SOLA INTERNATIONAL INC, 424B4, 1996-06-28

SOLA INTERNATIONAL INC
424B4, 1996-06-28
OPHTHALMIC GOODS

Previous: SOLA INTERNATIONAL INC, 11-K, 1996-06-28

Next: GFS BANCORP INC, 8-K, 1996-06-28

<PAGE>

Filed pursuant to Rule 424(b)(4)
Registration No. 333-3645

PROSPECTUS

2,805,415 Shares

[LOGO OF SOLA INTERNATIONAL APPEARS HERE]
COMMON STOCK

----------------

OF THE 2,805,415 SHARES OF COMMON STOCK OFFERED HEREBY, 2,020,000 SHARES
ARE BEING OFFERED BY THE COMPANY AND 785,415 SHARES ARE BEING OFFERED BY
THE SELLING STOCKHOLDERS. SEE "SELLING STOCKHOLDERS." THE COMPANY
WILL NOT RECEIVE ANY PROCEEDS FROM THE SALE OF SHARES BY THE
SELLING STOCKHOLDERS. THE COMMON STOCK IS TRADED ON THE NEW
YORK STOCK EXCHANGE UNDER THE SYMBOL "SOL." ON JUNE 26,
1996, THE REPORTED LAST SALE PRICE OF THE COMMON STOCK
ON THE NEW YORK STOCK EXCHANGE WAS $28 5/8 PER
SHARE.

----------------

SEE "RISK FACTORS" AT PAGE 9 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.

----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

----------------

PRICE $28 5/8 A SHARE

----------------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
-------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share................... $28.625 $1.360 $27.265 $27.265
Total(3).................... $80,305,004 $3,815,364 $55,075,300 $21,414,340
</TABLE>
- --------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $500,000.
(3) The Company has granted to the Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
300,000 additional Shares at the price to public less underwriting
discounts and commissions for the purpose of covering over-allotments,
if any. If the Underwriters exercise such option in full, the total
price to public, underwriting discounts and commissions and proceeds to
Company will be $88,892,504, $4,223,364 and $63,254,800, respectively.
See "Underwriters."

----------------

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Shearman
& Sterling, counsel for the Underwriters. It is expected that the delivery of
the Shares will be made on or about July 2, 1996, at the office of Morgan
Stanley & Co. Incorporated, New York, New York, against payment therefor in
same day funds.

----------------

MORGAN STANLEY & CO. MERRILL LYNCH & CO.
Incorporated

June 26, 1996
<PAGE>

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED HEREBY, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................. 3
Risk Factors....................... 9
The Company........................ 12
The AO Acquisition................. 12
Use of Proceeds.................... 13
Price Range of Common Stock and
Dividend Policy................... 14
Capitalization..................... 15
Selected Financial Data............ 16
Unaudited Pro Forma Condensed Com-
bined Financial Information....... 18
Selling Stockholders............... 25
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Capital Stock....... 26
Certain United States Federal Tax
Considerations for Non-U.S.
Holders of Common Stock........... 28
Underwriters....................... 31
Available Information.............. 32
Incorporation of Certain Documents
by Reference...................... 33
Legal Matters...................... 33
Experts............................ 33
Index to Consolidated Financial
Statements........................ F-1
</TABLE>

----------------

No action has been or will be taken in any jurisdiction by the Company, any
Selling Stockholder or any Underwriter that would permit a public offering of
the Common Stock or possession or distribution of this Prospectus in any
jurisdiction where action for that purpose is required, other than in the
United States. Persons into whose possession this Prospectus comes are
required by the Company, the Selling Stockholders and the Underwriters to
inform themselves about and to observe any restrictions as to the offering of
the Common Stock and the distribution of this Prospectus.

In this Prospectus, references to "dollar" and "$" are to United States
dollars, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.

----------------

The Company has a number of trademarks and trade names, including
Spectralite(R), VIP Gold(R), XL Gold(R), UltraGard(R), PermaGard Plus(R),
UTMC(R) and Matrix(R).

----------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-
COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the financial statements, including the notes thereto, set
forth elsewhere in this Prospectus or incorporated herein by reference, which
should be read in their entirety. Unless the context otherwise requires, all
references to the "Company" or "Sola" herein refer to Sola International Inc.
(or its predecessors) and its consolidated subsidiaries. References to the
"Acquisition" shall refer to the Company's purchase of the Sola business unit
(the "Predecessor Business") of Pilkington plc in December 1993, and references
to the "AO Acquisition" shall refer to the Company's acquisition of
substantially all of the worldwide ophthalmic business of American Optical
Corporation in June 1996. References herein to fiscal years are to the
Company's fiscal year which ends on March 31 of each year. For example, the
twelve months ended March 31, 1996 are referred to herein as fiscal 1996.
Unless otherwise indicated, the information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. References to the "IPO"
shall refer to the Company's initial public offering of the Company's Common
Stock in March 1995. References to the "Offering" shall refer to the offering
of the Company's Common Stock by the Underwriters named herein. Certain of the
information contained in this summary and elsewhere in this Prospectus,
including under "The AO Acquisition--Strategy," are forward-looking statements
which involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed under "Risk Factors."

THE COMPANY

Sola designs, manufactures and distributes a broad range of eyeglass lenses,
primarily focusing on the faster growing plastic lens segment of the global
lens market. Sola has manufacturing and distribution sites in three major
regions--North America, Europe, and Rest of World (comprising primarily
Australia, Asia and South America). The Company believes it ranks first or
second in unit sales of plastic eyeglass lenses in each of these geographic
regions (if the Japanese market is excluded from Rest of World).

Sola's market position is particularly strong in developing markets and
specialty lenses, which are markets and product categories that are
experiencing faster growth than the overall global lens market. The Company has
a leading position in developing markets such as South America and China, where
the Company estimates its share of the plastic lens market to be approximately
40% and 70%, respectively. In developed markets, Sola has successfully pursued
a strategy of building a leading market position in higher value-added, faster
growing product categories such as progressive lenses, lens coatings and
thinner and lighter plastic lenses, which typically generate an above average
gross profit per pair.

The Company's historical growth in sales and operating income reflects the
global market growth for plastic lenses and Sola's success in capturing strong
market positions worldwide as well as in key geographic regions and product
categories. From fiscal 1992 to fiscal 1996, the Company's net sales grew from
$258.8 million to $387.7 million and operating income grew from $29.4 million
to $60.8 million. During this period, net sales and operating income grew in
each year, including during the last global recession. For fiscal 1996, the
Company has experienced increases of 12.2% and 39.1% in its net sales and
operating income, respectively, as compared to its results in fiscal 1995
(fiscal 1995 operating income reflected on a pro forma basis excluding certain
charges relating to the Acquisition and the IPO).

The global market for plastic lenses is relatively young and has emerged
principally in the past 20 years. The Company estimates that this market is
currently in excess of $1.5 billion (based on wholesale prices) and has grown
at a compound annual growth rate of 8% during the past three years. The factors
driving market growth in developed markets differ from the factors driving
growth in developing markets. The growth in developed markets is driven by the
increasing average age of the population and consumer preference for higher
value-added products while the growth in developing markets is driven by
increasing usage of eyeglasses and a substitution of plastic lenses for glass
lenses. The Company believes that the following trends are likely to be
significant factors contributing to the growth in the eyeglass lens market for
the foreseeable future:

3
<PAGE>

The increasing average age of the population, primarily in the Company's two
largest markets--the United States and Europe. Demographic trends in the United
States and Europe are quite favorable for future revenue and margin growth in
the lens industry. The aging of the population increases the number of
consumers who are likely to require vision correction and the increasing
population group over the age of 45 is more likely to use higher value-added
lenses such as progressives and bifocals. The Optical Industry Association
estimates that over 90% of the U.S. population over the age of 45 requires
vision correction. In the United States, this group is estimated to increase by
over 20 million individuals during the next decade. Similar demographic trends
are evident in other developed countries.

A shift in consumer preference from lower-value plastic lenses toward higher-
value plastic lenses. Eyeglass wearers in the Company's most significant
markets, such as the United States and Europe, are increasingly replacing their
lower-value lenses with higher-value lenses due to the availability of thinner,
lighter plastic lenses, lens coatings and improved lens designs. For example,
enhanced coatings have permitted the introduction of eyeglasses that offer
improved durability, increased light transmission and better cosmetics.

Increases in wealth and literacy and, therefore, eyeglass use, in less
developed markets. Many first time purchasers of eyeglasses, particularly in
developing markets, are entering the market due to growth in income, a
population shift from rural to urban areas, higher literacy rates, the spread
of television and computers, and increasing employment in office or industrial
settings where vision correction is necessary.

The substitution of plastic for glass lenses. The Company estimates that in
the past 20 years, the penetration of plastic lenses has grown from an
insignificant amount to approximately 85% and 50% of all eyeglass lens sales in
North America and Western Europe, respectively. This trend can be attributed
largely to the lighter weight, greater impact resistance and tinting
flexibility of plastic as compared with glass lenses. The Company believes that
this trend will continue in these and other markets, particularly where the
percentage of plastic lens users is small. For example, in South America, the
Company estimates that plastic lenses constitute approximately 40% of the total
lens market, up from approximately 35% in 1991. The plastic lens market in
China is experiencing rapid growth, but still only represents approximately 5%
of total lens sales based on the Company's estimates.

BUSINESS STRATEGY

The Company has successfully implemented a business strategy that has enabled
it to achieve its leading market position and consistent growth in sales and
operating income. The Company intends to continue to pursue this strategy to
capitalize on the favorable industry trends discussed above. This strategy
includes the following:

Continual Introduction of Higher Value-Added, Technologically Advanced
Products. The Company believes that it is one of the technology leaders in the
plastic lens industry, especially with respect to the development of new lens
materials, and continues to devote significant resources to the development of
new products and technology. Over the last ten years, the Company has
successfully developed and marketed a number of innovative products. During
fiscal 1996, these value-added products accounted for over half of the
Company's net lens sales. The Company is a frequent winner of Optical
Laboratory Association awards for its products and has developed its own major
proprietary lens material, Spectralite. Sola has developed and successfully
marketed proprietary progressive lenses made from Spectralite, including VIP
Gold. These new products incorporate more complex design features and new
materials and coatings that differentiate them from competitors' products.
Sales of these new products generally experience a higher growth rate than the
growth rate of the plastic lens market as a whole and generate an above average
gross profit per pair. Sola's proprietary Matrix delivery system, which allows
the rapid delivery of lenses with anti-reflection coating, is also being
installed at an increasing number of United States and foreign locations.

4
<PAGE>

Expansion of Global Distribution Capabilities. Since its inception, the
Company has selectively expanded its global distribution capabilities. The
Company has 36 major distribution centers in 16 countries and its products are
currently sold to customers in over 50 countries worldwide.

Commitment to Customer Service and Product Quality. The Company continually
seeks to differentiate itself by providing its customers with improved delivery
timeliness, a wide range of product offerings, and a commitment to product
quality, technical support and product education. With manufacturing and
distribution facilities in each of its regions, the Company seeks to customize
its product mix to reflect local demands and to deliver products at a lower
cost and on a more timely basis than its competitors.

Emphasis on Efficient and Low Cost Manufacturing. Sola's manufacturing
strategy is to balance the benefits of local manufacturing with those of least-
cost sourcing. Each of the Company's three regions has its own manufacturing
facilities and is largely self-sufficient. The Company directs production of
some high volume, standard products to lower cost sites and produces newer,
more complex products at more experienced manufacturing sites located near the
Company's research and development centers.

The Company has implemented an on-going management program to reduce
manufacturing costs through (i) centralized purchase of certain raw materials
and improved supplies procurement, (ii) increased Company-wide use of best
internal demonstrated manufacturing practices and (iii) increased use of
automation at sites located in higher labor cost countries. This program
provides for a continual review of costs on a plant by plant basis and a
sharing of information and ideas across all of the Company's manufacturing
units. The Company believes that during the first three years of its operation
the program has been responsible for identifying significant cost savings,
primarily as a result of yield improvements, savings in the cost of supplies
and raw materials and higher asset utilization rates. The Company's emphasis on
reducing manufacturing costs has favorably impacted gross margins in fiscal
1994, fiscal 1995 and fiscal 1996.

RECENT DEVELOPMENTS

AO Acquisition. In June 1996, the Company acquired substantially all of the
worldwide ophthalmic business ("AO") of American Optical Corporation ("AOC")
for cash consideration of $107 million (together with the assumption of certain
liabilities), subject to post-closing adjustments (the "AO Acquisition"). AO
has its principal operations in the United States, Mexico, the United Kingdom,
France, Switzerland, Singapore and Zimbabwe. The AO Acquisition was funded
primarily through borrowings under the Company's New Credit Agreement (as
defined below), which borrowings will be repaid in part with the proceeds of
this Offering.

AO is a leading manufacturer and worldwide distributor of a broad range of
ophthalmic lenses used in prescription eyeware. Its product line includes
single vision, bifocal, trifocal and progressive lenses, many of which are sold
under the AO brand name. AO focuses on the production of plastic lenses, but
also offers value-added glass progressive lenses and glass executive bifocals.
The Company believes that approximately half of AO's sales during the 1996
fiscal year represented sales of value-added products. The Company estimates
that AO holds approximately 4% of the worldwide market for plastic spectacle
lenses (based on volume). AO generated $85.7 million of net sales and $11.9
million of operating income, after allocated corporate expenses, during the
fiscal year ended March 31, 1996. AO also provides value-added services through
five non-U.S. prescription laboratories which customize lenses to individual
customer prescriptions and preferences. More than 40% of AO's fiscal 1996 net
sales were generated from the services provided by these laboratories. See "The
AO Acquisition."

New Credit Agreement. Simultaneous with the closing of the AO Acquisition,
the Company entered into a new bank credit agreement (the "New Credit
Agreement"), replacing its existing credit agreement. The New Credit Agreement
is divided into three tranches which consist of: a five-year term loan of $30
million,

5
<PAGE>

a renewable three-year foreign currency revolving facility of $30 million, and
a five-year U.S. dollar revolver of $120 million. The New Credit Agreement is
unsecured. The Company believes that the New Credit Agreement will lower the
effective interest rate on its borrowings and provide it with greater operating
flexibility.

Neolens Acquisition. In May 1996 the Company announced that it had entered
into a definitive merger agreement which provides for the acquisition by the
Company of Neolens, Inc. ("Neolens"), a Florida corporation that manufactures
polycarbonate eyeglass lenses and has been a supplier to the Company (the
"Neolens Acquisition"). Pursuant to the merger agreement the Company has
commenced a cash tender offer for all outstanding shares of Neolens Common
Stock, Series A Preferred Stock and Series B Preferred Stock. The aggregate
purchase price will be approximately $16 million, including the assumption of
Neolens debt. Although there can be no assurance of consummation, the Company
expects to consummate the tender offer by August 1996. The Company believes
that the acquisition of Neolens will enable the Company to increase its
penetration of the fast growing polycarbonate market and will give the Company
access to certain technologies used in the production of single vision and
polycarbonate lenses.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered:
By the Company.................. 2,020,000 shares (1)
By the Selling Stockholders..... 785,415 shares
Total......................... 2,805,415 shares (1)
=================
Outstanding Common Stock:
Prior to the Offering........... 21,797,168 (2)
After the Offering.............. 23,817,168 (1)(2)
Use of Proceeds................... The Company expects to use the proceeds of
the Offering to repay certain indebtedness
incurred in connection with the AO
Acquisition. The Company will not receive
any proceeds from the sale of Shares by the
Selling Stockholders.
New York Stock Exchange Symbol.... "SOL"
</TABLE>
- --------
(1) Assumes the Underwriters' over-allotment option is not exercised. See
"Underwriters."
(2) Excludes 2,226,365 shares that may be issued upon the exercise of options
previously granted pursuant to the Company's stock option plans.

6
<PAGE>

SUMMARY FINANCIAL AND PRO FORMA DATA
The summary historical financial data set forth below as of March 31, 1996
and for the fiscal year then ended has been derived from the audited
consolidated financial statements of the Company included elsewhere in this
Prospectus. The unaudited pro forma statement of operations data for the fiscal
year ended March 31, 1994 gives effect to the Acquisition and the IPO as if
they had occurred on April 1, 1993 and the unaudited pro forma statement of
operations data for the fiscal year ended March 31, 1995 gives effect to the
IPO as if it had occurred on April 1, 1994. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
Form 10-K for the fiscal year ended March 31, 1996 (the "Form 10-K") for
additional information regarding the pro forma adjustments that have been
applied to the historical financial data. The unaudited pro forma statement of
operations data for the fiscal year ended March 31, 1996 gives effect to the AO
Acquisition, the Neolens Acquisition, the New Credit Agreement and the Offering
as if they had occurred on April 1, 1995. The pro forma financial data is
provided for informational purposes only and does not purport to be indicative
of the results which would have actually been obtained had the Acquisition, the
IPO, the AO Acquisition, the Neolens Acquisition, the New Credit Agreement and
the Offering, as the case may be, been completed on the dates indicated or
which may be expected to occur in the future. See "Selected Financial Data" and
the Company's Consolidated Financial Statements and notes thereto included
elsewhere in this Prospectus. The unaudited pro forma statement of operations
data for fiscal 1996 should be read in conjunction with the audited financial
statements of the Company and the unaudited pro forma financial information,
including the respective notes thereto, included elsewhere in this Prospectus
and the audited consolidated financial statements of AO contained in the
Company's Current Report on Form 8-K/A incorporated by reference herein.

<TABLE>
<CAPTION>
SOLA INTERNATIONAL INC.
-----------------------------------------
FISCAL YEAR ENDED MARCH 31,
-----------------------------------------
PRO FORMA PRO FORMA PRO FORMA
1996 (1) 1996 1995 (2) 1994 (3)
--------- -------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA
Net sales...................... $474,572 $387,709 $345,631 $306,055
Technology revenue............. 1,450 -- -- --
Cost of sales.................. 254,735 201,991 185,626 175,842
--------- -------- -------- --------
Gross profit.................. 221,287 185,718 160,005 130,213
--------- -------- -------- --------
Research and development
expenses...................... 14,709 13,329 14,051 11,123
Selling and marketing
expenses...................... 81,155 66,345 61,143 52,629
General and administrative
expenses (including goodwill
amortization)................. 55,500 45,291 41,150 35,648
--------- -------- -------- --------
Operating expenses............ 151,364 124,965 116,344 99,400
--------- -------- -------- --------
Operating income.............. 69,923 60,753 43,661 30,813
Interest expense, net.......... (16,786) (12,141) (12,150) (12,674)
Foreign currency adjustments... -- -- -- (645)
--------- -------- -------- --------
Income before provision for
income taxes, minority
interest and extraordinary
item......................... 53,137 48,612 31,511 17,494
Provision for income taxes..... 15,003 13,623 6,933 7,219
Minority interest.............. (401) (401) (933) (664)
--------- -------- -------- --------
Income before extraordinary
item(4)....................... $ 37,733 $ 34,588 $ 23,645 $ 9,611
========= ======== ======== ========
EARNINGS PER SHARE DATA
Earnings per share before
extraordinary item............ $ 1.51 $ 1.51 $ 1.05 $ 0.43
========= ======== ======== ========
Weighted average number of
shares outstanding............ 24,964 22,944 22,528 22,528
========= ======== ======== ========
</TABLE>

7
<PAGE>

SUMMARY FINANCIAL AND PRO FORMA DATA--(CONTINUED)

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED(5)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA
Working capital....................................... $ 96,456 $135,362
Total assets.......................................... 416,849 558,519
Short-term debt....................................... 17,403 12,222
Long-term debt........................................ 97,890 178,895
Shareholders' equity.................................. 192,241 239,085
</TABLE>
- --------
(1) The pro forma statement of operations data for fiscal 1996 has been derived
from the unaudited pro forma condensed combined financial information
included elsewhere in this Prospectus and gives effect to (i) the AO
Acquisition and the Neolens Acquisition and the financings thereof,
including borrowings under the New Credit Agreement, and (ii) the Offering
and the application of the net proceeds therefrom as if those transactions
had occurred on April 1, 1995. See "Unaudited Pro Forma Condensed Combined
Financial Information."
(2) The pro forma statement of operations data for fiscal 1995 gives effect to
the IPO as if it had occurred on April 1, 1994. In connection with the IPO,
the Company recorded a non-recurring charge of $3.0 million for the
termination of the management agreement between AEA Investors Inc. ("AEA")
and the Company that was reflected in general and administrative expenses.
This charge has been excluded from the pro forma statement of operations
data for fiscal 1995 because it is non-recurring. In addition, the pro
forma statement of operations data for fiscal 1995 has been adjusted to
reflect (i) a $0.9 million decrease to general and administrative expenses
which relates to the elimination of the AEA management fee, (ii) a $6.4
million decrease in interest expense which relates to the repayment of
certain debt with the IPO proceeds and the reduced interest rate from the
bank credit agreement entered into at the time of the IPO (the "Old Credit
Agreement") and (iii) an increase in income tax expense as a result of the
pro forma adjustments.
(3) The pro forma statement of operations data for fiscal 1994 gives effect to
the Acquisition and the IPO as if they had occurred on April 1, 1993. For
fiscal 1994, the Company recorded two non-recurring, non-cash charges
associated with the Acquisition: (i) a $32.9 million charge for the
amortization associated with an inventory write-up to fair value that was
reflected in cost of sales; and (ii) a $40.0 million charge for the write-
off of in-process research and development that was reflected in in-process
research and development expense. These charges have been excluded from
this pro forma statement of operations data for fiscal 1994 because they
are non-recurring. In addition, the pro forma statement of operations data
for fiscal 1994 has been adjusted to reflect (i) a $1.6 million increase to
general and administrative expenses reflecting a full year of amortization
of goodwill and intangibles arising from the Acquisition as partially
offset by the elimination of the AEA management fee, (ii) a $3.4 million
increase to interest expense primarily resulting from increased borrowings
as a result of the Acquisition, partially offset by the decrease in
interest expense resulting from repayments of debt from the IPO proceeds
and the reduced interest rate from the Old Credit Agreement and (iii) an
increase in income tax expense as a result of the pro forma adjustments.
(4) During fiscal 1996 and 1995, the Company incurred extraordinary charges of
$0.9 million and $3.9 million, respectively.
(5) The as adjusted balance sheet data has been derived from the unaudited pro
forma condensed combined financial information included elsewhere in this
Prospectus and gives effect to (i) the AO Acquisition and the Neolens
Acquisition and the financings thereof, including borrowings under the New
Credit Agreement, and (ii) the Offering and the application of the net
proceeds therefrom as if those transactions had occurred as of March 31,
1996. See "Unaudited Pro Forma Condensed Combined Financial Information."

8
<PAGE>

RISK FACTORS

Before purchasing the Common Stock offered hereby, a prospective investor
should consider the specific factors set forth below as well as other
information included or incorporated by reference in this Prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" in the Company's Form 10-K for a description of
other factors affecting the business of the Company.

HIGHLY COMPETITIVE INDUSTRY

The eyeglass lens and coating industry is highly competitive. The Company
competes principally on the basis of customer service, the quality and breadth
of product offerings, and price. The eyeglass lens and coating industry is
characterized by price competition, which can be severe in certain markets,
particularly for standard products. Sola attempts, to the extent possible, to
counter competition on the basis of price by focusing on providing a rapid
response to orders, maintaining high fill rates, developing differentiated new
products, and educating processing laboratories and eyecare practitioners on
the benefits of Sola lenses and coatings. There can be no assurance, however,
that the Company's competitors will not develop products or services that are
more effective or less expensive than the Company's products or which could
render certain of the Company's products less competitive. Since recently-
developed products comprise a substantial portion of the Company's sales, the
Company's performance and future growth are dependent upon its continuing
ability to develop and market new products. Some of the Company's competitors
have significantly greater financial resources than the Company to fund
expansion and research and development. See "--Substantial Indebtedness" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" in the Company's Form 10-K. Within
a particular market, certain of the Company's competitors may enjoy a "home-
country" advantage over foreign competition. In addition, in certain markets
(primarily Europe), the Company also faces competition from a number of its
principal competitors which are vertically integrated with processing centers
to a greater extent than the Company, enabling them to customize prescription
lenses. This limits the number of independent lens processing customers to
which the Company can market its products.

INTERNATIONAL OPERATIONS

The Company operates manufacturing and distribution sites in all major
regions of the world--North America (including Mexico), Europe, and Rest of
World (comprising primarily Australia, Asia and South America)--and derived
approximately half of its net sales in fiscal 1995 from the sale of products
outside the United States. As a result, a significant portion of the Company's
sales and operations are subject to certain risks, including adverse
developments in the foreign political and economic environment, exchange rates,
tariffs and other trade barriers, staffing and managing foreign operations and
potentially adverse tax consequences. Although the Company and its predecessors
have been successfully conducting business outside of the United States since
its inception in 1960, there can be no assurance that any of these factors will
not have a material adverse effect on the Company's financial condition or
results of operations in the future.

The Company's interest expense is denominated predominantly in U.S. dollars;
its cash flow, however, is comprised of a variety of currencies. Although the
Company may enter into currency swap agreements with financial institutions to
reduce its exposure to fluctuations in foreign currency values relative to its
debt obligations, such hedging transactions, if entered into, will not
eliminate that risk entirely. As a result of the Company's worldwide
operations, currency exchange rate fluctuations tend to affect the Company's
results of operations and financial position. The Company has significant
operations in Brazil, which has, until recently, experienced a hyper-
inflationary environment and whose currency risk may not be effectively hedged.
The functional currency of the Company's operations in Brazil is the U.S.
dollar. Under U.S. generally accepted accounting principles for hyper-
inflationary countries, all translation and transaction adjustments of foreign
operations are reflected in the Company's statements of operations. The
Company's historical statements of operations reflect significant charges to
income primarily attributable to significant devaluations of the Brazilian
currency. There can be no assurance that hyper-inflationary conditions will not
return to Brazil or be present in

9
<PAGE>

other countries in which the Company has significant operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Currency Exchange Rates" and "--Inflation" in the Company's Form
10-K.

RESTRICTIONS ON PAYMENT OF DIVIDENDS FROM SUBSIDIARIES

The Company's foreign operations are conducted through its subsidiaries.
These operations contribute significantly to the Company's sales and
profitability. The payment of dividends and the making of loans and advances
to the Company by its subsidiaries may be subject to statutory restrictions,
are contingent upon the earnings of those subsidiaries and are subject to
various business considerations. Dividends and other payments to the Company
from subsidiaries in certain jurisdictions are subject to legal restrictions
and may have adverse tax consequences to the Company. The Company intends to
remit dividends from its foreign operations subject to local cash requirements
and legal restrictions. Management reviews the need for cash distributions to
the Company from its foreign subsidiaries on a case by case basis. If the need
for cash distributions from the subsidiaries should arise in the future, there
can be no assurance that the subsidiaries will be permitted to make such cash
distributions without legal restrictions or adverse tax consequences to the
Company. Commencing in fiscal 1996, the Company has provided for U.S. federal
and state income taxes on unremitted earnings of foreign subsidiaries.

SUBSTANTIAL INDEBTEDNESS

Although the Company's outstanding indebtedness was reduced by application
of the proceeds of the IPO in March 1995, the Company continues to have
substantial indebtedness. The Company's substantial indebtedness may limit its
capacity to respond to market conditions (including its ability to satisfy
capital expenditure requirements) or to meet its contractual or financial
obligations. In addition, pursuant to the debt instruments governing the
Company's indebtedness, the Company is subject to restrictive covenants that
could limit its ability to conduct its business. Furthermore, the ability of
the Company to satisfy its obligations will be dependent upon its future
performance, which will be subject to prevailing economic conditions and to
financial, business and other factors, including factors beyond the control of
the Company. Through and including December 15, 1998, interest on the
Company's 9 5/8% Senior Subordinated Notes due 2003 (the "Notes") will be
payable in cash semiannually at the rate of 6% per annum of the principal
amount at maturity of the Notes. After December 15, 1998, interest on the
Notes will accrue and be payable in cash semiannually at the rate of 9 5/8%
per annum of the principal amount at maturity of the Notes. Although the
Company believes that cash flow from operations will be sufficient to meet all
of its debt service requirements and to fund its capital expenditure
requirements, there can be no assurance that this will be the case.

RELIANCE ON KEY MANAGEMENT

The operation of the Company requires managerial and operational expertise.
Although all of the key management employees have employment contracts with
the Company, there can be no assurance that such individuals will remain with
the Company. If, for any reason, such key personnel do not continue to be
active in the Company's management, operations could be adversely affected.

RISKS IN THE OPERATION OF RECENTLY ACQUIRED FACILITIES

In June 1996 the Company acquired substantially all of AOC's worldwide
ophthalmic business. The future success of the AO Acquisition and the effect
of the AO Acquisition on the financial and operating results of the Company
will depend in part on the ability of the Company to operate AO successfully
as a stand-alone business and, where possible, to engage in cooperative and
joint activities with AO. The ability of the Company to accomplish its
objectives in connection with the AO Acquisition is, like any acquisition,
subject to certain risks including, among others, the possible inability to
retain certain AO personnel, potential negative effects of diverting
management resources and the possible failure to retain AO customers.

10
<PAGE>

DIVIDEND POLICY; RESTRICTIONS ON PAYMENT OF DIVIDENDS

The Company has not declared or paid any cash dividends on any class of its
capital stock, and does not intend to pay dividends on its Common Stock in the
foreseeable future. The Company's New Credit Agreement, and the Indenture
governing the Notes (the "Indenture"), restrict and limit the payment of
dividends on the Common Stock. See "Price Range of Common Stock and Dividend
Policy."

ANTITAKEOVER PROVISIONS

The Company's Amended and Restated Certificate of Incorporation (the
"Restated Certificate of Incorporation") and Amended and Restated By-Laws (the
"By-Laws") contain certain provisions that could make more difficult the
acquisition of the Company by means of a tender offer, a proxy contest or
otherwise. These provisions include advance notice procedures for stockholders
to nominate candidates for election as directors of the Company and for
stockholders to submit proposals for consideration at stockholders' meetings.
In addition, the Company is subject to Section 203 of the Delaware General
Corporation Law ("Delaware Law"), which limits transactions between a publicly
held company and "interested stockholders" (generally, those stockholders who,
together with their affiliates and associates, own 15% or more of a company's
outstanding capital stock). This provision of Delaware Law also may have the
effect of deterring certain potential acquisitions of the Company. See
"Description of Capital Stock."

11
<PAGE>

THE COMPANY

The principal executive offices of the Company are located at 2420 Sand Hill
Road, Menlo Park, California 94025; the Company's telephone number is (415)
324-6868.

THE AO ACQUISITION

THE PURCHASE AGREEMENT

The Company and AOC are parties to a Purchase Agreement dated as of May 6,
1996 (the "Purchase Agreement"). Pursuant to the Purchase Agreement, Sola has
purchased substantially all of the assets of AOC's United States ophthalmic
business and all of the shares of capital stock of certain foreign
subsidiaries which operate AOC's ophthalmic business in Mexico, the United
Kingdom, France, Switzerland, Singapore, Canada and Zimbabwe. The purchase
price is $107 million (together with the assumption of certain liabilities),
subject to post closing adjustments. The AO Acquisition was consummated in
June 1996.

In connection with the AO Acquisition, Sola received a perpetual, royalty-
free license which generally provides for Sola's exclusive use of certain
trademarks and the AO and American Optical trade names in the ophthalmic
business worldwide, subject to certain limitations in connection with certain
specified geographic areas and products. Except as licensed to Sola, AOC
retains ownership and rights to use the licensed trademarks and trade names.
In connection with the AO Acquisition, the principal owner of AOC has agreed
not to compete with the acquired businesses for a period of seven years.

Pursuant to the terms of the Purchase Agreement, and subject to certain
exceptions, AOC has agreed to indemnify the Company for certain losses (i)
arising out of breaches of AOC's representations and warranties and covenants
contained in the Purchase Agreement, (ii) arising out of retained liabilities
or (iii) otherwise relating to environmental claims.

AO'S BUSINESS

AO is a leading manufacturer and worldwide distributor of a broad range of
ophthalmic lenses used in prescription eyewear. Its product line includes
single vision, bifocal, trifocal and progressive lenses, many of which are
sold under AO's brand names such as AOPro(TM), TruVision Omni(R), and
Aspherlite(R). AO focuses on the production of plastic lenses, but also offers
value-added glass progressive lenses and glass executive bifocals. The Company
believes that approximately half of AO's fiscal 1996 net sales represented
sales of value-added products such as progressive lenses and thinner, lighter
weight lenses made of high-index plastic, polycarbonate and other advanced
materials. AO also provides value-added services through five non-U.S.
prescription laboratories which customize lenses to individual customer
prescriptions and preferences. More than 40% of AO's fiscal 1996 net sales
were generated from the services provided by these laboratories.

AO sells its products to a diverse base of international and domestic
customers including retail chains, optical wholesalers and research
laboratories. AO's net sales and operating income, after allocated corporate
expenses, were approximately $85.7 million and $11.9 million, respectively,
during fiscal 1996. More than 70% of its fiscal 1996 net sales originated
outside the United States. AO has manufacturing operations in Massachusetts,
Mexico and the United Kingdom, and sales and distribution operations in the
United States, the United Kingdom, France, Switzerland, Mexico, Canada,
Singapore and Zimbabwe.

AO operates prescription laboratories in France, the United Kingdom, Mexico,
Singapore and Zimbabwe. The Company believes that AO's primary laboratory in
Fougeres, France is among the highest quality

12
<PAGE>

laboratories in Europe. Laboratory services provided by AO include
fabrication, the process of grinding a final prescription onto a semi-finished
lens; coating, which involves the application of scratch resistant hard
coating, anti-reflective coating or color tinting; and edging, the process of
shaping lenses to meet the specifications of a specific frame.

AO has approximately 1,200 employees, mostly at its Tijuana manufacturing
facilities and French prescription laboratory.

STRATEGY

The Company believes that the AO Acquisition will further its strategies of
introducing high value-added products, expanding worldwide distribution
capabilities and emphasizing low cost manufacturing. In particular, the
Company believes that it will benefit from the following factors:

Recognizable Brand Name. Tracing its roots back to the nineteenth century,
the AO name is one of the most widely known and respected brand names in the
ophthalmic industry. The Company believes that the AO name is especially well
known in developing markets such as China and Latin America, even though AO
has only limited sales in these markets at present. Sola hopes to benefit by
combining the strength of Sola's existing distribution channels in these
countries with the value of the AO name.

Low Cost Manufacturing. Substantially all of AO's manufacturing is conducted
at its glass lens plant and plastic lens plant in Tijuana, Mexico. The Company
hopes to improve the cost efficiency of AO's manufacturing operations in
Mexico by employing proven Sola technologies which the Company believes should
allow for a reduction in unit cost.

Broadened Customer Base. The Company believes that AO's customer base in the
value-added product market, including the progressive lens segment,
complements Sola's existing customer base. AO focuses on the economy segment
of this product market, which complements Sola's focus on the premium segment
of this product market. The Company also expects that AO's sales of middle
index materials, as well as plastic photochromic lenses, at economy prices
will further broaden Sola's customer base.

Strengthened European Distribution. The Company believes that the
acquisition of AO's modern prescription laboratory in France, as well as
access to its strong distribution network, will provide Sola with access to
AO's lab technology and the opportunity which the laboratory's distribution
gives the Company to work directly with eyecare practitioners.

Strong AO Management. Sola anticipates retaining all of the key members of
the AO management team, which Sola believes is experienced and talented. Sola
expects to operate AO as a stand-alone business, except where it believes that
both businesses can benefit from cooperative and joint activity.

USE OF PROCEEDS

The net proceeds from the sale of shares of Common Stock by the Company,
after deducting expenses of the Offering, including the discounts and
commissions paid to the Underwriters, will be approximately $54.6 million
(approximately $62.8 million if the Underwriters' over-allotment option is
exercised in full). The Company intends to use such net proceeds to repay
indebtedness which it incurred under the New Credit Agreement in order to pay
a portion of the purchase price for the AO Acquisition. The Company will not
receive any proceeds from the sale of shares of Common Stock by the Selling
Stockholders.

The New Credit Agreement consists of a five-year term loan of $30 million, a
renewable three-year foreign currency revolving facility of $30 million, and a
five-year U.S. dollar revolver of $120 million. The term loan and the U.S.
dollar revolving line of credit bear interest at an initial rate of LIBOR plus
0.75% (approximately 6.5%) and the foreign currency revolving facility bear an
initial interest rate of the relevant local economy IBOR plus 0.75%. The term
loan was made in order to finance a portion of the AO Acquisition, and the
revolving line of credit generally will be used for working capital.

13
<PAGE>

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock has been listed on the New York Stock Exchange
since February 23, 1995 under the symbol "SOL." The following table sets forth
on a per share basis the closing high and low sales prices for consolidated
trading in the Common Stock as reported on the New York Stock Exchange
Composite Tape for the fiscal quarters indicated.

<TABLE>
<CAPTION>
COMMON STOCK
PRICE RANGE
---------------
HIGH LOW
------- -------
<S> <C> <C>
Fiscal Year Ended March 31, 1995
Fourth Quarter (beginning February 23, 1995)................. $21 1/2 $16 1/2
Fiscal Year Ended March 31, 1996
First Quarter Ended June 30, 1995............................ 24 7/8 21 1/8
Second Quarter Ended September 30, 1995...................... 27 3/4 20 5/8
Third Quarter Ended December 31, 1995........................ 27 3/8 21 3/8
Fourth Quarter Ended March 31, 1996.......................... 32 1/4 25 1/2
Fiscal Year Ended March 31, 1997
First Quarter (through June 26, 1996)........................ 34 7/8 27 3/4
</TABLE>

For a recent reported last sale price for the Common Stock, see the cover
page of this Prospectus. As of May 31, 1996, there were 549 holders of record
of the Company's Common Stock, which excludes beneficial owners of Common
Stock held in "street name."

Since the Acquisition, the Company has not declared or paid any cash
dividends on its Common Stock. The Company's New Credit Agreement and the
Indenture generally restrict, subject to certain exceptions, the payment of
dividends, distributions and other payments. The Company does not anticipate
paying any cash dividends in the foreseeable future and intends to retain
future earnings for the development and expansion of its business. Subject to
such restrictions, any future determination to pay dividends will be at the
discretion of the Company's Board of Directors and subject to certain
limitations under the Delaware Law, and will depend upon the Company's results
of operations, financial condition, other contractual restrictions and other
factors deemed relevant by the Board of Directors.

14
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1996 and as adjusted giving effect to the AO Acquisition, the Neolens
Acquisition, the Offering and the New Credit Agreement as if each transaction
had occurred as of March 31, 1996. The information presented below should be
read in conjunction with the Consolidated Financial Statements and the related
notes thereto and the unaudited pro forma condensed combined financial
information included elsewhere in this Prospectus and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in the
Company's Form 10-K.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED
----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of
long-term debt (1)................................. $ 17,403 $ 12,222
=========== ===========
Long-term debt:
Old Credit Agreement.............................. $ 6,000 $ --
New Credit Agreement (2).......................... -- 84,634
Senior Subordinated Notes (3)..................... 88,530 88,530
Other long-term debt (1).......................... 3,360 5,731
----------- -----------
Total long-term debt............................. 97,890 178,895
----------- -----------
Shareholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized; no shares issued..................... -- --
Common stock, $.01 par value; 50,000,000 shares
authorized,
21,797,168 shares issued and outstanding
(23,817,168 shares issued and outstanding after
the Offering) (4)................................ 218 238
Additional paid-in capital........................ 206,412 260,967
Equity participation loans........................ (421) (421)
Accumulated deficit............................... (17,993) (25,724)
Cumulative foreign currency adjustments........... 4,025 4,025
----------- -----------
Total shareholders' equity....................... 192,241 239,085
----------- -----------
Total capitalization................................ $ 290,131 $ 417,980
=========== ===========
</TABLE>
- --------
(1) See Notes 5 and 6 to the Company's Consolidated Financial Statements
included elsewhere in this Prospectus.
(2) At March 31, 1996, on a pro forma basis, the Company would have had $94.0
million of unused borrowing capacity under the New Credit Agreement.
(3) See Note 8 to the Company's Consolidated Financial Statements included
elsewhere in this Prospectus.
(4) Excludes 2,226,365 shares that may be issued upon the exercise of options
previously granted pursuant to the Company's stock option plans as of
March 31, 1996.

15
<PAGE>

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected financial data set forth below as of March 31, 1996 and 1995
and for the fiscal years ended March 31, 1996 and 1995, and for the four and
eight months ended March 31, 1994 and November 30, 1993, respectively, should
be read in conjunction with the audited financial statements and the notes
thereto included elsewhere in this Prospectus. The selected financial data as
of March 31, 1994, 1993 and 1992 and for the fiscal years ended March 31, 1993
and 1992 are derived from audited combined financial statements for such
fiscal years. The financial information for all periods prior to December 1,
1993, the date of the Acquisition, are those of the Predecessor Business. The
historical data of the Predecessor Business and the Company are not comparable
in all respects. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in the Company's Form 10-K
incorporated herein by reference and the Company's Consolidated Financial
Statements and notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SOLA INTERNATIONAL INC. PREDECESSOR BUSINESS
------------------------------------ -------------------------------
FOUR FISCAL YEAR
FISCAL YEAR FISCAL YEAR MONTHS EIGHT MONTHS ENDED
ENDED ENDED ENDED ENDED MARCH 31,
MARCH 31, MARCH 31, MARCH 31, NOV. 30, ------------------
1996 1995 1994 1993 1993 1992
----------- ----------- --------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA
Net sales............. $387,709 $345,631 $106,030 $200,025 $281,494 $258,764
Cost of sales......... 201,991 185,626 93,428(1) 115,319 157,159 143,089
-------- -------- -------- -------- -------- --------
Gross profit.......... 185,718 160,005 12,602 84,706 124,335 115,675
-------- -------- -------- -------- -------- --------
Research and
development
expenses............. 13,329 14,051 3,877 7,246 10,785 9,247
Selling and marketing
expenses............. 66,345 61,143 19,146 33,483 51,183 44,543
General and
administrative
expenses............. 42,089 41,912(2) 9,604 23,438 32,041 32,459
Goodwill
amortization......... 3,202 3,155 980 -- -- --
In-process research
and development
expense.............. -- -- 40,000(1) -- -- --
-------- -------- -------- -------- -------- --------
Operating expenses... 124,965 120,261 73,607 64,167 94,009 86,249
-------- -------- -------- -------- -------- --------
Operating income
(loss).............. 60,753 39,744 (61,005) 20,539 30,326 29,426
Interest expense,
net.................. (12,141) (18,522) (6,160) (3,071) (4,490) (4,695)
Foreign currency
adjustments.......... -- -- (167) (478) (814) (2,510)
-------- -------- -------- -------- -------- --------
Income (loss) before
provision (benefit)
for income taxes,
minority interest
and extraordinary
item................ 48,612 21,222 (67,332) 16,990 25,022 22,221
Provision (benefit)
for income taxes..... 13,623 6,649 (6,194) 5,833 8,507 7,302
Minority interest..... (401) (933) (256) (408) -- --
-------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item.. 34,588 13,640 (61,394) 10,749 16,515 14,919
Extraordinary item,
write-off of debt
issuance costs,
net................. (912) (3,915)(2) -- -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss).... $ 33,676 $ 9,725 $(61,394) $ 10,749 $ 16,515 $ 14,919
======== ======== ======== ======== ======== ========
EARNINGS PER SHARE DATA
(3)
Income (Loss) before
extraordinary item... $ 1.51 $ 0.78 $ (3.75)
Extraordinary item.... (0.04) (0.22) --
-------- -------- --------
Net income (loss)..... $ 1.47 $ 0.56 $ (3.75)
======== ======== ========
Weighted average
number of shares
outstanding.......... 22,944 17,516 16,353
======== ======== ========
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
SOLA INTERNATIONAL INC. PREDECESSOR BUSINESS
-------------------------- ---------------------
AS OF MARCH 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital.............. $ 96,456 $ 76,595 $ 64,110 $ 53,849 $ 58,003
Total assets................. 416,849 383,457 360,631 246,944 235,076
Short-term debt.............. 17,403 11,078 12,524 45,627 44,789
Long-term debt............... 97,890 107,407 186,740 9,744 6,328
Parent company investment.... -- -- -- 117,129 120,810
Total Shareholders' equity... 192,241 159,443 63,495 -- --
</TABLE>
- --------
(1) For the four months ended March 31, 1994, the Company recorded two non-
recurring, non-cash charges associated with the Acquisition: (i) a $32.9
million charge for the amortization associated with an inventory write-up
to fair value that was reflected in cost of sales; and (ii) a $40.0
million charge for the write-off of in-process research and development
that was reflected in in-process research and development expense.
(2) For fiscal 1995, the Company recorded two non-recurring charges in
connection with the IPO: (i) a $3.0 million charge for the termination of
the AEA management agreement with the Company that was reflected in
general and administrative expenses; and (ii) a $3.9 million write-off of
debt issuance costs that was reflected in the historical financial
statements as an extraordinary item.
(3) Earnings per share are computed using the weighted average number of
common shares and common share equivalents outstanding during the period
after giving effect to the IPO.

17
<PAGE>

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

In June 1996 the Company acquired AO for cash consideration of $107 million
(together with the assumption of certain liabilities), subject to post-closing
adjustments. The AO Acquisition was funded primarily through borrowings under
the New Credit Agreement, which borrowings will be repaid in part with the
proceeds of the Offering. In May 1996, the Company announced that it had
entered into a definitive merger agreement which provides for the Neolens
Acquisition. The Company intends to fund the Neolens Acquisition primarily
through borrowings under the New Credit Agreement.

The unaudited pro forma condensed combined financial information gives
effect to the AO Acquisition and the Neolens Acquisition and the financings
thereof, including the borrowings under the New Credit Agreement and the
Offering, as if they had occurred on April 1, 1995 for purposes of the
unaudited pro forma condensed combined statement of operations and as of March
31, 1996 for purposes of the unaudited pro forma condensed combined balance
sheet. The pro forma adjustments have been applied to the financial
information derived from the audited financial statements of the Company and
AO and the unaudited financial statements of Neolens and substantially all of
AO's Singapore ophthalmic operations ("AO Singapore") to account for the AO
Acquisition and the Neolens Acquisition as purchases; accordingly, assets
acquired and liabilities assumed will be recorded at their estimated fair
values which are subject to further refinement, including appraisals and other
analyses, with appropriate recognition given to the effect of current interest
rates and income taxes.

The AO Acquisition and the Neolens Acquisition will be accounted for using
the purchase method of accounting. The unaudited pro forma condensed combined
financial information has been prepared on the basis of assumptions described
in the notes thereto and includes assumptions relating to the allocation of
the consideration paid for the assets and liabilities of AO and Neolens based
on preliminary estimates of their fair value. The actual allocation of such
consideration may differ from that reflected in the unaudited pro forma
condensed combined financial information after valuations and other procedures
to be performed after the closings of the AO Acquisition and the Neolens
Acquisition have been performed. The Company does not expect that the final
allocation of the aggregate purchase price for the AO Acquisition and the
Neolens Acquisition will differ materially from the preliminary allocations.
In addition, the proceeds from the Offering, the interest rate on, and the
amount of, borrowings under the New Credit Agreement and actual fees and
expenses may differ from the assumptions set forth below. In the opinion of
the Company, all adjustments necessary to present fairly such unaudited pro
forma condensed combined financial information have been made based on the
proposed terms and structures of the AO Acquisition and the Neolens
Acquisition.

As a result of the AO Acquisition, the Company expects to incur two
nonrecurring charges in fiscal 1997: (i) an estimated $7.0 million charge to
cost of sales for the amortization associated with an inventory write-up to
fair value; and (ii) an estimated $10.0 million charge for the write-off of
in-process research and development. These charges have been excluded from the
unaudited pro forma condensed combined statement of operations included herein
because they are nonrecurring. The Company also expects to record
approximately $71.8 million of goodwill in connection with the AO Acquisition
and the Neolens Acquisition, which will be amortized over 40 years.

The unaudited pro forma condensed combined financial information is not
necessarily indicative of what actual results would have been had the AO
Acquisition and the Neolens Acquisition occurred at the dates indicated nor do
they purport to project the future financial position or the results of future
operations of the Company.

The unaudited pro forma condensed combined financial information should be
read in conjunction with the accompanying notes and the audited financial
statements, including the notes thereto, of the Company, included elsewhere in
this Prospectus.

18
<PAGE>

SOLA INTERNATIONAL INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1996 (IN THOUSANDS)

The unaudited pro forma condensed combined balance sheet as of March 31,
1996 has been prepared by combining the historical consolidated balance sheet
of the Company as of March 31, 1996 with (i) the historical combined balance
sheet of the Worldwide Ophthalmic Group of American Optical Corporation as of
March 29, 1996, (ii) the historical balance sheet of AO Singapore as of March
31, 1996 and (iii) the historical balance sheet of Neolens as of January 31,
1996 and gives effect to the pro forma adjustments as described in the notes
hereto.

<TABLE>
<CAPTION>
SOLA AMERICAN
INTERNATIONAL OPTICAL AO NEOLENS, PRO FORMA
INC. CORPORATION SINGAPORE(i) INC.(ii) ADJUSTMENTS COMBINED
------------- ----------- ------------ -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equiva-
lents................. $ 22,394 $ 2,220 $ 680 $ 3 $ (32)(1) $ 25,265
Trade accounts receiv-
able, net............. 74,845 15,798 1,300 452 (967)(2) 91,428
Inventories............ 100,707 19,450 1,205 902 7,000 (1) 129,264
Deferred income taxes.. 7,491 -- -- -- 7,491
Prepaids and other
current assets........ 1,861 3,861 295 61 (236)(2) 5,842
-------- ------- ------ ------ ------- --------
Total current assets.. 207,298 41,329 3,480 1,418 5,765 259,290
Property, Plant and
equipment, net......... 79,582 9,884 332 896 616 (1) 91,310
Deferred income taxes... 6,800 252 -- -- 3,248 (1) 10,300
Debt issuance costs,
net.................... 1,907 -- -- 240 660 (3) 2,807
Goodwill and other
intangibles, net....... 120,352 -- -- -- 73,335 (1) 193,687
Other assets............ 910 175 -- 40 1,125
-------- ------- ------ ------ ------- --------
Total assets.......... $416,849 $51,640 $3,812 $2,594 $83,624 $558,519
======== ======= ====== ====== ======= ========
LIABILITIES AND SHARE-
HOLDERS' EQUITY
LIABILITIES
Current liabilities
Notes payable to
banks................. $ 13,722 $ 534 $ -- $1,066 $(1,066)(4) $ 7,601
(6,655)(5)
Current portion of
long-term debt........ 3,681 940 -- 300 (300)(4) 4,621
Accounts payable....... 39,415 5,477 839 1,180 46,911
Accrued liabilities.... 20,167 4,042 1,599 -- (1,203)(2) 24,605
Accrued reorganization
and acquisition
expenses.............. 9,746 -- -- -- 9,746
Accrued payroll and
related expenses...... 22,560 3,638 59 -- 26,257
Income taxes payable... 1,090 1,284 17 -- 2,391
Deferred income taxes.. 461 286 -- -- 1,049 (1) 1,796
-------- ------- ------ ------ ------- --------
Total current liabili-
ties................. 110,842 16,201 2,514 2,546 (8,175) 123,928
Long-term debt, less
current portion........ 3,360 2,371 -- -- 5,731
Bank debt, less current
portion................ 6,000 -- -- -- 78,634 (4,5) 84,634
Senior subordinated
notes.................. 88,530 -- -- 107 (107)(4) 88,530
Deferred income taxes... 4,990 -- -- -- 735 (1) 5,725
(1,086)(1)
Other liabilities....... 10,886 1,086 -- 125 (125)(4) 10,886
-------- ------- ------ ------ ------- --------
Total liabilities..... 224,608 19,658 2,514 2,778 69,876 319,434
SHAREHOLDERS' EQUITY
Parent company invest-
ment................... -- 31,982 1,298 (184) (33,096)(1) --
Common stock............ 218 -- -- -- 20 (6) 238
Additional paid-in capi-
tal.................... 206,412 -- -- -- 54,555 (6) 260,967
Equity participation
loans.................. (421) -- -- -- (421)
Accumulated deficit..... (17,993) -- -- -- (7,731)(7) (25,724)
Cumulative foreign
currency adjustments... 4,025 -- -- -- 4,025
-------- ------- ------ ------ ------- --------
Total shareholders'
equity/parent company
investment........... 192,241 31,982 1,298 (184) 13,748 239,085
-------- ------- ------ ------ ------- --------
Total liabilities and
shareholders'
equity............... $416,849 $51,640 $3,812 $2,594 $83,624 $558,519
======== ======= ====== ====== ======= ========
</TABLE>
- --------
(i) The financial information with respect to AO Singapore is derived from
unaudited internal financial data provided to the Company by AOC. This
information has not been independently reviewed or audited by the Company
or an independent accounting firm.
(ii) The financial information with respect to Neolens is based on unaudited
financial statements provided to the Company by Neolens. This information
has not been independently reviewed or audited by the Company or an
independent accounting firm.

19
<PAGE>

SOLA INTERNATIONAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1996

The pro forma condensed combined balance sheet gives effect to the following
pro forma adjustments:

(1)The AO Acquisition and the Neolens Acquisition will be accounted for as
purchases pursuant to APB Opinion No. 16, "Business Combinations." The
respective purchase prices will be allocated to the assets and liabilities of
the acquired businesses based on their relative fair values. Such allocations
are subject to final determination based on valuations and other studies that
are not yet completed. The final values may differ from those set forth below.
<TABLE>
<CAPTION>
NEOLENS
AO ACQUISITION ACQUISITION TOTAL
-------------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Estimated purchase price................. $107,000 $13,000 $120,000
Acquisition expenses..................... 2,500 565 3,065
-------- ------- --------
TOTAL ESTIMATED ACQUISITION COST....... $109,500 $13,565 $123,065
======== ======= ========
Historical net book value at March 31,
1996.................................... $ 33,280 $ (184) $ 33,096
Elimination of certain assets and liabil-
ities as per the agreement:
Elimination of U.S. cash balance........ (32) -- (32)
Elimination of U.S. Benefit Plan liabil-
ities not assumed...................... 1,086 -- 1,086
Elimination of current and deferred tax
liabilities in the U.S. (a)............ (221) -- (221)
-------- ------- --------
ADJUSTED BOOK VALUE ACQUIRED........... 34,113 (184) 33,929
Write-up of inventories (b).............. 7,000 -- 7,000
Write-up of property, plant and equip-
ment.................................... 616 -- 616
Goodwill................................. 58,086 13,749 71,835
In-process research and development...... 6,500 -- 6,500
Non-compete agreement.................... 1,500 -- 1,500
Net deferred tax effects of certain of
the above purchase accounting
adjustments (c)......................... 1,685 -- 1,685
-------- ------- --------
$109,500 $13,565 $123,065
======== ======= ========
</TABLE>
- --------
(a) The Company will be able to write-up the AO U.S. assets acquired,
including goodwill, for income tax purposes and accordingly, there will be
no initial differences between the tax bases and the fair values of the
U.S. assets upon acquisition. This will result in the elimination of the
following deferred tax amounts (in thousands):

<TABLE>
<S> <C>
Long term deferred tax asset...................................... $(252)
Current deferred tax liability.................................... 31
-----
$(221)
=====
</TABLE>

(b) The Company will write-up the value of certain AO inventory accounts in
connection with the purchase price allocation. The majority of this write-
up will be charged to cost of goods sold in fiscal 1997. This one-time
charge has not been reflected in the accompanying unaudited pro forma
condensed combined statement of operations due to its unusual, non-
recurring nature.

(c) Represents the deferred tax liability relating to the inventory and
property and equipment write-ups at the foreign locations for which there
is no change in tax basis, net of a deferred tax asset recognized in
connection with the in-process research and development charge. The net
deferred tax effect was calculated as follows (in thousands):

<TABLE>
<S> <C>
Current deferred tax liability relating to inventory write-up... $(1,335)
Long term deferred tax liability relating to property, plant and
equipment write-up............................................. (480)
Deferred tax asset relating to in-process research and develop-
ment........................................................... 3,500
-------
$ 1,685
=======
</TABLE>

20
<PAGE>

SOLA INTERNATIONAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET--(CONTINUED)
MARCH 31, 1996

(2)Under the terms of the AO Acquisition, the Company has acquired
substantially all of AO Singapore's ophthalmic operations, which are
separately disclosed in the above unaudited pro forma condensed combined
balance sheet. Intercompany accounts reflected on the historical balance
sheets have been eliminated.

(3)Represents expenses incurred in connection with entering into the New
Credit Agreement, estimated at $0.9 million, offset by the write-off of
Neolens deferred bank issue expenses of $0.2 million. The existing Neolens
bank credit agreement will be repaid in full in connection with the Neolens
Acquisition.

(4)Represents borrowings of Neolens which will be replaced by bank
borrowings under the New Credit Agreement after the Neolens Acquisition.

(5)Represents borrowings of $55.8 million under the New Credit Agreement
used to partially fund the AO Acquisition, and borrowings of $14.5 million
under the New Credit Agreement used to fund the Neolens Acquisition. In
addition, $8.3 million of borrowings under the New Credit Agreement are
assumed to replace certain foreign currency borrowings of the Company ($6.7
million) and certain obligations of Neolens ($1.6 million).

(6)Represents the issuance of approximately $57.8 million of Common Stock by
the Company in the Offering with net cash proceeds of $54.6 million.

(7)In accordance with generally accepted accounting principles, the Company
will allocate a portion of the AO purchase price to in-process research and
development and immediately write-off an estimated $10.0 million ($6.5 million
net of income taxes of $3.5 million) of in-process research and development of
AO as a charge to operations upon consummation of the AO Acquisition. This
will result in a corresponding charge to retained earnings. This one-time
charge is reflected in the unaudited pro forma condensed combined balance
sheet but not in the unaudited pro forma condensed combined statement of
operations due to its unusual, non-recurring nature.

21
<PAGE>

SOLA INTERNATIONAL INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The unaudited pro forma condensed combined statement of operations
information has been prepared by combining the historical consolidated
statement of operations of the Company for the fiscal year ended March 29,
1996 with (i) the historical combined statement of operations of the Worldwide
Ophthalmic Group of American Optical Corporation for the fiscal year ended
March 31, 1996, (ii) the historical statement of operations of AO Singapore
for the year ended March 31, 1996 and (iii) the historical statement of
operations of Neolens for the twelve months ended January 31, 1996 and gives
effect to the pro forma adjustments as described in the notes hereto.

<TABLE>
<CAPTION>
SOLA AMERICAN
INTERNATIONAL OPTICAL AO NEOLENS, PRO FORMA
INC. CORPORATION SINGAPORE(i) INC.(ii) ADJUSTMENTS COMBINED
------------- ----------- ------------ -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $387,709 $81,623 $5,440 $ 2,441 $(2,641)(1) $474,572
Technology revenue...... -- 1,450 -- -- 1,450
-------- ------- ------ ------- ------- --------
Total revenue.......... 387,709 83,073 5,440 2,441 (2,641) 476,022
(2,641)(1)
Cost of sales........... 201,991 48,220 4,576 2,512 77 (2) 254,735
-------- ------- ------ ------- ------- --------
Gross profit........... 185,718 34,853 864 (71) (77) 221,287
Research and development
expenses............... 13,329 1,146 -- 234 14,709
Selling and marketing
expenses............... 66,345 13,755 816 239 81,155
2,002 (3)
General and
administrative
expenses............... 45,291 6,242 657 1,008 300 (4) 55,500
-------- ------- ------ ------- ------- --------
Operating expenses..... 124,965 21,143 1,473 1,481 2,302 151,364
-------- ------- ------ ------- ------- --------
Operating income....... 60,753 13,710 (609) (1,552) (2,379) 69,923
Corporate allocation.... -- (1,235) -- -- 1,235 (5) --
Interest expense, net... (12,141) (172) 12 (324) (4,161)(6) (16,786)
-------- ------- ------ ------- ------- --------
Income before provision
for income taxes,
minority interest and
extraordinary item.... 48,612 12,303 (597) (1,876) (5,305) 53,137
Provision for income
taxes.................. 13,623 3,768 (413) -- (1,975)(7) 15,003
Minority interest....... (401) -- -- -- (401)
-------- ------- ------ ------- ------- --------
Income (loss) before
extraordinary item.... $ 34,588 $ 8,535 $ (184) $(1,876) $(3,330) $ 37,733
======== ======= ====== ======= ======= ========
Earnings per share
before extraordinary
item.................. $ 1.51 $ 1.51
======== ========
Weighted average number
of shares
outstanding........... 22,944 2,020 (8) 24,964
======== ======= === ========
</TABLE>
- --------
(i) The financial information with respect to AO Singapore is derived from
unaudited internal financial data provided to the Company by AOC. This
information has not been independently reviewed or audited by the Company
or an independent accounting firm.
(ii) The financial information with respect to Neolens is based on unaudited
financial statements provided to the Company by Neolens. This information
has not been independently reviewed or audited by the Company or an
independent accounting firm.

22
<PAGE>

SOLA INTERNATIONAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED MARCH 31, 1996

The pro forma condensed combined statement of operations gives effect to the
following pro forma adjustments:

(1)Under the terms of the AO Acquisition, the Company has acquired
substantially all of AO's Singapore ophthalmic operations, which are
separately disclosed in the above unaudited pro forma condensed combined
statement of operations. During the year ended March 29, 1996, AO recorded net
sales of $1.4 million to the AO Singapore operation, which are included in the
historical financial statements used in the unaudited pro forma condensed
combined statement of operations. The pro forma adjustments eliminate the AO
sales to AO Singapore. In addition, Neolens recorded sales of $1.2 million to
Sola during the twelve months ended January 31, 1996. The pro forma
adjustments eliminate the Neolens sales to Sola.

(2)Represents amortization of the write-up of property, plant and equipment
over an estimate of its composite useful life. Amortization of the property,
plant and equipment write-up has been allocated to cost of sales as the most
significant write-ups relate to laboratory assets in France and manufacturing
assets in Mexico. The composite useful life assumed in these pro forma
financial statements is eight years.

(3)Represents the amortization of goodwill and other intangible assets
arising upon the AO Acquisition and the Neolens Acquisition, over 40 years for
goodwill, and over seven years for the non-compete agreement (in accordance
with the terms of the Purchase Agreement), reflecting an estimate of the
amortizable lives of such intangibles (in thousands):

<TABLE>
<S> <C>
Amortization of goodwill........................................... $1,787
Amortization of non-compete agreement.............................. 215
------
Total amortization................................................. $2,002
======
</TABLE>

(4)Reflects the Company's estimate of additional general and administrative
expenses that will be incurred after the AO Acquisition. The estimated costs
relate primarily to expenditures on treasury, legal and tax and accounting
expenses.

(5)Reflects the reversal of $1.2 million of corporate allocations from AOC,
which will not continue after the AO Acquisition. The corporate allocations
include legal, financial and administrative services primarily provided by
AOC.

(6)Represents the additional interest expense for the fiscal year ended
March 31, 1996 that would have been incurred had the AO Acquisition, the
Neolens Acquisition and the Offering taken place on April 1, 1995 computed as
follows (in thousands):

<TABLE>
<S> <C>
Reduction in interest expense due to reduced interest rate under
the New Credit Agreement......................................... $ (169)
Reduction in interest expense incurred by Neolens when converted
to
New Credit Agreement............................................. (233)
Interest expense on increased borrowings of $70.3 million at
approximately 6.9% per annum..................................... 4,899
Interest expense savings on additional borrowings of $70.3 million
due to reduced interest rate under New Credit Agreement.......... (530)
Amortization of bank issue expenses over the life of the New
Credit Agreement
(three to five years) ........................................... 194
------
Change in interest expense........................................ $4,161
======
</TABLE>

23
<PAGE>

SOLA INTERNATIONAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS--
(CONTINUED)
FISCAL YEAR ENDED MARCH 31, 1996

A change of 1/4% in the interest rate payable on the outstanding balance
under the New Credit Agreement would change annual interest expense by
approximately $0.2 million before the effect of income taxes.

(7)Adjustment to reflect income tax effects assuming a combined state and
federal effective income tax rate of 35% for the companies acquired in the AO
Acquisition and the Neolens Acquisition. Interest payments on the acquisition
debt will be funded, in part, through interest received from the AO
subsidiaries that is attributable to that portion of acquisition debt which
can be allocated to foreign subsidiaries and through dividends remitted from
its subsidiaries. The Company anticipates that withholding taxes will be paid
on certain interest and dividend income on remittance to the Company and that
the deductibility of such taxes through foreign tax credits will be subject to
certain limitations. In addition, the AO and Neolens historical tax charges in
their statements of operations have benefitted from tax NOL's in certain
jurisdictions. Following the acquisition any benefit from such NOL's will be
charged directly to goodwill.

(8)Adjustment to reflect the issuance of 2.0 million shares of Common Stock
in the Offering.

24
<PAGE>

SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock (i) immediately prior to the Offering
and (ii) as adjusted to reflect the sale of the shares of Common Stock pursuant
to the Offering by each Selling Stockholder participating in the Offering.
Except as otherwise indicated, the persons or entities listed below have sole
voting and investment power with respect to all shares of Common Stock
beneficially owned by them, except to the extent such power may be shared with
a spouse.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
THE OFFERING THE OFFERING
--------------------- --------------------
NUMBER
OF SHARES
NAME NUMBER(1) PERCENT OFFERED NUMBER(1) PERCENT(2)
- ---- ------------ -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
SELLING STOCKHOLDERS:
AEA Investors Inc. ..... 355,278 1.6% 355,278 -- --
11 other Selling Stock-
holders, each of whom is
selling less than 50,000
shares in the Offering
or will beneficially own
less than 1% of the out-
standing Common Stock
after the Offering(3)... 1,022,179 4.7% 430,137 592,042 2.5%
</TABLE>
- --------
(1) Based on 21,797,168 shares of Common Stock outstanding prior to the
Offering and 23,817,168 shares of Common Stock outstanding after the
Offering.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) Certain of the Selling Stockholders are former directors of the Company.

25
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The following brief description of the Company's capital stock does not
purport to be complete and is subject in all respects to applicable Delaware
law and to the provisions of the Restated Certificate of Incorporation and the
By-Laws, copies of which have been filed with the Securities and Exchange
Commission (the "Commission").

The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, par value $.01 per share, and 5,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). All outstanding
shares of Common Stock are validly issued, fully paid and nonassessable. No
shares of Preferred Stock are issued and outstanding.

COMMON STOCK

Holders of the Common Stock are entitled to one vote per share on all
matters to be voted upon by the Company's stockholders, including the election
of directors. Holders of Common Stock do not have cumulative voting rights,
and therefore holders of a majority of the shares voting for the election of
directors can elect all of the directors. In such event, the holders of the
remaining shares will not be able to elect any directors.

Holders of the Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors of the Company out of
funds legally available therefor, after payment of dividends required to be
paid on outstanding Preferred Stock, if any, and subject to the terms of the
agreements governing the Company's long-term debt. See "Price Range of Common
Stock and Dividend Policy." In the event of the liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of Preferred Stock then outstanding, if any.

The Common Stock has no preemptive, conversion or redemption rights and is
not subject to further calls or assessments by the Company.

PREFERRED STOCK

The Board of Directors of the Company is authorized without further
stockholder action to provide for the issuance from time to time of up to
5,000,000 shares of Preferred Stock, in one or more classes or series, with
such powers, designations, preferences and relative, participating, optional
or other special rights, qualifications, limitations or restrictions as will
be set forth in the resolutions providing for the issue of such classes or
series of Preferred Stock adopted by the Board of Directors of the Company.
The holders of Preferred Stock will have no preemptive rights (unless
otherwise provided in the applicable resolutions or certificate of
designation) and will not be subject to future assessments by the Company.
Such Preferred Stock may have voting or other rights which could adversely
affect the rights of holders of the Common Stock. In addition, the issuance of
Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, under certain circumstances,
make it more difficult for a third party to gain control of the Company,
discourage bids for the Common Stock at a premium, or otherwise adversely
affect the market price of the Common Stock.

CERTAIN CHARTER AND BY-LAW PROVISIONS

The Restated Certificate of Incorporation, the By-Laws and Delaware Law
contain certain provisions that could make more difficult the acquisition of
the Company by means of a tender offer, a proxy contest or otherwise.

Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals

The By-Laws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors, or to bring other
business before an annual meeting of stockholders of the Company (the
"Stockholder Notice Procedure").

The Stockholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, the Company's Board of Directors, or by
a stockholder who has given timely written notice to the Secretary of the
Company prior to the meeting at which directors are to be elected, will be
eligible for election as directors of the Company. The Stockholder Notice
Procedure provides that at an annual meeting only such business may be
conducted as has been specified in the notice of the meeting given by, or at
the direction of, the Company's Board of Directors (or any duly authorized
committee thereof) or by a stockholder who has given timely written notice to
the Secretary of the Company of such stockholder's intention to bring such
business before such meeting.

26
<PAGE>

Under the Stockholder Notice Procedure, for notice of stockholder
nominations to be made or business to be conducted at an annual meeting to be
timely, such notice must be received by the Company not less than 60 days nor
more than 90 days prior to the date of the annual meeting or, in the event
that less than 70 days notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, not later than the close of
business on the tenth day following the day on which such notice was mailed or
such public disclosure was made, whichever first occurs. Under the Stockholder
Notice Procedure, for notice of a stockholder nomination to be made at a
special meeting at which directors are to be elected to be timely, such notice
must be received by the Company not later than the close of business on the
tenth day following the day on which such notice of the date of the special
meeting was mailed or public disclosure of the date of the special meeting was
made, whichever first occurs.

In addition, under the Stockholder Notice Procedure, a stockholder's notice
to the Company proposing to nominate a person for election as a director or
conduct certain business at an annual meeting must contain certain specified
information. If the Chairman of the Board of Directors presiding at a meeting
determines that a person was not nominated or other business was not brought
before the meeting in accordance with the Stockholder Notice Procedure, such
person will not be eligible for election as a director or such business will
not be conducted at such meeting, as the case may be.

Director's Liability

The Restated Certificate of Incorporation provides that to the fullest
extent permitted by Delaware Law as it currently exists, a director of the
Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director. Under current Delaware
Law, liability of a director may not be limited (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) in respect of certain unlawful dividend
payments or stock redemptions or repurchases and (iv) for any transaction from
which the director derives an improper personal benefit. The effect of this
provision of the Restated Certificate of Incorporation is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. This provision does
not limit or eliminate the rights of the Company or any stockholder to seek
non-monetary relief such as an injunction or rescission in the event of a
breach of a director's duty of care. In addition, the Restated Certificate of
Incorporation provides that the Company shall indemnify its directors,
officers, employees and agents to the fullest extent permitted by Delaware
Law. The By-Laws provide additional indemnification for the directors and
officers of the Company.

Section 203 of Delaware Law

The Company is a Delaware corporation and is subject to Section 203 of
Delaware Law. In general, Section 203 prevents an "interested stockholder"
(defined as a person who, together with affiliates and associates,
beneficially owns (or within three years, did beneficially own) 15% or more of
a corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years
following the date such person became an interested stockholder unless (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination; (ii)
upon consummation of the transaction that resulted in the interested
stockholder becoming an interested stockholder, the interested stockholder
owns at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding shares owned by persons who are both
officers and directors of the corporation and shares held by certain employee
stock ownership plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer); or (iii) following the transaction in
which such person became an interested stockholder, the business combination
is approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of at least
two-thirds of the outstanding voting stock of the corporation not owned by the
"interested stockholder." A "business combination" generally includes mergers,
stock or asset sales and other transactions resulting in a financial benefit
to the "interested stockholder."

27
<PAGE>

CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF
COMMON STOCK

The following discussion concerns the material United States federal income
and estate tax consequences of the ownership and disposition of shares of
Common Stock applicable to Non-U.S. Holders of such shares of Common Stock. In
general, a "Non-U.S. Holder" is any holder of Common Stock other than (i) a
citizen or resident of the United States, (ii) a corporation or partnership
created or organized in the United States or under the laws of the United
States or of any State or (iii) any estate or trust whose income is includible
in gross income for United States federal income tax purposes regardless of
its source. The discussion is based on current law, which is subject to
change, possibly with retroactive effect, and is for general information only.
The discussion does not address all aspects of federal income and estate
taxation nor any aspects of state, local or foreign tax laws. The discussion
does not consider any specific facts or circumstances that may apply to a
particular Non-U.S. Holder (including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers or certain U.S.
expatriates). Accordingly, prospective investors are urged to consult their
tax advisors regarding the United States federal, state, local and non-U.S.
income and other tax consequences of holding and disposing of shares of Common
Stock.

An individual may, subject to certain exceptions, be deemed to be a resident
alien (as opposed to a non-resident alien) by virtue of being present in the
United States for at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to tax as if they were U.S. citizens.

DIVIDENDS

In general, dividends paid to a Non-U.S. Holder will be subject to United
States withholding tax at a 30% rate (or lower rate as may be prescribed by an
applicable tax treaty, if applicable certification requirements are satisfied)
unless (i) the dividends are effectively connected with a trade or business
carried on by the Non-U.S. Holder within the United States or (ii) if a tax
treaty applies, the dividends are attributable to a U.S. permanent
establishment maintained by the Non-U.S. Holder. Dividends effectively
connected with such a trade or business will generally not be subject to
withholding tax (if the Non-U.S. Holder properly files an executed IRS Form
4224, or applicable successor form, with the payor of the dividend) and will
generally be subject to United States federal income tax on a net income basis
at regular graduated rates. In the case of a Non-U.S. Holder which is a
corporation, such effectively connected income also may be subject to the
branch profits tax (which is generally imposed on a foreign corporation on the
repatriation from the United States of effectively connected earnings and
profits at a 30% rate). The branch profits tax may not apply or may apply at a
reduced rate if the recipient is a qualified resident of certain countries
with which the United States has an income tax treaty. To determine the
applicability of a tax treaty providing for a lower rate of withholding,
dividends paid to an address in a foreign country are presumed, under the
current Treasury regulations, to be paid to a resident of that country, unless
the payor has definite knowledge that such presumption is not warranted.
Proposed Treasury regulations, if finally adopted, however, would require Non-
U.S. Holders to satisfy certain certification and other requirements to obtain
the benefit of any applicable tax treaty providing for a lower rate of
withholding tax on dividends paid after December 31, 1997 (December 31, 1999
in the case of dividends paid to accounts in existence on or before the date
that is 60 days after the proposed Treasury regulations are published as final
regulations). A Non-U.S. Holder that is eligible for a reduced rate of U.S.
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the Internal
Revenue Service. The Company must report annually to the Internal Revenue
Service and to each Non-U.S. Holder the amount of dividends paid to, and the
tax withheld with respect to, each Non-U.S. Holder. These reporting
requirements apply regardless of whether withholding was reduced or eliminated
by an applicable tax treaty. Copies of these information returns also may be
made available under the provisions of a specific treaty or agreement with the
tax authorities in the country in which the Non-U.S. Holder resides.

28
<PAGE>

SALE OF COMMON STOCK

Generally, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the disposition of such holder's shares
of Common Stock unless (i) the gain is effectively connected with a trade or
business carried on by the Non-U.S. Holder within the United States or, if a
tax treaty applies, is attributable to a permanent establishment maintained by
a Non-U.S. Holder in the United States (in either case
the branch profits tax described above may also apply to a corporate Non-U.S.
Holder); (ii) the Non-U.S. Holder is an individual who holds the shares of
Common Stock as a capital asset and is present in the United States for 183
days or more in the taxable year of the disposition, and either (a) such Non-
U.S. Holder has a "tax home," for federal income tax purposes, in the United
States (unless the gain from the disposition is attributable to an office or
other fixed place of business maintained by such Non-U.S. Holder in a foreign
country and such gain has been subject to a foreign income tax equal to at
least 10%), or (b) the gain from the disposition is attributed to an office or
other fixed place of business maintained by such non-U.S. Holder in the United
States; or (iii) the Company is or has been a "U.S. real property holding
corporation" for federal income tax purposes (which the Company does not
believe that it is or is likely to become) at any time during the five year
period ending on the date of disposition (or such shorter period that such
shares were held) and, subject to certain exceptions, the Non-U.S. Holder
held, directly or constructively, more than five percent of the Common Stock.

ESTATE TAX

Shares of Common Stock owned or treated as owned by an individual who is a
Non-U.S. Holder at the time of death will be includible in the individual's
gross estate for the United States federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise, and may be subject to United
States federal estate tax.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Under current United States federal income tax law, backup withholding tax
(which generally is a withholding tax imposed at the rate of 31% on certain
payments to persons that fail to furnish certain required information) and
information reporting requirements apply to payments of dividends (actual and
constructive) made to certain non-corporate United States persons. The United
States backup withholding tax and information reporting requirements (other
than those described above under "--Dividends") will generally not apply to
dividends paid on Common Stock to a Non-U.S. Holder at an address outside the
United States. However, backup withholding and information reporting generally
will apply to dividends paid on shares of Common Stock to addresses in the
United States to beneficial owners that are not "exempt recipients" and that
fail to provide in the manner required certain identifying information.

The payment of the proceeds from the disposition of shares of Common Stock
through the United States office of a broker will be subject to information
reporting and backup withholding unless the holder, under penalties or
perjury, certifies, among other things, its status as a Non-U.S. Holder, or
otherwise establishes an exemption. Generally, the payment of the proceeds
from the disposition of shares of Common Stock to or through a non-U.S. office
of a non-U.S. broker will not be subject to backup withholding and will not be
subject to information reporting. In the case of the payment of proceeds from
the disposition of shares of Common Stock through a non-U.S. office of a
broker that is a U.S. person or a "U.S.-related person," existing regulations
require information reporting (but not backup withholding) on the payment
unless the broker receives a statement from the owner, signed under penalties
of perjury, certifying, among other things, its status as a Non-U.S. Holder,
or the broker has documentary evidence in its files that the owner is a Non-
U.S. Holder and the broker has no actual knowledge to the contrary. Proposed
regulations state that backup withholding will not apply to such payments
(absent actual knowledge that the payee is a U.S. person). For this purpose, a
"U.S.-related person" is (i) a "controlled foreign corporation" for United
States federal income tax purposes or (ii) a foreign person, 50% or more of
whose gross income from all sources for the three year period ending with the
close of its taxable year preceding the payment (or for such part of the
period that the broker has been in existence) is derived from activities that
are effectively connected with the conduct of a United States trade or
business.

29
<PAGE>

The Internal Revenue Service recently proposed regulations addressing
certain withholding, certification and information reporting rules which could
affect the treatment of the payment of dividends and the payment of proceeds
discussed above. Non-U.S. Holders should consult their tax advisors regarding
the application of these rules to their particular situations, the
availability of an exemption therefrom, and the procedures for obtaining such
an exemption, if available.

Any amounts withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the United States
Internal Revenue Service. The backup withholding and information reporting
rules are currently under review by the U.S. Treasury Department and their
application to the shares of Common Stock is subject to change.

Non-U.S. Holders should consult their tax advisors regarding the application
of these rules to their particular situations, the availability of an
exemption therefrom and the procedure for obtaining such an exemption, if
available.

30
<PAGE>

UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the Underwriters named
below have severally agreed to purchase, and the Company and the Selling
Stockholders have agreed to sell to them, the respective number of shares of
the Common Stock set forth opposite the names of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Morgan Stanley & Co. Incorporated................................ 962,708
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................ 962,707
William Blair & Company L.L.C. .................................. 40,000
Alex. Brown & Sons Incorporated.................................. 80,000
Commerzbank Capital Markets Corporation.......................... 80,000
Crowell, Weedon & Co. ........................................... 40,000
Donaldson, Lufkin & Jenrette Securities Corporation.............. 80,000
Goldman, Sachs & Co. ............................................ 80,000
Montgomery Securities............................................ 80,000
Needham & Company, Inc. ......................................... 40,000
Ragen MacKenzie Incorporated..................................... 40,000
Robertson, Stephens & Company LLC................................ 80,000
Smith Barney Inc. ............................................... 80,000
Societe Generale Securities Corporation.......................... 80,000
Sutro & Co. Incorporated......................................... 40,000
Van Kasper & Company............................................. 40,000
---------
Total....................................................... 2,805,415
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of Common Stock offered hereby (other than
those shares covered by the Underwriters' over-allotment option described
below) if any such shares are taken.

The Underwriters initially propose to offer part of the Common Stock
directly to the public at the Price to Public set forth on the cover page
hereof and part to certain dealers at a price which represents a concession
not in excess of $.82 a share under the public offering price. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $.10 a share to other Underwriters or to certain dealers. After the
initial offering of the Common Stock, the offering price and other selling
terms may from time to time be varied by the Underwriters.

Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable at any time for 30 days from the date of
this Prospectus, to purchase up to 300,000 additional shares of Common Stock
at the Price to Public set forth on the cover page hereof, less underwriting
discounts and commissions. The Underwriters may exercise such option to
purchase solely for the purpose of covering over-allotments, if any, incurred
in the sale of the shares of Common Stock offered hereby. To the extent such
option is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number set forth next to such Underwriter's name in
the preceding table bears to the total number of shares of Common Stock
offered by the Underwriters hereby.

The Company has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated, it will not (a) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or

31
<PAGE>

indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or (b) enter into any swap or
similar agreement that transfers, in whole or in part, the economic risk of
ownership of such Common Stock, whether any such transaction described in
clause (a) or (b) of this sentence is to be settled by delivery of such Common
Stock or such other securities, in cash or otherwise, for a period of 90 days
after the date of this Prospectus, other than (i) any shares of Common Stock
sold by the Company upon the exercise of any option outstanding on the date of
the Offering granted under the stock option plans of the Company existing at
the closing of the Offering and (ii) the issuance of additional options to
purchase 757,418 shares of Common Stock to employees of the Company pursuant
to any stock option plans existing at the closing of the Offering (and the
issuance of the shares of Common Stock issuable thereon). In addition the
Company's executive officers have agreed, subject to certain limited
exceptions, not to (a) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or (b) enter into any swap or
similar agreement that transfers, in whole or in part, the economic risk of
ownership of the Common Stock, whether any such transaction described in
clause (a) or (b) of this sentence is to be settled by delivery of such Common
Stock or such other securities, in cash or otherwise, for a period of 90 days
after the date of this Prospectus without the prior written consent of Morgan
Stanley & Co. Incorporated.

Because more than 10% of the proceeds of the Offering, not including
underwriting compensation, may be received by affiliates of members of the
National Association of Securities Dealers, Inc. (the "NASD") who are
participating in the Offering, the Offering is being conducted pursuant to
NASD Conduct Rule 2710(c)(8). This rule allows an NASD member to participate
in an offering in which an affiliate will receive more than 10% of the
proceeds if such offering is of a class of securities for which a "bona fide
independent market" (as defined) exists as of the date of the filing of the
registration statement.

The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act").

From time to time Morgan Stanley & Co. Incorporated and Merrill Lynch & Co.
have provided, and continue to provide, investment banking services to the
Company and its affiliates.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement (which
term shall encompass any amendment thereto) on Form S-3 under the Securities
Act with respect to the shares of Common Stock offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement
and the exhibits and schedules thereto, to which reference is hereby made.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. The
Registration Statement and the exhibits and schedules thereto filed by the
Company with the Commission, as well as such reports, proxy statements and
other information filed by the Company with the Commission, may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and should also be
available for inspection and copying at the regional offices of the Commission
located in the Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can also be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Copies of such material are
available for inspection at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.

32
<PAGE>

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission pursuant to
the Exchange Act (File No. 1-13606) are incorporated herein by reference:

(1) The Company's Annual Report on Form 10-K for the year ended March 31,
1996;

(2) The Company's Current Reports on Form 8-K, Form 8-K/A (Amendment No.
1) and Form 8-K/A (Amendment No. 2), in each case dated May 6, 1996; and

(3) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on January 20,
1995, as amended February 17, 1995.

All other documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of this offering shall be
deemed to be incorporated by reference herein and to be a part hereof from the
respective dates of the filing of such reports and documents.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to any person, including any
beneficial owner of Common Stock, to whom this Prospectus is delivered, upon
the written or oral request of such person, a copy of any and all information
incorporated by reference in this Prospectus, other than exhibits to such
information (unless such exhibits are specifically incorporated by reference
in such documents). Such requests should be directed to: Corporate Secretary,
Sola International Inc., 2420 Sand Hill Road, Menlo Park, California 94025
(telephone (415) 324-6868).

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations), New
York, New York, and for the Underwriters by Shearman & Sterling, New York, New
York.

EXPERTS

The consolidated financial statements of the Company as of March 31, 1996
and 1995 and for the years ended March 31, 1996 and 1995 and for the four
months ended March 31, 1994 and the combined financial statements of the
Predecessor Business for the eight months ended November 30, 1993 appearing in
this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

The combined financial statements of the Worldwide Ophthalmic Group of
American Optical Corporation at March 29, 1996 and March 31, 1995 and for the
years ended March 29, 1996 and March 31, 1995 included in the Current Report
(Form 8-K/A) dated May 6, 1996 of Sola International Inc., and incorporated by
reference in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such combined financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.

33
<PAGE>

SOLA INTERNATIONAL INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........................ F-2
Consolidated Balance Sheets as of March 31, 1996 and 1995................ F-3
Consolidated Statements of Operations for the years ended March 31, 1996
and 1995 and for the four months ended March 31, 1994................... F-4
Combined Statement of Operations for the eight months ended November 30,
1993.................................................................... F-4
Consolidated Statements of Shareholders' Equity for the years ended March
31, 1996 and 1995 and for the four months ended March 31, 1994.......... F-5
Combined Statement of Parent Company Investment for the eight months
ended November 30, 1993................................................. F-6
Consolidated Statements of Cash Flows for the years ended March 31, 1996
and 1995 and for the four months ended March 31, 1994................... F-7
Combined Statement of Cash Flows for the eight months ended November 30,
1993.................................................................... F-7
Notes to Consolidated Financial Statements............................... F-8
Quarterly Financial Data (unaudited)..................................... F-26
</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors and Shareholders

Sola International Inc.

We have audited the accompanying consolidated balance sheets of Sola
International Inc. as of March 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the years
ended March 31, 1996 and 1995 and for the four months ended March 31, 1994. We
have also audited the combined statements of operations, cash flows, and
parent company investment of the Predecessor Business for the period from
April 1, 1993 to November 30, 1993. These consolidated and combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Sola International Inc. as of March 31, 1996 and 1995, and the results of
its operations and its cash flows for the years ended March 31, 1996 and 1995
and for the four months ended March 31, 1994, in conformity with generally
accepted accounting principles. Also in our opinion, the combined financial
statements of the Predecessor Business referred to above present fairly, in
all material respects, the results of its operations and its cash flows for
the period April 1, 1993 to November 30, 1993 in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Palo Alto, California
May 6, 1996

F-2
<PAGE>

SOLA INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
MARCH 31,
------------------
ASSETS 1996 1995
------ -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 22,394 $ 16,148
Trade accounts receivable, less allowance for doubtful
accounts of $5,424 and $2,854 at March 31, 1996 and
1995, respectively..................................... 74,845 69,672
Inventories............................................. 100,707 85,676
Deferred income taxes................................... 7,491 7,548
Prepaids and other current assets....................... 1,861 2,019
-------- --------
Total current assets.................................. 207,298 181,063
Property, plant and equipment, at cost, less accumulated
depreciation and amortization............................ 79,582 71,432
Deferred income taxes..................................... 6,800 4,763
Debt issuance costs, net.................................. 1,907 2,613
Goodwill and other intangibles, net....................... 120,352 122,356
Other assets.............................................. 910 1,230
-------- --------
Total assets.......................................... $416,849 $383,457
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities
Current liabilities:
Notes payable to banks.................................. $ 13,722 $ 7,291
Current portion of long-term debt....................... 3,681 3,787
Accounts payable........................................ 39,415 28,190
Accrued liabilities..................................... 20,167 22,042
Accrued reorganization and acquisition expenses......... 9,746 13,856
Accrued payroll and related compensation................ 22,560 26,157
Income taxes payable.................................... 1,090 855
Deferred income taxes................................... 461 2,290
-------- --------
Total current liabilities............................. 110,842 104,468
Long-term debt, less current portion...................... 3,360 3,741
Bank debt, less current portion........................... 6,000 --
Senior subordinated notes................................. 88,530 103,666
Deferred income taxes..................................... 4,990 986
Other liabilities......................................... 10,886 11,153
-------- --------
Total liabilities..................................... 224,608 224,014
Commitments and contingencies............................. -- --
Shareholders' equity
Preferred stock, $0.01 par value; 5,000 shares authorized;
no shares issued......................................... -- --
Common stock, $0.01 par value; 50,000 shares authorized;
21,797 shares (21,780 shares as of March 31, 1995) issued
and outstanding.......................................... 218 218
Additional paid-in capital................................ 206,412 206,353
Equity participation loans................................ (421) (1,095)
Accumulated deficit....................................... (17,993) (51,669)
Cumulative foreign currency adjustments................... 4,025 5,636
-------- --------
Total shareholders' equity............................ 192,241 159,443
-------- --------
Total liabilities and shareholders' equity............ $416,849 $383,457
======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>

SOLA INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
PREDECESSOR BUSINESS COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PREDECESSOR
SOLA INTERNATIONAL INC. BUSINESS
--------------------------------- ------------
FOUR MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, NOVEMBER 30,
1996 1995 1994 1993
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales...................... $387,709 $345,631 $106,030 $200,025
Cost of sales.................. 201,991 185,626 93,428 115,319
-------- -------- -------- --------
Gross profit.................. 185,718 160,005 12,602 84,706
-------- -------- -------- --------
Research and development ex-
penses........................ 13,329 14,051 3,877 7,246
Selling and marketing ex-
penses........................ 66,345 61,143 19,146 33,483
General and administrative ex-
penses........................ 45,291 45,067 10,584 23,438
In-process research and devel-
opment expense................ -- -- 40,000 --
-------- -------- -------- --------
Operating expenses............ 124,965 120,261 73,607 64,167
-------- -------- -------- --------
Operating income (loss)...... 60,753 39,744 (61,005) 20,539
Interest income................ 544 470 67 149
Interest expense............... (12,685) (18,992) (6,227) (3,220)
Foreign currency adjustments... -- -- (167) (478)
-------- -------- -------- --------
Income (loss) before provi-
sion (benefit) for income
taxes, minority interest
and extraordinary item...... 48,612 21,222 (67,332) 16,990
Provision (benefit) for income
taxes......................... 13,623 6,649 (6,194) 5,833
Minority interest.............. (401) (933) (256) (408)
-------- -------- -------- --------
Income (loss) before extraor-
dinary item................. 34,588 13,640 (61,394) 10,749
Extraordinary item, repurchase
of senior subordinated notes
(1995--write-off of debt issu-
ance costs), net of tax....... (912) (3,915) -- --
-------- -------- -------- --------
Net income (loss).............. $ 33,676 $ 9,725 $(61,394) $ 10,749
======== ======== ======== ========
Earnings (loss) per share:
Income (loss) before extraor-
dinary item................. $ 1.51 $ 0.78 $ (3.75)
Extraordinary item........... (0.04) (0.22) --
-------- -------- --------
Net income (loss)............ $ 1.47 $ 0.56 $ (3.75)
======== ======== ========
Weighted average number of
shares outstanding............ 22,944 17,516 16,353
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

SOLA INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
CURRENCY
FOREIGN
COMMON STOCK ADDITIONAL EQUITY CURRENCY TOTAL
---------------- PAID-IN PARTICIPATION ACCUMULATED TRANSLATION SHAREHOLDERS'
(SHARES) (VALUE) CAPITAL LOANS DEFICIT ADJUSTMENTS EQUITY
-------- ------- ---------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
16,319 shares of $0.01
par value common stock
issued on December 1,
1993 for cash and eq-
uity participation
loans (restated)....... 16,319 $163 $124,779 $(1,304) $123,638
Cumulative translation
adjustments............ $1,251 1,251
Net loss................ $(61,394) (61,394)
------ ---- -------- ------- -------- ------ --------
Balances, March 31, 1994
(restated)............. 16,319 163 124,779 (1,304) (61,394) 1,251 63,495
58 shares of $0.01 par
value common stock is-
sued for cash and Eq-
uity participation
loans.................. 58 1 447 (86) 362
Repayment of Equity par-
ticipation loans....... 295 295
Initial Public Offering
of 5,403 shares of
$0.01 par value common
stock, net of
offering expenses...... 5,403 54 81,127 81,181
Cumulative translation
adjustments............ 4,385 4,385
Net income.............. 9,725 9,725
------ ---- -------- ------- -------- ------ --------
Balances, March 31,
1995................... 21,780 218 206,353 (1,095) (51,669) 5,636 159,443
17 shares of $0.01 par
value common stock is-
sued under stock option
plans.................. 17 59 59
Repayment of Equity par-
ticipation loans....... 674 674
Cumulative translation
adjustments............ (1,611) (1,611)
Net income.............. 33,676 33,676
------ ---- -------- ------- -------- ------ --------
Balances, March 31,
1996................... 21,797 $218 $206,412 $ (421) $(17,993) $4,025 $192,241
====== ==== ======== ======= ======== ====== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

SOLA INTERNATIONAL INC.

PREDECESSOR BUSINESS COMBINED STATEMENT OF
PARENT COMPANY INVESTMENT
(IN THOUSANDS)

PARENT COMPANY INVESTMENT

<TABLE>
<S> <C>
Balances, April 1, 1993............................................... $117,129
Net income.......................................................... 10,749
Net change in cumulative translation adjustments.................... (2,546)
Dividends declared.................................................. (1,046)
Net change in parent company investment............................. 5,868
--------
Balances, November 30, 1993........................................... $130,154
========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>

SOLA INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
PREDECESSOR BUSINESS COMBINED STATEMENT OF CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
SOLA INTERNATIONAL INC. PREDECESSOR BUSINESS
--------------------------------- --------------------
FOUR MONTHS
ENDED EIGHT MONTHS
YEAR ENDED YEAR ENDED MARCH 31, ENDED
MARCH 31, MARCH 31, 1994 NOVEMBER 30,
1996 1995 (RESTATED) 1993
---------- ---------- ----------- --------------------
<S> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income (loss)....... $33,676 $ 9,725 $(61,394) $10,749
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating ac-
tivities:
Depreciation and amorti-
zation................. 17,247 20,981 5,992 7,017
Inventory write-up...... -- -- 32,905 --
In-process research and
development............ -- -- 40,000 --
Provision for excess and
obsolete inventory..... 1,090 1,981 604 1,204
Provision for doubtful
accounts............... 2,846 2,442 412 1,223
Increase (decrease) in
net deferred taxes..... 1,657 (1,404) (3,522) 6
(Gain) loss on
disposal/sale of prop-
erty, plant and equip-
ment................... (73) 20 -- (22)
Changes in assets and
liabilities:
Trade accounts receiv-
able.................. (10,883) (8,941) (5,265) (2,994)
Inventories............ (16,222) (4,405) 6,254 (11,441)
Prepaids and other
current assets........ 127 (318) 545 (912)
Other assets........... 394 (151) 800 276
Accounts payable--
trade................. 10,010 (3,183) 6,150 (9,207)
Accounts payable--
Pilkington and affil-
iates................. -- -- (1,705) 294
Accrued and other cur-
rent liabilities...... (9,750) 2,657 298 1,417
Other long-term lia-
bilities.............. 643 (950) 8 1,005
------- ------- -------- -------
Net cash provided by
(used in) operating
activities.......... 30,762 18,454 22,082 (1,385)
------- ------- -------- -------
Cash flows from invest-
ing activities:
Acquisition of Sola
Group, less cash and
cash equivalents
of $7,117.............. -- -- (304,316) --
Additional investment in
Venezuela subsidiary... (3,561) -- -- --
Capital expenditures.... (17,580) (11,588) (4,309) (6,271)
Payments received on
notes receivable from
Pilkington
and affiliates......... 1,585 1,200 -- --
Proceeds from sale of
fixed assets........... 585 550 210 161
------- ------- -------- -------
Net cash used in in-
vesting activities.. (18,971) (9,838) (308,415) (6,110)
------- ------- -------- -------
Cash flows from financ-
ing activities:
Proceeds from acquisi-
tion debt.............. -- -- 187,737 --
Sale of common stock.... -- 81,838 123,638 --
Payments on equity par-
ticipation
loans/exercise of stock
options................ 733 -- -- --
Net receipts (payments)
under notes payable to
banks.................. 6,785 396 (4,290) 421
Decrease in notes pay-
able to Pilkington and
affiliates............. -- -- -- 4,340
Borrowings on long-term
debt................... 1,297 7,382 2,495 2,966
Payments on long-term
debt................... (1,735) (11,487) (5,973) (3,907)
Net receipts (payments)
under Bank debt........ 6,000 (82,195) (6,742) --
Repurchase of senior
subordinated notes..... (17,766)
Dividends paid to par-
ent.................... -- -- -- (4,562)
Net change in parent
company investment..... -- -- -- 6,286
------- ------- -------- -------
Net cash provided by
(used in) financing
activities.......... (4,686) (4,066) 296,865 5,544
------- ------- -------- -------
Effect of exchange rate
changes on cash and
cash equivalents....... (859) 913 153 (197)
------- ------- -------- -------
Net increase (decrease)
in cash and cash equiv-
alents................. 6,246 5,463 10,685 (2,148)
Cash and cash equiva-
lents at beginning of
period................. 16,148 10,685 -- 9,265
------- ------- -------- -------
Cash and cash equiva-
lents at end of peri-
od..................... $22,394 $16,148 $ 10,685 $ 7,117
======= ======= ======== =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-7
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND BASIS OF PRESENTATION

Sola International Inc. ("Company" or "SII") designs, manufactures and
distributes a broad range of eyeglass lenses, primarily focusing on the fast
growing plastic lens segment of the global market. All significant
intercompany transactions have been eliminated in the accompanying
consolidated and combined financial statements. The Company operates in one
business segment.

On October 5, 1995 the Company increased its investment in its Venezuela
joint venture, Sola de Venezuela Industria Optica, C.A. ("Sola Venezuela"),
from 45% to 80%, which was effective from March 31, 1995. In addition, in
March 1996, the Company exercised its option to acquire the remaining 20% of
the shares in Sola Venezuela. The purchase price for all the shares, including
the 20% option, and acquisition expenses, amounted to approximately $3.6
million and was paid in cash, $2.0 million in October 1995, and $1.6 million
in March 1996. In addition to the $1.6 million cash purchase price of the
final 20% of Sola Venezuela, there will be a contingent payment, if any, based
on the growth in the net income of Sola Venezuela in fiscal 1998 over the net
income of Sola Venezuela in fiscal 1995. Under certain circumstances the
contingent payment could be based on an earlier 12 month period. The
acquisition has been accounted for under the purchase method of accounting.

On February 23, 1995, Sola Holdings Inc. ("SHI"), SII's sole shareholder,
was merged with and into Sola Investors Inc., SHI's parent, with Sola
Investors Inc. being the surviving corporation. On the same day, Sola
Investors Inc. merged with its then wholly owned subsidiary, Sola
International Inc. with Sola International Inc. being the surviving
corporation ("Merger" or "Mergers"). The simplified corporate structure was
adopted to cause the Company's common stock to be more amenable to sale and
trading in public equity markets. The Mergers have been treated as a
reorganization of companies under common control and are accounted for similar
to a pooling of interests for accounting and financial reporting purposes. The
accompanying statements of shareholders' equity and cash flows for the four
months ended March 31, 1994 have been restated for the effects of the Mergers.
Sola Investors Inc. and Sola Holdings Inc. had no net income (loss) prior to
the Mergers, thus the Mergers did not change previously reported consolidated
net income (loss) of the Company.

On December 1, 1993, the Company acquired the Sola business unit (the
"Predecessor Business" or "Sola Group") of Pilkington plc ("Pilkington")
pursuant to the terms of the Purchase Agreement (the "Purchase Agreement")
dated September 1, 1993 between Sola Holdings Inc., and Pilkington (the
"Acquisition"). The Acquisition has been accounted for under the purchase
method of accounting as of the closing date.

The accompanying consolidated and combined financial statements of the
Company and the Predecessor Business have been prepared in accordance with
U.S. generally accepted accounting principles. The Predecessor Business's
financial statements presented herein include the results of operations and
cash flows for the eight months ended November 30, 1993 as if the eyeglass
operations existed as a corporation separate from Pilkington during the
periods presented on a historical basis. The Company's financial statements
presented herein include the results of operations and cash flows for fiscal
1996 and 1995 and for the four months ended March 31, 1994, and the balance
sheets as of March 31, 1996 and 1995. The results of operations for the
Company reflect the impact of interest expense on indebtedness related to the
Acquisition and amortization and other expenses (inclusive of certain non-
recurring charges) arising from purchase accounting adjustments and,
therefore, the financial statements of the Company are not directly comparable
to those of the Predecessor Business.

The combined financial statements of the Predecessor Business include
transactions with Pilkington for treasury functions, tax services, internal
audit services and insurance costs. The Predecessor Business also had an
agreement with Pilkington for use of technology and the Pilkington logo in
which amounts totaling $1.0 million for the eight months ended November 30,
1993 have been treated as a dividend to Pilkington in the accompanying
financial statements.

F-8
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Combination:

The consolidated or combined financial statements include the accounts of
the Company and its wholly-owned and controlled foreign subsidiaries. All
significant transactions between the entities have been eliminated.

Cash and Cash Equivalents:

Cash equivalents consist primarily of short-term investments with an
original maturity of three months or less, carried at cost which approximates
market.

Inventories:

Inventories are stated at the lower of cost (first-in, first-out) or market.

Property, Plant and Equipment:

Property, plant and equipment are stated at cost and are depreciated on a
straight-line basis over the estimated useful lives of the related assets
(buildings--10 to 50 years; plant and office equipment--2 to 10 years).
Leasehold improvements and leased equipment are amortized over the lesser of
their useful lives or the remaining term of the related leases.

Impact of recently issued accounting standards:

In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be disposed of", which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets carrying amounts. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company will adopt Statement 121 in the first quarter of fiscal 1997 and based
on current circumstances does not believe the effect of adoption will be
material.

Intangible Assets:

Intangible assets, including trademarks, patents and licenses, are stated at
cost and amortized on a straight-line basis over their estimated useful lives
of 2 to 17 years. Legal costs incurred by the Company in defending its patents
are capitalized to patent costs and amortized over the remaining life of the
patent. Goodwill is amortized over 40 years. As of March 31, 1996 and 1995
accumulated amortization was $7.3 million and $4.1 million, respectively.

Debt issuance costs are being amortized to interest expense over the
respective lives of the debt instruments which range from six to ten years. As
of March 31, 1996 and 1995, accumulated amortization was $1.1 million and $1.3
million, respectively. As a result of repurchasing $19.9 million of the
Company's 9 5/8% Senior Subordinated Notes in fiscal 1996 (see Note 8), the
Company wrote off $0.4 million of debt issuance costs reflected on the
statement of operations, together with the premium over accreted value, as an
extraordinary item, net of tax. In fiscal 1995, associated with the Company's
initial public offering ("IPO") (Note 9) and renegotiation of the Bank Credit
Agreement (Note 7) the Company wrote off $3.9 million of debt issuance costs,
net of related income tax benefit of zero, reflected on the statement of
operations as an extraordinary item.

F-9
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

Foreign Currency Translation:

The assets and liabilities and revenue and expense accounts of the Company's
foreign subsidiaries operating in non-highly inflationary economies have been
translated using the exchange rate at the balance sheet date and the weighted
average exchange rate for the period, respectively.

The net effect of the translation of the accounts of the Company's
subsidiaries has been included in equity as cumulative foreign currency
translation adjustments. Adjustments that arise from exchange rate changes on
transactions denominated in a currency other than the local currency are
included in income as incurred and are not material.

The Company has operations in Brazil, a hyper-inflationary country until
recently, for which the functional currency is the U.S. dollar. All
translation and transaction adjustments are included in determining net income
(loss). For fiscal 1996 and fiscal 1995 no translation adjustments were
necessary. For the four months ended March 31, 1994 and the eight months ended
November 30, 1993, foreign currency adjustments attributable to the Brazilian
operation totaled $0.2 million and $0.5 million, respectively.

Revenue Recognition:

Sales and related cost of sales are recognized upon shipment of product. The
Company's principal customers are wholesale distributors and processing
laboratories, retail chains, superoptical retail stores, independent eyecare
practitioners and sunglass manufacturers. No individual customer accounts for
more than 10% of net sales. The Company generally does not require collateral
from its customers, but performs on-going credit evaluations of its customers.

Advertising and Promotion Costs:

The Company's policy is to expense advertising and promotion costs as they
are incurred. The Company's advertising and promotion expenses were
approximately $9.4 million, $9.1 million, $2.1 million and $2.4 million for
fiscal 1996, fiscal 1995, the four months ended March 31, 1994 and the eight
months ended November 31, 1993, respectively.

Income Taxes:

The accompanying financial statements of the Company and the Predecessor
Business reflect the provisions of FASB 109.

Income taxes have been provided in the Predecessor Business statements of
operations as if the Predecessor business was a separate taxable entity. Since
the United States ("U.S.") and United Kingdom ("U.K.") operations within the
Sola group were not separate taxable entities but were included in the
consolidated income tax returns of other Pilkington group companies, the
current provision for U.S. federal and state income taxes and for U.K. income
taxes was assumed to be payable to Pilkington in the period presented.
However, in accordance with the Pilkington tax allocation agreement with its
U.S. and U.K. subsidiaries, the benefit of a reduction in taxes payable due to
the utilization of net operating losses on a consolidated federal tax return
and U.K. tax filing could reduce the payable to Pilkington. Such benefits were
reflected as a capital contribution as of each fiscal year end. The current
provision for all other combined foreign entities was assumed to be payable to
the applicable taxing authority.

Appropriate U.S. and foreign income taxes have been provided on the portion
of the accumulated earnings of the Predecessor Businesses foreign subsidiaries
which were intended to be remitted to Pilkington within the foreseeable
future.

F-10
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

Investment tax credits and research and development credits are accounted
for by the flow-through method.

Use of Estimates:

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Concentration of Credit Risks:

Cash and cash equivalents are invested in deposits with major banks in the
United States and in countries where subsidiaries operate. Deposits in these
banks may exceed the amount of insurance provided on such deposits. The
Company has not experienced any losses on its deposits of cash and cash
equivalents.

Financial Instruments With Off-Balance-Sheet Risk:

The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to reduce its exposure to market and interest
rate risk. Gains and losses due to rate fluctuations on such transactions are
recognized currently. Cash flows related to these gains and losses are
reported as operating activities in the accompanying consolidated statements
of cash flows. As of March 31, 1996, certain of the Company's foreign
subsidiaries had entered into forward contracts for intercompany purchase
commitments in amounts other than their home currency. The carrying amount of
the foreign exchange contracts approximates fair value, which has been
estimated based on current exchange rates. The forward exchange contracts
generally have varying maturities up to 9 months. Unless noted otherwise, the
Company does not require collateral or other security to support financial
instruments with credit risk.

Earnings (Loss) Per Share:

Earnings (loss) per share have been computed based upon the weighted average
number of common and common equivalent shares outstanding, when dilutive.
Common equivalent shares result from dilutive stock options, using the
treasury stock method. Pursuant to Securities and Exchange Commission (SEC)
rules, common and common equivalent shares issued by the Company at prices
below the public offering price during the twelve months immediately preceding
the Company's initial public offering (IPO) in March 1995 are included in the
calculation (using the treasury stock method and the initial public offering
price) as if they were outstanding for all periods prior to the offering date.

F-11
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

Supplemental pro forma earnings per share (unaudited), calculated as if the
Acquisition, Mergers and IPO, had taken place at the beginning of fiscal 1995,
and excluding Acquisition and IPO related non-recurring charges from net
income, was $1.05 for fiscal 1995, calculated as follows:

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1995
---------------
(IN THOUSANDS,
EXCEPT PER
SHARE DATA)
(UNAUDITED)

<S> <C>
Net income, as reported................................................ $ 9,725
Pro forma adjustments, primarily interest and AEA fees, assuming that
the IPO occurred at the beginning of the period....................... 13,920
=======
Net Income used for supplemental pro forma earnings per share calcula-
tion.................................................................. $23,645
=======
Weighted average number of shares outstanding, as reported............. 17,516
Adjustment necessary assuming shares issued in the IPO were outstanding
for the full period................................................... 5,012
=======
Shares used in supplemental pro forma earnings per share calculation... 22,528
=======
Supplemental pro forma earnings per share.............................. $ 1.05
=======
</TABLE>

Stock-Based Compensation:

The Company accounts for its stock option plan in accordance with the
provisions of the Accounting Principles Board's Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees". In 1995, the Financial Accounting
Standards Board released the Statement of Financial Accounting Standards No.
123 ("SFAS 123"), "Accounting for Stock-Based Compensation". SFAS 123 provides
an alternative method of accounting for stock-based compensation to APB 25 and
is effective for fiscal years beginning after December 15, 1995. The Company
expects to continue to account for its stock-based compensation in accordance
with the provision of APB 25. Accordingly, SFAS 123 is not expected to have
any material impact on the Company's financial position or results of
operations.

3. INVENTORIES

<TABLE>
<CAPTION>
MARCH 31,
----------------
1996 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.................................................. $ 10,595 $10,208
Work in progress............................................... 4,782 4,882
Finished goods................................................. 59,595 50,767
Molds.......................................................... 25,735 19,819
-------- -------
$100,707 $85,676
======== =======
</TABLE>

Molds comprise mainly finished goods for use by manufacturing affiliates in
the manufacture of spectacle lenses.

F-12
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
MARCH 31,
----------------
1996 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Land, buildings and leasehold improvements.................... $ 26,599 $21,720
Machinery and office equipment................................ 78,882 63,782
Equipment under capital leases................................ 874 910
-------- -------
106,355 86,412
Less accumulated depreciation and amortization................ 26,773 14,980
-------- -------
$ 79,582 $71,432
======== =======
</TABLE>

At March 31, 1996 and 1995, equipment acquired under capital leases had
related accumulated amortization of approximately $176,000 and $169,000,
respectively.

5. NOTES PAYABLE TO BANKS

Notes payable to banks at March 31, 1996 represent borrowings generally
denominated in foreign currencies under several foreign credit agreements with
lenders at interest rates ranging from 1.63% to 11.50%, and 54.00% for
Brazilian Real based borrowings. The Brazilian Real based borrowings were
$124,000 at March 31, 1996. The weighted average interest rates as of March
31, 1996 and 1995 were 8.47% and 8.07%, respectively. As of March 31, 1996,
the Company had total unused lines of credit amounting to $23.3 million. As of
March 31, 1996, the Company was in compliance with minimum net worth
requirements of agreements with certain foreign banks.

6. LONG-TERM DEBT

<TABLE>
<CAPTION>
MARCH 31,
1996
--------------
(IN THOUSANDS)
<S> <C>
Uncollateralized term loans, interest rates varying from 5.70%
to 6.35% at March 31, 1996, principal and interest payable
through December 2002......................................... $3,547
Uncollateralized term loans, interest rates varying from PIBOR
plus .50% to plus .75%, (PIBOR was 4.23% at March 31,1996)
principal and interest payable through January 1998........... 2,185
Loans collateralized by equipment and other assets, interest
rates varying from 8.0% to 16.6% at March 31, 1996, principal
and interest payable through March 1998....................... 590
Loans collateralized by equipment and other assets in Brazil,
interest rates varying from 29.0% to 52.94% at March 31, 1996,
principal and interest payable through April 1998............. 188
Loan collateralized by guarantees over Company assets, interest
13.27% at March 31, 1996, principal and interest payable
through June 1996............................................. 359
Other.......................................................... 172
------
7,041
Less current portion........................................... 3,681
------
$3,360
======
</TABLE>

F-13
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. LONG-TERM DEBT--(CONTINUED)

Aggregate annual maturities of long-term debt over the next five years and
thereafter are as follows:

<TABLE>
<CAPTION>
PERIOD ENDING MARCH 31,
- ----------------------- (IN THOUSANDS)
<S> <C>
1997........................................................... $3,681
1998........................................................... 1,437
1999........................................................... 791
2000........................................................... 401
2001........................................................... 341
Thereafter..................................................... 390
</TABLE>

The Company believes that as of March 31, 1996, the fair value of its long-
term debt approximates the carrying value of those obligations. The fair value
of the Company's long-term debt is estimated based on quoted market prices for
similar issues with the same interest rates that would be available to the
Company for similar debt obligations.

7. BANK CREDIT AGREEMENT

On March 2, 1995 the Company entered into an Amended and Restated Bank
Credit Agreement with The Bank of Nova Scotia, for itself and as agent for a
syndicate of other financial institutions, covering an aggregate amount of $85
million (the "Revised Bank Facility"). The Revised Bank Facility consists of a
revolving credit facility (the "Revised Revolver") with the amount thereunder
equal to the lesser of (i) $85 million or (ii) 75% of eligible accounts
receivable and 45% of eligible inventory of the Company and its subsidiaries,
as defined. Up to $20 million of capacity under the Revised Revolver is
available for the issuance of letters of credit and up to $15 million of
capacity is available for swing line advances. The Revised Revolver terminates
on December 1, 1999. As of March 31, 1996 total availability under the Revised
Revolver was $85 million, of which $6.0 million had been utilized and a
further $1.4 million had been used for letters of credit issued with varying
maturities. Revised Revolver terminates on December 1, 1999. As of March 31,
1996 total availability under the Revised Revolver was $85 million, of which
$6.0 million had been utilized and a further $1.4 million had been used for
letters of credit issued with varying maturities.

Borrowings under the Amended and Restated Bank Credit Agreement's Revised
Revolver (other than swing line loans, which may only be Base Rate loans) can
be made in both Base Rate and LIBO Rate Loans. Base Rate Loans bear interest
at rates per annum equal to the sum of the Scotiabank Alternate Base Rate and
a margin varying from nil to 1/4%, based on the Company's consolidated debt to
EBITDA Ratio, as defined. LIBO Rate Loans bear interest at a rate per annum
equal to the sum of the LIBO Rate and a margin varying from 3/4% to 1 1/2%,
based on the Company's consolidated debt to EBITDA Ratio. In addition a
commitment fee on the unused portion of the Revolver is payable quarterly in
arrears at a rate varying from 0.25% to 0.5% per annum based on the Company's
consolidated debt to EBITDA Ratio.

The Amended and Restated Bank Credit Agreement contains a number of
covenants, including among others, covenants restricting the Company and its
subsidiaries with respect to the incurrence of indebtedness (including
contingent obligations), declare, make or pay dividends or other distributions
in excess of prescribed levels, the creation of liens, the making of certain
investments and loans, engaging in unrelated business, transactions with
affiliates, the consummation of certain transactions such as sales of
substantial assets, mergers or consolidations and other transactions. The
Company and its subsidiaries are also required to comply with certain
financial tests and maintain certain financial ratios. The Company has pledged
the shares in its domestic subsidiaries and has pledged 65% of the shares of
certain significant foreign subsidiaries, as defined in the Amended and
Restated Bank Credit Agreement as collateral for the Revised Facility.

F-14
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. SENIOR SUBORDINATED NOTES

The Company's 9 5/8% Senior Subordinated Notes ("Notes") were issued under
an indenture dated December 1, 1993, among the Company and Bank of New York,
as Trustee (the "Indenture"). The Notes are unsecured senior subordinated
obligations of the Company, limited to $116.6 million aggregate principal
amount at maturity, and will mature on December 15, 2003. Prior to December
15, 1998, interest will accrue on the Notes and is payable in cash
semiannually at the rate of 6% per annum of the principal amount at maturity
of the Notes on June 15 and December 15 of each year. In addition, prior to
December 15, 1998, original issue discount will accrete on the Notes such that
the yield to maturity will be 9 5/8% per annum, compounded on the basis of
semiannual compounding. From and after December 15, 1998, interest on the
Notes will accrue and be payable in cash semiannually at the rate of 9 5/8%
per annum of the principal amount at maturity of the Notes on June 15 and
December 15 of each year, commencing June 15, 1999.

The Notes may be redeemed at the option of the Company, in whole or in part,
at any time on or after December 15, 1998, initially at 104.813% of their
principal amount at maturity and declining to 100% of such principal amount at
maturity on or after December 15, 2000, in each case plus accrued interest. In
addition, at the option of the Company at any time prior to December 15, 1996,
the Company may redeem up to $40.75 million aggregate principal amount at
maturity of the Notes from the proceeds of one or more Public Equity Offerings
following which there is a Public Market, at a redemption price of 109.625% of
the Accreted Value of the Notes, plus accrued interest.

The Indenture contains certain covenants that, among other things, limit the
ability of the Company and its subsidiaries to incur indebtedness, pay
dividends, redeem capital stock and make other restricted payments, issue
capital stock of subsidiaries, create liens, permit dividend restrictions
affecting subsidiaries, engage in transactions with stockholders and
affiliates, sell assets and engage in mergers and consolidations.

The Notes are subordinated to all Senior Indebtedness, as defined in the
Indenture, of the Company and effectively subordinated to all liabilities of
the Company's subsidiaries. The Company believes that as of March 31, 1996,
the fair value of its Senior Subordinated Notes approximates the carrying
value of those obligations.

During fiscal 1996 the Company repurchased approximately $19.9 million
principal amount at maturity of the Notes. As a result of the repurchases the
Company recorded an extraordinary charge of $0.9 million for fiscal 1996
resulting from the write-off of unamortized debt issuance costs and premium
over accreted value, net of tax. The repurchase was partly funded by
borrowings under the Bank Credit Agreement and partly from excess cash arising
from the IPO. The Company may from time to time purchase additional Notes in
the market or otherwise subject to market conditions.

9. COMMON STOCK

The Company's common stock comprises 50 million authorized shares at a par
value of $0.01 each.

During February and March 1995, the Company sold 5,403,305 shares of common
stock at $16.50 per share through its initial public offering (IPO). The net
proceeds (after underwriter's discounts and commissions and other costs
associated with the IPO) totaled $81.2 million.

The Company has entered into loan agreements with certain members of the
Company's management to enable them to invest in the Company's common stock.
As of March 31, 1996 and 1995, loans amounting to $0.4 million and $1.1
million, respectively, which bear interest at 7.5% per annum, payable
quarterly, and mature

F-15
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. COMMON STOCK--(CONTINUED)

on December 1, 1998, were outstanding under this plan. These loans are secured
by the common stock and have been reflected as a reduction in shareholders'
equity on the consolidated balance sheet.

Sola Investors Inc. adopted the Sola Investors Inc. Stock Option Plan (the
"Existing Option Plan"), pursuant to which certain key employees and/or
directors of the Company and its subsidiaries and affiliates (each an
"Optionee") were eligible to receive non-qualified stock options (the
"Existing Options") to acquire shares of the non-voting common stock of Sola
Investors Inc...... Existing Options granted to an Optionee are evidenced by an
agreement between the Optionee and Sola Investors Inc. which contains terms
not inconsistent with the Existing Option Plan which the committee appointed
to administer the Existing Option Plan deemed necessary or desirable (the
""Existing Option Agreement'').

Upon consummation of the Mergers, the Existing Option Plan and the Existing
Option Agreements were assumed by the Company and all Existing Options which
were outstanding at such time were converted into options to acquire shares of
the Company's Common Stock, with the number of shares subject to such option
and the exercise price thereof adjusted appropriately. The Existing Option
Plan has been amended to provide that effective upon the consummation of the
Mergers, no new options will be granted thereunder.

The Company adopted the Sola International Inc. Stock Option Plan
("International Plan"), effective February 15, 1995. The maximum number of
shares of Common Stock with respect to which options may be granted under the
International Plan is 855,868 shares plus, subject to the requirement of rule
16b-3 of the Securities Exchange Act of 1934, if applicable, the number of
shares of Common Stock subject to existing options under the Existing Stock
Option Plan, which expire or terminate without exercise for any reason, which
number of shares underlying Existing Options shall not exceed 1,645,219. Under
the International Plan certain key employees and/or creditors of the Company
and its subsidiaries and affiliates (each an "Optionee") were eligible to
receive non-qualified stock options (the "International Options") to acquire
shares of common stock of the Company. International Options granted to an
Optionee are evidenced by an agreement between the Optionee and the Company
which contains terms not inconsistent with the International Plan which the
committee appointed to administer the International Plan deemed necessary or
desirable (the "International Option Agreement").

Pursuant to the Existing Option Plan and the International Plan ("Plans"),
unless otherwise set forth in an Existing Option Agreement or an International
Option Agreement, 20% of the Options granted to an Optionee vest on the date
of grant, with an additional 20% vesting on each successive one-year
anniversary of the date of grant. Options not previously vested become fully
vested in the event of a sale or other disposition of 80% or more of the
outstanding capital stock or substantially all of the assets of the Company,
or upon a Merger or consolidation of the Company and its subsidiaries and
affiliates unless the merger or consolidation is one in which the Company is
the surviving corporation or one in which control of the Company and its
subsidiaries and affiliates does not change (a "Termination Event"). However,
Existing Options which are not exercised on or prior to a Termination Event
lapse upon the closing of a Termination Event. All non-vested Options of an
Optionee lapse upon such Optionee's termination of employment for any reason.
An Optionee's vested Options lapse 45 days after termination of such
Optionee's employment with the Company and its subsidiaries and affiliates for
any reason other than death or disability, in which case such options
terminate 180 days after such termination; provided, however, that such
options lapse immediately in the event an Optionee's employment with the
Company and its subsidiaries and affiliates is terminated for cause.

F-16
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. COMMON STOCK--(CONTINUED)

The following table contains information concerning the options under the
Plans after giving effect to the Merger:

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING EXERCISE PRICE
OPTIONS ($/SHARE)
---------------- -----------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Options granted during fiscal
1995............................ 905 $ 9.71--$16.50
Options outstanding as of March
31, 1995........................ 2,166 $ 9.71--$16.50
Options exercisable as of March
31, 1995........................ 685 $ 9.71--$16.50
Options available for grant as of
March 31, 1995.................. 335 --
Options granted during fiscal
1996............................ 113 $ 21.13--$25.25
Options outstanding as of March
31, 1996........................ 2,227 $ 9.71--$25.25
Options exercised in fiscal
1996............................ 17 $ 9.71--$16.50
Options cancelled in fiscal
1996............................ 35 $ 9.71--$16.50
Options exercisable as of March
31, 1996........................ 1,119 $ 9.71--$25.25
Options available for grant as of
March 31, 1996.................. 257 --
</TABLE>

10. DEFINED CONTRIBUTION PLANS

The Company sponsors several defined contribution plans covering
substantially all U.S. and U.K. employees. The plans provide for limited
Company matching of participants' contributions. Contributions to all defined
contribution plans charged to operations were $0.9 million and $0.8 million
for fiscal 1996, $0.3 million and $0.5 million fiscal 1995, the four months
ended March 31, 1994 and the eight months ended November 30, 1993,
respectively.

11. DEFINED BENEFIT RETIREMENT PLANS

Prior to the sale by Pilkington, the Predecessor Business participated in a
non-contributory Pilkington defined benefit pension plan covering
substantially all full-time domestic employees. As of the Acquisition,
Pilkington retained responsibility for all assets and liabilities of this
plan. The domestic employees participation in the plan was curtailed as of the
closing date and all employees were fully vested as of that date.

Costs incurred and charged to the Predecessor Business's operations for its
portion of the Domestic Pension Plan were $1.1 million for the eight months
ended November 30, 1993.

The Company implemented a new Sola Optical defined benefit pension plan
("Domestic Pension Plan") with substantially the same pension benefits as the
Pilkington plan. The new plan offers pension benefits from December 1, 1993.
The plan provides prior service benefits to employees for years of service
completed under Pilkington ownership, and a liability reflecting the
difference between Projected Benefit Obligation and Accumulated Benefit
Obligation as of December 1, 1993 has been provided in the financial
statements as of the Acquisition date.

Benefit payments under the new plan are based principally on earnings during
the last five- or ten-year period prior to retirement and/or length of
service. New employees are eligible to participate in the plan within one year
of employment and are vested after five years of service. The Company's policy
is to fund such amounts

F-17
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. DEFINED BENEFIT RETIREMENT PLANS--(CONTINUED)

as are necessary, on an actuarial basis, to provide for the plan's current
service costs and the plan's prior service costs over their amortization
periods.

The Company also participates in a contributory defined benefit pension plan
covering certain Australian employees ("International Pension Plan"). Benefits
are generally based on length of service and on compensation during the last
three years of service prior to retirement. The Company's policy is to fund
such amounts as are necessary, on an actuarial basis, to provide for the
plan's current service costs and the plan's prior service costs over their
amortization periods.

The following table provides information on the status of the Domestic
Pension Plan and the International Pension Plan.

Net periodic pension cost included the following:

<TABLE>
<CAPTION>
FOUR MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, NOVEMBER 30,
1996 1995 1994 1993
---------- ---------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Domestic Pension Plan:
Service cost-benefits earned
during the period.......... $1,370 $1,252 $469
Interest cost on projected
benefit obligation......... 509 377 127
Actual return on plan as-
sets....................... (180) 1 --
Net amortization and defer-
ral........................ 25 (1) --
------ ------ ----
Total net periodic pension
costs...................... $1,724 $1,629 $596
====== ====== ====
International Pension Plan:
Service cost-benefits earned
during the period.......... $1,539 $1,299 $428 $ 856
Interest cost on projected
benefit obligation......... 684 579 187 375
Actual return on plan as-
sets....................... (1,454) 134 (533) (1,067)
Net amortization and defer-
ral........................ 583 (938) 231 461
------ ------ ---- ------
Total net periodic pension
costs...................... $1,352 $1,074 $313 $ 625
====== ====== ==== ======
</TABLE>

The significant actuarial assumptions for the following tables, as of the
period-end measurement dates, are as follows:

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Domestic Pension Plan:
Discount rate............................... 7.0% 7.5%
Expected long-term rate of return on plan
assets..................................... 8.0% 8.0%
Rate of increase in future compensation lev-
els........................................ 5.0% 5.0%
International Pension Plan:
Discount rate............................... 8.0% 7.5% 7.5%
Expected long-term rate of return on plan
assets..................................... 8.5% 8.0% 8.0%
Rate of increase in future compensation lev-
els........................................ 5.5% 5.5% 5.5%
</TABLE>

F-18
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11. DEFINED BENEFIT RETIREMENT PLANS--(CONTINUED)

The change in the actuarial assumptions for fiscal 1996 and 1995 have not
had a significant effect on the funded status of the Domestic or International
Pension Plans.

At March 31, 1996, the Domestic Pension Plan and International Pension Plan
assets include cash equivalents, fixed income securities and common stock.

The funded status as of the year-end measurement dates was as follows:

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------
1996 1995 1994
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic Pension Plan:
Actuarial present value of benefit obligations:
Vested benefit obligation......................... $ 2,776 $ 968 $ 313
======= ====== ======
Accumulated benefit obligation.................... $ 3,091 $1,262 $ 408
======= ====== ======
Projected benefit obligation...................... $ 9,603 $6,566 $5,023
Plan assets at fair value......................... 3,733 58 --
------- ------ ------
Projected benefit obligation in excess of plan as-
sets............................................. 5,870 6,508 5,023
Unrecognized net loss............................. (1,179) (13) (18)
Unrecognized prior service cost................... -- -- --
Unrecognized transition asset, net................ -- -- --
------- ------ ------
Accrued pension cost.............................. $ 4,691 $6,495 $5,005
======= ====== ======
International Pension Plan:
Actuarial present value of benefit obligations:
Vested benefit obligation......................... $10,480 $3,518 $7,439
======= ====== ======
Accumulated benefit obligation.................... $10,486 $8,524 $7,442
======= ====== ======
Projected benefit obligation...................... $10,827 $9,069 $7,857
Plan assets at fair value......................... 12,032 9,546 8,966
------- ------ ------
Projected benefit obligation less than plan as-
sets............................................. (1,205) (477) (1,109)
Unrecognized net gain............................. 947 208 828
Unrecognized transition asset, net................ 258 269 281
------- ------ ------
Accrued pension cost.............................. $ -- $ -- $ --
======= ====== ======
</TABLE>

Employees in the U.K. participated in the Pilkington Superannuation Scheme
which is a defined benefit pension plan with employee and employer
contributions. The employees remained covered under this plan through March
31, 1994 and the Company contributed $0.1 million to the plan for the four
months ended March 31, 1994. Subsequent to March 31, 1994, employees in the UK
ceased to participate in the Pilkington Superannuation Scheme and are eligible
to participate in a new, defined contribution pension plan (see Note 10).

F-19
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. INCOME TAXES

The domestic and foreign components of income (loss) before taxes are as
follows:

<TABLE>
<CAPTION>
FOUR MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, NOVEMBER 30,
1996 1995 1994 1993
---------- ---------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Domestic......................... $27,158 $ 9,746 $(44,930) $ 5,683
Foreign.......................... 21,454 11,476 (22,402) 11,307
------- ------- -------- -------
$48,612 $21,222 $(67,332) $16,990
======= ======= ======== =======
</TABLE>

The components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
FOUR MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, NOVEMBER 30,
1996 1995 1994 1993
---------- ---------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal................. $ 2,912 $ 28 $ -- $2,907
State................... 844 129 -- 322
Foreign................. 8,210 7,896 (1,377) 3,555
Deferred:
Federal................. 7,020 5,695 (573) (957)
State................... 2,161 1,675 -- --
Foreign................. 1,134 (4,795) (4,244) 6
Valuation allowance ad-
justment............... (8,658) (3,979) -- --
------- ------ ------- ------
$13,623 $6,649 $(6,194) $5,833
======= ====== ======= ======
</TABLE>

A reconciliation between income tax provisions computed at the U.S. federal
statutory rate and the effective rate reflected in the statements of
operations is as follows:

<TABLE>
<CAPTION>
FOUR MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, NOVEMBER 30,
1996 1995 1994 1993
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Provision (benefit) at statutory
rate........................... 35.0% 34.0% (34.0)% 34.0%
State tax provision............. 3.6 2.7 -- .6
Valuation allowance............. (12.7) 4.5 28.6 --
Income (loss) of foreign subsid-
iaries tax provision or benefit
at differing statutory rates... 9.3 (4.6) (3.8) (.3)
Tax benefit from NOL utiliza-
tion........................... (5.1) -- -- --
Other........................... (1.5) 1.8 -- --
----- ---- ------ ----
28.6% 38.4% (9.2)% 34.3%
===== ==== ====== ====
</TABLE>

F-20
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES--(CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:

<TABLE>
<CAPTION>
MARCH 31,
----------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowances for
doubtful accounts......................................... $ 3,008 $ 3,264
Inventories, principally due to reserves................... 8,626 3,819
Property, plant and equipment, principally due to differ-
ences in depreciation..................................... 2,687 765
Accruals for employee benefits............................. 8,788 11,398
In-process research and development........................ 10,809 11,477
Other assets............................................... 4,554 8,755
Net operating losses....................................... 3,685 4,507
------- -------
Total gross deferred tax assets............................ 42,157 43,985
Less valuation allowance................................... (15,294) (25,155)
------- -------
Net deferred tax assets.................................... $26,863 $18,830
======= =======
Deferred tax liabilities:
Property, plant and equipment, principally due to differ-
ences in depreciation..................................... $ 9,264 $ 6,735
Inventories................................................ 2,252 1,818
Unremitted income of foreign subsidiaries.................. 2,400 --
Other...................................................... 4,107 1,242
------- -------
$18,023 $ 9,795
======= =======
</TABLE>
For balance sheet presentation, deferred tax assets and liabilities have
been netted for each separate tax jurisdiction.

The net changes in the total valuation allowance for fiscal 1996, 1995 and
1994 were $(9.9) million, $(6.8) million and $30.9 million, respectively, and
relate primarily to movements in certain foreign and U.S. net operating
losses.

For tax purposes, the Company, at March 31, 1996, utilized net operating
loss ("NOL") carryforwards for U.S. Federal income tax purposes of
approximately $7.0 million. The Company's Australian subsidiary had available,
as of March 31, 1996, NOL carryforwards for Australian tax purposes of
approximately $9.8 million which do not expire. The deferred tax assets
reflected in the Company's accounts as of March 31, 1996 before valuation
allowances reflect these NOLs.

A valuation allowance of approximately $15.3 million, comprising $9.2
million against U.S. and $6.1 million against Australian deferred tax assets
has been established for those tax assets which may not be realized. Of the
$7.0 million of valuation allowances provided in fiscal 1994 against deferred
tax assets arising from the Acquisition, $1.2 million was applied to reduce
goodwill, in fiscal 1996 and $2.8 million in fiscal 1995. The remaining
valuation allowances of $3.0 million will be applied first to reduce remaining
goodwill, and if no goodwill remains, then will reduce income tax expense.

The Company has not provided for U.S. federal income and foreign withholding
taxes on $5 million of non-U.S. subsidiaries' undistributed earnings as of
March 31, 1996 because such earnings are intended to be reinvested
indefinitely. If these earnings were distributed, foreign tax credits should
become available under

F-21
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES--(CONTINUED)

current law to reduce or eliminate the resulting U.S. income tax liability.
Where excess cash has accumulated in the company's non-U.S. subsidiaries and
it is advantageous for tax or foreign exchange reasons, subsidiary earnings
are remitted.

13. COMMITMENTS

The Company leases certain warehouse and office facilities, office equipment
and automobiles under non cancelable operating leases which expire in 1996
through 2006. The Company is responsible for taxes, insurance and maintenance
expenses related to the leased facilities. Under the terms of certain lease
agreements, the leases may be extended, at the Company's option, and certain
of the leases provide for adjustments of the minimum monthly rent.

Future minimum annual lease payments under the leases are as follows (in
thousands):

<TABLE>
<CAPTION>
PERIOD ENDING MARCH 31,
-----------------------
<S> <C>
1997............................................................. $4,185
1998............................................................. 3,391
1999............................................................. 2,461
2000............................................................. 1,359
2001............................................................. 439
Thereafter....................................................... 3,264
</TABLE>

Rent expense for fiscal 1996, fiscal 1995, the four months ended March 31,
1994, and the eight months ended November 30, 1993 was $5.4 million, $5.1
million, $1.0 million and $3.6 million, respectively.

14. CONTINGENCIES

The Company is subject to environmental laws and regulations concerning
emissions to the air, discharges to surface and subsurface waters and the
generation, handling, storage, transportation, treatment and disposal of waste
materials.

The Company is currently participating in a remediation program of one of
its manufacturing facilities under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and the Superfund Amendments and
Reauthorization Act of 1986. The Company estimates that, based on an
independent feasibility report prepared in accordance with an EPA 1991 Consent
Order, additional clean-up costs of approximately $100,000 per annum for up to
17 years may be incurred. Under the current remediation program, the EPA has
established that re-evaluation of the program be performed every five years,
with the next scheduled review by the EPA being in fiscal 1998.

The Company is also involved in other investigations of environmental
contamination at several U.S. sites. Some clean-up activities have been
conducted and investigations are continuing to determine future remedial
requirements, if any.

Under the terms of the sale agreement with Pilkington, Pilkington has
indemnified the Company with regard to expenditures subsequent to the
Acquisition for certain environmental matters relating to circumstances
existing at the time of the Acquisition. Under the terms of the
indemnification, the Company is responsible for the first $1 million spent on
such environmental matters, Pilkington and the Company share equally the cost
of any further expenditures between $1 million and $5 million, and Pilkington
retains full liability for any expenditures in excess of $5 million.

F-22
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

14. CONTINGENCIES--(CONTINUED)

As of March 31, 1996 and March 31, 1995, the Company has provided for
environmental remediation costs in the amount of $2.5 million and $2.7
million, respectively, which is included in the balance sheet under other
long-term liabilities.

In the ordinary course of business, various legal actions and claims pending
have been filed against the Company. While it is reasonably possible that such
contingencies may result in a cost greater than that provided for in the
financial statements, it is the opinion of management that the ultimate
liability, if any, with respect to these matters, will not materially affect
the consolidated operations or financial position of the Company.

15. SIGNIFICANT RELATED PARTY TRANSACTIONS

Notes Payable to Pilkington and Affiliates:

Interest expense on notes payable to Pilkington for the eight months ended
November 30, 1993, was $1.5 million.

Payables to Affiliated Companies and other Activities:

Pilkington charged the Predecessor Business for services and shared costs
relating to treasury functions, tax return preparations, internal audit
service and risk management services. For the eight months ended November 30,
1993 the Predecessor Business expensed $0.4 million relating to Pilkington
services and shared costs. In addition, Pilkington facilitated the Predecessor
Business purchases of certain outside services, such as legal, worker's
compensation and other insurance premiums.

Arrangements with AEA Investors Inc.:

In connection with the Acquisition and in consideration of services
performed by AEA Investors Inc. ("AEA"), in arranging, structuring, and
negotiating the terms of the Acquisition and the related financing
transactions, the Company paid AEA a transaction fee of $5 million.

Prior to the IPO, AEA and the Company were parties to an agreement pursuant
to which AEA provided management, consulting and financial services to the
Company. In consideration for such services, the Company paid AEA a management
fee for the first nine months of fiscal 1995 and the four months ended March
31, 1994 of $750,000 and $250,000, respectively. Subsequent to the IPO the
agreement was terminated and the Company paid AEA a fee of $3.0 million in
connection therewith.

F-23
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

16. WORLDWIDE OPERATIONS

The Company operates in the ophthalmic industry in the design and
manufacture of eyeglass lenses.

A summary of information about the Company's geographic areas is as follows
(in thousands):

<TABLE>
<CAPTION>
NORTH REST OF
AMERICA EUROPE WORLD ELIMINATIONS TOTAL
-------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
SOLA INTERNATIONAL INC.
YEAR ENDED MARCH 31, 1996
Revenue:
External............... $190,785 $106,726 $ 90,198 $ -- $387,709
Internal............... 12,414 57,300 38,950 (108,664) --
Operating income (loss).. 35,318 16,645 9,612 (822) 60,753
Identifiable assets...... 204,733 115,205 105,096 (8,185) 416,849
YEAR ENDED MARCH 31, 1995
Revenue:
External............... $169,316 $100,045 $ 76,270 $ -- $345,631
Internal............... 13,357 52,524 37,180 (103,061) --
Operating income (loss).. 18,391 12,443 9,010 (100) 39,744
Identifiable assets...... 192,425 106,916 90,281 (6,165) 383,457
FOUR MONTHS ENDED MARCH
31, 1994
Revenue:
External............... $ 54,880 $ 27,643 $ 23,507 $ -- $106,030
Internal............... 2,759 14,889 9,226 (26,874) --
Operating income (loss).. (41,033) (5,774) (11,778) (2,420) (61,005)
Identifiable assets...... 187,083 96,624 80,897 (4,155) 360,449
PREDECESSOR BUSINESS
EIGHT MONTHS ENDED NOVEM-
BER 30, 1993
Revenue:
External............... $100,230 $ 56,095 $ 43,700 $ -- $200,025
Internal............... 5,265 28,874 24,044 (58,183) --
Operating income......... 10,222 3,554 6,070 693 20,539
</TABLE>

Internal sales represent intercompany sales between regions at a mark-up
from cost, the elimination of any profit arising from such sales is reflected
in eliminations in determining operating income (loss).

Included in the operating loss for the four months ended March 31, 1994 for
North America, Europe, and Rest of World were charges of $15.1 million, $8.6
million and $6.3 million, respectively, representing the reversal of write-up
of inventories to fair value at the Acquisition date, and amortization of
goodwill. In addition, write-off of in-process research and development
expenses in North America and Australia (included in Rest of World) amounted
to $32 million and $8 million, respectively.

For fiscal 1996 and 1995, the four months ended March 31, 1994 and the eight
months ended November 30, 1993 the corporate headquarters costs of $7.7
million, $11.7 million, $0.8 million and $4.2 million, respectively, are
included in the North American geographic area. Included in fiscal 1995
corporate headquarters costs are the AEA management fees and management
agreement termination fee totaling $3.9 million.

F-24
<PAGE>

SOLA INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. SUPPLEMENTARY CASH FLOW DATA (IN THOUSANDS)

<TABLE>
<CAPTION>
SOLA INTERNATIONAL INC. PREDECESSOR BUSINESS
--------------------------------- --------------------
FOUR MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, NOVEMBER 30,
1996 1995 1994 1993
---------- ---------- ----------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Supplemental disclosures
of cash flow informa-
tion:
Interest paid......... $11,220 $19,264 $2,389 $3,211
======= ======= ====== ======
Taxes paid............ $11,486 $ 6,233 $ 439 $4,223
======= ======= ====== ======
Supplemental disclosures
of noncash investing
and
financing activities:
Capital expenditures
accrued but not
paid................. $ 1,646 $ 2,541 $2,236 $ 930
======= ======= ====== ======
Dividends previously
declared subsequently
cancelled............ $ -- $ -- $ -- $3,304
======= ======= ====== ======
</TABLE>

18. SUBSEQUENT EVENTS (UNAUDITED)

In June 1996 the Company acquired substantially all of the worldwide
ophthalmic business ("AO") of American Optical Corporation (the "AO
Purchase"). The purchase price was approximately $107.0 million, excluding
acquisition costs, and assumption of certain debt and liabilities, subject to
adjustment for certain financial conditions as of closing. The AO Purchase
will be accounted for under the purchase method of accounting. AO's worldwide
ophthalmic business recorded net sales and operating income, after allocated
corporate expenses, of approximately $85.7 million and $11.9 million,
respectively, for its fiscal year ended March 31, 1996.

Simultaneous with the closing of the AO Acquisition, the Company entered
into a new bank credit agreement (the "New Credit Agreement"), replacing its
existing credit agreement. The New Credit Agreement is divided into three
tranches which consist of: a five-year term loan of $30 million, a renewable
three-year foreign currency revolving facility of $30 million, and a further
five-year U.S. dollar revolver of $120 million. The New Credit Agreement is
unsecured. The Company believes that the New Credit Agreement will lower the
effective interest rate on its borrowings and provide it with greater
operating flexibility.

In May 1996 the Company announced that it had entered into a definitive
merger agreement which provides for the acquisition by the Company of Neolens,
Inc. ("Neolens"), a Florida corporation that manufactures polycarbonate
eyeglass lenses and has been a supplier to the Company. Pursuant to the merger
agreement the Company has commenced a cash tender offer for all outstanding
shares of Neolens Common Stock, Series A Preferred Stock and Series B
Preferred Stock. The aggregate purchase price will be approximately $16.0
million, including the assumption of Neolens debt. Although there can be no
assurance of consummation, the Company expects to consummate the tender offer
by August 1996.

F-25
<PAGE>

SOLA INTERNATIONAL INC.

QUARTERLY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
QUARTER QUARTER QUARTER QUARTER
ENDED ENDED ENDED ENDED
JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1995 1995 1995 1996
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net sales................................ $95,922 $95,866 $91,329 $104,592
Gross profit............................. 45,740 45,404 43,557 51,017
Operating income......................... 13,668 15,565 11,461 20,059
Income before extraordinary item......... 7,355 9,000 5,958 12,275
Net income............................... 6,443 9,000 5,958 12,275
Earnings per share:
Income before extraordinary item....... 0.32 0.39 0.26 0.53
Extraordinary item..................... (0.04) -- -- --
Net income per share..................... 0.28 0.39 0.26 0.53
<CAPTION>
QUARTER QUARTER QUARTER QUARTER
ENDED ENDED ENDED ENDED
JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1994 1994 1994 1995
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net sales................................ $83,741 $84,420 $82,854 $ 94,616
Gross profit............................. 35,900 38,931 39,374 45,800
Operating income......................... 8,149 10,511 7,631 13,453
Income before extraordinary item......... 2,373 4,347 1,332 5,588
Net income(1)............................ 2,373 4,347 1,332 1,673
Earnings per share:
Income before extraordinary item....... 0.14 0.25 0.08 0.32
Extraordinary item..................... -- -- -- (0.22)
Net income per share..................... 0.14 0.25 0.08 0.10
</TABLE>
- --------
(1) The quarter ended March 31, 1995 net income reflects an effective tax rate
of 36% compared to the previous three quarters reflecting an effective tax
rate of 28%. The increase in effective tax rate for the quarter ended March
31, 1995 is caused by non-recurring charges associated with the IPO.

F-26
<PAGE>

[LOGO] SOLA