<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 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 17, 2000
----------------
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 17, 2000, 9:00 a.m., local time, at
the Company's principal office located at 6003 Guion Road, Indianapolis,
Indiana, for the following purposes:
1. To elect three directors to the Board of Directors of the Company, two
of which will serve until the 2003 Annual Meeting of Shareholders, one
of which will serve until the 2002 Annual Meeting of Shareholders and
all of which will serve until their successors are elected and have
qualified;
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditors for the 2000 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 March 23, 2000 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 13, 2000
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 17, 2000, at 9:00 a.m., local time, at the Company's
principal office located at 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 ELECTION AS DIRECTORS OF THE
THREE NOMINEES NAMED HEREIN AND FOR PROPOSAL 2. These proxy solicitation
materials and the accompanying Annual Report to Shareholders for the fiscal year
ended January 29, 2000 (the "1999 fiscal year") are first being sent to
shareholders on or about April 13, 2000.
As of March 23, 2000, 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 10,937,148 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 Proposal 2 is subject to the vote of the holders
of a greater number of shares favoring approval than those opposing it. 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 a 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 Proposal 2 will be approved.
<PAGE> 4
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 Company and by
Corporate Investor Communication, Inc., a proxy solicitation firm, for a fee of
$1,200, plus out-of-pocket expenses not to exceed $400. 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 23, 2000 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.
NUMBER OF
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED OF CLASS
------------------- ------------ --------
Charlotte G. Fischer 992,800(1) 8.40%
3791 Bay Creek Drive
Bonita Springs, FL 34134
Dimensional Fund Advisors Inc. 726,302(2) 6.66%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Fuller & Thaler Asset Management, Inc. 653,400(3) 5.99%
411 Borel Avenue, Suite 402
San Mateo, CA 94402
- ------------------------
(1) Includes 876,000 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) Based solely on information in reports filed by the beneficial owner under
Section 13(d) or 13(g) of the Securities Exchange Act of 1934 (the "1934
Act"). The beneficial owner is an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940 (the "Investment
Advisors Act") and has sole power to vote or direct the vote of 726,302
shares.
(3) Based solely on information in reports filed by the beneficial owners
under Section 13(d) or 13(g) of the 1934 Act. Each beneficial owner is a
member of a group that possesses the power to vote 465,000 shares and to
dispose or direct the disposition of 653,400 shares. Fuller & Thaler Asset
Management, Inc. ("Fuller & Thaler") is an investment advisor registered
under Section 203 of the Investment Advisors Act. Mr. Russell J. Fuller is
the President of Fuller & Thaler. Fuller & Thaler and Mr. Fuller have sole
power to (a) vote or direct the vote of 465,000 shares and (b) dispose or
direct the disposition of 653,400 shares.
2
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT
Based upon information provided by such individuals, the following table
shows, as of March 23, 2000, 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.
NUMBER OF SHARES OF
COMMON STOCK PERCENT
NAME BENEFICIALLY OWNED (1) OF CLASS
---- ---------------------- --------
Richard A. Feinberg, Ph.D. 15,500 *
Charlotte G. Fischer (2) 992,800 8.40%
Keith L. Himmel, Jr. 43,666 *
Glenn S. Lyon 0 *
Thomas McCain (3) 10,500 *
James T. Morris 20,000 *
Leslie Nathanson Juris, Ph.D. 11,000 *
John E. Peters 28,000 *
Sally M. Tassani 71,000 *
All directors and executive officers 1,192,466 9.97%
as a group (9 individuals)
- -----------------------------------
* 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); and (ii) the following shares subject to outstanding options
which are exercisable within 60 days: Mr. Feinberg, 14,000 shares; Ms.
Fischer, 876,000 shares; Mr. Himmel, 43,666 shares; Ms. Juris, 11,000
shares; Mr. Morris, 14,000 shares; Mr. Peters, 8,000 shares; Ms. Tassani,
61,000 shares; and all directors and executive officers as a group,
1,027,666 shares.
(2) Ms. Fischer was employed by the Company from April 29, 1994 to March 13,
2000.
(3) Mr. McCain was employed by the Company from October 15, 1998 to June 14,
1999.
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 of the three director nominees, Mr. Morris and Ms. Tassani, are to be
elected at the Annual Meeting for a term expiring at the 2003 Annual Meeting.
The third director nominee, Mr. Lyon, is to be elected at the Annual Meeting for
a term expiring at the 2002 Annual Meeting. On March 31, 2000, the Board of
Directors of the Company appointed Mr. Lyon to fill the vacancy in the Board of
Directors resulting from Charlotte G. Fischer's resignation on March 13, 2000.
Ms. Fischer's term as a director of the Company was not to expire until 2002.
The enclosed Proxy cannot be voted for a greater number of persons than the
three 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
Nominee
Director for Term
Name of Nominee Age Since Expiring In
--------------- --- -------- -----------
Glenn S. Lyon 49 2000 2002
James T. Morris 57 1996 2003
Sally M. Tassani 51 1995 2003
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:
Nominee
Director for Term
Name of Nominee Age Since Expiring In
--------------- --- -------- -----------
Leslie Nathanson Juris, Ph.D. 53 1998 2001
John E. Peters 52 1998 2001
Richard A. Feinberg, Ph.D. 49 1997 2002
4
<PAGE> 7
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.
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. Ms. Juris is a member of the board of directors of
Successories, Inc., an Illinois corporation.
Glenn S. Lyon became the President and General Merchandise Manager for the
Company in March 2000. From February 1997 until January 2000, he was the
president of Modern Woman, Inc., a division of Charming Shoppes Inc. From May
1995 to January 1997, he was the senior vice president and general merchandise
manager of Modern Woman, Inc. Modern Woman, Inc., based in New York City, is a
150-store specialty chain dedicated to the plus size female customer. From
October 1990 to June 1994, he was the executive vice president of The Ormond
Shops Inc., a New Jersey-based 200-store chain specializing in budget and
moderate women's apparel. Approximately 20 months after he left The Ormond Shops
Inc., an involuntary bankruptcy petition was filed against The Ormond Shops Inc.
on February 27, 1996.
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
5
<PAGE> 8
other financial reporting matters. The Audit Committee met four times during the
Company's 1999 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 four
times during the Company's 1999 fiscal year.
The Board of Directors also has a Nominating Committee which is currently
composed of Ms. Juris and Ms. Tassani. The Nominating Committee nominates
persons to serve as directors. The Nominating Committee met one time during the
Company's 1999 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, Indiana
46254.
During the Company's 1999 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 $1,000 per annum.
Directors who are not employees of the Company participate in the Company's
Outside Directors Stock Option Plan (the "Directors Plan"). Under the Directors
Plan, annually each eligible director is granted an option to purchase 3,000
shares of Common Stock in the month following the annual meeting of
shareholders. In addition, newly elected eligible directors receive an option to
purchase 5,000 shares of Common Stock in the month following election. Pursuant
to the Directors Plan, the option price per share is equal to the fair market
value of one share of Common Stock on the date of grant. The options become
exercisable six months following the date of grant and expire ten years
following the date of grant. During 1999, eligible directors were granted
options to purchase an aggregate of 12,000 shares of Common Stock.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth the annual and long-term compensation of
each individual who served as an executive officer of the Company during the
1999 fiscal year for services rendered during the Company's 1999, 1998 and 1997
fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- -------------------------
OTHER
ANNUAL SECURITIES ALL OTHER
COMPEN- RESTRICTED UNDERLYING COMPEN-
NAME AND PRINCIPAL FISCAL BONUS SATION STOCK AWARDS OPTIONS SATION
POSITION YEAR SALARY ($) ($)(1) ($) ($) (#) ($)(2)
- ------------------ ------ ---------- ------- ------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Charlotte G. Fischer (3) 1999 775,000 200,000 --- 65,000 3,181 (4)
Chairman of the Board, 1998 700,000 200,000 --- 347,000 (5) 175,000 3,052 (4)
President and Chief 1997 500,000 550,000 $1,000,000 (6) 50,000 2,905 (4)
Executive Officer
Sally Tassani (7) 1999 250,000 --- --- 45,000 1,735 (8)
Executive Vice President 1998 144,231 --- --- 60,000 121,894 (9)
Marketing 1997 --- --- --- --- ---
Thomas McCain (10) 1999 100,846 --- --- --- 64,364 (11)(12)
Senior Vice President of 1998 56,269 --- --- 50,000 (13) 1,855 (11)
Finance and Chief 1997 --- --- --- --- ---
Financial Officer
Keith Himmel 1999 125,000 --- --- 20,000 1,500 (14)
Vice President of 1998 112,231 --- --- 16,000 2,086 (14)
Finance, Treasurer and 1997 103,846 55,000 --- --- 1,954 (14)
Corporate Secretary
</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) Ms. Fischer left the Company on March 13, 2000. See "--Employment
Agreements and Termination of Employment."
(4) Of the amounts shown, $2,146 for 1999, $1,747 for 1998 and $1,600 for 1997
represent Company-paid contributions to the 401(k) retirement plan.
Company-paid contributions are fully vested upon contribution.
(5) 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,
2000, the value of the remaining 10,000 non-vested shares of restricted
stock using the closing price of the Company's Common Stock on January 29,
2000 of $3.03 was $30,313.
(6) 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 and Termination of Employment."
(7) Ms. Tassani became Executive Vice President - Marketing in July 1998. The
amounts shown for 1998 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, $700 represents Company-paid contributions to the
401(k) retirement plan. Company-paid contributions are fully vested upon
contribution.
(9) 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.
(10) Mr. McCain was employed by the Company from October 15, 1998 to June 14,
1999.
(11) Of the amount shown, $16,864 in 1999 and $1,591 in 1998 represents
relocation expenses and taxes on the reimbursed amounts.
(12) Of the amount shown, $47,500 represents severance paid as a result of Mr.
McCain terminating his employment with the Company on June 14, 1999.
(13) Upon Mr. McCain's cessation of employment from the Company on June 14,
1999, all 50,000 securities underlying stock options were forfeited.
(14) Of the amount shown, $1,250 for 1999, $1,506 for 1998 and $1,519 for 1997
represent Company-paid contributions to the 401(k) retirement plan.
Company-paid contributions are fully vested upon contribution.
7
<PAGE> 10
OPTION GRANTS
The following table sets forth certain information concerning the number of
shares and the terms and conditions of the stock options granted by the Company
under the 1996 Stock Option and Incentive Plan (the "1996 Plan") during the
Company's 1999 fiscal year to the individuals named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM($)(1)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ------------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH)(2) DATE(3) 5%($) 10%($)
- ------------------------ --------------- ------------ -------------- ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Charlotte G. Fischer 40,000 6.64% 5.000 08/24/2009 (4) $ 125,779 $ 318,748
25,000 4.15% 3.031 01/29/2010 (4) 47,658 120,776
Sally Tassani 10,000 1.66% 5.625 05/11/2009 (5) 35,375 89,648
10,000 1.66% 5.625 05/11/2009 (5) 35,375 89,648
10,000 1.66% 5.625 05/11/2009 (5) 35,375 89,648
5,000 0.83% 3.125 12/28/2009 (6) 9,826 24,902
5,000 0.83% 3.125 12/28/2009 (6) 9,826 24,902
5,000 0.83% 3.125 12/28/2009 (6) 9,826 24,902
Thomas McCain 0 0.00% 0 0
Keith Himmel 1,666 0.28% 6.188 05/19/2009 (6) 6,483 16,429
1,667 0.28% 6.188 05/19/2009 (6) 6,487 16,439
1,667 0.28% 6.188 05/19/2009 (6) 6,487 16,439
5,000 0.83% 3.125 12/28/2009 (6) 9,826 24,902
5,000 0.83% 3.125 12/28/2009 (6) 9,826 24,902
5,000 0.83% 3.125 12/28/2009 (6) 9,826 24,902
</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 1999 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 are exercisable on 7/1/99, 7/1/00 and 7/1/01, respectively.
(6) 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
1999 fiscal year and the unexercised stock options held by such individuals as
of January 29, 2000.
<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
OPTIONS AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
------------------------------ --------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------- ---------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <S>
Charlotte G. Fischer 0 --- 891,000 10,000 $ 219,719 ---
Sally Tassani 0 --- 51,000 35,000 --- ---
Thomas McCain (2) 0 --- 0 0 --- ---
Keith Himmel 0 --- 32,000 30,667 19,271 ---
</TABLE>
- ---------------------------------
(1) The closing sale price of the Common Stock as reported on the Nasdaq
National Market on January 29, 2000 was $3.03125. Value is calculated on
the basis of the difference between the exercise price and $3.03125,
multiplied by the number of "In-The-Money" shares of Common Stock
underlying the options.
(2) Mr. McCain was employed by the Company from October 15, 1998 to June 14,
1999.
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 401(k) Plan are fully vested when contributed.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT
Effective March 13, 2000, Charlotte G. Fischer terminated her employment
with and resigned as a director of the Company. Ms. Fischer was employed as the
Company's President and Chief Executive Officer pursuant to an employment
agreement which had a term ending January 31, 2003. Under the employment
agreement, Ms. Fischer was paid a base salary of $775,000 for the 1999 fiscal
year. Ms. Fischer's base salary was scheduled to increase each fiscal year up to
$1,000,000 during the last year of the agreement, which was the 2002 fiscal
year. The employment agreement provided for annual bonus compensation (as long
as the Company had 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 elected 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 superseded the provisions of the employment agreement with
respect to Ms. Fischer's cash bonus for such fiscal year.
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<PAGE> 12
The employment agreement provided 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 each fiscal year, as
compared to the "women's specialty peer group" (as such terms are defined in the
agreement). The employment agreement also provided that the Company would 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. In the
event that Ms. Fischer elected 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
superseded the provisions of the employment agreement with respect to awards of
restricted stock for such fiscal year.
Ms. Fischer's employment agreement also included a confidentiality
agreement and a one-year covenant not to compete and not to solicit employees if
Ms. Fischer terminated her employment in violation of the employment agreement
prior to the expiration of the term or if the Company terminated her employment
for cause.
Effective March 13, 2000, pursuant to a settlement agreement, Ms. Fischer
terminated her employment with the Company, resigned as a director of the
Company and her employment agreement was terminated. Under the settlement
agreement, the Company will pay Ms. Fischer approximately $3.1 million in
accordance with a bi-weekly payment schedule beginning March 22, 2000 and ending
January 22, 2003. The Company also granted to Ms. Fischer a fully vested and
immediately exercisable option to purchase 25,000 shares of Common Stock, at an
exercise price equal to the fair market value of the Common Stock at the close
of business on January 29, 2000, which expires on the tenth anniversary of the
grant date. The settlement agreement permits Ms. Fischer to exercise the stock
options previously granted to her by the Company at any time on or before the
expiration date of such options.
Under the settlement agreement, the Company also granted to Ms. Fischer a
restricted stock award of 25,000 shares of Common Stock and all other non-vested
restricted stock awards previously granted to Ms. Fischer under the employment
agreement became fully vested as of March 13, 2000. The settlement agreement
also includes a confidentiality agreement, a six month covenant not to solicit
company employees and mutual releases.
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal year 1999 were
current directors Mr. Feinberg, Ms. Juris, Mr. Morris and Mr. Peters. 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.
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.
10
<PAGE> 13
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 Compensation Committee will be undertaking an extensive review,
competitive and internal, of the compensation practices currently in place at
the Company to: (i) understand how the Company's compensation policies reflect
compensation trends in the retail industry; (ii) creatively align the Company's
compensation practices with other innovative compensation practices; (iii)
increase the probability of achieving Company goals; and (iv) more clearly
motivate and recognize executive achievement.
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 $700,000 for
the 1998 fiscal year to $775,000 for the 1999 fiscal year, and provided for
annual increases in Ms. Fischer's base salary up to $1,000,000 in the 2002
fiscal year. The agreement provided for annual bonuses equal to specified
percentages of base salary contingent upon the Company's 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 and Termination of Employment."
The Company awarded options to purchase an aggregate of 130,000 shares of
Common Stock to three officers of the Company under the 1996 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
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 28, 1995, the date immediately prior to the
11
<PAGE> 14
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
[GRAPH]
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
FISCAL YEAR
-----------------------------------------------------------------------------
1/28/95 1995 1996 1997 1998 1999
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul Harris Stores, Inc. 100.00 70.83 687.50 287.50 254.17 101.04
- -------------------------------------------------------------------------------------------------------------------------
S&P Retail (Specialty Apparel) Index 100.00 119.08 150.78 273.72 464.88 443.29
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index 100.00 138.67 175.20 222.34 294.58 325.06
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The appointment of PricewaterhouseCoopers LLP as independent auditors for
the Company during its 2000 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 2000.
12
<PAGE> 15
DEADLINE FOR RECEIPT OF SHAREHOLDERS'
PROPOSALS FOR THE 2001 ANNUAL MEETING
Proposals of shareholders that are intended to be presented by such
shareholders at the Company's 2001 Annual Meeting must be received by the
Company no later than December 17, 2000 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 2001 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
13
<PAGE> 16
to the Company and written representations from the Company's executive officers
and directors, the Company believes that during the 1999 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 29,
2000 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 1999 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.
14
<PAGE> 17
PAUL HARRIS STORES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR
ANNUAL MEETING MAY 17, 2000
The undersigned hereby constitutes and appoints Glenn S. Lyon, Sally M.
Tassani 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 Company's
principal office located at 6003 Guion Road, Indianapolis, Indiana 46254 on
Wednesday, May 17, 2000, 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]
<PAGE> 18
[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
Proposal 2.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
ALL ALL
1. ELECTION OF [ ] [ ] 2. Proposal to ratify the [ ] [ ] [ ]
DIRECTORS appointment of
Director Nominees: PricewaterhouseCoopers
Glenn S. Lyon, James T. LLP as independent
Morris and Sally M. Tassani auditors for the fiscal year
2000.
(To withhold authority to vote for any 3. Upon or in connection with the transaction of such other business as may
nominee, write that nominee's name in the properly come before the meeting or any adjournment thereof.
space provided below.)
- --------------------------------------------
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: , 2000
----------------------------------- --------------------------------- -------------------------
</TABLE>
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.
