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 8, 1999
-------------------------
To the Shareholders of
Sunglass Hut International, Inc.:
NOTICE IS HEREBY GIVEN that the 1999 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
Tuesday, June 8, 1999, 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 2002 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 30, 1999
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 10, 1999
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>
1999 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 1999 Annual Meeting of Shareholders of the Company to be held on
Tuesday, June 8, 1999, at the Waldorf-Astoria, 301 Park Avenue, New York, NY
10022 at 9:15 A.M. local time 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 10, 1999. Shareholders should
review the information provided herein in conjunction with the Company's 1998
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 2002 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 30, 1999 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 46,428,551 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
2
<PAGE>
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 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 April 15, 1999 (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 Executive
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>
FMR Corp. ............................................................ 4,997,525(3) 10.8%
Greenway Partners .................................................... 4,163,600(4) 9.0%
Capital Research and Management Company .............................. 3,770,250(5) 8.1%
Reich & Tang Asset Management L.P. ................................... 3,388,100(6) 7.2%
James N. Hauslein .................................................... 1,601,311(7) 3.5%
Rohit M. Desai ....................................................... 309,200(8) *
John H. Duerden ...................................................... 51,200(9) *
William S. Field ..................................................... 51,200(9) *
Robert C. Grayson .................................................... 91,200(10) *
William E. Phillips .................................................. 28,200(11) *
John X. Watson ....................................................... 166,666(9) *
Stephen P. Lundeen ................................................... 3,500 *
Larry G. Petersen .................................................... 123,506(12) *
Eric Schumann ........................................................ 66,666(9) *
W. John Short ........................................................ 66,666(9) *
All Directors and executive officers as a group (14 persons) ......... 2,559,315(13) 5.5%
</TABLE>
- ----------------
* 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 on the Schedule 13G, dated April 9, 1999, filed with the SEC by FMR
Corp., which reported its address as 82 Devonshire St., Boston, MA 02109.
Includes shares beneficially owned by affiliates as set forth in the
referenced Schedule 13G. The Schedule 13G further states the shares
reported includes 1,452,620 shares of common stock resulting from the
assumed conversion of $43,940,000 principal amount of the Company's 5.25%
Convertible Subordinated Notes due 2003 (33.057 shares of common stock for
each $1,000 principal amount of the convertible corporate bond).
(4) Based on the Schedule 13D/A, dated October 9, 1998, filed with the SEC by
Greenway Partners L.P. which reported its address as 277 Park Ave., 27th
Floor, New York, NY 10017. Includes shares beneficially owned by various
partners and affiliates as set forth in the referenced
Schedule 13D/A.
4
<PAGE>
(5) Based on the Schedule 13G, dated February 11, 1999, filed with the SEC by
Capital Research and Management Company ("CRMC"), which reported its
address as 333 South Hope St., 55th Floor, Los Angeles, CA 90071. The
Schedule 13G reports that all of the securities are beneficially owned by
CRMC, an investment adviser registered under Section 203 of the Investment
Advisers Act of 1940, which shares include 570,250 shares resulting from
the assumed conversion of $17,250,000 principal amount of the Company's
5.25% Convertible Subordinated Notes due 2003. CRMC has sole dispositive
power over all such shares and no voting power.
(6) Based solely on the Schedule 13G, dated February 9, 1999, filed with the
SEC by Reich & Tang Asset Management L.P., ("Reich") which reported its
address as 600 Fifth Avenue, New York, New York 10020. Reich has shared
voting and dispositive power over all such shares.
(7) Represents 924,955 shares held of record and 676,356 shares subject to
presently exercisable stock options.
(8) Represents 258,000 shares held of record by Equity-Linked Investors II
("ELI-II") and 51,200 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.
(9) Represents shares subject to presently exercisable stock options.
(10) Represents 80,000 shares held of record and 11,200 shares subject to
presently exercisable stock options.
(11) Represents 17,000 shares held of record and 11,200 shares subject to
presently exercisable stock options.
(12) Represents 10,000 shares held of record, 3,240 shares subject to issuance
upon conversion of $98,000 aggregate principal amount of the Company's
5.25% Convertible Subordinated Notes due 2003, and 110,266 shares subject
to presently exercisable stock options.
(13) Includes 1,045,955 shares held of record, 3,240 shares subject to issuance
upon conversion of $98,000 aggregate principal amount of the Company's
5.25% Convertible Subordinated Notes due 2003 held by Mr. Petersen and
1,261,721 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 (8).
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 named executive officers, and persons who own more than
ten percent of the Company's Common Stock, to file with 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. During the Company's 1998 fiscal year, Mr. Phillips was late
filing one Form 4 and Mr. Short was late filing a Form 3.
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:
<TABLE>
<CAPTION>
CLASS DIRECTORS TERM EXPIRES IN:
- ------- --------------------- -----------------
<S> <C> <C>
I John H. Duerden 2000
I William S. Field 2000
I John X. Watson 2000
II James N. Hauslein 2001
II Robert C. Grayson 2001
III Rohit M. Desai 1999
III William E. Phillips 1999
</TABLE>
The two directors serving in Class III have terms expiring at the Annual
Meeting. The Class III directors currently serving on the Board, Messrs. Desai
and Phillips, have been nominated by the Board of Directors for re-election to
three-year terms at the Annual Meeting. Each Class III director elected at the
Annual Meeting will serve for a term expiring at the Company's 2002 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>
BOARD OF DIRECTORS
JAMES N. HAUSLEIN
Mr. Hauslein, age 40, 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 and from May 1997 to January 1998,
Mr. Hauslein served as the Company's acting Chief Executive Officer. From
February 1995 until January 1997, Mr. Hauslein was engaged in private
investments as his principal occupation through Hauslein & Company, Inc. Prior
to 1990, Mr. Hauslein served as a Partner of Kidd, Kamm & Co., a private
investment firm specializing in private equity investments and leveraged
buyouts, and has been a principal shareholder in the Company since June, 1987.
JOHN X. WATSON
Mr. Watson, age 45, was appointed President, Chief Executive Officer and a
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.
ROHIT M. DESAI*
Mr. Desai, age 60, a Director of the Company since March 1993 and from
June 1987 until July 1991, 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., and
Independence Community BankCorp.
JOHN H. DUERDEN
Mr. Duerden, age 58, 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.
WILLIAM S. FIELD
Mr. Field, age 69, a Director of the Company since July 1991, is currently
engaged in private investments as his principal occupation. Mr. Field served as
Chairman and Chief Executive Officer of Prudential Equity Investors, Inc., a
subsidiary of The Prudential Insurance Company of America, from April 1984 to
July 1994.
- ----------------
* Nominees for re-election.
7
<PAGE>
ROBERT C. GRAYSON
Mr. Grayson, age 54, a Director of the Company since October 1993, has
served as President of Robert C. Grayson & Associates, a retail consulting
group since 1992, and Vice Chairman of BerglassGrayson, Inc., a management
consulting group since 1994. 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 as his principal occupation. 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., Kenneth Cole
Productions, Inc., and Frisby Technologies, Inc.
WILLIAM E. PHILLIPS*
Mr. Phillips, age 69, 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.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Company's fiscal year ended January 30, 1999, the Company's
Board of Directors held six meetings and took certain actions by written
consent. During the 1998 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 1998 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 1998. Mr. Hauslein is Chairman of the
Audit Committee. The Board of Directors concurs with most of the views
established by SEC Blue Ribbon Committee on Audit Committees that the Audit
Committee should be one of oversight and monitoring of financial reporting. In
that regard, the Audit Committee relies on senior financial management and
internal and outside auditors to provide a legal, regulatory, and
self-regulatory framework that emphasizes disclosure, transparency and
accountability in the Company's financial reporting. The primary functions of
the Audit Committee are to recommend the appointment of the public accountants
and review with them their report on the financial reports of the corporation;
to review the adequacy of the system of internal controls and of compliance
with material policies and laws, including the corporation's code of conduct;
and to provide a direct channel of communications to the Board of
- ----------------
* Nominees for re-election.
8
<PAGE>
Directors for the public accountants and internal auditors and, when needed,
finance officers, compliance officers and the general counsel. Management
believes that it has followed many of the procedures which are consistent with
best practice recommendations by the Blue Ribbon Committee, however, it is
still in the process of reviewing the recommendations of the Blue Ribbon
Committee to determine whether any modifications in the Audit Committee
procedures are appropriate.
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, 1999, two
Directors had elected to defer compensation valued at $321,378 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 $19,989 in fiscal 1998.
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 restricted 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 18, 1999,
each of the Company's Directors (other than Mr. Watson) received options of
6,000 shares of Common Stock at a per share exercise price of $10.5655. In
addition, the Board of Directors approved and each non-employee Director
elected to receive an additional grant of options to purchase 3,000 shares of
Common Stock in lieu of the grant of 1,500 shares of restricted Common Stock.
Such options were also issued at a per share exercise price of $10.5655.
In fiscal 1998, each of the non-employee Directors and many employees,
elected to participate in an option grant exchange program wherein options
granted in 1995 and 1996 were exchanged for a fewer number of replacement
options. See "Exchange of Options" on page 12.
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 James N. Hauslein, the Company's Chairman
of the Board. Pursuant to the agreement, the Consultant agreed to cause Mr.
Hauslein to provide management and consulting services to the Company on a
substantially full-time basis. During fiscal year 1998 the Company paid the
Consultant consulting and management fees of $751,000, reimbursed the
Consultant for expenses in the amount of $324,000, $157,000 of which was for
expenses incurred in fiscal 1997, and reimbursed Mr. Hauslein $15,135 for
expenses. Either party may terminate the agreement upon 30 days' prior notice
to the other.
9
<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 1998, 1997, and 1996 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 30, 1999 (collectively the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ---------------
OTHER NUMBER OF
FISCAL ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTED(2) COMPENSATION
- ---------------------------------- -------- --------- --------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John X. Watson(3) 1998 500,000 375,000 307,502(4) 250,000 --
President and Chief 1997 21,154 75,000 -- 250,000
Executive Officer 1996 -- -- -- -- --
W. John Short(3) 1998 338,942 172,000 101,242(5) 200,000 15,000(6)
Executive Vice President 1997 -- -- -- -- --
1996 -- -- -- -- --
Eric Schumann(3) 1998 300,000 150,000 -- -- --
Executive Vice President 1997 118,846 150,000 -- 200,000 --
1998 -- -- -- -- --
Larry G. Petersen 1998 260,000 78,000 -- 69,100(7) 4,698(8)
Senior Vice President 1997 260,000 50,000 -- 75,000 3,750(8)
Finance; Chief Financial Officer 1996 256,154 -- -- 20,000 3,750(8)
Stephen P. Lundeen(3) 1998 119,231 75,000 203,529(9) 100,000 --
Senior Vice President 1997 -- -- -- -- --
Human Resources 1996 -- -- -- -- --
</TABLE>
- ----------------
(1) Unless otherwise noted, the aggregate amount of perquisites and other
personal benefits provided to each Named Executive 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 the
options granted in March 1998.
(3) Mr. Watson, Mr. Schumann, and Mr. Lundeen were hired in January 1998,
September 1997, and August, 1998. Mr. Short was employed by the Company
from February 1, 1998 to May 7, 1999.
(4) Represents $298,502 for reimbursement of relocation expenses and $9,000
automobile allowance.
(5) Represents $50,000 for hiring bonus, $43,107 for reimbursement of
relocation expenses, and $8,135 automobile allowance.
(6) Represents fees paid for consulting services rendered prior to employment.
(7) Includes 19,100 options issued pursuant to an option grant replacement.
(See "Exchange of Options")
10
<PAGE>
(8) Includes Company contribution to the Sunglass Hut International
Savings/Profit Sharing Plan and the Executive Savings Plan to match
participant deferrals (included under Salary) made by Mr. Petersen to such
plans.
(9) Represents $76,514 for hiring bonus, $122,515 for reimbursement of
relocation expenses and $4,500 automobile allowance.
OPTION GRANTS TABLE
The following table sets forth certain information concerning grants of
stock options made during fiscal 1998 to the Named Executive Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1998 FISCAL YEAR
------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION
NUMBER OF GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE PER EXPIRATION -----------------------------
NAME GRANTED(1) 1998(2) SHARE DATE 5% 10%
- ---------------------------- --------------- ------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John X. Watson ............. 250,000 12.93 6.81 2008 $1,070,693 $2,713,347
Stephen P. Lundeen ......... 100,000 5.17 8.13 2008 511,291 1,295,713
Larry G. Petersen .......... 69,100(3) 3.57 7.09 2008 307,907 780,296
Eric Schumann .............. -- -- -- -- -- --
W. John Short .............. 200,000 10.34 7.13 2008 896,804 2,272,677
</TABLE>
- ----------------
(1) Each of the options is a non-qualified stock option granted pursuant to the
1996 Plan, 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) Includes options of all employees that were granted or granted pursuant to
an exchange of options. See "Exchange of Options."
(3) Includes options for 19,100 shares with an exercise price of $6.00 granted
in exchange for options for 48,500 shares granted in 1995 and 1996 with
expiration dates of 2005 and 2006, respectively. (See "Exchange of
Options").
11
<PAGE>
AGGREGATED OPTION EXERCISES IN 1998 FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE TABLE
The following table sets forth certain information concerning option
exercises in fiscal 1998 and the number of stock options held by the Named
Executive Officers as of January 30, 1999, 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. No Named Executive Officers exercised options in
1998.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AS OF JANUARY 30, 1999 AS OF JANUARY 30, 1999
------------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
John X. Watson ............... 83,333 416,667 $212,241 $1,061,209
Stephen P. Lundeen ........... -- 100,000 -- 123,440
Larry G. Petersen(1) ......... 88,825 105,275 142,274 210,161
Eric Schumann ................ 66,666 133,334 140,625 281,255
W. John Short ................ -- 200,000 -- 445,880
</TABLE>
- ----------------
(1) Includes replacement options issued pursuant to option exchange. (See
"Exchange of Options")
12
<PAGE>
EXCHANGE OF OPTIONS
In December 1998, the Company's Board of Directors approved the exchange
of stock options granted in 1995 and 1996. The options granted to plan
participants in 1995 and 1996 were granted at exercise prices of $13.43 and
$30.81, respectively, for employees, and $13.94 and $30.50 respectively for
non-employee Directors. Due to the Company's stock price performance during
1997 and through mid 1998 (trending between $3.75 and $12.75) the Board
concluded that these options would not provide the desired incentive based
compensation results as originally intended. However, the Board did not want to
incur shareholder dilution which generally results from typical repricing
option schemes. Consequently, to be sensitive to shareholder interests, the
Board of Directors authorized an option exchange program that equated the
expected profit potential per old option (the original 1995 and 1996 options
granted at $13.94 and $30.50 respectively, probabstically weighted), to a fewer
number of new options at a lower exercise price of $6.00 (but still 10% above
fair market value of $5.34 at the time of the exchange.) The exchange was made
available to all employees on a voluntary basis. The exchange options were
issued in accordance with the same vesting and expiration schedule as the
option for which they were exchanged. Consequently, a total of 279,500 old
options were exchanged for 106,150 new options, a net reduction of 172,450
option shares or 62%. Each of the non-employee Directors, one Named Executive
Officer and many employees participated in the exchange program, as set out in
the following table.
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING MARKET PRICE EXERCISE NUMBER(#)
NUMBER OF OF STOCK AT PRICE AT OF NEW LENGTH OF ORIGINAL
OPTIONS TIME OF TIME OF REPLACEMENT EXERCISE OPTION TERM REMAINING
NAME DATE REPLACED(#) REPLACEMENT($) REPLACEMENT($) OPTIONS PRICE($) AT DATE OF REPLACEMENT
- ------------------- ---------- ------------- ---------------- ---------------- ------------- ---------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Larry G. Petersen 12/14/98 28,500 $5.43 $13.43 17,100 $6.00 6 years, 3 months
12/14/98 20,000 $5.43 $30.81 2,000 $6.00 7 years, 3 months
Directors(1) 12/14/98 6,000 $5.43 $13.94 3,600 $6.00 6 years, 3 months
12/14/98 6,000 $5.43 $30.50 600 $6.00 7 years, 3 months
All Participants 12/14/98 156,400 $5.43 $13.43(2) 93,840 $6.00 6 years, 3 months
12/14/98 123,100 $5.43 $30.81(2) 12,310 $6.00 7 years, 3 months
</TABLE>
- ----------------
(1) Participation of each non-employee Director.
(2) Employee participants only.
William S. Field, Chairman
John H. Duerden
William E. Phillips
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL AGREEMENTS
The Company has no employment agreements with any Named Executive
Officers.
Each Named Executive Officer 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
13
<PAGE>
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 the Company's
Human Resources staff as well as outside consultants are significant resources
available to the Committee in discharging its responsibilites.
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").
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 consistent 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 annual 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 1998 saw the virtual completion of the transition to a
management team that the Board of Directors believes can deliver the
performance necessary to achieve satisfactory increases in shareholder value.
The CEO's salary reflects a full year of employment at the initial hire salary.
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
14
<PAGE>
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 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 busines strategy.
Fiscal year 1998 bonuses reflect a sixty-six percent company performance
factor against the Plan. The CEO's bonus also reflects strong individual
performance in hiring new key executives, refocusing the merchandising
functions of the Company, re-instilling a profit-oriented culture among all
employees and significantly improving relationships with vendors.
STOCK OPTIONS. The Compensation Commitee believes that long-term
incentives should consititute 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 reflect options granted in
connection with employment except for those granted to Mr. Petersen.
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
15
<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 30,
1999, with the cumulative total return of the S&P Specialty Retail Index and
S&P 500 Index.
COMPARISON OF CUMULATIVE TOTAL RETURN(1)
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
6/9/93 1/28/94 1/27/95 2/2/96 1/31/97 1/30/98 1/30/99
<S> <C> <C> <C> <C> <C> <C> <C>
Sunglass Hut International 100 152.58 187.83 457.73 152.50 142.50 186.88
S&P Specialty Retail 100 93.46 74.04 86.52 112.38 219.90 287.06
S&P 500 100 107.39 105.52 142.64 176.36 201.83 415.18
</TABLE>
- ----------------
(1) Assumes reinvestment of dividends
16
<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
30, 1999. 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 1999 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 2000 Annual Meeting of Shareholders
must deliver a proposal in writing to Corporate Secretary, Sunglass Hut
International, Inc., 255 Alhambra Circle, Coral Gables, Florida 33134, no later
than January 8, 2000. Proposals not in full conformity with the applicable
rules of the Securities and Exchange Commission may be excluded from the Proxy
Statement.
By Order of the Board of Directors
James N. Hauslein
CHAIRMAN OF THE BOARD
Coral Gables, Florida
May 10, 1999
17
<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
signed 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 1999 Annual Meeting of Shareholders of the Company, to be held on
Tuesday, June 8, 1999 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 DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
SUNGLASS HUT INTERNATIONAL, INC.
JUNE 8, 1999
Please Detach and Mail in the Envelope Provided
A [X] Please mark your
votes as in this
example.
VOTE FOR all nominees listed
at right except vote withheld
from the following nominee(s)
1. ELECTION VOTE WITHHELD NOMINEES: Rohit M. Desal
OF (if any) from all nominees William E. Phillips
DIRECTORS. ______ _________________
The Board of Directors unanimously recommends a VOTE FOR the election of all the
director nominees listed in proposal (1).
2. Upon such other business as may properly come before the Annual Meeting or
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 adjourments 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 DIRECTION 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 1996 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 quardian, 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.
