, the following table
shows, as of March 11, 1999, the shares of the Company's Common Stock
beneficially owned by each of the Company's directors and nominees for election
to the Board, each executive officer of the Company named in the Summary
Compensation Table, and all directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK PERCENT
NAME BENEFICIALLY OWNED(1) OF CLASS
- ---- ---------------------- --------
<S> <C> <C>
Richard A. Feinberg, Ph.D................................... 12,000 *
Charlotte G. Fischer........................................ 852,800 7.35%
Thomas McCain............................................... -- *
James T. Morris............................................. 17,000 *
Leslie Nathanson Juris, Ph.D................................ 8,000 *
John E. Peters.............................................. 15,000 *
Sally M. Tassani............................................ 21,000 *
John H. Boyers(2)........................................... 121,333 1.12%
All directors and executive officers as a group (8
individuals).............................................. 1,047,133 8.93%
</TABLE>
- ---------------
* Less than one percent
(1) Each person has sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by him or her except: (i) 2,400
shares included as being owned by Ms. Fischer which are held by members of
her family (Ms. Fischer disclaims beneficial ownership of such shares); (ii)
the following shares subject to outstanding options which are exercisable
within 60 days: Mr. Feinberg, 11,000 shares; Ms. Fischer, 811,000 shares;
Ms. Juris, 8,000 shares; Mr. Morris, 11,000 shares; Mr. Peters, 5,000
shares; Ms. Tassani, 11,000 shares; Mr. Boyers, 73,333 shares; and all
directors and executive officers as a group, 990,333 shares.
(2) Mr. Boyers was employed by the Company from March 6, 1995 to October 31,
1998.
3
<PAGE> 6
ELECTION OF DIRECTORS
The Board of Directors currently consists of six members divided into three
classes. Pursuant to the Company's Amended and Restated Articles of
Incorporation, the Board of Directors is to be divided into three classes, with
each class serving a three-year term and each class containing the same number
of directors as near as practicable.
Two directors are to be elected at the Annual Meeting for a term expiring
at the 2002 Annual Meeting. In order to equalize the number of directors in each
class, Charlotte G. Fischer is standing for re-election this year even though
her current term was not to expire until 2000. The Company's By-Laws currently
provide for a Board of Directors consisting of six directors. The enclosed Proxy
cannot be voted for a greater number of persons than the two nominees for
director listed below.
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.
NOMINEES
<TABLE>
<CAPTION>
NOMINEE
DIRECTOR FOR TERM
NAME OF NOMINEE AGE SINCE EXPIRING IN
- --------------- --- -------- -----------
<S> <C> <C> <C>
Richard A. Feinberg, Ph.D................................... 48 1997 2002
Charlotte G. Fischer........................................ 49 1993 2002
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE ABOVE NOMINEES.
CONTINUING DIRECTORS
The following table contains certain information with respect to each other
member of the Board of Directors whose term will continue after the Annual
Meeting:
<TABLE>
<CAPTION>
DIRECTOR TERM EXPIRES
NAME OF DIRECTOR AGE SINCE IN
- ---------------- --- -------- ------------
<S> <C> <C> <C>
James T. Morris............................................. 56 1996 2000
Sally M. Tassani............................................ 50 1995 2000
Leslie Nathanson Juris, Ph.D................................ 52 1998 2001
John E. Peters.............................................. 51 1998 2001
</TABLE>
BIOGRAPHICAL INFORMATION
Richard A. Feinberg, Ph.D., is a Professor of Consumer Sciences and
Retailing at Purdue University, a position he has held since 1989. His other
current positions with Purdue University include Director of the Center for
Customer Driven Quality, an Associate of the Business and Industrial Development
Center, and a member of the board of directors of the Purdue University Press.
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 of the Company. 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. Ms. Fischer is a director of Trans World
Entertainment Corp., Inc. and National City Bank of Indiana.
Leslie Nathanson Juris, Ph.D. is a founding partner of Roberts, Nathanson &
Wolfson, a consulting firm specializing in implementing strategy and managing
complex organizational change. Prior to January 1, 1999, she was the managing
director of Roberts, Nathanson & Wolfson, a position she had held for more than
the past five years.
4
<PAGE> 7
James T. Morris is the chairman of the board and president and chief
executive officer of IWC Resources Corporation, a water utility holding company,
positions he has held for more than the past five years. Mr. Morris is also a
director of NIPSCO Industries, Inc., American United Life and National City Bank
of Indiana.
John E. Peters has been president of Oak Ridge Investments, an investment
management company, since July 1998. He was president of Dreman Value Management
LLC, an equity management company, from October 1997 to June 1998. From 1984 to
1996, he was employed by Zurich Kemper Investments, a mutual fund and cash
management services firm, serving as senior vice president and managing director
of the retail products business unit from 1990 to 1996 and as president and
chief executive officer of Kemper Distributors, Inc. from 1994 to 1996.
Sally M. Tassani became Executive Vice President-Marketing for the Company
in July 1998. She was an independent consultant and subsequently a managing
director of Tassani Partners LLC, a strategic marketing communications firm,
from July 1997 to June 1998. She was senior vice president-director of direct
marketing and sales promotion for Leo Burnett Company, Inc., an advertising
agency, from October 1995 until July 1997. From August 1995 to September 1995,
she was senior vice president of Bender, Browning, Dolby & 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.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has a Finance and Audit Committee (the "Audit
Committee") which is currently composed of Messrs. Feinberg, Peters and Morris.
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 1998 fiscal year.
The Board of Directors also has a Compensation and Stock Option Committee
(the "Compensation Committee") which is currently composed of Mr. Feinberg, Ms.
Juris, Mr. Morris and Mr. Peters. The Compensation Committee considers and
authorizes remuneration arrangements for senior management, including the grant
of options under the Company's option plans. The Compensation Committee met
three times during the Company's 1998 fiscal year.
The Board of Directors also has a Nominating Committee which is currently
composed of Ms. Fischer, Ms. Juris and Ms. Tassani. The Nominating Committee
nominates persons to serve as directors. The Nominating Committee met one time
during the Company's 1998 fiscal year. The Nominating Committee will consider
candidates recommended by shareholders. Shareholders who wish to nominate
persons for election as directors must comply with the advance notification
requirements contained in the Company's By-Laws, a copy of which is available
upon request. Any such request or nominations should be addressed to Keith L.
Himmel, Jr., Secretary, Paul Harris Stores, Inc., 6003 Guion Road, Indianapolis,
IN 46254.
During the Company's 1998 fiscal year, the Board of Directors held five
meetings. Each director attended every meeting of the Board and every meeting of
each committee of the Board of which he or she was a member.
Directors who are not employees of the Company receive fees of $20,000 per
annum for attending four regular meetings of the Board. Non-employee directors
also receive fees for additional meetings of $1,000 (if attended in person) or
$500 (if attended via telephone conference) per meeting. The Chairs of the Audit
Committee, the Compensation Committee and the Nominating Committee receive
additional fees of $3,000 per annum. Each member of such committees receives an
additional $1,000 per annum.
5
<PAGE> 8
Directors who are not employees of the Company participate in the Company's
Outside Directors Stock Option Plan (the "Directors Plan"). Under the Directors
Plan, annually each eligible director is granted an option to purchase 3,000
shares of Common Stock in the month following the annual meeting of
shareholders. In addition, newly elected eligible directors receive an option to
purchase 5,000 shares of Common Stock in the month following election. Pursuant
to the Directors Plan, the option price per share is equal to the fair market
value of one share of Common Stock on the date of grant. The options become
exercisable six months following the date of grant and expire ten years
following the date of grant. During 1998, eligible directors were granted
options to purchase an aggregate of 22,000 shares of Common Stock.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth the annual and long-term compensation of
each individual who served as an executive officer of the Company during the
1998 fiscal year for services rendered during the Company's 1998, 1997 and 1996
fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------- --------------------------
OTHER
ANNUAL SECURITIES ALL OTHER
COMPEN- RESTRICTED UNDERLYING COMPEN-
FISCAL BONUS SATION STOCK AWARDS OPTIONS SATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($)(1) ($) ($) (#) ($)(2)
- --------------------------- ------ ---------- -------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Charlotte G. Fischer...... 1998 $700,000 $200,000 -- $347,000(3) 175,000 $ 3,052(4)
Chairman of the Board, 1997 500,000 550,000 $1,000,000(5) 50,000 2,905(4)
President and Chief 1996 420,000 640,000(6) -- 200,000 2,758(4)
Executive Officer
Sally Tassani(7).......... 1998 144,231 0 -- 60,000 121,894(8)
Executive Vice President 1997 -- -- -- -- --
Marketing 1996 -- -- -- -- --
Thomas McCain(9).......... 1998 56,269 0 -- 50,000 1,855(10)
Senior Vice President of 1997 -- -- -- -- --
Finance and Chief Financial 1996 -- -- -- -- --
Officer
John H. Boyers(11)........ 1998 175,000 0 -- 0 8,777(12)(13)
Senior Vice 1997 175,000 135,000 -- 0 2,895(13)
President-Finance
and Treasurer 1996 131,000 96,000 -- 50,000 2,187(13)
</TABLE>
- ---------------
(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) Represents the value of an award of 50,000 shares of restricted stock
calculated by multiplying the closing price of the Company's Common Stock
on the date of grant, which was $6.94, by 50,000 shares. As of January 30,
1999, the value of such shares of restricted stock using the closing price
of the Company's Common Stock on January 29, 1999 of $7.625 was $381,250.
(4) Of the amounts shown, $1,747 for 1998, $1,600 for 1997 and $1,453 for 1996
represent Company-paid contributions to the 401(k) retirement plan.
Company-paid contributions are fully vested upon contribution.
(5) Represents a one-time payment made to Ms. Fischer in connection with her
employment agreement in recognition of past service and accomplishments.
See "--Employment Agreements."
(6) The amount shown includes deferred compensation of $47,000, which was paid
in 1998.
(7) Ms. Tassani became Executive Vice President -- Marketing in July 1998. The
amounts shown do not include consulting fees of $116,000 and director fees
of $14,195 earned prior to her being employed by the Company in July 1998.
(8) Of the amount shown, (i) $70,994 represents relocation expenses and income
taxes on reimbursed amounts paid by the Company and (ii) $50,000 represents
a signing bonus paid by the Company.
(9) Mr. McCain became Senior Vice President and Chief Financial Officer in
October 1998.
(10) Of the amount shown, $1,591 represents relocation expenses and taxes on the
reimbursed amounts.
(11) Mr. Boyers left the Company as of October 31, 1998. The Company agreed to
pay a minimum severance benefit of six months' salary, continued medical
and dental benefits for six months and relocation costs in the event his
employment was terminated without cause.
(12) Of the amount shown, $5,697 represents relocation expenses paid by the
Company.
(13) Of the amounts shown, $1,640 for 1998, $1,455 for 1997 and $747 for 1996
represent Company-paid contributions to the 401(k) retirement plan. Company
paid contributions are fully vested upon contribution.
7
<PAGE> 10
OPTION GRANTS
The following table sets forth certain information concerning the number of
shares and the terms and conditions of the stock options granted by the Company
under the 1996 Stock Option and Incentive Plan (the "1996 Plan") during the
Company's 1998 fiscal year to the individuals named in the Summary Compensation
Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM($)(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH)(2) DATE(3) 5%($) 10%($)
- ---- ---------- ------------ --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Charlotte G. Fischer....... 100,000 18.47% $ 8.875 3/2/08(4) $558,144 $1,414,446
50,000 9.23% 6.940 8/30/08(5) 218,226 553,029
25,000 4.62% 7.625 1/30/09(4) 119,883 303,807
Sally Tassani.............. 3,000 0.55% 12.880 6/1/08(6) 24,300 61,582
10,000 1.85% 12.520 7/6/08(7) 78,738 199,537
10,000 1.85% 10.250 8/6/08(7) 64,462 163,359
10,000 1.85% 8.310 9/6/08(7) 52,261 132,440
30,000 5.54% 9.120 9/28/08(7) 172,066 436,048
Thomas McCain.............. 50,000 9.23% 7.875 10/15/08(7) 247,627 627,536
John H. Boyers............. 0
</TABLE>
- ---------------
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates required by applicable regulation and are not intended to
forecast the possible future appreciation, if any, of the Common Stock.
(2) The exercise price is the closing market price per share of the Common Stock
on the date of grant.
(3) All option grants to the named individuals in fiscal 1998 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
under certain specified circumstances.
(4) These options were immediately exercisable on the date of grant.
(5) These options become exercisable for 40,000 shares on the first anniversary
date of the grant and for 5,000 shares on each of the second and third
anniversary dates of the grant.
(6) These options were awarded when Ms. Tassani was a director of the Company
and are exercisable six months from the date of grant.
(7) These options become exercisable in three equal installments on the first
three anniversaries of the grant date.
8
<PAGE> 11
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information concerning stock option
exercises by the individuals named in the Summary Compensation Table during the
1998 fiscal year and the unexercised stock options held by such individuals as
of January 30, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR-END IN-THE-MONEY OPTIONS
SHARES ACQUIRED (#) AT FISCAL YEAR-END ($)(1)
ON EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charlotte G. Fischer.... 0 $ 0 811,000 50,000 $1,736,000 $34,250
Sally Tassani........... 0 0 11,000 60,000 -- --
Thomas McCain........... 0 0 0 50,000 -- --
John H. Boyers(2)....... 0 0 73,333 16,667 239,800 --
</TABLE>
- ---------------
(1) The closing sale price of the Common Stock as reported on the Nasdaq
National Market on January 29, 1999 was $7.625. Value is calculated on the
basis of the difference between the exercise price and $7.625, multiplied by
the number of "In-The-Money" shares of Common Stock underlying the options.
(2) Mr. Boyers was employed by the Company from March 6, 1995 to October 31,
1998.
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 "Code") (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 Code. Participant salary deferrals were matched by the
Company in an amount equal to 25% until January 1, 1998, when the amount was
increased to 50%, up to a maximum of 4% of the participant's compensation. All
amounts in the plan are fully vested when contributed.
EMPLOYMENT AGREEMENTS
Charlotte G. Fischer is employed as the Company's Chief Executive Officer
pursuant to an employment agreement which has a term ending January 31, 2003.
The agreement will terminate earlier in the event of Ms. Fischer's death or
disability, the Company's termination for "cause" (as defined therein) or upon
180 days' prior written notice by Ms. Fischer. Upon the occurrence of such
events, Ms. Fischer would be entitled to receive the amount of base salary
accrued prior to the termination of employment and to exercise any vested stock
options for a period of at least six months, and, in the event of her death or
disability, she would be entitled to a pro rata bonus for the year of
termination and an extended option exercise period. In the event the Company
terminates Ms. Fischer's employment without cause (which includes a
"constructive termination" as defined therein), the Company shall pay to Ms.
Fischer the base salary she would have been entitled to through January 31, 2003
had her employment not been terminated, but not less than $1,750,000, and a
bonus for the fiscal year in which the termination occurs, assuming that she had
worked to fiscal year-end. In such event, Ms. Fischer would also be entitled to
exercise any stock option granted to her by the Company, to the extent vested
and exercisable, at any time during the remaining term of the stock option. The
agreement does not provide for severance benefits following the expiration of
the term of the agreement on January 31, 2003.
Under the agreement, Ms. Fischer is paid a base salary which is $775,000
for the 1999 fiscal year, and which will increase each fiscal year up to
$1,000,000 during the last year of the agreement, which is the 2002
9
<PAGE> 12
fiscal year. In recognition of past service and accomplishments, the Company
also awarded Ms. Fischer a one-time special bonus of $500,000 payable during
1997 and $500,000 payable during 1998. The agreement provides for annual bonus
compensation (as long as the Company has pretax earnings in excess of $200,000)
equal to the greater of $200,000 or percentages of base salary contingent upon
the Company achieving pretax earnings targets in each fiscal year, up to a
maximum bonus equal to 200% of base salary for each fiscal year. In the event
that Ms. Fischer elects to participate in the Company's 1998 Cash Bonus
Performance Plan for Executive Officers (the "Bonus Plan") during a particular
fiscal year, then the provisions of the Bonus Plan will supersede the provisions
of the agreement with respect to Ms. Fischer's cash bonus for such fiscal year.
The agreement provides for annual awards to Ms. Fischer of non-qualified
stock options to purchase a number of shares of Common Stock based on the
Company's "annual total return to shareholders" for such fiscal year, as
compared to the "women's specialty peer group" (as such terms are defined in the
agreement). The exercise price of the options is the closing price per share of
the Common Stock on the date of grant and the options expire on the tenth
anniversary of the date of grant, subject to earlier expiration in the event of
termination of employment under certain specified circumstances. The agreement
provides that the Company will grant to Ms. Fischer restricted stock awards of
at least 50,000 shares of Common Stock each fiscal year, contingent upon the
attainment of specified performance goals related to the Company's strategic,
business and financial objectives. Upon attainment of the goals, Ms. Fischer
will be awarded the restricted stock, subject to a vesting schedule. In the
event that Ms. Fischer elects to participate under the portion of the 1996 Plan,
as amended, governing performance-based awards of restricted shares of Common
Stock during a particular fiscal year, then the terms of the 1996 Plan will
supersede the provisions of the agreement with respect to awards of restricted
stock for such fiscal year.
Ms. Fischer's employment agreement also includes a confidentiality
agreement and a one-year covenant not to compete and not to solicit employees if
Ms. Fischer terminates her employment in violation of the agreement prior to the
expiration of the term or if the Company terminates her employment for cause. In
the event of termination of Ms. Fischer's employment or constructive termination
following a "change in control" (as defined therein) of the Company prior to
January 31, 2003, Ms. Fischer would be entitled to receive her base salary
through the termination date, a lump sum payment of 2.9 times the greater of her
then current base salary or her base salary for the most recent fiscal year
ended prior to such termination (reduced by the value of certain other
benefits), a bonus for the fiscal year in which termination occurs (equal to the
greater of her bonus for the most recent fiscal year ended prior to such
termination or her bonus for the fiscal year in which such termination occurs
based on her then current base salary and assuming that she had been employed by
the Company for the entire fiscal year), the continuation of Company-paid health
insurance for 36 months, the continuation of other benefits for a period of one
year and the right to exercise any stock option to the extent vested and
exercisable, at any time during the remaining term of such stock option. The
intent of these provisions and the 2.9 limitation is to prevent the benefits
from being characterized as parachute payments under Section 280G of the Code.
These benefits are not payable unless, prior to January 31, 2003, Ms. Fischer is
terminated from employment (including constructive termination) after a
change-in-control.
The Company has agreed to pay Ms. Tassani a severance benefit in the event
her employment is terminated without cause equal to a maximum of twelve months'
salary. The Company has also agreed to pay Mr. McCain a severance benefit in the
event his employment is terminated without cause equal to a maximum of six
months' salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal year 1998 were
current directors Mr. Feinberg, Ms. Juris, Mr. Morris, Mr. Peters and Ms.
Tassani (Ms. Tassani was the chair of the Compensation Committee until June 1998
when she became Executive Vice President-Marketing for the Company in July 1998,
at which time she resigned her position as a member of the Compensation
Committee). Except for Ms. Tassani, 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 current or former
officer or employee of the Company.
10
<PAGE> 13
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. During the
1997 fiscal year, the Compensation Committee utilized the services of a
consulting firm to assist it in determining competitive compensation packages
for the Company's key executives.
The Company's compensation arrangements consist of base salary, cash
incentive bonuses and long-term incentive compensation consisting of stock
grants or stock options. The Company's compensation programs are designed to:
(i) attract, retain and demonstrate a commitment to key executives; (ii)
reinforce strategic initiatives; (iii) align management interests with those of
shareholders through grants of stock options; (iv) provide compensation levels
that are in line with market practice and performance; and (v) provide above
average competitive compensation when aggressive financial performance targets
are met. The competitive positioning of compensation levels is periodically
reviewed and adjusted as appropriate.
Effective February 1, 1998, the Company entered into a new employment
agreement with Ms. Fischer replacing a previous employment agreement with her.
The new agreement extended the term of Ms. Fischer's employment to January 31,
2003. The new agreement increased Ms. Fischer's base salary from $500,000 for
the 1997 fiscal year to $700,000 for the 1998 fiscal year, and provides for
annual increases in Ms. Fischer's base salary up to $1,000,000 in the 2002
fiscal year. The agreement provides for annual bonuses equal to specified
percentages of base salary contingent upon the Company achieving specified
targets for pretax earnings in a fiscal year, performance-based awards of
options to purchase shares of Common Stock and performance-based awards of
restricted stock. In recognition of past service and accomplishments, the
Company also awarded Ms. Fischer a one-time special bonus of $500,000 payable
during 1997 and $500,000 payable during 1998. See "EXECUTIVE
COMPENSATION --Employment Agreements."
The Company awarded options to purchase an aggregate of 456,500 shares of
Common Stock to 12 officers of the Company under the 1996 Plan and the Company's
1992 Non-Qualified Stock Option Plan.
MEMBERS OF THE COMPENSATION AND STOCK OPTION COMMITTEE
Richard A. Feinberg, Ph.D.
Leslie Nathanson Juris, Ph.D.
James T. Morris
John E. Peters
11
<PAGE> 14
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total returns to shareholders, assuming
reinvestment of dividends, if any, of the Company, the Standard & Poor's Retail
(Specialty Apparel) Index and the Standard & Poor's 500 Index. It assumes an
investment of $100 on January 29, 1994, the date immediately prior to the
commencement of the Company's last five complete fiscal years, in the Company,
the Standard & Poor's Retail (Specialty Apparel) Index and the Standard & Poor's
500 Index.
COMPARISON OF 5 YEAR CUMULATIVE RETURNS OF
THE COMPANY, S&P RETAIL (SPECIALTY APPAREL) INDEX, S&P 500 INDEX
<TABLE>
<CAPTION>
S&P RETAIL (SPECIALITY
PAUL HARRIS STORES APPAREL) INDEX S&P 500 INDEX
------------------ ---------------------- -------------
<S> <C> <C> <C>
'1/29/94' 100 100 100
'1994' 46.6 80.12 100.53
'1995' 33.01 95.41 139.4
'1996' 320.36 120.81 176.13
'1997' 133.97 219.32 223.52
'1998' 118.44 372.48 296.14
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FISCAL YEAR
--------------------------------------------------------------------------------
1/29/94 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Paul Harris Stores, Inc. 100.00 46.60 33.01 320.36 133.97 118.44
- ----------------------------------------------------------------------------------------------------------------------
S&P Retail (Specialty Apparel)
Index 100.00 80.12 95.41 120.81 219.32 372.48
- ----------------------------------------------------------------------------------------------------------------------
S&P 500 Index 100.00 100.53 139.40 176.13 223.52 296.14
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 15
APPROVAL OF AMENDMENT TO THE 1996 STOCK OPTION AND INCENTIVE PLAN
On March 2, 1999, the Board of Directors of the Company adopted an
amendment to the Company's 1996 Stock Option and Incentive Plan (the "1996
Plan"), and directed that the amendment to the 1996 Plan be submitted to the
shareholders of the Company for consideration and approval at the 1999 annual
meeting. The amendment would increase from 1,000,000 to 2,000,000 the number of
shares of Common Stock available for issuance pursuant to awards made under the
1996 Plan.
As of March 11, 1999, options to purchase 636,800 shares of Common Stock
and 50,000 shares of restricted stock were outstanding under the 1996 Plan. No
awards of stock appreciation rights or performance shares have been awarded
under the 1996 Plan as of the date of this Proxy Statement.
The following is a summary of the principal features of the 1996 Plan. The
summary is qualified in its entirety by reference to the complete text of the
1996 Plan, as proposed to be amended. The proposed amendment to the 1996 Plan is
set forth as Appendix A to this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT.
PURPOSE
The purpose of the 1996 Plan is to promote the long-term interests of the
Company and its shareholders by providing a means of attracting and retaining
officers and key employees of the Company. The Company believes that employees
who own shares of the Company's Common Stock will have a closer identification
with the Company and greater motivation to work for the Company's success by
reason of their ability as shareholders to participate in the Company's growth
and earnings.
ELIGIBLE PERSONS
Recipients of incentive awards under the 1996 Plan must be, or have been at
the time of grant, officers or key employees of the Company or its subsidiaries
as determined by the Compensation Committee. The Company presently has
approximately 375 officers and employees who fall within the category of key
employees and may be considered for incentive awards under the 1996 Plan. No
awards may be granted under the 1996 Plan to Directors who are not also
employees of the Company or one of its subsidiaries.
SHARES SUBJECT TO THE 1996 STOCK OPTION PLAN
If the amendment to the 1996 Plan is approved by the shareholders, the
number of shares of the Company's Common Stock subject to the 1996 Plan would be
increased from 1,000,000 to 2,000,000. The number of shares of the Company's
Common Stock subject to the 1996 Plan is subject to adjustment in certain
events. No individual participant may receive awards for more than 200,000
shares in any calendar year.
The number of shares covered by an award under the 1996 Plan reduces the
number of shares available for future awards under the 1996 Plan; however, any
shares of restricted stock or performance shares that ultimately are forfeited
to the Company by the grantee will become available for further incentive awards
under the 1996 Plan. Similarly, if any stock option granted under the 1996 Plan
terminates or is surrendered or canceled without having been exercised in full,
the number of shares then subject thereto is added back to the number of
remaining available shares under the 1996 Plan.
The closing sale price of the Company's Common Stock on April 8, 1999, as
quoted on The Nasdaq Stock Market and reported in The Wall Street Journal, was
$6.875 per share.
ADMINISTRATION OF THE 1996 PLAN
The 1996 Plan is administered by the Compensation Committee. The members of
the Compensation Committee must qualify as "non-employee directors" under Rule
16b-3 under the Securities Exchange Act of 1934, as amended, and as "outside
directors" under Section 162(m) of the Code. Subject to the terms of the 1996
Plan, the Compensation Committee has the sole discretion to determine the
officers and key employees
13
<PAGE> 16
who shall be granted awards; to designate the number of shares to be covered by
each award; to establish vesting schedules; subject to certain restrictions, to
specify all other terms of the awards, including the status of awards subsequent
to the termination of a grantee's employment with the Company; and to construe
and interpret the 1996 Plan.
GRANT OF STOCK OPTIONS
With respect to the grant of stock options under the 1996 Plan that are
intended to qualify as "incentive stock options" under Section 422 of the Code,
the option price must be at least 100% (or 110% in the case of any holder of 10%
or more of the Company's voting stock) of the fair market value of the Company's
Common Stock on the date of the grant of the stock option. The aggregate fair
market value (determined on the date of grant) of the shares of stock subject to
"incentive stock options" that become exercisable for the first time by a
grantee in any calendar year may not exceed $100,000. The Compensation Committee
establishes the exercise price of nonqualified stock options at the time the
options are granted.
During the time that the 1996 Plan has been in effect, the Named Executive
Officers have received options to purchase the indicated numbers of shares of
Common Stock (excluding any options which have been canceled or forfeited) under
the 1996 Plan as follows: Charlotte G. Fischer, President and Chief Executive
Officer -- 225,000; Sally M. Tassani, Executive Vice
President-Marketing -- 60,000; Thomas McCain, Senior Vice President and Chief
Financial Officer -- 50,000; and John H. Boyers, past Senior Vice
President-Finance and Treasurer -- 18,300. All current executive officers as a
group have been granted options under the 1996 Plan to purchase 335,000 shares
of the Company's Common Stock. Additionally, options totaling 351,800 shares
have been received by all employees of the Company as a group, other than
executive officers, pursuant to the 1996 Plan. The preceding numbers represent
all option grants pursuant to the 1996 Plan up to March 31, 1999 and do not
include any options which have been canceled or forfeited. None of the current
directors who are not executive officers have been granted any options to
purchase shares of the Company's Common Stock under the 1996 Plan.
EXERCISE OF STOCK OPTIONS
No incentive stock option granted under the 1996 Plan may be exercised more
than ten years, or five years in the case of any holder of 10% or more of the
Company's voting stock, (or such shorter period as the Compensation Committee
may determine) from the date it is granted. Nonqualified stock options may be
exercised during such period as the Compensation Committee determines at the
time of grant.
Stock options granted under the 1996 Plan become exercisable in one or more
installments in the manner and at the time or times specified by the
Compensation Committee at the time of grant. Unless otherwise determined by the
Compensation Committee, if a grantee's employment with the Company or a
subsidiary is terminated for cause or voluntarily by the grantee for any reason
other than death, disability or retirement, such grantee's options expire at the
date of termination.
The exercise price of each option together with an amount sufficient to
satisfy any tax withholding requirement must be paid in full at the time of
exercise. The Compensation Committee may permit payment through the tender of
shares of the Company's Common Stock already owned by the participant,
withholding of shares issuable under the award or by any other means which the
Compensation Committee determines to be consistent with the purpose of the 1996
Plan.
RESTRICTED STOCK
The Compensation Committee may grant awards in the form of restricted
stock, in which case the participant would be granted shares of the Company's
Common Stock, which shares would be subject to such forfeiture provisions and
transfer restrictions as the Compensation Committee determined at the time of
grant. Pending the lapse of such forfeiture provisions and transfer
restrictions, certificates representing shares of restricted stock would be held
by the Company, but the grantee generally would have all of the rights of a
shareholder, including the right to vote the shares and the right to receive all
dividends thereon.
14
<PAGE> 17
While restricted stock would be subject to forfeiture provisions and
transfer restrictions for a period or periods of time, the 1996 Plan does not
set forth any minimum or maximum duration for such provisions and restrictions.
It is expected that the terms of restricted stock awards ordinarily will provide
that the restricted stock will be forfeited to the Company if the grantee ceases
to be employed by the Company prior to the lapse of the forfeiture provisions
and transfer restrictions, subject to exceptions for death, disability or
retirement while employed by the Company. It is also expected that a specified
percentage of the restricted stock will become free of the forfeiture provisions
and transfer restrictions on each anniversary of the date of grant of the
restricted stock award.
During the time that the 1996 Plan has been in effect, the Named Executive
Officers have received restricted stock under the 1996 Plan: Ms. Fischer,
President and Chief Executive Officer -- 50,000 shares. All current executive
officers as a group have been granted restricted stock under the 1996 Plan
totaling 50,000 shares. No shares of restricted stock have been received by any
employee of the Company, other than Ms. Fischer, pursuant to the 1996 Plan. None
of the current directors who are not executive officers have been granted
restricted stock under the 1996 Plan.
STOCK APPRECIATION RIGHTS ("SARS")
SARs may be granted as a separate award or together with an option. The
number of shares covered by such SAR will be determined by the Compensation
Committee. Upon exercise of an SAR, the participant will receive a payment from
the Company equal to (1) the excess of the fair market value of a share of the
Company's Common Stock on the date of exercise over the base price which, in the
case of an SAR granted in connection with a stock option, will equal the
exercise price of the underlying option, times (2) the number of shares with
respect to which the SAR is exercised. SARs may be paid in cash, shares of the
Company's Common Stock or a combination thereof as determined by the
Compensation Committee.
As of the date of this Proxy Statement, the Company has not made any awards
of SARs.
PERFORMANCE SHARES
The Compensation Committee may grant awards of performance shares, in which
case the grantee could be granted shares of the Company's Common Stock, subject
to satisfaction of specified performance goals established by the Compensation
Committee. Performance goals may be established on one or more of the following
business criteria: earnings per share; return on equity; return on assets;
comparable store sales; sales volume; total sales; operating income; market
value per share; costs; market shares; total annual return to shareholders;
total sales volume; net income; or earnings before interest, taxes, depreciation
and amortization. The applicable performance goals and all other terms and
conditions of the award are determined in the discretion of the Compensation
Committee.
After an award of performance shares has vested (that is, after the
applicable performance goal or goals have been achieved), the grantee will be
entitled to a payment of shares of the Company's Common Stock, cash or a
combination thereof. However, no grantee shall receive any such payment unless
the Compensation Committee has certified, by resolution or other appropriate
action in writing, that the amount thereof has been accurately determined in
accordance with the terms, conditions and limits of the 1996 Plan and that the
performance goals and any other material terms previously established by the
Compensation Committee or set forth in the 1996 Plan were in fact satisfied. If
a grantee terminates employment prior to the end of the period of time over
which the performance shares are being earned for any reason other than death,
disability or retirement, all of such grantee's rights with respect to
performance shares that have not yet been earned shall be forfeited. However, a
grantee shall be entitled to receive any performance shares earned as of the
date of termination if the specified performance goals have been attained.
As of the date of this Proxy Statement, the Company has not made any awards
of performance shares.
15
<PAGE> 18
ADJUSTMENTS IN AWARDS
In the event of any reorganization, recapitalization, stock split, stock
dividend, combination or exchange of shares, merger, consolidation or any change
in the corporate structure of the Company affecting shares of the Company's
Common Stock, the Compensation Committee shall adjust the number and class of
shares which may be delivered under the 1996 Plan, and the number of class of
shares subject to outstanding awards, in such manner as the Compensation
Committee (in its sole discretion) shall determine to be appropriate to prevent
the dilution or diminution of such awards.
CHANGE IN CONTROL
In general, if the employment of a recipient of restricted shares is
involuntarily terminated within 18 months following a "Change in Control" of the
Company, the forfeiture provisions and transfer restrictions applicable to such
shares lapse. The Compensation Committee may establish guidelines providing that
if the employment of a recipient of performance shares is terminated before the
end of the performance cycle by reason of a "Change in Control" the recipient
will receive a prorated payment with respect to any performance shares that have
not been earned as of the date of termination. In addition, in the event of a
tender offer or exchange offer for the Company's Common Stock or upon the
occurrence of certain other events, all options and SARs granted under the 1996
Plan shall become exercisable in full, unless otherwise provided by the
Compensation Committee.
NONTRANSFERABILITY OF AWARDS
Except as otherwise expressly provided by the Compensation Committee,
awards granted under the 1996 Plan may not be assigned, encumbered or
transferred, other than by will or by the applicable laws of descent and
distribution.
LOANS BY THE COMPANY
The 1996 Plan empowers the Company to make loans to grantees in connection
with the exercise of stock options or the ownership of restricted stock, up to
the following amounts:
(1) With respect to the exercise of stock options, the sum of the
exercise price and the amount of income taxes reasonably estimated to be
payable by the grantee in connection with such exercise; or
(2) With respect to restricted stock, the amount of income taxes
reasonably estimated to be payable by the grantee in connection with the
ownership of the restricted stock.
Loans made under the terms of the 1996 Plan bear interest at such rates as
may be established by the Company. No loan may have an initial term exceeding
three years, but the loan may be renewed at the discretion of the Compensation
Committee. With the consent of the Compensation Committee, loans may be repaid
in shares of the Company's Common Stock at their then fair market value. Loans
may, but are not required to be, secured by shares of the Company's Common
Stock.
AMENDMENT OF THE PLAN
The Board may at any time terminate or amend the 1996 Plan. No amendments
to the 1996 Plan will require shareholder approval unless such approval is
required to comply with Rule 16b-3 under the Securities Exchange Act of 1934,
Section 422 of the Code or the requirements of the Nasdaq National Market
System.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences of awards under the 1996 Plan. The summary is based on current
federal income tax laws and interpretations thereof, all of which are subject to
change at any time, possibly with retroactive effect. The summary is not
intended to be exhaustive.
16
<PAGE> 19
Limitation on Amount of Deduction. The Company generally will be entitled
to a tax deduction for awards under the 1996 Plan only to the extent that the
participants recognize ordinary income from the award. Section 162(m) of the
Code contains special rules regarding the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly compensated executive officers of the Company. The
general rule is that annual compensation paid to any of these specified
executives will be deductible only to the extent that it does not exceed
$1,000,000 or it qualifies as "performance-based compensation" under Section
162(m). The 1996 Plan has been designed to permit the Compensation Committee to
grant awards which qualify for deductibility under Section 162(m).
Taxation of Ordinary Income and Capital Gains. Subject to certain
exceptions, the maximum federal tax rate on "net capital gains" from the sale or
exchange of capital assets is 20%. "Net capital gain" is the excess of net
long-term capital gain over net short-term capital loss. Short-term capital
gains are taxed at the same rates applicable to ordinary income. Gains or losses
from the sale or exchange of capital assets will be "long-term" if the capital
asset was held for more than one year and "short-term" if the capital asset was
held for one year or less. For taxpayers with certain income levels, the
marginal tax rate applicable to ordinary income can range up to 39.6%. The
classification of income as ordinary compensation income or capital gain is also
relevant for income tax purposes for taxpayers who have capital losses and
investment interest.
Nonqualified Stock Options. An employee who is granted a nonqualified
option does not recognize taxable income upon the grant of the option, and the
Company is not entitled to a tax deduction at such time. The employee will
recognize ordinary income upon the exercise of the option in an amount equal to
the excess of the fair market value of the option shares on the exercise date
over the option price. Such income will be treated as compensation to the
employee subject to applicable withholding requirements. The Company is
generally entitled to a tax deduction in an amount equal to the amount taxable
to the employee as ordinary income in the year the income is taxable to the
employee. Any appreciation in value after the time of exercise will be taxable
to the employee as capital gain and will not result in a deduction by the
Company.
The employee may also be required to recognize gain or loss upon the sale
of the option shares. If the selling price of the option shares exceeds the
employee's basis in the shares, the employee will recognize long-term capital
gain if the option shares were held for more than one year, and short-term
capital gain if the shares were held for one year or less. If the selling price
of the option shares is less than the employee's basis in the shares, the
employee will recognize long-term capital loss if the shares were held for more
than one year, and short-term capital loss if the shares were held for one year
or less. The employee's basis in the option shares will equal the amount of
ordinary income recognized by the employee upon exercise of the option, plus any
cash paid to exercise the option.
Incentive Stock Options. An employee who receives an incentive stock
option does not recognize taxable income upon the grant or exercise of the
option, and the Company is generally not entitled to a tax deduction. The
difference between the option price and the fair market value of the option
shares on the date of exercise, however, will be treated as a tax preference
item for purposes of determining the alternative minimum tax liability, if any,
of the employee in the year of exercise. The Company will not be entitled to a
deduction with respect to any item of tax preference.
An employee will recognize gain or loss upon the disposition of shares
acquired from the exercise of incentive stock options. The nature of the gain or
loss depends on how long the option shares were held. If the option shares are
not disposed of pursuant to a "disqualifying disposition" (i.e., no disposition
occurs within two years from the date the option was granted nor one year from
the date of exercise), the employee will recognize long-term capital gain or
capital loss depending on the selling price of the shares. If option shares are
sold or disposed of as part of a disqualifying disposition, the employee must
recognize ordinary income in an amount equal to the lesser of the amount of gain
recognized on the sale, or the difference between the fair market value of the
option shares on the date of exercise and the option price. Any additional gain
will be taxable to the employee as a long-term or short-term capital gain,
depending on how long the option shares were held. The Company is generally
entitled to a deduction in computing its federal income taxes for the year of
disposition in an amount equal to any amount taxable to the employee as ordinary
income pursuant to a "disqualifying disposition" by an employee.
17
<PAGE> 20
Restricted Stock. An employee who receives an award of restricted stock
generally will not recognize taxable income at the time of the award, nor will
the Company be entitled to a tax deduction at that time, unless the employee
makes an election under Section 83(b) of the Code to recognize the income upon
the receipt of the restricted stock. If the election is not made, the employee
will recognize ordinary income at such time as the transfer and forfeiture
restrictions applicable to such stock lapsed, in an amount equal to the
aggregate fair market value of the shares, as of the date such restrictions
lapse. If the Company complies with applicable withholding requirements, it is
generally entitled to a deduction in computing its federal income taxes in an
amount equal to the ordinary income taxable to the employee. Such deduction
would be available in the year in which the income is taxable to the employee.
Upon disposition of the shares, any amount received in excess of the fair market
value of the shares on the date such restrictions lapsed would be treated as
long-term or short-term capital gain, depending upon the employee's holding
period following such lapse. Dividends or other distributions of property (other
than a distribution of Common Stock of the Company) with respect to restricted
stock prior to the lapse of the transfer and forfeiture restrictions related
thereto would constitute ordinary income to the employee and the Company would
be entitled to a deduction at the same time and in the same amount.
Pursuant to the provisions of Section 83(b) of the Code, an employee who
receives restricted stock may elect to be taxed at the time of the award. If the
employee so elects, the full value of the shares (without regard to
restrictions) at the time of the grant, less any amount paid by the employee,
will be taxed to the participant as ordinary income and will be deductible by
the Company. Dividends paid with respect to the shares during the period of
restriction will be taxable as dividends to the participant and not deductible
by the Company. If, after making an election pursuant to Section 83(b), any
shares are subsequently forfeited, the employee will be entitled to a capital
loss deduction.
Stock Appreciation Rights. An employee who receives SARs does not
recognize taxable income at the time of the award, nor will the Company be
entitled to a deduction at that time. Instead, the employee will recognize
additional compensation taxable as ordinary income and subject to withholding,
and the Company will be entitled to ta tax deduction at the time the SARs are
exercised.
Performance Shares. A participant who receives performance shares will
generally recognize additional compensation taxable as ordinary income and
subject to withholding, and the Company will be entitled to a tax deduction, at
the time payment is made, whether in the form of cash or shares of the Company's
Common Stock. To the extent that payment is made in the form of stock, the
amount taxable as compensation to the participant and deductible by the Company
is measured by the then fair market value of the shares, which constitutes an
addition to the participant's tax basis in such shares.
18
<PAGE> 21
APPROVAL OF THE AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED ARTICLES OF INCORPORATION
On March 2, 1999, the Board of Directors of the Company approved an
amendment to Article V of the Company's Amended and Restated Articles of
Incorporation to increase the number of authorized shares of the Company's
Common Stock which the Company has authority to issue from 20,000,000 to
40,000,000 (the "Amendment").
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT.
As of March 11, 1999, 10,798,814 shares of the Company's Common Stock were
issued and outstanding, 500,000 shares of the Company's Common Stock were held
as treasury stock, 884,724 shares of the Company's Common Stock were reserved
for issuance under the Company's 1992 Non-Qualified Stock Option Plan, 686,800
shares of the Company's Common Stock were reserved for issuance under the
Company's 1996 Stock Option and Incentive Plan, 55,000 shares of the Company's
Common Stock were reserved for issuance under the Company's Outside Directors
Stock Option Plan and 7,074,662 shares of the Company's Common Stock were
authorized but unissued and unreserved.
The Amendment will ensure that shares of the Company's Common Stock will be
available, if needed, for the issuance in connection with stock splits, stock
dividends, acquisitions and other corporate purposes. The Board of Directors
believes that the availability of the additional shares for such purposes
without delay or the necessity for a shareholders' meeting would be beneficial
to the Company. The Company has no immediate plans to issue any of the
additional shares of its Common Stock that would be authorized by the Amendment.
No further action by the shareholders of the Company would be necessary
prior to the issuance of the additional shares of the Company's Common Stock,
except as may be required by applicable law or any stock exchange on which the
Company's securities may then be listed. Neither the shares of the Company's
Common Stock presently authorized nor the shares of the Company's Common Stock
to be authorized by the Amendment have preemptive rights.
If someone attempted a hostile takeover of the Company, the use of the
additional authorized shares to make a counteroffer for the shares of the bidder
or to sell shares to dilute the voting power of the bidder could make the
takeover attempt more difficult. The Amendment is not part of a plan by the
Company to adopt a series of antitakeover amendments, and the Company's Board of
Directors presently is unaware of any effort to accumulate shares of the
Company's Common Stock or to obtain control of the Company by means of a merger,
tender offer, solicitation in opposition to management or otherwise.
The Company's Amended and Restated Certificate of Incorporation and By-Laws
presently contain certain provisions which could be construed as antitakeover
measures. The Company's Amended and Restated Certificate of Incorporation and
By-Laws provide that the Board of Directors of the Company will be divided into
three classes of directors, with each class to be as nearly equal in number as
possible. The term of the office of one class of directors expires each year in
rotation so that one class is elected at each annual meeting of shareholders for
a full three-year term. The affirmative vote of the holders of a majority of the
outstanding shares of the Company's capital stock entitled to vote is required
to amend the classified board of directors provisions of the Company's Amended
and Restated Certificate of Incorporation or to remove a Director prior to the
expiration of his or her term. Under the classified board of directors
provisions described above, it would take at least two elections of Directors
for anyone to gain control of the Company's Board of Directors. Accordingly,
these provisions would tend to discourage unfriendly takeovers.
The Company's By-Laws establish an advance notice procedure for
shareholders to make nominations of candidates for election as Directors, or to
bring other business before an annual meeting of the Company's shareholders. The
Company's By-Laws provide that only persons who are nominated by, or at the
direction of, the Company's Board of Directors, by a nominating Committee
appointed by the Board of Directors, or by a shareholder who has given timely
written notice to the Company's Secretary prior to the meeting at which
Directors are to be elected, will be eligible for election as Directors of the
Company. The Company's By-Laws
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<PAGE> 22
also provide that at an annual meeting only such business may be conducted as
has been brought before the meeting by, or at the direction of, the Company's
Board of Directors, or by a shareholder who has given timely written notice to
the Secretary of the Company of such shareholder's intention to bring such
business before such meeting. Under the By-Laws, a shareholder's notice must
also contain certain information specified in the By-Laws.
The Company's Amended and Restated Articles of Incorporation authorize the
Board of Directors (without shareholder approval) to issue shares of Preferred
Stock from time to time in one or more series, each series to have such powers,
designations, preferences and rights, and qualifications, limitations or
restrictions thereof, as may be determined by the Board of Directors. Because
the Board of Directors has the power to establish the preferences and rights of
each series of Preferred Stock, it may afford the holders of any series of
Preferred Stock preferences and rights, voting or otherwise, that are senior to
the rights of holders of Common Stock. In connection with the Company's
Shareholder Rights Plan, the Board of Directors authorized the issuance of up to
104,000 shares of Series A Participating Cumulative Preferred Stock upon
exercise of rights under the Company's Shareholder Rights Plan. The Shareholder
Rights Plan, a "poison pill," can make a takeover attempt of the Company
prohibitively expensive absent the Board of Directors approval of the takeover.
The Company currently has no shares of Preferred Stock outstanding.
The Indiana Business Corporation Law (the "IBCL") applies to the Company as
an Indiana corporation. Under certain circumstances, the following provisions of
the IBCL may delay, prevent or make more difficult unsolicited acquisition or
changes of control of the Company. Such provisions also may have the effect of
preventing changes in the management of the Company. It is possible that such
provisions could make it more difficult to accomplish transactions which
shareholders may otherwise deem to be in their best interests.
Under Sections 23-1-42-1 to 23-1-42-11 of the IBCL, an "acquiring person"
who makes a "control share acquisition" in an "issuing public corporation" may
not exercise voting rights on any "control shares" unless such voting rights are
conferred by a majority vote of the disinterested shareholders of the issuing
corporation at a special meeting of such shareholders held upon the request and
at the expense of the acquiring person. In the event that control shares
acquired in a control share acquisition are accorded full voting rights and the
acquiring person acquires control shares with a majority or more of all voting
power, all shareholders of the issuing corporation have dissenters' rights to
receive the fair value of their shares.
Under the IBCL, "control shares" means shares acquired by a person that,
when added to all other shares of the issuing public corporation owned by that
person or in respect to which that person may exercise or direct the exercise of
voting power, would otherwise entitle that person to exercise voting power of
the issuing public corporation in the election of directors within any of the
following ranges: (a) one-fifth or more but less than one-third; (b) one-third
or more but less than a majority; or (c) a majority or more. "Control share
acquisition" means, subject to certain exceptions, the acquisition, directly or
indirectly, by any person of ownership of, or the power to direct the exercise
of voting power with respect to, issued and outstanding control shares. Shares
acquired within 90 days or under a plan to make a control share acquisition are
considered to have been acquired in the same acquisition. "Issuing public
corporation" means a corporation which is organized in Indiana, has 100 or more
shareholders, its principal place of business, its principal office or
substantial assets are within Indiana and either (a) more than 10% of its
shareholders resident in Indiana, (b) more than 10% of its shares owned by
Indiana residents or (c) 10,000 shareholders resident in Indiana. The above
provisions do not apply if, before a control share acquisition is made, the
corporation's articles of incorporation or by-laws (including a board adopted
by-law) provide that they do not apply. The Company's Amended and Restated
Articles of Incorporation and By-Laws do not exclude it from the restrictions
imposed by such provisions.
Sections 23-1-43-1 to 23-1-43-23 of the IBCL restrict the ability of a
"resident domestic corporation" to engage in any combinations with an
"interested shareholder" for five years after the interested shareholder's date
of acquiring shares unless the combination or the purchase of shares by the
interested shareholder on the interested shareholder's date of acquiring shares
is approved by the board of directors of the resident domestic corporation
before that date. If the combination was not previously approved, the interested
shareholder may effect a combination after the five-year period only if such
shareholder receives approval from a majority of the
20
<PAGE> 23
disinterested shares or the offer meets certain fair price criteria. For
purposes of the above provisions, "resident domestic corporation" means an
Indiana corporation that has 100 or more shareholders. "Interested shareholder"
means any person, other than the resident domestic corporation or its
subsidiaries, who is (1) the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the outstanding voting shares of the resident
domestic corporation or (2) an affiliate or associate of the resident domestic
corporation and at any time within the five-year period immediately before the
date in question was the beneficial owner of 10% or more of the voting power of
the then outstanding shares of the resident domestic corporation. The above
provisions do not apply to corporations that so elect in an amendment to their
articles of incorporation approved by a majority of the disinterested shares.
Such an amendment, however, would not become effective until 18 months after its
passage and would apply only to stock acquisitions occurring after its effective
date. The Company's Amended and Restated Articles of Incorporation do not
exclude the Company from the restrictions imposed by such provisions.
Under Sections 23-1-22-1 to 23-1-22-5 of the IBCL, in addition to any other
provision authorized by any other section of the IBCL or contained in the
articles of incorporation or the by-laws, a corporation may establish one or
more procedures to regulate transactions that would, when consummated, result in
a change of "control" of the corporation. Such a procedure may be established in
the original articles of incorporation or by-laws, by an amendment to the
articles of incorporation, or notwithstanding the fact that a vote of the
shareholders would otherwise be required by any other provision of the IBCL or
the articles of incorporation, by an amendment to the by-laws. For purposes of
this section, "control" means, for any corporation that has 100 or more
shareholders, the beneficial ownership, or the direct or indirect power to
direct the voting, of not less than 10% of the voting shares of a corporation's
outstanding voting shares.
Section 23-1-35-1 provides that directors are required to discharge their
duties: (i) in good faith; (ii) with the care an ordinarily prudent person in a
like position would exercise under similar circumstances; and (iii) in a manner
the directors reasonably believe to be in the best interests of the Company.
However, this section also provides that a director is not liable for any action
taken as a director, or any failure to act, unless the director has breached or
failed to perform the duties of the director's office and the action or failure
to act constitutes willful misconduct or recklessness. This statutory
exoneration from liability does not affect the liability of directors for
violations of the federal securities laws.
The overall effect of the provisions of the statutes, the Company's Amended
and Restated Certificate of Incorporation and By-Laws described above may be to
render more difficult or to discourage a merger, tender offer, proxy contest,
the assumption of control of the Company by a holder of a large block of the
Company's Common Stock or other person, or the removal of incumbent management,
even if such actions may be beneficial to the Company's shareholders generally.
If the Amendment to increase the number of authorized shares of the
Company's Common Stock is approved, the Amendment will become effective upon the
filing of a Certificate of Amendment with the Indiana Secretary of State.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The appointment of PricewaterhouseCoopers LLP as independent auditors for
the Company during its 1999 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 of Directors upon recommendation of the Audit Committee. A representative
of PricewaterhouseCoopers LLP is expected to be present at the meeting, such
representative will be given an opportunity to make a statement 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 PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT AUDITORS DURING FISCAL 1999.
21
<PAGE> 24
DEADLINE FOR RECEIPT OF SHAREHOLDERS'
PROPOSALS FOR THE 2000 ANNUAL MEETING
Proposals of shareholders that are intended to be presented by such
shareholders at the Company's 2000 Annual Meeting must be received by the
Company no later than December 15, 1999 in order to be included in the Company's
Proxy Statement and form of Proxy relating to that meeting.
In order to be considered at the 2000 Annual Meeting, shareholder proposals
must comply with the advance notice and eligibility requirements contained in
the Company's By-Laws. The Company's By-Laws provide that shareholders are
required to give advance notice to the Company of any nomination by a
shareholder of candidates for election as directors and of any business to be
brought by a shareholder before an annual shareholders' meeting. Specifically,
the By-Laws provide that for a shareholder to nominate a person for election to
the Company's Board of Directors, the shareholder must be entitled to vote for
the election of directors at the meeting and must give timely written notice of
the nomination to the Secretary of the Company. The By-Laws also provide that
for business to be properly brought before an annual meeting by a shareholder,
the shareholder must have the legal right and authority to make the proposal for
consideration at the meeting and the shareholder must give timely written notice
thereof to the Secretary of the Company. In order to be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Company not less than 60 days prior to the meeting. In the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder must be
received not later than the close of business on the tenth day following the day
on which notice of the date of the meeting was mailed or public disclosure was
made. The notice must contain specified information about each nominee or the
proposed business and the shareholder making the nomination or proposal.
The specific requirements of these advance notice and eligibility
provisions are set forth in Section 1.10 and Section 1.11 of the Company's
By-Laws, a copy of which is available upon request. Such requests and any
shareholder proposals should be sent to the Secretary of the Company at the
principal executive offices of the Company.
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 Graph
and Compensation Committee Report on Executive Compensation included herein
shall not be incorporated by reference in any such filings.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 Common Stock to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission. Such
persons are required by Securities and Exchange Commission 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 the 1998 fiscal year all Section 16(a) filing
requirements applicable to its executive officers, directors and greater than
10% beneficial owners were timely satisfied.
ANNUAL REPORTS
The Annual Report to Shareholders for the fiscal year ended January 30,
1999 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 1998 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING
FINANCIAL STATEMENTS BUT EXCLUDING EXHIBITS, MAY BE OBTAINED WITHOUT CHARGE UPON
WRITTEN REQUEST TO KEITH L. HIMMEL, JR., SECRETARY, PAUL HARRIS STORES, INC.,
6003 GUION ROAD, INDIANAPOLIS, INDIANA 46254.
22
<PAGE> 25
EXHIBIT A
PAUL HARRIS STORES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
SECOND AMENDMENT
This Paul Harris Stores, Inc. 1996 Stock Option and Incentive Plan (the
"Plan") is hereby amended as follows:
1. Section 5(a) of the Plan is amended to read as follows:
(a) The maximum number of Shares with respect to which Awards may
be made under the Plan is 2,000,000 Shares. The Shares with respect to
which Awards may be made under the Plan may either be authorized and
unissued shares or unissued shares heretofore or hereafter reacquired
and held as treasury shares. Any Award which terminates or is
surrendered for cancellation or with respect to Restricted Stock or
Performance Shares which is forfeited (so long as any cash dividends
paid on such Shares are also forfeited), may be subject to new Awards
under the Plan with respect to the number of Shares as to which such
termination or forfeiture has occurred.
2. Except as expressly amended, the provisions of the Plan shall
remain in full force and effect.
3. This Amendment shall be effective immediately upon approval by the
Company's Board of Directors and shareholders of the Company.
Adopted by the Board
this 2nd day of March, 1999
Approved by the Shareholders
this ____ day of May, 1999
A-1
<PAGE> 26
PAUL HARRIS STORES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR
ANNUAL MEETING MAY 19, 1999
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 to be held at the Paul Harris store at 11
South Meridian Street, Indianapolis, Indiana 46204 on Wednesday, May 19, 1999,
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]
A-2
<PAGE> 27
[ x ] Please mark your
votes as in this
example.
This proxy will be voted as specified and, unless otherwise specified, this
proxy will be voted FOR the election as directors of all nominees and FOR
Proposals 2, 3, and 4.
<TABLE>
<CAPTION>
FOR WITHHELD
ALL ALL
--- --------
<S> <C> <C>
1. ELECTION OF [ ] [ ]
DIRECTORS
Director
Nominees:
Richard A.
Feinberg, Ph.D.
and Charlotte
G. Fischer
(To withhold authority to vote for any
nominee, write that nominee's name in
the space provided below.)
- --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
2. Proposal to [ ] [ ] [ ]
approve the
proposed amendment
to the Company's
1996 Stock Option
and Incentive
Plan.
3. Proposal to [ ] [ ] [ ]
approve the
amendment to the
Company's Amended
and Restated
Articles of
Incorporation.
4. Proposal to ratify [ ] [ ] [ ]
the appointment of
PricewaterhouseCoopers
LLP as independent
auditors for the
fiscal year 1999.
5. Upon or in connection with the
transaction of such other business as may
properly come before the meeting or any
adjournment thereof.
</TABLE>
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
Signature:
- ---------------------------------
- --------------------------------- Dated:
- ------------------ , 1999
NOTE: Please sign exactly as name appears above. 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.
A-3
