<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Sola International Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
SOLA INTERNATIONAL INC.
----------------
PROXY STATEMENT IN CONNECTION WITH
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, AUGUST 16, 1996
----------------
This Proxy Statement is furnished to stockholders of Sola International
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company (the "Board of
Directors") of proxies to be voted at the Annual Meeting of Stockholders of
the Company to be held at the Quadrus Conference Center, 2400 Sand Hill Road,
Menlo Park, California 94025, on Friday, August 16, 1996, at 10:00 a.m. (local
time), and any adjournments thereof (the "Annual Meeting"). Action will be
taken at the Annual Meeting to elect Directors of the Company and to ratify
the appointment of the Company's auditors.
Holders of record of outstanding shares of the Company's Common Stock, $.01
par value (the "Common Stock"), at the close of business on June 28, 1996, are
entitled to vote at the Annual Meeting or any adjournments thereof. Voting
rights are vested exclusively in the holders of the Common Stock. Each share
of Common Stock outstanding on the record date will be entitled to one vote on
all matters to be voted upon. Shares held as treasury shares by the Company
are not entitled to vote. As of the close of business on the record date, June
28, 1996, 21,809,528 shares of Common Stock were outstanding. This Proxy
Statement, the accompanying form of proxy and the Company's annual report to
stockholders for the fiscal year ended March 31, 1996 are being mailed on or
about July 12, 1996 to each stockholder entitled to vote at the meeting.
VOTING AND REVOCATION OF PROXIES
When proxies in the enclosed form are returned properly executed, the shares
represented thereby will be voted at the meeting and, where instructions have
been given by the stockholder, will be voted in accordance therewith. If the
stockholder does not otherwise specify, the stockholder's shares of Common
Stock will be voted for the election of the nominees set forth in the Proxy
Statement as directors of the Company, for the amendments to the Sola
International Inc. Stock Option Plan (the "International Stock Option Plan")
which permit non-employee directors of the Company to elect to receive all or
a portion of their annual retainer fee in the form of options to acquire
shares of Common Stock and which increase the number of shares reserved for
issuance pursuant to the exercise of stock options issued thereunder by
500,000, and for the appointment of Ernst & Young LLP as the Company's
independent auditor for the fiscal year ending March 31, 1997. If any other
matter is properly presented for action at the meeting, the persons named in
the enclosed proxy will vote on such matter in their discretion.
The holders of a majority in number of the total outstanding shares of
Common Stock entitled to vote at the meeting, present in person or represented
by proxy, constitute a quorum. Assuming a quorum is present, the affirmative
vote of a plurality of the votes cast at the meeting and entitled to vote in
the election will be required for the election of directors and the
affirmative vote of a majority of the votes cast at the meeting and entitled
to vote thereon will be required to act on all other matters to come before
the Annual Meeting, including the amendments to the International Stock Option
Plan and the appointment of the independent auditor. Pursuant to the law of
the State of Delaware, where the Company is incorporated, as well as the
provisions of the Company's Certificate of Incorporation and By-Laws,
abstentions, but not broker non-votes, will be counted as votes cast against
the proposal being considered. Votes will be counted by employees of the First
National Bank of Boston, the Company's independent transfer agent and
registrar.
Any proxy may be revoked by the stockholder, either by attending the meeting
and voting in person or by submitting a revocation in writing to the Company
(including a subsequent signed proxy) at any time prior to the closing of the
polls at the meeting.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors currently consists of seven directors. Seven
directors are to be elected at the Annual Meeting to hold office as directors
until the 1997 Annual Meeting of Stockholders or until their respective
successors have been duly elected and qualified. Unless otherwise directed,
proxies in the accompanying form will be voted FOR the nominees listed below.
All nominees have consented to be named and to serve if elected. If any one or
more of the nominees is unable to serve or for good cause will not serve,
proxies will be voted for the substitute nominee or nominees, if any, proposed
by the Board of Directors. The Board has no knowledge that any nominee will or
may be unable to serve or will or may withdraw from nomination. Each nominee
will be elected if he receives the affirmative vote of a plurality of the
votes cast by holders of shares of Common Stock at the Annual Meeting.
The Board of Directors proposes the election of the following directors of
the Company for a term of one year. All of the nominees are presently
directors of the Company. Set forth below for each nominee is his name, age,
the year in which he became a director of the Company, all positions and
offices with the Company which he holds, if any, his principal occupations
during at least the last five years and any additional directorships in
publicly-held companies or registered investment companies. References to the
Company include the Company and its predecessors.
IRVING S. SHAPIRO, 79, has been Chairman of the Board of the Company since
December 1994. Mr. Shapiro is Of Counsel to Skadden, Arps, Slate, Meagher &
Flom. He was Chairman and Chief Executive Officer of E.I. du Pont de Nemours
and Company from 1974 to 1981. He has been Chairman of the Board of the Howard
Hughes Medical Institute since 1990 and is a director of J.P. Morgan Florida
Federal Savings Bank, Pediatric Services of America Inc. and Gliatech, Inc.
JOHN E. HEINE, 52, has served as Chief Executive Officer and President of
the Company since November 1981, has been a director of the Company since
September 1993 and served as Chairman of the Board of the Company from
September 1993 to December 1994. Mr. Heine joined the Company in 1981 as
Managing Director of Sola International Holdings, Ltd. and previously held
general management positions with Southern Farmers Holdings, Ltd. in Adelaide
and J.J. Heinz in Melbourne, Australia.
DOUGLAS D. DANFORTH, 73, has been a director of the Company since December
1994. He was Chairman and Chief Executive Officer of Westinghouse Corporation
from 1983 to 1987. He is a director of Travelers, Inc.
HAMISH MAXWELL, 69, has been a director of the Company since December 1994.
Mr. Maxwell was Chairman of the Executive Committee of the Board of Directors
of Philip Morris Companies Inc. from September 1991 through April 1995 and was
Chairman and Chief Executive Officer of such company from 1984 to 1991. He is
a director of Bankers Trust Company, Bankers Trust New York Corporation and
The News Corporation Limited.
RUBEN F. METTLER, 72, has been a director of the Company since December
1994. He was Chairman and Chief Executive Officer of TRW Inc. from 1977 to
1988.
LAURENCE ZA YU MOH, 70, has been a director of the Company since December
1994. He is Chairman Emeritus of Universal Furniture Limited, which he founded
in 1959. Mr. Moh is also a director of Stimsonite Corp.
JACKSON L. SCHULTZ, 70, has been a director of the Company since November
1995. Mr. Schultz joined Wells Fargo Bank in 1970, retiring in 1990 as Senior
Vice President responsible for Public and Governmental Affairs. Mr. Schultz
remains a consultant to the bank. Mr. Schultz is also a director of Cooper
Development Company and The San Francisco Company.
2
<PAGE>
INFORMATION CONCERNING THE BOARD
OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company directs the management of the business
and affairs of the Company, as provided by Delaware law, and conducts its
business through meetings of the Board and two standing committees: Audit and
Compensation. In addition, from time to time, special committees may be
established under the direction of the Board when necessary to address
specific issues. The Company has no nominating or similar committee.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held seven meetings during fiscal
1996. Each current director, other than Laurence Za Yu Moh, attended 75% or
more of the aggregate of (i) meetings of the Board held during the period for
which he served as a director and (ii) meetings of all committees held during
the period for which he served on those committees.
The Compensation Committee is responsible for executive compensation,
including setting the Company's compensation philosophy and policies,
recommending to the Board of Directors the compensation to be paid to the
Chief Executive Officer and determining the compensation for all other
executive officers. The Compensation Committee is also responsible for
administering the Company's executive compensation plans and programs,
including the Sola Investors Inc. Stock Option Plan, the Sola International
Inc. Stock Option Plan and the Management Incentive Plan. The Committee
consists of Hamish Maxwell (Chairman), Ruben F. Mettler, Laurence Za Yu Moh
and Irving S. Shapiro (ex officio). Messrs. Maxwell, Mettler, Moh and Shapiro
are "disinterested persons" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934. The Committee held two meetings during fiscal
1996.
The Audit Committee's principal functions are to review the scope of the
annual audit of the Company by its independent auditors, review the annual
financial statements of the Company and the related audit report of the
Company as prepared by the independent auditors, recommend the selection of
independent auditors each year and review the Company's internal controls and
accounting policies and procedures. The Audit Committee reports its findings
and recommendations to the Board of Directors for appropriate action. The
Audit Committee is currently composed of two directors, Douglas D. Danforth
and Irving S. Shapiro (ex officio), who are not executive officers or
employees of the Company or any of its subsidiaries. The Company's Audit
Committee held two meetings during fiscal 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Decisions with respect to compensation are made by the Compensation
Committee of the Company. The members of the Compensation Committee as of
March 31, 1996 were Hamish Maxwell, Ruben F. Mettler, Laurence Za Yu Moh and
Irving S. Shapiro (ex officio). Vincent A. Mai and Charles F. Baird, Jr.
served as members of the Compensation Committee during part of fiscal 1996 and
resigned as directors of the Company during fiscal 1996.
DIRECTOR COMPENSATION
Directors who are full time employees of the Company receive no compensation
for serving on the Board of Directors or its committees. During fiscal 1996,
directors received an annual fee of $5,000, except for the Chairman who
received an annual fee of $25,000, and $500 for each Board meeting attended.
During fiscal 1997, directors will receive an annual fee of $20,000, except
for the Chairman who will receive an annual fee of $40,000, and $500 for each
Board meeting attended. In April and July 1996 the Board of Directors amended
the International Stock Option Plan, subject to stockholder approval, to
permit non-employee directors to receive all or a portion of their annual
retainer fee in the form of options to acquire shares of Common Stock.
Directors are reimbursed for traveling costs and other out-of-pocket expenses
incurred in attending meetings. Directors who serve on the Audit Committee or
the Compensation Committee receive no additional compensation for committee
meetings held on the same date as a Board meeting and received $500 in fiscal
1996 (and will receive $500 in fiscal 1997) for each committee meeting held on
a date on which there is or was no Board meeting.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock by (a) each person who is known to the
Company to be the beneficial owner of more than five percent of the Company's
Common Stock (based on a review by the Company of filings with the Securities
and Exchange Commission), (b) each director of the Company, (c) each of the
executive officers named in the Summary Compensation Table and (d) all
directors and executive officers of the Company as a group. 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>
NUMBER OF SHARES PERCENTAGE
NAME BENEFICIALLY OWNED OF CLASS(1)
- ---- ------------------ ----------
<S> <C> <C>
5% STOCKHOLDERS:
Putnam Investment Management, Inc.
Eleventh Floor, One Post Office Square
Boston, MA 02109............................... 1,405,000 5.8
John W. Bristol & Co.
41st Floor, 233 Broadway
New York, N.Y. 10279........................... 1,301,000 5.4
DIRECTORS:
Irving S. Shapiro(2)............................ 19,211 *
Douglas D. Danforth............................. 16,819 *
John E. Heine(3)................................ 311,731 1.3
Hamish Maxwell.................................. 126,751 *
Ruben F. Mettler................................ 14,522 *
Laurence Za Yu Moh(4)........................... 128,853 *
Jackson L. Schultz.............................. 3,000 *
NAMED EXECUTIVE OFFICERS:
James H. Cox(5)................................. 100,549 *
Ian S. Gillies(6)............................... 94,012 *
Colin M. Perrott(7)............................. 80,599 *
Bernard Freiwald(8)............................. 67,724 *
All directors and executive officers as a group
(19 persons)(9)................................ 1,436,094 5.8
</TABLE>
- --------
* The percentage of shares of Common Stock beneficially owned does not exceed
one percent of the outstanding shares of Common Stock.
(1) Based on 24,129,528 shares of Common Stock outstanding on July 9, 1996.
Calculations of percentage of beneficial ownership assume the exercise by
only the respective named stockholder of all options for the purchase of
Common Stock held by such stockholder which are exercisable within 60 days
of June 28, 1996.
(2) Mr. Shapiro's shares are held by a trust of which Mr. Shapiro is both
trustee and sole beneficiary. Excludes shares owned by the Howard Hughes
Medical Institute, for which Mr. Shapiro serves as Chairman of the Board and
for which shares Mr. Shapiro disclaims beneficial ownership.
(3) Includes 238,356 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from June 28, 1996 and 73,375 shares of
Common Stock held by a trust for which Mr. Heine and members of his family
are trustees and beneficiaries. Mr. Heine is also a Named Executive Officer.
(4) All shares are held in the name of Zayucel Ltd., for which shares Mr. Moh
claims beneficial ownership.
(5) Includes 67,362 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from June 28, 1996.
(6) Includes 67,362 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from June 28, 1996.
(7) Includes 51,819 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from June 28, 1996.
(8) Includes 51,819 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from June 28, 1996.
(9) Excludes shares held by persons who served as a director of the Company
during part of fiscal 1996, and subsequently resigned as a director.
4
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth in summary form all compensation for all
services rendered in all capacities to the Company paid or accrued during the
year ended March 31, 1996 ("fiscal 1996"), the year ended March 31, 1995
("fiscal 1995") and the year ended March 31, 1994 ("fiscal 1994"), to the
Chief Executive Officer of the Company and to the four other most highly
compensated executive officers of the Company whose total annual salary and
bonus exceeds $100,000 (collectively, with the Chief Executive Officer, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
SECURITIES
UNDERLYING
NAME AND OTHER ANNUAL OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) COMPENSATION (2) SARS(#) COMPENSATION
- ------------------------ ---- -------- --------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John E. Heine........... 1996 $430,048 $432,427 $103,592 -- -- (3)
President and Chief 1995 425,240 704,521 148,463 -- --
Executive Officer 1994 525,240 218,573 149,264 397,261 --
James H. Cox............ 1996 $261,725 $207,368 $ 4,192 -- $ 4,072(4)
Vice President, 1995 257,824 293,017 5,749 -- 9,283
Assistant Secretary and 1994 252,832 185,724 7,104 112,270 4,528
Assistant Treasurer;
President, Sola Optical
USA
Colin M. Perrott........ 1996 $235,870 $168,961 $ 93,756 -- -- (3)
Vice President, 1995 232,601 275,260 165,916 -- --
Technology and 1994 253,496 92,141 180,196 86,366 --
Development
Ian S. Gillies.......... 1996 $213,624 $152,075 $ 96,290 -- $ 4,620(4)
Vice President, Fi- 1995 209,355 247,751 98,470 -- 4,711
nance, Chief Financial 1994 225,710 82,139 125,524 112,270 118,982
Officer and Treasurer
Bernard Freiwald........ 1996 $230,000 $167,072 $ 21,599 -- $ 4,620(4)
Vice President, 1995 224,894 272,182 37,925 -- 26,772
Business Development 1994 195,425 49,165 50,727 86,366 4,937
</TABLE>
- --------
(1) The amounts indicated for fiscal 1994 do not include bonuses paid by
Pilkington plc ("Pilkington") to certain Named Executive Officers of the
Company for services rendered to Pilkington in connection with the
acquisition by the Company of the Sola business unit of Pilkington on
December 1, 1993 (the "Acquisition").
(2) The amounts indicated for Messrs. Heine, Perrott, Gillies and Freiwald
include an expatriate accommodation allowance and benefits package of
$116,008, $109,843, $81,462 and $39,648, respectively, for fiscal 1994;
$117,509, $112,584, $73,534 and $17,005, respectively, for fiscal 1995;
and $78,445, $67,277, $68,281 and $2,734, respectively, for fiscal 1996.
(3) In lieu of participation in the Sola Optical Australia Superannuation
Plan, Messrs. Heine and Perrott earn equivalent pensions under separate
Expatriate Superannuation Agreements with the Company. See "--Pension
Plan".
(4) Messrs. Cox, Gillies and Freiwald deferred portions of their annual salary
pursuant to the Sola Optical USA 401(k) Savings Plan. The amounts shown
represent cash contributions made by the Company to the plan for the
account of such Named Executive Officers for fiscal 1996 in the amounts of
$4,072, $4,620 and $4,620, respectively.
5
<PAGE>
EXISTING OPTION PLAN
Sola Investors Inc., the Company's former parent, 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 such terms not inconsistent with the Existing Option Plan as the
committee appointed to administer the Existing Option Plan deemed necessary or
desirable (the "Existing Option Agreements"). Pursuant to the Existing Option
Plan, unless otherwise set forth in an Existing Option Agreement, 20% of the
Existing Options granted to an Optionee vested on the date of grant, with an
additional 20% vesting on each successive one-year anniversary of the date of
grant. Existing 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 Sola Investors Inc. (or its successor),
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. The consummation of the merger
of Sola Investors Inc. into the Company in February 1995 (the "Merger") did
not constitute a Termination Event. All non-vested Existing Options of an
Optionee lapse upon such Optionee's termination of employment for any reason.
An Optionee's vested Existing 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.
Upon consummation of the Merger, 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. Existing Options to
acquire approximately 1,645,219 shares of the Company's Common Stock (as
adjusted to reflect consummation of the Merger) were outstanding under the
Existing Option Plan as of the date of the Merger. The Existing Option Plan
was amended to provide that, effective upon the consummation of the Merger, no
new options will be granted thereunder.
OPTION EXERCISE TABLE
The following table sets forth the number of shares covered by both
exercisable and unexercisable Existing Options granted to the Named Executive
Officers under the Existing Option Plan as of March 31, 1996. No options were
granted to the Named Executive Officers under the Sola International Inc.
Stock Option Plan as of March 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY OPTIONS/
UNEXERCISED OPTIONS/SARS AT SARS AT FISCAL YEAR-
FISCAL YEAR-END END(1)
---------------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
John E. Heine........... 238,356 158,905 $5,103,202 $3,402,156
James H. Cox............ 67,362 44,908 1,442,220 961,480
Colin M. Perrott........ 51,819 34,546 1,109,445 739,630
Ian S. Gillies.......... 67,362 44,908 1,442,220 961,480
Bernard Freiwald........ 51,819 34,546 1,109,445 739,630
</TABLE>
- --------
(1) Values for "in-the-money" Existing Options represent the positive spread
between $9.71, the exercise price of outstanding Existing Options, and the
closing price of $31.12 per share of Common Stock of the Company at March
29, 1996, as reported on the New York Stock Exchange.
6
<PAGE>
EMPLOYMENT AGREEMENTS
The Company and each of Messrs. Heine, Cox, Perrott and Gillies is party to
an employment agreement, each dated as of February 26, 1993. Each agreement
has an initial term of three years and is automatically extended for an
indefinite term unless terminated upon prior notice by either party. If the
Company elects not to extend the term of an agreement or to terminate an
agreement subsequent to the initial term other than for Cause (i.e., a
material breach by the officer of the terms of his employment agreement,
failure to perform his duties as an officer of the Company or commission of
fraud or willful misconduct), the Company is required to give 18 months'
notice in the case of Mr. Heine, and 12 months' notice in the case of Messrs.
Cox, Perrott and Gillies. Each agreement provides for an annual base salary at
a rate not less than the rate in effect on the date of the agreement. Such
salaries are subject to discretionary increases in accordance with the
Company's normal review procedures and policies. The agreements also provide
for participation in various other plans and programs provided by the Company.
In the event of a transfer of all or substantially all of the stock or assets
of the Company in a privately negotiated transaction, the Company will assign
its obligations under the employment agreements to the transferee. For
purposes of assignment and transfer provisions in the agreements, a sale of
stock of the Company as part of a public offering will not be treated as
pursuant to a privately negotiated transaction.
Each of the agreements provides that the Company has no further obligations
under such agreement (other than for salary through the officer's termination
date) in the event of an officer's termination by the Company for Cause, by
the officer for other than Good Reason (i.e., diminution of the officer's
responsibilities within the Company) or as a result of the officer's death or
disability. If an officer is terminated by the Company for reason other than
Cause or if the officer terminates his employment for Good Reason, the Company
is required to continue to pay the salary of such officer until the later of
the expiration of (i) the original term of the agreement or (ii) the 18-month
period from the date of termination in the case of Mr. Heine and the 12-month
period from the date of termination in the case of Messrs. Cox, Perrott and
Gillies.
The Company and Mr. Freiwald entered into a letter agreement (the
"Agreement") as of June 7, 1994 with respect to the terms and conditions of
Mr. Freiwald's appointment by the Company to the position of Vice President,
Business Development, which appointment commenced June 1, 1994. The Agreement
provides that Mr. Freiwald will be employed by the Company on a full-time
basis with a provision to permit employment on a part-time basis at a reduced
salary at a to be agreed upon date. On April 1, 1996 Mr. Freiwald moved to a
part-time basis under the terms of this Agreement. Pursuant to the Agreement,
while employed by the Company on a full-time or part-time basis, Mr. Freiwald
is eligible to continue to participate in various employee benefit plans and
programs of the Company and is entitled to reimbursement of certain costs
incurred in connection with his relocation to California.
Under the Agreement, in the event the Company terminates Mr. Freiwald's
employment for any reason other than cause while he is employed on a full-time
or part-time basis, he will be paid his full-time salary at the rate in effect
on the date of his termination, for a period of 18 months from his termination
date.
PENSION PLAN
Prior to the Acquisition, Mr. Cox and Mr. Freiwald were participants in the
Pilkington Visioncare Pension Plan. In connection with the Acquisition, the
Company implemented the Sola Optical Pension Plan, which is currently
intended, together with the Pilkington Visioncare Pension Plan, to provide
substantially the same benefit that would have been payable had Mr. Cox and
Mr. Freiwald continued active participation under the Pilkington Visioncare
Pension Plan, as it existed on December 1, 1993, until retirement. To that
end, retirement benefits under the basic formula of the Sola Optical Pension
Plan currently are substantially identical to the Pilkington Visioncare
Pension Plan for a given level of compensation and service. Messrs. Heine and
Perrott do not participate in the Sola Optical Pension Plan. In lieu of their
participation in the Sola Optical Australia Superannuation Plan, Messrs. Heine
and Perrott earn equivalent pensions under separate Expatriate Superannuation
Agreements with the Company. Under those agreements, the Company will be
required to make a lump sum payment for the benefit of each of Messrs. Heine
and Perrott upon their termination of service or
7
<PAGE>
retirement from the Company based on the benefits they would have accrued
under the Sola Optical Superannuation Plan had they continued their
participation therein. Payments under the Sola Optical Australia plan
generally are based on years of service and final average compensation. The
estimated lump sum benefits for the benefit of Messrs. Heine and Perrott upon
normal retirement from the Company at age 65 are Australian $2,328,000 and
Australian $1,409,000, respectively (U.S.$1,822,000 and U.S.$1,103,000, based
on a conversion rate of 1.278 Australian $ to the U.S.$). Mr. Gillies did not
participate in the Pilkington Visioncare Pension Plan; however, he does
participate in the Sola Optical Pension Plan.
The following table shows estimated annual benefits payable upon retirement
to Messrs. Cox, Gillies and Freiwald under the Sola Optical Pension Plan in
combination (to the extent applicable) with the Pilkington Visioncare Pension
Plan. The Sola Optical Pension Plan will provide the amount of the benefit in
excess of a portion of the amount accrued under the Pilkington Visioncare
Pension Plan as of December 1, 1993; assuming retirement at age 65, the amount
of annual benefit payable by the Pilkington Visioncare Pension Plan to Mr. Cox
and Mr. Freiwald which will be offset from the Sola Optical Pension Plan will
be $16,929.48 and $33,787.08, respectively. Assets of the Pilkington
Visioncare Pension Plan were not transferred to the Company from Pilkington in
connection with the sale of the Company from Pilkington and the Company has no
obligation under the Pilkington Visioncare Pension Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000.............................. $26,850 $35,801 $44,751 $53,701 $62,651
150,000.............................. 32,573 43,431 54,288 65,146 76,003
175,000.............................. 32,573 43,431 54,288 65,146 76,003
200,000.............................. 32,573 43,431 54,288 65,146 76,003
225,000.............................. 32,573 43,431 54,288 65,146 76,003
250,000.............................. 32,573 43,431 54,288 65,146 76,003
300,000.............................. 32,573 43,431 54,288 65,146 76,003
350,000.............................. 32,573 43,431 54,288 65,146 76,003
400,000.............................. 32,573 43,431 54,288 65,146 76,003
450,000.............................. 32,573 43,431 54,288 65,146 76,003
500,000.............................. 32,573 43,431 54,288 65,146 76,003
</TABLE>
The years of credited service as of March 31, 1996 for Messrs. Cox, Gillies
and Freiwald are 10.25, 2.33 and 18.25, respectively.
Benefits under the Sola Optical Pension Plan are not offset by Social
Security benefits. The amounts shown are based upon certain assumptions,
including retirement of the employee at exact age 65 on March 31, 1996 and
payment of the benefit under the basic form of the Sola Optical Pension Plan,
a single life annuity for the life of the participant. The amounts will change
if the payment is made under any other form permitted by the Sola Optical
Pension Plan, or if an employee's retirement occurs after March 31, 1996,
since the Social Security Wage Base of such an employee (one of the factors
used in computing the annual retirement benefits) will reflect higher Social
Security tax bases for years after 1996. The Sola Optical Pension Plan
provides a higher level of benefits for the portion of compensation above the
compensation levels on which Social Security benefits are based.
The remuneration levels shown represent the five year average of annual
compensation covered by the Sola Optical Pension Plan as of March 31, 1996.
Compensation covered by the Sola Optical Pension Plan includes regular base
salary, hourly wages, shift differentials, overtime, vacation and sick leave
pay, commissions, sales bonus, amounts deferred under any tax qualified plan
of the Company and amounts paid pursuant to management bonus plans or other
formally adopted incentive compensation plans. The current compensation
covered by the Sola Optical Pension Plan for Messrs. Cox, Gillies and Freiwald
differs substantially (by more than 10%) from
8
<PAGE>
that set forth in the Summary Compensation Table under the aggregate of the
"Salary" and "Bonus" columns because the amount of compensation which may be
covered under a tax qualified pension plan is limited by the Internal Revenue
Code.
The pension amounts shown for remuneration in excess of the compensation cap
($150,000 for 1995) are based upon the compensation cap in each year, as
required by law. The IRC Section 415 defined limit was $120,000 for 1995, but
it did not provide any further limitation on the amounts calculated.
COMPENSATION COMMITTEE REPORT ON
COMPENSATION OF EXECUTIVE
OFFICERS OF THE COMPANY
The Company's Compensation Committee is responsible for executive
compensation, including setting the Company's compensation philosophy and
policies, recommending to the Board of Directors the compensation to be paid
to the Chief Executive Officer and determining the compensation for the other
executive officers. The Compensation Committee is also responsible for
administering the Company's executive compensation plans and programs. The
Compensation Committee reviews the Company's executive compensation program on
at least an annual basis to ensure that the program continues to meet the
goals of its compensation policy.
COMPENSATION POLICY
The Compensation Committee has designed the Company's executive compensation
program (i) to attract qualified executive officers from a global pool of
talent, (ii) to reward, motivate and retain the Company's executive officers
and (iii) to align the interests of its executive officers with those of the
Company's stockholders by linking the executives' annual cash and long-term
incentive compensation to Company performance and by encouraging the
executives to purchase equity in the Company.
The Company's compensation program consists of three basic components: base
salary; annual cash incentive-based compensation; and long-term compensation
in the form of stock options. Because the Company was formerly owned by a U.K.
corporation with a generally conservative view of incentive compensation, its
executive compensation program has historically been heavily weighted toward
base salary. Since the Acquisition, the Compensation Committee's goal has been
to base a greater portion of the executives' compensation on Company
performance. Therefore, subsequent to the Acquisition, the base salary of
executives generally has increased at below market rates. At the same time,
the executives' opportunity for cash awards under the Company's incentive
compensation program has been increased and two stock option plans have been
implemented.
To further the Compensation Committee's goal of more closely aligning the
executives' interests with those of the Company's stockholders, share purchase
programs were implemented in connection with the Acquisition and the Company's
initial public offering in March 1995 to encourage the executive officers (as
well as certain other employees) to purchase equity in the Company (and its
former parent). The Company also provides perquisites to its executive
officers to maintain the Company's competitive status in attracting and
retaining executive officers in a competitive global market.
BASE SALARY
The Compensation Committee reviews base salary levels of the executive
officers annually. Adjustments, if any, are made effective January 1. Salary
ranges for each executive officer are determined by the Compensation Committee
using a two-step process. First, the level and functional responsibilities of
the position held by each executive officer is evaluated using the Hay Guide
Chart Job Evaluation Method. Second, based on such evaluation, salary ranges
for each position are determined using marketplace data provided by Hay
Management Consultants and periodically cross-checked with other market
surveys published by Mercer, Cullen-Egan-Dell
9
<PAGE>
and other compensation consultants. Historically, a mid-point base salary has
been established around the 75th percentile among a select group of companies,
with a minimum salary at 80% of the mid-point and a maximum salary at 120% of
the mid-point. An executive officer's progression through the salary range is
based upon the Compensation Committee's evaluation of the individual's job
performance.
The Company's base salary policy was originally established prior to the
Acquisition, when the Company was owned by a U.K. corporation with a generally
conservative view of incentive compensation. Accordingly, a mid-point base
salary for each position was established around the 75th percentile among a
select group of companies so that the Company could maintain its competitive
position in the U.S. market. At the time of the Acquisition, based on advice
from compensation consultants, the Compensation Committee determined that the
Company's incentive compensation arrangements were not competitive. The
Company has subsequently increased the performance based component of its
executives' compensation by increasing the executives' opportunity for a cash
award under the Company's incentive compensation plan and by introducing stock
option plans. Consequently, the Compensation Committee has determined that a
mid-point base salary at the 75th percentile is no longer necessary to
maintain the Company's competitive position in the U.S. market. As a result,
only five executive officers received increases in base salary for fiscal 1996
at a rate comparable to the group of companies to which the Compensation
Committee compares the Company. No other officers (including Mr. Heine)
received an increase in base salary for fiscal 1996 (although effective
January 1, 1996 approximately twenty percent of the annual housing allowance
paid to Messrs. Heine, Perrot and Gillies is paid in the form of base salary).
The group of companies to which the Company compares itself with respect to
base salary compensation of its executives is not the same as the group to
which it compares itself on the Performance Graph below. The comparison group
for base salary purposes is comprised of visioncare, healthcare and technology
companies whose businesses are concentrated on the west coast of the United
States. The Compensation Committee selected these companies because it
believes that they are the companies with respect to which the Company must
remain competitive in order to attract and retain qualified executives to work
at its Northern California locations. The comparison group used in the
Performance Graph is comprised of the Company's worldwide competitors.
ANNUAL CASH INCENTIVE COMPENSATION
The Compensation Committee views the annual cash incentive compensation
component of its program as a significant element in attaining its goal of
closely linking Company performance with executive compensation by providing
additional annual cash compensation based on the Company's achievement of
objective financial performance targets.
During fiscal 1995, the Compensation Committee, with the approval of the
Board of Directors, adopted a management incentive plan (the "Management
Incentive Plan") for fiscal years commencing after fiscal 1995 to provide
annual performance-based cash bonuses to officers designated by the
Compensation Committee. Under the Management Incentive Plan, each designated
officer has the opportunity to receive a performance-based cash bonus based on
the Company's achievement of certain pre-established performance targets
related to "trading profit," "trading cash flow" and the ratio of working
capital to sales, in each instance as measured on a Company-wide and/or
regional basis.
The Compensation Committee establishes target award percentages for each
participant, which is the percentage of a participant's salary that will be
awarded depending on the percentage of the performance target which is
attained. The Compensation Committee will determine whether to establish
maximum target award percentages. The maximum award which any participant may
receive in a fiscal year under the Management Incentive Plan is $1 million.
The Compensation Committee does not have discretion to increase the amount of
a participant's award payable under the plan after the establishment of the
relevant performance targets and target award percentages. Awards are paid
annually upon certification by the Compensation Committee of achievement of
the relevant performance targets at such time and in such manner as the
Compensation Committee shall determine.
10
<PAGE>
The amount of an executive's bonus for fiscal 1996 was based on the
Company's level of achievement measured against its pre-established
performance targets. A bonus equal to 33% of the target bonus amount was
payable if 95% of the performance targets for fiscal 1996 was achieved. A
bonus in excess of 100% of the target bonus amount was payable if greater than
100% of the performance targets was achieved. No bonus was payable if the
Company did not achieve at least 95% of its performance targets.
Prior to the commencement of fiscal 1996, the Compensation Committee
established target bonus awards equal to 70% of base salary for Mr. Heine and
equal to 50% of base salary for each of the other executive officers, in each
instance payable only upon attainment of 100% of the performance targets. The
Compensation Committee determined such percentages to be appropriate based on
market surveys of executive compensation, including the Executive Compensation
Reports published by Hay Management Consultants. In significant part due to
the generally modest increases in base salary received by executive officers
over the last two fiscal years, the Compensation Committee has determined to
increase the target bonus awards under the Management Incentive Plan for
fiscal 1997 from 70% to 80% of base salary for Mr. Heine and from 50% to 60%
of base salary for all other executive officers.
STOCK OPTION PLANS
The Compensation Committee believes that the stock option component of its
executive compensation program causes the executives' interests to be more
closely aligned with those of the Company's stockholders because the value of
the options is linked directly to the price of the Company's stock. The
Compensation Committee awarded stock options to the executive officers prior
to fiscal 1995 under the Company's then existing stock option plan. Such plan
has been amended to provide that no options would be granted thereunder after
February 28, 1995 and the International Stock Option Plan has been adopted by
the Company.
In light of the awards made to Mr. Heine and the other named executive
officers in December 1993 under the Company's then existing stock option plan,
the Compensation Committee determined that it was not appropriate to grant
such persons options under the International Stock Option Plan during fiscal
1996. Recognizing the importance of grants under the International Stock
Option Plan to attracting and retaining its officers, the full Board of
Directors has amended the International Stock Option Plan to provide that,
subject to approval of stockholders at the 1996 Annual Meeting, the number of
shares available for issuance thereunder will be increased by 500,000.
PERQUISITES
The Company provides a company car allowance and supplemental medical
coverage to certain named executive officers and an ex-patriate allowance for
housing and family education to each named executive officer who has relocated
to California from outside the United States. The foregoing perquisites are
provided to executive officers because the Compensation Committee believes
that they are necessary to attract and retain executive talent in a global
market. Mr. Heine, a former resident of Australia, is provided with each of
the foregoing benefits (other than the family education benefit).
SHARE PURCHASE PROGRAM
In connection with the Acquisition, the executive officers (and other
members of management) were eligible to buy shares of Sola Investors Inc., the
Company's former parent, at the fair market value of such shares on the date
of the purchase. Executive officers (and other members of management) were
offered access to a company loan program to enhance their stock purchase
capability in the short-term. All loans made to executive officers under this
program have been repaid.
11
<PAGE>
CEO COMPENSATION
The Compensation Committee determines Mr. Heine's compensation on the same
basis and under the same philosophy it uses in determining the compensation of
other executive officers. As discussed above, the goal of the Compensation
Committee is to link a significant portion of the compensation of its
executive officers, including Mr. Heine, to Company performance. The
Compensation Committee did not increase Mr. Heine's base salary for fiscal
1994, 1995 or 1996 in order to ensure that the proportion of his compensation
tied to Company performance would be increased (although as of January 1,
1996, approximately 20% of his annual housing allowance has been paid in the
form of base salary).
To further link Mr. Heine's compensation to Company performance, a
substantial amount of Mr. Heine's potential compensation for fiscal 1996 was
tied to the Company's achievement of certain objective financial targets
described above under the Management Incentive Plan. Based on the Company's
performance for fiscal 1996, Mr. Heine realized a bonus award equal to
approximately 100% of his base salary.
In deciding not to award additional stock options to its named executive
officers, including Mr. Heine, in fiscal 1996, the Compensation Committee
determined that in light of the awards made in December 1993 no awards were
appropriate.
SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a deduction to any publicly-held corporation for compensation paid
in excess of $1 million in a taxable year to its chief executive officer or
any of the four other most highly-compensated executive officers employed by
the Company on the last day of its taxable year.
The deduction limitation of Section 162(m) does not apply to compensation
payable during a transition period pursuant to plans or arrangements in effect
while a corporation is not publicly held. The Compensation Committee has
structured the Company's executive compensation program with the intent that
compensation paid to the executive officers thereunder will not be subject to
the deduction limitation of Section 162(m) during such transition period,
which for the Company expires in 1999. The Compensation Committee will
determine whether or not to administer the Company's executive compensation
program so that compensation payable after the expiration of the transition
period would be subject to the reduction limitation.
Respectfully submitted,
Hamish Maxwell, Chairman
Ruben F. Mettler
Laurence Za Yu Moh
Irving S. Shapiro
12
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on $100 invested on
February 23, 1995 in each of the Common Stock of the Company, Standard &
Poor's 500 Index and the Dow Jones World Stock Index--Medical Supplies, the
latter of which the Company finds representative given the inclusion of
certain competitors of the Company in such index. The return of the Standard &
Poor's 500 Index is calculated assuming reinvestment of dividends. The Company
has not paid any dividends. The graph covers the period from February 23,
1995, when the Company's Common Stock was first offered to the public, through
March 29, 1996. The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN OF
SOLA INTERNATIONAL INC., S&P 500 INDEX AND DOW
JONES WORLD STOCK INDEX--MEDICAL SUPPLIES
2/23/95 3/31/95 3/29/96
------- ------- -------
Sola International Inc. 100 130.30 188.64
S&P 500 Index 100 104.00 125.33
Dow Jones World Stock 100 102.80 132.20
13
<PAGE>
CERTAIN TRANSACTIONS
The Company made loans to certain executive officers to facilitate their
purchase of securities of the Company's former parent. The following executive
officers' loans were in an amount in excess of $60,000 (the amounts listed are
the largest aggregate amount outstanding at any time since the beginning of
the Company's last fiscal year and the amount outstanding on March 31, 1996):
Mark T. MacKenzie, Vice President, European Regional Director, $100,015 (as of
April 1, 1995) and $41,015 (as of March 31, 1996); Ian S. Gillies, Vice
President, Finance, Chief Financial Officer, Secretary and Treasurer, $98,315
(as of April 1, 1995) and zero (as of March 31, 1996); and Colin M. Perrott,
Vice President, Technology and Development, $82,500 (as of April 1, 1995) and
zero (as of March 31, 1996). The rate of interest charged on such indebtedness
was 7.5% annually.
The Company has entered into agreements to provide indemnification for its
directors and executive officers in addition to the indemnification provided
for in the Company's Amended and Restated Certificate of Incorporation and
Amended and Restated By-Laws. The Company has also purchased directors and
officers insurance for its directors and executive officers.
APPROVAL OF AMENDMENT TO INTERNATIONAL STOCK OPTION PLAN
PERMITTING NON-EMPLOYEE DIRECTORS TO ELECT TO
RECEIVE ANNUAL RETAINER IN THE FORM OF STOCK OPTIONS
In April and July 1996, the Board of Directors approved for submission to
the Company's stockholders at the 1996 Annual Meeting amendments to the
International Stock Option Plan to permit non-employee directors of the
Company to elect to receive all or a portion of their annual retainer fee in
the form of options to acquire shares of Common Stock. The following summary
describes certain features of the amendment. This summary is qualified in its
entirety by reference to the specific provisions of the amendment, the full
text of which is set forth as Exhibit A. The Board of Directors recommends a
vote FOR this proposal.
Purpose of the Amendments. The purpose of these amendments is to promote the
interests of the Company and its stockholders by attracting and retaining
experienced and highly qualified non-employee directors capable of furthering
the future success of the Company and by aligning their economic interests
more closely with those of the Company's stockholders. The Company believes
that the ability of a director to receive the annual retainer in the form of
stock options will enhance the attractiveness of the Company's director
compensation package for recruitment purposes. Recent studies show that many
of the country's largest corporations provide stock-based compensation to
directors.
The International Stock Option Plan. The Company adopted the International
Stock Option Plan effective February 15, 1995. Pursuant to the International
Stock Option Plan, key employees and/or directors of the Company are eligible
to receive awards of stock options in consideration of their services to the
Company. The International Stock Option Plan is described in greater detail
below at pages 16 to 18 of this Proxy Statement.
Eligibility. Non-employee directors of the Company will be eligible to elect
to receive options to acquire shares of Common Stock in lieu of all or a
portion of their annual cash retainer fee. In general, non-employee directors
must make their election no later than June 15 of each year with respect to
the retainer payable for the immediately succeeding twelve month period
commencing July 1. In general, options will be granted on the first business
day following the next annual meeting of stockholders following the date of
the election. With respect to their annual retainer payable for the period
April 1, 1996 through June 30, 1997, certain non-employee directors have
elected, subject to stockholder approval, to receive on November 1, 1996 all
or a part of their retainer in the form of options.
Number of Options. The number of shares of common stock subject to options
will equal (i) the cash value of the fee which the non-employee director
wishes to receive in the form of stock options, divided by (ii) the Fair
Market Value of the Company's Common Stock on the date of grant, multiplied by
(iii) three.
Exercise Price. The per share purchase price for shares of Common Stock
underlying an option will be the fair market value of the Common Stock on the
date of grant.
14
<PAGE>
Vesting. Each non-employee director stock option will be fully exercisable
upon grant.
New Plan Benefits. As of June 28, 1996, the Company had six non-employee
directors. During fiscal 1996, directors received an annual fee of $5,000,
except for the Chairman who received an annual fee of $25,000. During fiscal
1997, directors will receive an annual fee of $20,000, except for the Chairman
who will receive an annual fee of $40,000. With respect to their annual
retainer payable for the period April 1, 1996 through June 30, 1997, certain
non-employee directors have elected, subject to stockholder approval, to
receive on November 1, 1996 all or part of their retainer in the form of
options. The number of shares subject to such options cannot be determined
until November 1, 1996. If this amendment had been in effect during all of
fiscal 1996 and each non-employee director had elected to receive all of his
annual retainer fee during fiscal 1996 in the form of stock options, each non-
employee director would have received options to acquire 625 shares of Common
Stock, except for the Chairman who would have received options to acquire
3,125 shares of Common Stock, at an exercise price of $28 per share (in each
case based on the closing stock price of $28 per share on August 14, 1995, the
first business day after the Company's 1995 annual meeting). As of June 28,
1996, the last reported sales price of the Company's Common Stock on the New
York Stock Exchange was $29 per share.
Certain Federal Income Tax Consequences. The following discussion is a brief
summary of the principal United States federal income tax consequences under
current federal income tax laws relating to options granted to non-employee
directors under the International Stock Option Plan. This summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign income and other tax consequences.
An optionee will not recognize any taxable income upon the grant of an
option and the Company will not be entitled to a tax deduction with respect to
such grant. Upon exercise of an option, the excess of the fair market value of
the Common Stock on the exercise date over the exercise price will be taxable
as compensation income to the optionee. The Company should be entitled to a
tax deduction in the amount of such compensation income. The optionee's tax
basis for the Common Stock received pursuant to such exercise will equal the
sum of the compensation income recognized and the exercise price.
In the event of a sale of Common Stock received upon the exercise of an
option, any appreciation or depreciation after the exercise date generally
will be taxed as capital gain or loss and will be long-term gain or loss if
the holding period for such Common Stock was more than one year.
APPROVAL OF AMENDMENT TO INTERNATIONAL STOCK OPTION PLAN
INCREASING BY 500,000 THE NUMBER OF SHARES RESERVED FOR
ISSUANCE PURSUANT TO THE EXERCISE OF STOCK OPTIONS
On June 13, 1996, the Board of Directors approved for submission to the
stockholders at the 1996 Annual Meeting an amendment to the International
Stock Option Plan which would increase by 500,000 the number of shares
reserved for issuance pursuant to the exercise of stock options granted under
the International Stock Option Plan. The following summary describes certain
features of the amendment. This summary is qualified in its entirety by
reference to the specific provisions of the amendment, the full text of which
is set forth as Exhibit B. The Board of Directors recommends a vote FOR this
proposal.
Purpose of the Amendment. The purpose of this amendment is to permit the
Compensation Committee, through the grant of options to acquire shares of
Common Stock, to continue to promote the interests of the Company and its
stockholders by attracting, retaining and motivating key employees and non-
employee directors capable of furthering the success of the Company and by
aligning their economic interests more closely with those of the Company's
stockholders. In addition, the Company believes that the Compensation
Committee requires additional flexibility to award stock options in light of
the Company's recent acquisition of substantially all of the worldwide
ophthalmic business of American Optical Corporation. The increase in the
reserve under the International Stock Option Plan is also necessary because,
subject to stockholder approval of Amendment No. 1 to the International Stock
Option Plan, the Company's non-employee directors may now elect to receive
15
<PAGE>
their annual retainer fee in the form of stock options. The ability of non-
employee directors to receive options granted under the plan is not subject to
approval of this Amendment No. 2 to the International Stock Option Plan.
The Compensation Committee last awarded stock options to its executive
officers during fiscal 1995 and awarded options to acquire 112,867 and 83,430
shares of Common Stock during fiscal 1996 and fiscal 1997 to date,
respectively, to non-executive officers. There are currently 173,988 shares
reserved for the issuance of new stock options under the International Stock
Option Plan. If this amendment to the International Stock Option Plan is
approved by stockholders, the number of shares reserved for issuance
thereunder would increase by 500,000. Approximately 85 individuals are
currently eligible to receive awards under the International Stock Option
Plan.
The International Stock Option Plan. The Company adopted the International
Stock Option Plan effective February 15, 1995. Pursuant to the International
Stock Option Plan, key employees of the Company are eligible to receive awards
of stock options in consideration of their services to the Company. Options
granted under the plan may be either nonqualified stock options or "incentive
stock options," within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended.
Subject to antidilution and similar provisions, the number of shares of
Common Stock with respect to which options may be awarded under the
International Stock Option Plan equals (i) 855,868, plus (ii) subject to the
requirements of Rule 16b-3 of the Securities Exchange Act of 1934, as amended,
if applicable, the number of shares of Common Stock subject to options granted
under the Sola Investors Inc. Stock Option Plan which expire or terminate
without exercise for any reason, which number of shares shall not exceed
1,645,219. As of June 28, 1996, there were 1,614,628 shares of Common Stock
reserved for issuance pursuant to the exercise of stock options previously
granted under the Sola Investors Inc. Stock Option Plan and 682,807 shares of
Common Stock reserved for issuance pursuant to the exercise of stock options
previously granted under the International Stock Option Plan.
The International Stock Option Plan is administered by the Compensation
Committee. Subject to the provisions of the International Stock Option Plan,
the Compensation Committee will determine when and to whom options will be
granted, the number of shares covered by each option and the terms and
provisions with respect to the options. The Compensation Committee may not
grant options to any eligible employee under the International Stock Option
Plan with respect to more than 500,000 shares of Common Stock in any fiscal
year during the term of the plan (subject to antidilution and similar
adjustments).
An option may be granted on such terms and conditions as the Compensation
Committee may approve, provided that all options must be granted with an
exercise price not less than the fair market value of the underlying Common
Stock on the date of grant (110% in the case of "incentive stock options"
granted to a "ten percent stockholder," as provided in Section 422 of the
Code). No option may be exercised after the expiration of ten years from the
date of grant (five years in the case of an "incentive stock option" granted
to a "ten percent stockholder"). Payment of the option exercise price must be
made by certified or bank check. Options granted under the International Stock
Option Plan will become exercisable at such times and under such conditions as
the Compensation Committee shall determine. However, unless the Compensation
Committee otherwise provides, options shall become exercisable as to 20% of
the shares covered thereby on the date of grant and as to an additional 20% of
such shares on each of the first four anniversaries of the date of grant.
Vested options lapse 45 days after termination of employment with the Company
for any reason other than death or disability, in which case such options
terminate 180 days after termination. The portion of an option that is not
vested will automatically lapse upon the employee's termination of employment
with the Company for any reason. All options automatically lapse upon the
termination of the optionee's employment for cause. Unless otherwise
determined by the Compensation Committee, in the event of certain change of
control transactions with respect to the Company, all outstanding options
shall vest and, upon exercise, entitle the holder thereof to receive in
respect of each share of Common Stock subject to an Option the same amount and
kind of stock,
16
<PAGE>
securities, cash, property or other consideration that each holder of a share
of Common Stock was entitled to receive in such transaction in respect of a
share of Common Stock.
The Board of Directors may at any time and from time to time suspend, amend,
modify or terminate the International Stock Option Plan; provided, however,
that, to the extent required by Rule 16b-3 promulgated under the Exchange Act,
or any other law, regulation or stock exchange rule, no such change shall be
effective without the requisite approval of the Company's stockholders. In
addition, no such change may alter or impair any rights or obligations under
any awards previously granted, except with the written consent of the
optionee.
Certain Federal Income Tax Consequences. The following discussion is a brief
summary of the principal United States federal income tax consequences under
current federal income tax laws relating to options granted under the
International Stock Option Plan. This summary is not intended to be exhaustive
and, among other things, does not describe state, local or foreign income and
other tax consequences.
An optionee will not recognize any taxable income upon the grant of a
nonqualified option and the Company will not be entitled to a tax deduction
with respect to such grant. Upon exercise of a nonqualified option, the excess
of the fair market value of the Common Stock on the exercise date over the
exercise price will be taxable as compensation income to the optionee. The
Company should be entitled to a tax deduction in the amount of such
compensation income. The optionee's tax basis for the Common Stock received
pursuant to such exercise will equal the sum of the compensation income
recognized and the exercise price.
In the event of a sale of Common Stock received upon the exercise of a
nonqualified option, any appreciation or depreciation after the exercise date
generally will be taxed as capital gain or loss and will be long-term gain or
loss if the holding period for such Common Stock was more than one year.
Generally, an optionee should not recognize taxable income at the time of
grant or exercise of an incentive stock option and the Company should not be
entitled to a tax deduction with respect to such grant or exercise. The
exercise of an incentive stock option generally will give rise to an item of
tax preference that may result in alternative minimum tax liability for the
optionee.
A sale or other disposition by an optionee of shares acquired upon the
exercise of an incentive stock option more than one year after the transfer of
the shares to such optionee and more than two years after the date of grant of
the incentive stock option should result in any difference between the net
sale proceeds and the exercise price being treated as long-term capital gain
or loss to the optionee with no deduction being allowed to the Company. Upon a
sale or other disposition of shares acquired upon the exercise of an incentive
stock option within one year after the transfer of the shares to the optionee
or within two years after the date of grant of the incentive stock option
(including the delivery of such shares in payment of the exercise price of
another incentive stock option within such period), any excess of (a) the less
of (i) the fair market value of the shares at the time of exercise of the
option and (ii) the amount realized on such disqualifying sale or other
disposition of the shares over (b) the exercise price of such shares, should
constitute ordinary income to the optionee and the Company should be entitled
to a deduction in the amount of such income. The excess, if any, of the amount
realized on a disqualifying sale over the fair market value of the shares at
the time of the exercise of the option generally will constitute short-term or
long-term capital gain and will not be deductible by the Company. Special
rules may apply to optionees who are subject to Section 16 of the Securities
Exchange Act of 1934.
Under certain circumstances the accelerated vesting or exercise of options
in connection with a change of control of the Company might be deemed an
"excess parachute payment" for purposes of the golden parachute tax provision
of section 280G of the Internal Revenue Code. To the extent it is so
considered, the optionee may be subject to a 20% excise tax and the Company
may be denied a tax deduction.
Section 162(m) of the Internal Revenue Code generally disallows a federal
income tax deduction to any publicly held corporation for compensation paid in
excess of $1 million in any taxable year to the chief executive
17
<PAGE>
officer or any of the four other most highly compensated executive officers
who are employed by the Company on the last day of the taxable year. Under a
transition rule contained in IRS regulations, compensation attributable to
options granted under the International Stock Option Plan before the Company's
annual meeting in the year 1999 should not be subject to such deduction
limitation. The Compensation Committee will determine whether or not to
administer the International Stock Option Plan so that compensation
attributable to options granted thereafter would be subject to the deduction
limitation.
New Plan Benefits. The Compensation Committee has discretion to award
options under the International Stock Option Plan. It has not currently
determined to grant any options which would be exercisable for any of the
additional 500,000 shares which are the subject of this stockholder proposal,
but it may do so in the future.
As of June 28, 1996, the last reported sales price of the Company's Common
Stock on the New York Stock Exchange was $29 per share.
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Ernst & Young LLP, Palo Alto, California, as the firm of independent
public accountants to audit the books and accounts of the Company for the
fiscal year ending March 31, 1997. Although the appointment of independent
public accountants is not required by law or the Company's By-Laws to be
approved by the Company's stockholders, the Board of Directors believes that
stockholders should participate in the selection of the Company's independent
public accountants. Accordingly, the stockholders will be asked at the Annual
Meeting to ratify the appointment by the Board of Directors of Ernst & Young
LLP as the Company's independent public accountants for the fiscal year ending
March 31, 1997. In the event the stockholders do not approve the appointment
of Ernst & Young LLP, the selection of other independent accountants will be
considered by the Board of Directors. A representative of Ernst & Young LLP
will be in attendance at the 1996 Annual Meeting, will have an opportunity to
make a statement if such representative desires to do so, and will be
available to respond to appropriate questions.
STOCKHOLDERS' PROPOSALS FOR THE
1997 ANNUAL MEETING OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received at the Company's principal offices,
2420 Sand Hill Road, Suite 200, Menlo Park, California 94025, Attention:
Secretary, for inclusion in the Company's Proxy Statement and form of proxy
relating to that Annual Meeting no later than March 2, 1997. Proposals, as
well as any questions related thereto, should be submitted in writing to the
Secretary of the Company. Proposals may be included in the proxy statement for
the 1997 Annual Meeting if they comply with certain rules and regulations
promulgated by the U.S. Securities and Exchange Commission and with certain
procedures described in the Company's By-Laws, a copy of which may be obtained
from the Secretary of the Company.
EXPENSES OF SOLICITATION
The solicitation of proxies in the form enclosed is made on behalf of the
Board of Directors of the Company. All expenses relating to the solicitation
will be borne by the Company. In addition to the solicitation of proxies by
use of the mails, some of the officers, directors and regular employees of the
Company and its subsidiaries, none of whom will receive additional
compensation therefor, may solicit proxies in person or by telephone,
telegraph or other means. As is customary, the Company will, upon request,
reimburse brokerage firms, banks, trustees, nominees and other persons for
their out-of-pocket expenses in forwarding proxy materials to their
principals.
18
<PAGE>
OTHER MATTERS
The persons named in the enclosed form of proxy have no intention of
bringing before the meeting for action any matter other than as specifically
referred to above, nor has management or the Board of Directors any such
intention, and none of such persons, management or the Board of Directors is
aware of any matters which may be presented by others. If any such business
should properly come before the meeting, the persons named in the form of
proxy intend to vote thereon in accordance with their best judgment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The directors, executive officers and ten percent stockholders of the
Company are required to file reports of their ownership of the Company's
Common Stock with the Securities and Exchange Commission and the New York
Stock Exchange pursuant to Section 16(a) of the Securities Exchange Act of
1934. To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no
other reports were required, all of such reporting requirements were satisfied
during fiscal 1996.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON WRITTEN REQUEST, A COPY OF ITS ANNUAL REPORT ON FORM 10-
K FOR THE FISCAL YEAR ENDED MARCH 31, 1996, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES BUT EXCLUDING EXHIBITS). COPIES OF ANY EXHIBITS THERETO ALSO WILL BE
FURNISHED UPON THE PAYMENT OF A REASONABLE DUPLICATING CHARGE. REQUESTS IN
WRITING FOR COPIES OF ANY SUCH MATERIALS SHOULD BE DIRECTED TO SOLA
INTERNATIONAL INC., 2420 SAND HILL ROAD, SUITE 200, MENLO PARK, CALIFORNIA
94025, ATTENTION: INVESTOR RELATIONS.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
ARE URGED TO DATE, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
ENCLOSED ENVELOPE.
By order of the Board of Directors,
Ian S. Gillies
Secretary
Menlo Park, California
July 12, 1996
A copy of the Company's Annual Report for the fiscal year ended March 31,
1996, including financial statements, accompanies this Proxy Statement. The
Annual Report is not to be regarded as proxy soliciting material or as a
communication by means of which any solicitation is to be made.
19
<PAGE>
EXHIBIT A
AMENDMENT NO. 1
TO
SOLA INTERNATIONAL INC. STOCK OPTION PLAN
WHEREAS, Sola International Inc. (the "Company") has adopted the Sola
International Inc. Stock Option Plan (the "Plan"); and
WHEREAS, the Board of Directors of the Company has the right to amend the
Plan; and
WHEREAS, the Board of Directors of the Company now desires to amend the Plan
in order to provide for the granting of Options to nonemployee directors of
the Company;
NOW, THEREFORE, the Plan is amended, effective as of April 1, 1996, as
follows:
1. The phrase "or a Nonemployee Director" shall be added to Section 1.2(m)
after the word "Company."
2. The following new Section 1.2(s) shall be added:
(s) "Director Option" means an Option issued pursuant to Section 2.6.
3. The following new Section 1.2(t) shall be added:
(t) "Nonemployee Director" means a director of International, including
the Chairman of the Board, who is not an officer or employee of the
Company.
4. The words "and to Nonemployee Directors in accordance with Section 2.6"
shall be added after the word "select" in Section 1.4.
5. The words "or directorship" shall be added after the word "employment" in
the fourth and sixth lines of Section 2.4(a), the third line of Section 2.4(d)
and the first line of Section 1.2(q).
6. The following shall be added after the word "Options" in the second line
of Section 2.4(c): "(other than Director Options)"
7. The following new Section 2.6 shall be added to the Plan:
2.6 Nonemployee Director Options.
(a) Ineligibility for Other Awards. Nonemployee Directors shall not be
eligible to receive Options pursuant to the Plan other than as set forth in
this Section 2.6.
(b) Election. Each Nonemployee Director may elect to receive all or a
portion of his or her annual cash retainer fee for services as a
Nonemployee Director (the "Fee") in the form of an Option (a "Director
Option"). The election must be made by written notice to the Committee by
June 15 with respect to the Fee that is otherwise payable for the
immediately succeeding four calendar quarters commencing on July 1;
provided, however, that with respect to the Fee that is payable for the
period April 1, 1996 through June 30, 1997, the election must be made prior
to April 30, 1996. The election shall be irrevocable. No election shall be
effective with respect to any Director Option unless the Nonemployee
Director making the election is a Nonemployee Director on the relevant Date
of Grant. Newly-elected directors may not elect to receive Director Options
in respect of the Fee payable for the calendar year in which they are
elected. A Nonemployee Director shall not be entitled to receive in cash
any portion of the Fee with respect to which an election has been made to
receive Director Options.
A-1
<PAGE>
(c) Grant Date. Notwithstanding anything in this Plan to the contrary,
Director Options shall be granted on November 1, 1996 with respect to an
election made for the Fees payable for the period April 1, 1996 through
June 30, 1997, and on the first business day following the next annual
meeting of stockholders following an election with respect to Fees payable
for subsequent periods.
(d) Shares Subject to Option. Notwithstanding anything in this Plan to
the contrary, the number of shares of Common Stock in respect of a Director
Option shall be equal to the product of (i) the quotient of (x) the cash
value of the Fee which the Nonemployee Director elects to receive in the
form of an Option, divided by (y) the Fair Market Value of a share of
Common Stock on the Date of Grant, and (ii) three.
(e) Purchase Price. Notwithstanding anything in this Plan to the
contrary, the per share purchase price for shares of Common Stock
underlying a Director Option shall be the Fair Market Value of the Common
Stock on the Date of Grant.
(f) Vesting. Notwithstanding anything in this Plan to the contrary, each
Director Option shall be fully exercisable upon grant.
8. The first letter of the first word in Section 3.8 shall be changed to
lower case and the following shall be added to the beginning of the section:
"Except as to grants of Director Options,"
9. The word "Optionee" on the first and second lines of Section 1.2(q) shall
be deleted and replaced with the word "employee," and the following shall be
added to Section 1.2(q): ", and with respect to any Nonemployee Director, the
commission of an act of fraud or intentional misrepresentation or an act of
embezzlement, misappropriation or conversion of assets or opportunities of the
Company."
* * * * *
This Amendment No. 1 to the Plan shall be conditioned on the approval of
such amendment by a majority of the stockholders of the Company entitled to
vote at its annual meeting of stockholders next following adoption of this
amendment by the Board. Any Director Option granted prior to receipt of such
approval shall be expressly conditioned on the receipt of such approval.
A-2
<PAGE>
EXHIBIT B
AMENDMENT NO. 2
TO THE
SOLA INTERNATIONAL INC. STOCK OPTION PLAN
WHEREAS, Sola International Inc. (the "Company") has adopted the Sola
International Inc. Stock Option Plan (the "Plan"); and
WHEREAS, the Board of Directors of the Company has the right to amend the
Plan; and
WHEREAS, the Board of Directors of the Company now desires to amend the Plan
in order to reserve an additional 500,000 shares of Common Stock for the
issuance of options under the Plan;
NOW, THEREFORE, the Plan is amended, effective August 16, 1996, as follows:
1. The number "855,868" in Section 1.6(a)(i) of the Plan shall be deleted
and replaced with the number "1,355,868."
2. This Amendment No. 2 to the Plan shall be conditioned on the approval of
such amendment by a majority of the stockholders of the Company entitled to
vote at its annual meeting of stockholders next following adoption of this
amendment by the Board.
B-1
<PAGE>
IMPORTANT INFORMATION
SOLA INTERNATIONAL INC.
1996 ANNUAL MEETING
Sola International Inc.'s Annual Meeting of
Stockholders will be held at the Quadrus
Conference Center, 2400 Sand Hill Road, Menlo
Park, California 94025 on Friday, August 16,
1996, at 10:00 a.m. (local time).
<PAGE>
SOLA INTERNATIONAL INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF SOLA INTERNATIONAL INC. FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON AUGUST 16, 1996
P R O X Y
The undersigned hereby appoints John E. Heine, James H. Cox and Ian S.
Gillies, and each of them, as attorneys and proxies with full power of
substitution, to vote for and on behalf of the undersigned all shares of common
stock of Sola International Inc. held of record by the undersigned on June 28,
1996, at the Sola International Inc. Annual Meeting of Stockholders to be held
on August 16, 1996 and at any adjournment thereof, upon the following matters
and upon any other business that may properly come before the meeting, as set
forth in the related Notice of Annual Meeting and Proxy Statement, both of which
have been received by the undersigned.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHARE OWNER. IF THIS PROXY IS EXECUTED BUT NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR
NOMINEES AND IN FAVOR OF THE TWO AMENDMENTS TO THE SOLA INTERNATIONAL INC. STOCK
OPTION PLAN AND RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS FOR
FISCAL 1997.
Please indicate your vote for the election of directors on the other
side. The nominees for director are: Douglas D. Danforth, John E. Heine,
Harnish Maxwell, Ruben F. Mettler, Laurence Za Yu Moh, Irving S. Shapiro and
Jackson L. Schultz.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE>
[X] Please mark votes as in this example.
The Board of Directors recommends a vote "For All Nominees" on proposal 1 and a
vote "For" proposals 2, 3 and 4.
1. Election of seven directors:
Nominees: Douglas D. Danforth, John E. Heine, Harnish Maxwell, Ruben F. Mettler,
Laurence Za Yu Moh, Irving S. Shapiro and Jackson L. Schultz.
FOR [ ] WITHHELD [ ]
[ ] __________________________________
For all nominees except as noted above
2. Amendment of the Sola International Inc. Stock Option Plan to permit
non-employee directors to elect to receive all or a portion of their annual
retainer fee in the form of stock options.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Amendment of the Sola International Inc. Stock Option Plan to increase the
number of shares reserved thereunder by 500,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Ratification of Ernst & Young LLP as independent public accountants for
fiscal 1997.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
Please sign this proxy and return it promptly whether or not you expect to
attend the meeting. You may nevertheless vote in person if you attend. Give
full title if an Attorney, Executor, Administrator, Trustee, Guardian, etc. If
a corporation, please sign in full corporate name by authorized officer. If a
partnership, please sign in partnership name by authorized person. For an
account in the name of two or more persons, each should sign, or if one signs,
he or she should ?????? evidence of authority.
Signature: _______________________ Date:________________
Signature: _______________________ Date:________________
