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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SUNGLASS HUT INTERNATIONAL, INC.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the 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 transactions 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>
SUNGLASS HUT INTERNATIONAL, INC.
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 4, 1998
-------------------------
To the Shareholders of
Sunglass Hut International, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders (the
"Annual Meeting") of Sunglass Hut International, Inc., a Florida corporation
("Sunglass Hut" or the "Company"), will be held at 9:15 A.M. local time, on
Thursday, June 4, 1998, at the Waldorf-Astoria Hotel, 301 Park Avenue, New
York, New York 10022, for the following purposes:
(1) To elect two members to the Company's Board of Directors to hold office
until the Company's 2001 Annual Meeting of Shareholders or until their
successors are duly elected and qualified; and
(2) To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 24, 1998
as the record date for determining those shareholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournments or postponements
thereof.
Whether or not you expect to be present, please sign, date and return the
enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors
JAMES N. HAUSLEIN
CHAIRMAN OF THE BOARD
Coral Gables, Florida
May 8, 1998
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. ALL SHAREHOLDERS ARE RESPECTFULLY URGED TO EXECUTE AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO
EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY
AND VOTE THEIR SHARES IN PERSON.
<PAGE>
1998 ANNUAL MEETING OF SHAREHOLDERS
OF
SUNGLASS HUT INTERNATIONAL, INC.
-------------------------
PROXY STATEMENT
-------------------------
DATE, TIME AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Sunglass Hut International, Inc., a Florida
corporation ("Sunglass Hut" or the "Company"), of proxies from the holders of
the Company's common stock, par value $.01 per share (the "Common Stock"), for
use at the 1998 Annual Meeting of Shareholders of the Company to be held on
Thursday, June 4, 1998, or at any adjournments or postponements thereof (the
"Annual Meeting"), pursuant to the enclosed Notice of Annual Meeting of
Shareholders. The approximate date that this Proxy Statement and the enclosed
proxy are first being sent to shareholders is May 8, 1998. Shareholders should
review the information provided herein in conjunction with the Company's 1997
Annual Report to Shareholders which accompanies this Proxy Statement. The
Company's principal executive offices are located at 255 Alhambra Circle, Coral
Gables, Florida 33134, and its telephone number is (305) 461-6100.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in so doing.
<PAGE>
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and vote
upon the following matters:
(1) To elect two members to the Company's Board of Directors to serve until
the Company's 2001 Annual Meeting of Shareholders or until their
successors are duly elected and qualified; and
(2) To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted (1) FOR the election of the two nominees for director named
below, and (2) by the proxies in their discretion upon any other proposals as
may properly come before the Annual Meeting. In the event a shareholder
specifies a different choice by means of the enclosed proxy, such shareholder's
shares will be voted in accordance with the specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on April 24, 1998 as
the record date (the "Record Date") for determining shareholders of the Company
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
there were 54,721,612 shares of Common Stock issued and outstanding, all of
which are entitled to be voted at the Annual Meeting. Each share of Common
Stock is entitled to one vote on each matter submitted to shareholders for
approval at the Annual Meeting. Shareholders do not have the right to cumulate
their votes for directors.
The attendance, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by a plurality of
the votes cast by the shares of Common Stock represented in person or by proxy
at the Annual Meeting. Any other matter that may be submitted to a vote of the
shareholders will be approved if the number of shares of Common Stock voted in
favor of the matter exceeds the number of shares voted against the matter,
unless the matter is one for which a greater vote is required by law or the
Company's Articles of Incorporation or Bylaws. If less than a majority of
outstanding shares of Common Stock are represented at the Annual Meeting, a
majority of the shares so represented may adjourn the Annual Meeting to another
date, time or place, and notice need not be given of the new date, time or
place if the new date, time or place is announced at the meeting before an
adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof. Abstentions will
be considered as shares present and entitled to vote at the Annual Meeting and
will be counted as votes cast at the Annual Meeting, but will not be counted as
votes cast for or against any given matter. The inspectors of election
2
<PAGE>
will treat shares referred to as "broker or nominee non-votes" (shares held by
brokers or nominees as to which instructions have not been received from the
beneficial owners or persons entitled to vote and the broker or nominee does
not have discretionary voting power on a particular matter) as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. For purposes of determining the outcome of any matter as to which the
proxies reflect broker or nominee non-votes, shares represented by such proxies
will be treated as not present and not entitled to vote on that subject matter
and therefore will not be considered by the inspectors of election when
counting votes cast on the matter (even though those shares are considered
entitled to vote for quorum purposes and may be entitled to vote on other
matters). Accordingly, abstentions and broker or nominee non-votes will not
have the same effect as a vote against the election of any director.
3
<PAGE>
SECURITY OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1998 (unless otherwise
indicated) by (a) each person known by the Company to beneficially own more
than five percent of the outstanding shares of Common Stock, (b) each director
of the Company who beneficially owns any shares, (c) each Named Officer (see
"Executive Compensation and Other Information"), and (d) all directors and
executive officers as a group:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(2)
--------------------------------
NAME AND ADDRESS(1) SHARES PERCENTAGE
- ------------------- ------------------ -----------
<S> <C> <C>
Mellon Bank Corporation .............................................. 5,297,120(3) 9.7%
First Pacific Advisors ............................................... 3,440,000(4) 6.3%
Reich & Tang Asset Management L.P. ................................... 2,994,300(5) 5.5%
James N. Hauslein .................................................... 1,554,111(6) 2.8%
Rohit M. Desai ....................................................... 312,000(7) *
John H. Duerden ...................................................... 54,000(8) *
William S. Field ..................................................... 54,000(8) *
Robert C. Grayson .................................................... 54,000(9) *
William E. Phillips .................................................. 32,000(10) *
John X. Watson ....................................................... -- *
Jack B. Chadsey ...................................................... 1,165,792(11) 2.1%
Edward L. Grund ...................................................... 259,166(12) *
Larry G. Petersen .................................................... 117,240(13) *
Eric Schumann ........................................................ -- *
Sherry L. Lay ........................................................ 30,000(8) *
All directors and executive officers as a group (15 persons) ......... 2,001,351(14) 3.7%
<FN>
- ----------------
* Less than 1%
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is 255 Alhambra Circle, Coral Gables, Florida 33134.
(2) Unless otherwise indicated, each person has sole voting and investment
power with respect to all such shares.
(3) Based solely on the Schedule 13G, dated February 6, 1998, filed with the
SEC by Mellon Bank Corporation ("MBC"), Boston Group Holdings, Inc.
("BGHI") and The Boston Company, Inc. ("BCI"). The Schedule 13G reports
that all of the securities are beneficially owned by MBC and direct or
indirect subsidiaries in their various fiduciary capacities, including
BGHI and BCI, which entities have sole voting power over 4,734,894 of such
shares and shared dispositive power over all such shares. MBC reported its
address as One Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
(4) Based solely on the Schedule 13G, dated February 9, 1998, filed with the
SEC by First Pacific Advisors, Inc. ("FPAI"), which reported its address
as 11400 West Olympic Boulevard, Suite 1200, Los Angeles, California
90064. The Schedule 13G reports that all of the securities are
beneficially owned by FPAI and has shared voting power over 3,160,000 of
such shares and shared dispositive power over all such shares.
4
<PAGE>
(5) Based solely on the Schedule 13G, dated February 12, 1998, filed with the
SEC by Reich & Tang Asset Management L.P., which reported its address as
600 Fifth Avenue, New York, New York 10020.
(6) Represents 924,955 shares held of record and 629,156 shares subject to
presently exercisable stock options.
(7) Represents 258,000 shares held of record by Equity-Linked Investors II
("ELI-II") and 54,000 shares subject to presently exercisable stock
options. ELI-II is a limited partnership, the general partner of which is
Rohit M. Desai Associates-II (the "General Partner"). Mr. Desai is a
director of the Company and is the managing general partner of the General
Partner. Mr. Desai is also the sole stockholder, Chairman of the Board and
President of Desai Capital Management Incorporated ("DCMI"), which acts as
an investment advisor to ELI-II. Under the investment advisory agreement
between DCMI and ELI-II, DCMI has the power to vote and dispose of these
securities. DCMI and Mr. Desai each disclaim beneficial ownership of the
securities. Mr. Desai's address is 540 Madison Avenue, 36th Floor, New
York, New York 10022.
(8) Represents shares subject to presently exercisable stock options.
(9) Represents 40,000 shares owned and 14,000 shares subject to presently
exercisable stock options.
(10) Represents 4,000 shares owned and 28,000 shares subject to presently
exercisable stock options.
(11) Represents 658,636 shares held of record by Chadsey Family Investments,
Ltd., a Florida limited partnership controlled by Mr. Chadsey, and 507,156
shares subject to presently exercisable stock options.
(12) Represents 200,000 shares owned and 59,166 shares subject to presently
exercisable stock options.
(13) Represents 10,000 shares owned, $98,000 face value of subordinated
debentures convertible to 3,240 shares at $30.25 per common share and
104,000 shares subject to presently exercisable stock options.
(14) Includes 986,455 shares owned, $98,000 face value of subordinated
debentures convertible to 3,240 shares at $30.25 per common share and
1,011,656 shares subject to options held by executive officers and
directors that are presently exercisable. Does not include shares held of
record by ELI-II. See footnote (7).
</FN>
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock. Such persons are required by SEC regulation to
furnish the Company with copies of all such reports they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filings with respect to the Company's
1997 fiscal year were timely filed.
5
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Company's Articles of Incorporation provide that the Board of
Directors shall consist of not less than three nor more than nine members, with
the exact number to be fixed from time to time by the Board of Directors. The
Articles of Incorporation divide the Board of Directors into three classes,
with staggered three-year terms. The current classes of the Board of Directors
and their terms of office are as follows:
CLASS DIRECTORS TERM EXPIRES IN:
- ------- --------- -----------------
I John H. Duerden 2000
I William S. Field 2000
I John X. Watson 2000
II James N. Hauslein 1998
II Robert C. Grayson 1998
III Rohit M. Desai 1999
III William E. Phillips 1999
The two directors serving in Class II have terms expiring at the Annual
Meeting. The Class II directors currently serving on the Board, Messrs.
Hauslein and Grayson, have been nominated by the Board of Directors for
re-election to three-year terms at the Annual Meeting. Each Class II director
elected at the Annual Meeting will serve for a term expiring at the Company's
2001 Annual Meeting of Shareholders or when his successor has been duly elected
and qualified. The Board of Directors has no reason to believe that any nominee
will refuse or be unable to accept election; however, in the event that any
nominee is unable to accept election or if any other unforeseen contingencies
should arise, each proxy that does not direct otherwise will be voted for the
remaining nominees, if any, and for such other person(s) as may be designated
by the Board of Directors.
6
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ----- ---------
<S> <C> <C>
James N. Hauslein 39 Chairman of the Board
John X. Watson 44 President, Chief Executive Officer and Director
Eric Schumann 49 Executive Vice President and General Manager, Watch Station
W. John Short 49 Executive Vice President, Strategic Business Development
and International
Larry G. Petersen 50 Senior Vice President, Finance and Chief Financial Officer
Randall Carucci 45 Vice President, Real Estate and Construction
John T. Cavanaugh 45 Vice President, Management Information Systems
Sherry L. Lay 47 Vice President, Merchandising
George L. Pita 36 Vice President, Finance
Arthur Quintana 48 Vice President, Inventory Management and Logistics
Rohit M. Desai 59 Director
John H. Duerden 57 Director
William S. Field 68 Director
Robert C. Grayson 53 Director
William E. Phillips 68 Director
</TABLE>
Mr. Hauslein joined the Company's Board in March 1990 and has served as
Chairman of the Board since July 1991. From July 1991 through January 1995, and
since February 1997, Mr. Hauslein has devoted substantially all of his working
time to the Company's affairs (see Director Compensation). From May 1997 to
January 1998, Mr. Hauslein served as acting Chief Executive Officer. From
February 1995 until January 1997, Mr. Hauslein was engaged in private
investments through Hauslein & Company, Inc. Prior to that time, Mr. Hauslein
served as a partner at Kidd Kamm & Co., a private investment firm headquartered
in Greenwich, Connecticut and specializing in acquisitions and leveraged
buy-outs.
Mr. Watson was appointed President, Chief Executive Officer and Director
of the Company in January 1998. From July 1995 until his appointment, Mr.
Watson was employed by Reebok International, Ltd. where he served as Senior
Vice President--Apparel and Senior Vice President--Strategic
Marketing/Planning. From 1992 to 1995, Mr. Watson was employed by Esprit de
Corp GmBH where he served as President and Chief Operating Officer in
Dusseldorf, Germany. Prior to these assignments, he was employed by McKinsey &
Company, Inc., where he served as a senior management consultant. Mr. Watson
has over 20 years experience in retailing, consumer marketing and international
business.
Mr. Schumann was appointed Executive Vice President and General Manager,
Watch Station, a division of Sunglass Hut, in September 1997. Prior to joining
the Company, Mr. Schumann was employed by Petrie Stores as Senior Vice
President and General Merchandising Manager from December 1994 to December
1996. From July 1992 to December 1994, he was employed by Liz Claiborne where
he served as President of the Jewelry Division. From January 1984 to July 1992,
he
7
<PAGE>
was employed by the Limited where he most recently served as Vice
President--General Merchandise Manager. Mr. Schumann has over 20 years
experience in the retailing industry.
Mr. Short was appointed Executive Vice President, Strategic Business
Development and International in February 1998. From January 1996 until such
time, Mr. Short was engaged in consulting and advisory work for branded goods
retailers in Europe and the United States. In this capacity, Mr. Short was a
consultant for Sunglass Hut from January 1998 to February 1998. Mr. Short's
previous experience includes 9 years with the Esprit group of companies from
March 1987 to January 1996 where he had responsibility for vertical retailing,
wholesaling, buying/sourcing and licensing activities in Europe and Asia. At
Esprit, he held the positions of President, Chief Operating Officer and
Director of Hong Kong-based Esprit Far East Limited, Chief Executive Officer
and Director of Esprit Europe, and Chief Executive Officer and Director of
Esprit International (the group's global trademark/licensing vehicle).
Previously, Mr. Short held various positions in corporate lending with Citibank
NA in Ecuador, Venezuela and Hong Kong. Mr. Short is a Director of the Santa
Barbara-based menswear cataloger, The Territory Ahead, Inc.
Mr. Petersen, appointed Senior Vice President in March 1994, has served as
Chief Financial Officer since joining the Company in February 1994 and served
as Vice President-Finance from February 1994 through March 1994. From 1982 to
1993, Mr. Petersen was employed by Carter Hawley Hale Stores, Inc., where he
most recently served as Executive Vice President--Chief Financial Officer. Mr.
Petersen has over 20 years of experience in the retailing industry, including
earlier employment with J.C. Penney Company, Clarkins, Inc. and Lafayette
Radio.
Mr. Carucci was appointed Vice President, Real Estate and Construction in
December 1997. From October to December 1997, Mr. Carucci served as Leasing
Director for the Western Regions of the Sunglass and Watch Station divisions.
From September 1994 to February 1996, Mr. Carucci served as Head of Leasing for
the Western Region of Sunglass Hut. From February 1996 to October 1997, he was
employed by Cinnabon Inc. where he served as Vice President--Real Estate and
Construction. Prior to his initial appointment at Sunglass Hut, Mr. Carucci was
President of Carucci Real Estate Consultants from March 1992 to September 1994,
where he served as a consultant specializing in tenant representation. Mr.
Carucci has over 18 years of experience in retail real estate and shopping
center leasing.
Mr. Cavanaugh was appointed Vice President, Management Information Systems
in November 1997. From January 1997 to July 1997, Mr. Cavanaugh was employed by
Riscorp where he served as Director of Information Systems. From March 1988 to
December 1996, Mr. Cavanaugh was employed by Burger King Corp. where he served
as Director of Information Systems. Mr. Cavanaugh has over 20 years of
experience in management information systems, having also served at Frito-Lay,
Inc., Blue Cross/Blue Shield of Texas and General Motors Corp. in management
positions.
Ms. Lay has served as Vice President, Merchandising since joining the
Company in September 1996. From September 1993 until such time, Ms. Lay was
employed by Ann Taylor where she most recently served as Vice President of
Merchandising. From November 1992 to September 1993, Ms. Lay was employed by
Petite Sophisticate where she served as Divisional Merchandise Manager. From
November 1992 to August 1994, she was employed by the Limited, Inc. where she
most recently served as a Senior Merchant for The Limited Stores.
8
<PAGE>
Mr. Pita, appointed Vice President, Finance in October 1994, served as
Managing Director of Finance from April 1993 to October 1994 and as Controller
from October 1989 to April 1993. Prior to joining the Company, Mr. Pita was
employed by Arthur Andersen LLP where he most recently served as Audit Manager.
Mr. Quintana was appointed Vice President, Inventory Management and
Logistics in July 1997. Prior to joining the Company, he was employed by Office
Depot, Inc., where he served as Vice President and General Manager,
Merchandising-Replenishment from January 1990 to July 1997. Previously, he was
employed by Evans Products, Inc., where he served as Vice President of
Merchandising.
Mr. Desai has served as a director of the Company since March 1993 and
also served as a director of the Company from June 1987 until July 1991. Mr.
Desai is the Founder, Chairman and President of Desai Capital Management
Incorporated, a specialized equity investment management firm in New York which
manages the assets of various institutional clients. Mr. Desai serves as a
director of The Rouse Company, Finlay Enterprises, Inc., Independence Community
BankCorp and several privately-held companies.
Mr. Duerden, a director of the Company since October 1993, has served as
Chairman of the Board of Directors, Chief Executive Officer and President of
Dictaphone Corporation since August 1995. From 1988 to April 1995, Mr. Duerden
served Reebok International, Ltd. ("Reebok") in various capacities, most
recently as President and Chief Operations Officer. Prior to joining Reebok,
Mr. Duerden was employed by Xerox Corporation in a number of executive
capacities.
Mr. Field, a director of the Company since July 1991, is currently engaged
in private investments as his principal occupation. Mr. Field served as
Chairman of Prudential Equity Investors, Inc., a subsidiary of The Prudential
Insurance Company of America, from April 1984 to July 1994.
Mr. Grayson, a director of the Company since October 1993, is currently
President of Robert Grayson & Associates, a retail consulting group, and Vice
Chairman of BerglassGrayson, a management consulting group. From June 1994 until
April 1996, Mr. Grayson served as Chairman of the Board of Tommy Hilfiger
Retail, Inc., a subsidiary of Tommy Hilfiger Corporation. Since February 1992,
Mr. Grayson has been engaged in consulting and private investments. From 1985 to
1992, Mr. Grayson served as President and Chief Executive Officer of Lerner, New
York. From 1982 until 1985, Mr. Grayson served as President and Chief Executive
Officer of Limited Stores, a specialty store division of The Limited, Inc. Mr.
Grayson also serves as a director of AnnTaylor, Inc. and Frisby Technologies,
Inc. He is also a director of several privately held companies.
Mr. Phillips, a director of the Company since March 1992, has been engaged
in consulting, private investments and charitable work as his principal
occupation since January 1990. From May 1982 until May 1988, Mr. Phillips
served as Chairman of the Board and Chief Executive Officer of Ogilvy & Mather
(the Ogilvy Group), an international advertising agency headquartered in New
York. Mr. Phillips also served as a director and Chairman of the Executive
Committee of the Ogilvy Group from May 1988 through May 1989. Mr. Phillips also
serves as a director of Lillian Vernon, a publicly traded specialty mail-order
catalog house.
9
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Company's fiscal year ended January 31, 1998, the Company's
Board of Directors held 7 meetings and took certain actions by written consent.
During the 1997 fiscal year, no director attended fewer than 75 percent of the
aggregate of (i) the number of meetings of the Board of Directors held during
the period he served on the Board, and (ii) the number of meetings of
committees of the Board of Directors held during the period he served on such
committees.
Messrs. Field, Phillips and Duerden serve as members of the Compensation
Committee, which held three meetings during fiscal 1997 and took certain
actions by written consent. Mr. Field is Chairman of the Compensation
Committee. The Compensation Committee is responsible for setting and
administering policies that govern annual compensation of the Company's
executive officers, approving all compensation for executive officers and
administering the Company's 1996 Executive Incentive Compensation Plan, as
amended (the "1996 Plan").
Messrs. Hauslein, Desai and Grayson are members of the Audit Committee,
which held four meetings during fiscal 1997. Mr. Hauslein is Chairman of the
Audit Committee. The duties and responsibilities of the Audit Committee include
(i) recommending to the full Board the appointment of the Company's auditors
and any termination of engagement, (ii) reviewing the plan and scope of audits,
(iii) reviewing the Company's significant accounting policies and internal
controls, (iv) administering the Company's compliance programs, and (v) having
general responsibility for all related auditing matters.
DIRECTOR COMPENSATION
The Company pays each of Messrs. Field, Phillips, Duerden, Hauslein, Desai
and Grayson an annual director's fee of $15,000, payable quarterly, a $2,500
fee for each meeting of the Board of Directors attended and, if not held in
conjunction with a regular Board meeting, a $500 fee for each Board committee
meeting attended. Directors may elect to defer such compensation. Payment under
the deferred compensation plan is made in cash or common stock (at the
Company's election) and is calculated as the original compensation amount
adjusted for the appreciation (depreciation) of the Company's common stock for
the period between the date earned and the date paid. As of March 31, 1998, two
directors had elected to defer compensation valued at $230,286 in total as of
this date for deferrals made since 1995. The Company also reimburses all
directors for all expenses incurred in connection with their activities as
directors. Such reimbursements aggregated $43,905 in fiscal 1997.
The 1996 Plan provides for grants upon appointment for each non-employee
director of the Company of 40,000 shares of common stock and annual grants to
each non-employee director of (i) options to purchase 6,000 shares of common
stock, and (ii) 1,500 shares of common stock (or, in lieu thereof and upon the
approval of the Company's Board of Directors, options for an additional 3,000
shares of common stock). All awards are made on the date that the Company
issues its annual earnings release for the prior fiscal year at a per share
exercise price equal to the closing sale price on the date of grant as reported
by the Nasdaq National Market, and the options vest at 33 1/3% per year.
Pursuant to the 1996 Plan, effective March 11, 1998, each of the Company's
directors (other than Mr. Watson) received options of 9,000 shares of common
stock at a per share exercise price of $9.75.
Effective February 1997, the Company entered into a Consulting and
Management Service Agreement with Hauslein & Company, Inc. (the "Consultant") a
corporation owned and controlled by
10
<PAGE>
James N. Hauslein, the Company's Chairman of the Board. Pursuant to the
agreement, (i) the Consultant agreed to cause Mr. Hauslein to provide
management and consulting services to the Company on a substantially full-time
basis, and (ii) the Company agreed to pay the Consultant an annual base cash
consulting and management fee equal to $375,000, payable in monthly
installments, as well as reimburse the Consultant for certain expenses. Either
party may terminate the agreement upon 30 days' prior notice to the other.
Prior to February 1997, the Company paid to Mr. Hauslein a consulting fee of
$10,000 per month.
11
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation paid
by the Company for services rendered during fiscal 1997, 1996, and 1995 to the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers who were serving as executive officers as of
January 31, 1998 (collectively the "Named Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- --------------------------------
OTHER VALUE OF NUMBER OF
FISCAL ANNUAL SHARES OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTED GRANTED(2)
- --------------------------- ------------- ---------- ----------- ----------------- -------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
James N. Hauslein 1997(4) $ -- $400,000 $ 514,807(7) -- 156,000
Chairman of the Board & former 1996 -- -- -- -- --
acting Chief Executive Officer 1995 -- -- -- -- --
John X. Watson 1997(5) 21,154 75,000 -- -- 250,000
President and Chief 1996 -- -- -- -- --
Executive Officer 1995 -- -- -- -- --
Jack B. Chadsey 1997(3) 190,385 -- 314,228(6) -- --
Former President and Chief 1996 434,616 -- -- -- 50,000
Executive Officer 1995 346,153 350,000 -- -- 82,000
Edward L. Grund(9) 1997 356,539 75,000 -- 1,575,000(10) 50,000
Executive Vice President and 1996 261,153 -- -- -- 20,000
General Manager, Sunglass Hut 1995 237,693 120,000 -- -- 33,000
North America
Larry G. Petersen 1997 260,000 50,000 -- -- 75,000
Senior Vice President, 1996 256,154 -- -- -- 20,000
Finance and Chief Financial Officer 1995 228,077 117,500 53,495(8) -- 38,000
Eric Schumann 1997(5) 118,846 150,000 -- -- 200,000
Executive Vice President and 1996 -- -- -- -- --
General Manager, Watch Station 1995 -- -- -- -- --
Sherry L. Lay 1997 200,000 35,000 -- -- 75,000
Vice President, 1996(5) 63,846 15,000 -- -- 20,000
Merchandising 1995 -- -- -- -- --
<FN>
- ----------------
(1) Unless otherwise noted, the aggregate amount of perquisites and other
personal benefits provided to each Named Officer has been omitted because
it is less than the lesser of either $50,000 or 10% of the total of annual
salary and bonus of such officer.
(2) See "Option Grants Table" below for additional information about these
options granted in March 1997.
(3) Mr. Chadsey resigned from the Company in May 1997.
(4) Mr. Hauslein was acting Chief Executive Officer of the Company from May
1997 to January 1998.
(5) Mr. Watson, Mr. Schumann, and Ms. Lay were hired in January 1998, September
1997 and September 1996, respectively.
(6) Represents $308,000 for severance and a $6,228 automobile allowance.
12
<PAGE>
(7) Represents $348,654 for consulting fees paid to Hauslein & Company, Inc.,
a corporation owned and controlled by Mr. Hauslein, $95,461 for
administrative expense allowance, $8,250 for auto allowance, $28,942 for a
housing allowance, and $33,500 for director's fees. (See "Director
Compensation" for further information.)
(8) Represents a $44,495 reimbursement of relocation expenses and $9,000
automobile allowance.
(9) Mr. Grund's employment terminated in May 1998.
(10) Represents 25,000 shares of common stock and 200,000 shares of restricted
common stock (vesting equally over three years) granted April 1997 under
the 1996 Plan at a grant price of $7.00 per share. In 1998, the Board
accelerated the vesting of the restricted stock to 100% immediate vesting.
At January 31, 1998, the value of the remaining 200,000 shares held by Mr.
Grund at the market price of $7.125 per share was $1,425,000.
</FN>
</TABLE>
OPTION GRANTS TABLE
The following table sets forth certain information concerning grants of
stock options made during fiscal 1997 to the Named Officers.
<TABLE>
<CAPTION>
INDIVIDUAL OPTIONS GRANTED IN 1997 FISCAL YEAR
-----------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
GRANTED TO STOCK PRICE APPRECIATION
NUMBER OF EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL PRICE PER EXPIRATION ----------------------------
NAME GRANTED(1) 1997 SHARE DATE 5% 10%
- ---- ---------------- ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
James N. Hauslein ......... 156,000(3) 10.2% $ 6.55 2007 $ 642,180 $1,627,410
John X. Watson ............ 250,000 16.3 6.81 2008 1,071,086 2,714,343
Jack B. Chadsey ........... -- -- -- -- -- --
Edward L. Grund ........... 50,000(2) 3.3 7.37 2007 231,748 587,294
Larry G. Petersen ......... 75,000(2) 4.9 7.37 2007 347,622 880,941
Eric Schumann ............. 200,000 13.1 7.25 2007 911,897 2,310,927
Sherry L. Lay ............. 75,000(2) 4.9 7.37 2007 347,622 880,941
<FN>
- ----------------
(1) Each of the options is a non-qualified stock option granted pursuant to the
Company's 1996 Executive Incentive Compensation Plan, as amended, has an
exercise price equal to the market price of a share of Common Stock on the
date of grant, and vests in increments of 33 1/3% on each of the first
three anniversaries of the date of grant.
(2) Each of the options automatically becomes exercisable as to 66 2/3% of the
shares if the Company terminates the optionee's employment for any reason
other than cause prior to May 27, 1999. Unexercised options lapse 12
months after termination.
(3) Options of 150,000 vested January 8, 1998.
</FN>
</TABLE>
13
<PAGE>
AGGREGATED OPTION EXERCISES IN 1997 FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE TABLE
The following table sets forth certain information concerning option
exercises in fiscal 1997 and the number of stock options held by the Named
Officers as of January 31, 1998, and the value (based on the fair market value
of a share of stock at fiscal year-end) of in-the-money options outstanding as
of such date.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AS OF JANUARY 31, 1998 AS OF JANUARY 31, 1998
ACQUIRED ON VALUE ------------------------------- ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- --------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
James N. Hauslein ......... -- -- 627,156 6,000 $2,725,980 $ 6,000
John X. Watson ............ -- -- -- 250,000 -- 78,125
Jack B. Chadsey ........... -- -- 507,156 -- 2,297,855 --
Edward L. Grund ........... -- -- 21,250 89,500 -- --
Larry G. Petersen ......... -- -- 39,500 134,000 -- --
Eric Schumann ............. -- -- -- 200,000 -- --
Sherry L. Lay ............. -- -- 5,000 90,000 -- --
</TABLE>
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL AGREEMENTS
The Company has no employment agreements with any Named Officers.
Certain Named Officers hold options to purchase Common Stock granted under
the Company's Amended and Restated Stock Option Plan. To the extent not already
exercisable, such options generally become exercisable upon (i) a merger,
consolidation or similar corporate transaction in which ownership or more than
49% of the voting power of the Company's voting stock is transferred, (ii) a
merger or consolidation or similar corporate transaction in which the Company
does not survive, or (iii) a sale or other disposition of all or substantially
all of the Company's assets. Each Named Officer also holds or is eligible to
receive options and other awards under the Company's 1996 Plan which provides
that awards granted thereunder will vest upon a "change in control" as defined
therein. A "change in control" generally includes any reorganization, merger,
consolidation, liquidation, dissolution or sale of substantially all assets of
the Company, an acquisition by any person, entity or group of 25% or more of
the outstanding Common Stock or 25% or more of the voting power of the
Company's outstanding voting securities, or a change in the composition of the
Board such that the persons constituting the current Board, and subsequent
directors approved by the current Board (or approved by such subsequent
directors), cease to constitute at least a majority of the Board.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE. Each member of the Compensation Committee is an
independent outside director. The Committee seeks to ensure that compensation
policy and programs appropriately support the successful execution of Sunglass
Hut's business strategy. The Chief Executive Officer ("CEO") and outside
consultants are significant resources available to the Committee in discharging
its responsibilities.
14
<PAGE>
The Compensation Committee approves all compensation policy and programs
in addition to all specific compensation actions for the CEO, Executive Vice
Presidents, Senior Vice Presidents and Vice Presidents ("executive officers")
as set forth in the Management table in this Proxy Statement.
COMPENSATION POLICY. Sunglass Hut's business strategy is to enhance its
position as the largest specialty retailer of sunglasses and as a retailer of
watches by providing consumers a broad selection of brand name products at
everyday low prices in an easy-to-shop environment that emphasizes customer
service and education.
The Company believes that only through consistently successful execution
of this strategy can the long term value of Sunglass Hut to customers,
suppliers, employees, shareholders and the communities it serves be maximized
and that such execution can only be achieved by a motivated group of high-
caliber executives attracted and retained through competitive compensation
programs.
COMPENSATION PROGRAMS. To implement its compensation policy, Sunglass Hut
has adopted compensation programs consisting of base salary, annual cash
bonuses and stock option grants for the CEO, other executive officers and other
management staff. These programs are performance oriented since major portions
of total compensation opportunities vary both with overall Company and
individual performance.
BASE SALARY. Salary ranges for each management position have been set to
reflect the underlying responsibilities and accountabilities of the position.
These salary ranges are reviewed annually and are benchmarked periodically to
the salary ranges of similar positions in the retail industry through various
sources, including use of an outside compensation consulting firm and
comparison to a group of specialty retailers of similar characteristics
selected by the Compensation Committee. Salary increases are based on an
assessment of each individual's performance against the requirements of the job
(merit), and any adjustments necessary to bring high performing executives to
competitive levels (market parity).
Fiscal year 1997 was a year of transition to a management team that the
Board of Directors believes can deliver the performance necessary to achieve
satisfactory increases in shareholder value. The increase in Mr. Grund's salary
reflects a promotion and market parity adjustment late in fiscal year 1996.
ANNUAL CASH BONUSES. Annual cash bonus awards are based on both Company
performance relative to an annual plan prepared before the beginning of each
fiscal year and approved by the Board of Directors, reflecting appropriate
progress toward the Company's long-term goals, and individual contributions to
the achievement of the annual plan. Bonus awards may range from zero to various
percentages of base salary.
Company performance against the annual plan is assessed with respect to
such considerations as sales growth, including comparable store sales growth,
new store openings and the sales performance of new stores against plan; gross
profit and margin; store contribution and margin; net income and earnings per
share growth; and return on shareholders' equity. The assessment of individual
performance reflects such factors as the operating results of one or more
business segments for which an individual is accountable; the achievement of
specific goals assigned to an individual; the further
15
<PAGE>
development of the human resources for which an individual is responsible; and
contributions to the overall team effort that are essential to the successful
execution of the Company's business strategy.
No bonuses related to Company performance were granted in fiscal year
1997. Signing bonuses in the amounts shown in the table were granted to Mr.
Watson and Mr. Schumann. Mr. Hauslein's bonus reflects the outstanding job he
did in addressing the Company's problems as acting Chief Executive Officer and
providing the leadership which has resulted in improved operations and a
successful rejuvenation of the top management team. The bonuses paid to other
Named Officers reflect their individual contributions during a period of
difficult transition.
STOCK OPTIONS. The Compensation Committee believes that long-term
incentives should constitute a larger portion of incentive compensation
potential than annual cash bonuses. The Committee further believes that
stock-based incentives are the appropriate long-term incentive because they
directly align management interest with shareholders' desire for long-term
common stock price appreciation.
Options granted at the time of employment reflect the responsibilities of
the new employee relative to those of other employees and competitive market
conditions existing at the time of employment. Annual stock option grants are
based on option ranges for each management position approved by the
Compensation Committee. Actual option grants depend upon executive level and
the Compensation Committee's assessment of Company and individual performance
as previously described.
Options are non-qualified, have a ten-year term and a per share exercise
price equal to the fair market value per share on the date of grant, vest
equally over three or four years and, as to vested options, are subject to
exercise for three months following termination of employment with certain
exceptions. The option grants shown in the table for Mr. Watson and Mr.
Schumann were awarded at the time of employment. Mr. Hauslein was awarded
150,000 options with respect to his role as acting Chief Executive Officer. Mr.
Grund was awarded 25,000 shares of common stock and 200,000 shares of
restricted common stock in connection with his promotion and market parity
adjustment in fiscal year 1996. The other option grants for Named Officers are
annual grants reflecting individual contributions made toward the achievement
of Company goals.
The annual cash bonus and stock option programs are benchmarked
periodically against the practices of other retail companies through the use of
an outside compensation consulting firm. These programs are also benchmarked
against the programs of other specialty retail companies of similar size.
SUMMARY. The Compensation Committee believes that the Company's
compensation programs are competitive with those of other specialty retailers
of similar size.
William S. Field, Chairman
John H. Duerden
William E. Phillips
16
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder returns on
the Company's Common Stock, based on the market prices of Common Stock from the
date of the Company's initial public offering in June 1993 through January 31,
1998, with the cumulative total return of the S&P Specialty Retail Index and
S&P 500 Index.
<TABLE>
<CAPTION>
6/9/93 1/28/94 7/28/94 1/27/95 7/28/95 2/28/96 8/2/96 1/31/97 8/1/97 1/30/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sunglass
Hut International 100 152.58 132.99 187.83 336.08 457.73 247.50 152.50 165.00 142.50
S&P Specialty Retail 100 93.46 88.83 74.04 82.90 86.52 117.32 112.38 212.47 219.90
S&P 500 100 107.39 102.80 105.52 126.28 142.64 148.61 176.36 159.82 201.83
</TABLE>
17
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP, independent public accountants, served as
the Company's independent public accountants for the fiscal year ended January
31, 1998. The Board of Directors, on the recommendation of the Company's Audit
Committee, has selected Arthur Andersen LLP as the Company's independent public
accountants for the 1998 fiscal year. One or more representatives of Arthur
Andersen LLP are expected to be present at the Annual Meeting. Such
representatives will have the opportunity to make a statement if they desire to
do so and are expected to be available to respond to appropriate questions from
shareholders.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, any other business should properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote proxies as in
their discretion they may deem appropriate, unless they are directed by a proxy
to do otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal to be included in the
Company's proxy statement for the Company's 1999 Annual Meeting of Shareholders
must deliver a proposal in writing to the Company's principal executive offices
no later than January 8, 1999.
By Order of the Board of Directors
James N. Hauslein
CHAIRMAN OF THE BOARD
Coral Gables, Florida
May 8, 1998
18
<PAGE>
SUNGLASS HUT INTERNATIONAL, INC.
255 ALHAMBRA CIRCLE
CORAL GABLES, FLORIDA 33134
THIS PROXY IS SOLICITED ON BEHALF OF THE
COMPANY'S BOARD OF DIRECTORS
The undersigned holder of Common Stock of Sunglass Hut International, Inc.,
a Florida corporation (the "Company"), hereby appoints John X. Watson and Larry
G. Petersen, and each of them, as proxies for the undersigned, each with full
power of substitution, for and in the name of the undersigned to act for the
undersigned and to vote, as designated on the reverse side of this proxy card,
all of the shares of stock of the Company that the undersigned is entitled to
vote at the 1998 Annual Meeting of Shareholders of the Company, to be held on
Thursday, June 4, 1998 at 9:15 a.m., local time, at the Waldorf-Astoria Hotel,
301 Park Avenue, New York, New York 10022, and at any adjournments or
postponements thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
[X] Please mark your
votes as in this
example.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE
DIRECTOR NOMINEES LISTED IN PROPOSAL (1).
1. ELECTION OF DIRECTORS
VOTE FOR all nominees listed
at right except vote withheld
from the following nominee(s) VOTE WITHHELD
(If any) from all nominees
[ ] [ ]
NOMINEES: James N. Hauslein
Robert C. Grayson
(Instruction: To withhold authority for an individual nominee, write that
nominee's name on the line provided below.)
________________________________________________________________________________
2. Upon such other business as may properly come before the Annual Meeting of
any adjournment thereof.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting, and any adjournments
or postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" THE ELECTION OF ALL DIRECTOR NOMINEES LISTED IN PROPOSAL (1) AT
LEFT.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE NECESSARY IF MAILED WITHIN THE UNITED STATES.
The undersigned hereby acknowledges receipt of (i) the Notice of Annual
Meeting, (ii) the Proxy Statement, and (iii) the Company's 1997 Annual Report to
Shareholders.
DATE ___________________ SIGNATURE______________________________________________
SIGNATURE (if held jointly) ____________________________________________________
NOTE: Please sign exactly as your name appears hereon and mail it promptly even
though you now plan to attend the meeting. 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 the partnership name by authorized person.
