<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(2)
REGISTRATION NO. 333-45929
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 10, 1998)
$100,000,000
SOLA INTERNATIONAL INC.
6 7/8% NOTES DUE 2008
----------------
Interest on the 6 7/8% Notes due 2008 (the "Notes") is payable semiannually
on March 15 and September 15 of each year, commencing September 15, 1998. The
Notes will mature on March 15, 2008. The Notes will not be subject to any
sinking fund. The Notes will be redeemable, as a whole or from time to time in
part, at the option of the Company on any date at a redemption price equal to
the greater of (i) 100% of the principal amount of the Notes to be redeemed
and (ii) the sum of the present values of the Remaining Scheduled Payments (as
defined herein) thereon discounted to such redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate (as defined herein) plus 20 basis points, plus in either case
accrued interest on the principal amount being redeemed to such redemption
date.
The Notes will be issued in the form of one or more global Notes (the
"Global Securities") registered in the name of The Depository Trust Company
("DTC") or its nominee. Beneficial interests in the Global Securities will be
shown on, and transfers will be effected only through, records maintained by
DTC and its participants. Except as described herein, Notes in definitive form
will not be issued. See "Description of Debt Securities--Book-Entry Debt
Securities" in the accompanying Prospectus.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THE ACCOMPANYING PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE NOTES OFFERED HEREBY.
----------------
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 SUPPLEMENT OR
THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note......................... 99.595% .65% 98.945%
- ----------------------------------------------------------------------------------
Total............................ $99,595,000 $650,000 $98,945,000
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from March 19, 1998.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $500,000.
----------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and to certain other conditions.
The Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. It is expected that delivery of the
Notes will be made through the book-entry facilities of DTC on or about March
19, 1998.
----------------
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
BANCAMERICA ROBERTSON STEPHENS
----------------
The date of this Prospectus Supplement is March 13, 1998.
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference herein and in the
accompanying Prospectus constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and are subject to a number of risks and
uncertainties. Any such forward-looking statements contained or incorporated
by reference herein or in the accompanying Prospectus should not be relied
upon as predictions of future events. Such forward-looking statements are
necessarily dependent on assumptions, data or methods that may be incorrect or
imprecise and they may be incapable of being realized. In that regard, the
following factors, among others and in addition to the matters discussed
elsewhere in this Prospectus Supplement, the accompanying Prospectus and the
documents incorporated or deemed to be incorporated by reference herein, could
cause actual results or other matters to differ materially from those in such
forward-looking statements: highly competitive conditions in the eyeglass lens
and coating industry and the effect of new products on results, risks
associated with international operations, risks associated with currency
fluctuations, restrictions on payment of dividends from the Company's
subsidiaries, effect of the Company's indebtedness on operations and
liquidity, reliance on key management and risk of liability under
environmental laws. As a result of the foregoing, no assurance can be given as
to future results of operations or financial condition, and the Company wishes
to caution prospective investors not to rely on any such forward-looking
statements. The Company does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements, which speak only as of
the date made. For a discussion of certain of these risks and uncertainties,
see "Risk Factors" in the accompanying Prospectus and Exhibit 99.1, Factors
Affecting Future Operating Results, included in the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1997, which is incorporated by
reference in the accompanying Prospectus and may be obtained as described
therein under "Available Information."
----------------
Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Notes. Such
transactions may include stabilizing, the purchase of Notes to cover syndicate
short positions and the imposition of penalty bids. For a description of these
activities, see "Underwriting."
S-2
<PAGE>
THE COMPANY
Unless otherwise expressly stated or the context otherwise requires, all
references to the "Company" or "Sola" herein refer to Sola International Inc.
(or its predecessors) and consolidated subsidiaries. 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, 1997 are referred to
herein as fiscal 1997. Data included and incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus regarding the size,
growth and factors affecting markets for lenses, Sola's market position,
demographic and other trends (including changes in age of the population,
wealth, literacy, need for vision correction and similar matters), changes in
consumer preferences, plastic lens sales as a proportion of total lens sales
in specific markets, market share, competitive position and other similar
matters are approximations based on the Company's estimates. Although the
Company believes that such data are generally indicative of the matters
reflected therein, such data are inherently imprecise and investors are
cautioned not to place undue reliance on any such data. Unless the context
otherwise requires, the data relating to sales of lenses is based on unit,
rather than dollar sales.
Sola designs, manufactures and distributes a broad range of eyeglass lenses,
primarily focusing on the 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 (comprised primarily of Australia, Asia and
South America). The Company believes it is one of the leaders in plastic
eyeglass lens sales in each of these geographic regions (if the Japanese
market is excluded from Rest of World).
Sola believes its principal strengths lie in value-added lens designs,
materials and coatings, which are product categories that the Company believes
are experiencing faster growth than the overall global lens market. Sola has
successfully pursued a strategy of building one of the leading positions in
categories such as progressive lenses, anti-reflection lens coatings, plastic
photochromic lenses and thinner and lighter plastic lenses, which typically
generate higher gross profit margins. Sola has also developed an innovative
lens delivery system, Matrix(TM), which is currently being launched in the
United States and overseas.
The Company's historical growth in sales and operating income (before non-
recurring charges) reflects the global market growth for plastic lenses and
Sola's success in capturing strong positions in a number of worldwide markets,
as well as in certain key geographic regions and product categories. From
fiscal 1993 to fiscal 1997, the Company's net sales grew from $281.5 million
to $488.7 million and operating income grew from $30.3 million to $57.3
million. Net sales and operating income for the nine months ended December 31,
1997 were $402.6 million and $64.1 million, respectively. Fiscal 1997 and the
nine months ended December 31, 1997 include results of the Worldwide
Ophthalmic Group of American Optical Corporation, which the Company acquired
in June 1996.
The global market for plastic lenses is relatively young and has emerged
principally in the past 20 years. The Company estimates that sales in this
market are approaching $2 billion annually (based on wholesale prices). The
Company believes that the factors driving market growth in developed markets
differ from the factors driving growth in developing markets. The Company
believes that 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:
The increasing average age of the population, primarily in the Company's two
largest markets--the United States and Europe. Sola believes that 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
Company believes that the increasing population group over the age of 45 is
more likely to use higher value-added lenses such as progressives and
bifocals. Industry sources estimate that over 90% of the U.S. population over
the age of 45 requires vision correction. In the United States, this age group
is estimated to be increasing by approximately 2 million individuals per year.
The Company believes similar demographic trends are evident in other developed
countries.
S-3
<PAGE>
A shift in consumer preference from lower-value plastic lenses toward
higher-value plastic lenses. Sola believes that eyeglass wearers in the
Company's most significant markets, such as the United States and Europe, are
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. The Company believes that 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 25 years, the penetration of plastic lenses has grown from an
insignificant amount to a substantial majority of all eyeglass lenses sold in
North America and a majority of all eyeglass lenses sold in Western Europe.
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,
the Company believes that the plastic lens market in certain developing
markets is experiencing rapid growth, particularly when compared to the United
States and Western European markets.
BUSINESS STRATEGY
The Company has successfully implemented a business strategy that has
enabled it to achieve its strong market position and consistent growth in
sales and operating income (before non-recurring items). 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. The
Company is a frequent winner of Optical Laboratory Association awards for its
products and, most recently, won an award for its new Percepta(R) progressive
lens. Sola also has developed its own major proprietary lens material,
Spectralite(R). Sola has developed and successfully marketed proprietary
progressive lenses made from Spectralite(R), including VIP Gold(R) and
Percepta(R). Sola's proprietary Matrix(TM) 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. 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 have experienced a higher growth rate and generated an
above average gross profit per pair compared to other plastic lenses sold by
the Company.
Expansion of Global Distribution Capabilities. Since its inception, the
Company has selectively expanded its global distribution capabilities. The
Company has 50 major distribution centers in 20 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 three 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
S-4
<PAGE>
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 the program has been responsible for
identifying significant cost saving opportunities, primarily as a result of
yield improvements, savings in the cost of supplies and raw materials and
higher asset utilization rates.
USE OF PROCEEDS
The proceeds to the Company from the sale of the Notes offered hereby (net
of underwriting discounts and commissions and the estimated expenses of the
offering) are estimated to be approximately $98.4 million. The Company plans
to use the proceeds of the offering to repay indebtedness outstanding under
its bank credit agreement (the "Credit Agreement"). Amounts repaid under the
Credit Agreement from the proceeds of the offering may, subject to the terms
and conditions of the Credit Agreement, be reborrowed from time to time.
Indebtedness under the Credit Agreement accrues interest at either a base
rate or a LIBOR rate (or the foreign jurisdiction equivalent under Tranche A)
plus a margin. Tranche A of the Credit Agreement permits borrowings of up to
$30 million (or foreign currency equivalent) and matures in October 2000 and
may be extended to May 2001. Tranche B permits borrowings of up to $270
million and matures in May 2001. Indebtedness currently outstanding under the
Credit Agreement was incurred in connection with the Company's repurchase of
all of its senior subordinated notes, the Company's acquisition (the "AO
Acquisition") of the worldwide ophthalmic lens business of American Optical
Corporation, the Company's acquisition of Neolens, Inc. and for general
corporate purposes. As of February 20, 1998, approximately $208 million was
outstanding under the Credit Agreement, and the weighted average interest rate
was approximately 6.1%.
S-5
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited short-term debt and the
unaudited capitalization of the Company and its consolidated subsidiaries as
of December 31, 1997 and as adjusted to give effect to the offering made
hereby and the application of the estimated net proceeds therefrom as if they
had occurred as of December 31, 1997. The information presented below should
be read in conjunction with the Consolidated Condensed Financial Statements
and the related notes thereto and "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" included in the Company's Form
10-Q for the quarter ended December 31, 1997.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------
ACTUAL AS ADJUSTED
----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of
long-term debt..................................... $ 20,791 $ 20,791
=========== ===========
Long-term debt:
Credit Agreement(1)............................... $ 190,000 $ 91,555
Notes offered hereby, net of unamortized discount
of $405,000...................................... -- 99,595
Other long-term debt.............................. 1,689 1,689
----------- -----------
Total long-term debt............................ 191,689 192,839
----------- -----------
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, 24,491,086 shares issued and
outstanding(2)................................... 245 245
Additional paid-in capital........................ 273,369 273,369
Equity participation loans........................ (230) (230)
Retained earnings................................. 41,082 41,082
Cumulative foreign currency adjustments........... (10,673) (10,673)
----------- -----------
Total shareholders' equity...................... 303,793 303,793
----------- -----------
Total capitalization............................ $ 495,482 $ 496,632
=========== ===========
</TABLE>
- --------
(1) At December 31, 1997, the Company had $104.4 million of unused borrowing
capacity under the Credit Agreement.
(2) Excludes 2,353,641 shares that may be issued upon the exercise of options
previously granted pursuant to the Company's stock option plan as of
December 31, 1997.
S-6
<PAGE>
SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data set forth below as of March 31, 1997 and 1996
and for the fiscal years ended March 31, 1997, 1996 and 1995 (other than
certain information set forth under Other Financial Data) are derived from,
and should be read in conjunction with, the audited financial statements and
the notes thereto included in the Company's Form 10-K for the fiscal year
ended March 31, 1997. The financial statements for the year ended March 31,
1997 reflect the consolidated operations of the Company after accounting for
the AO Acquisition on June 19, 1996, using the purchase method of accounting.
The selected financial information set forth below at December 31, 1997 and
for the nine months ended December 31, 1997 and 1996 is derived from unaudited
financial statements of the Company. In the opinion of the Company, such
unaudited financial statements reflect all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the
Company's results of operations for those periods and financial position at
those dates. The results for the nine months ended December 31, 1997 are not
necessarily indicative of the results for any future period. The selected
financial data as of March 31, 1995 and 1994 and for the four and eight months
ended March 31, 1994 and November 30, 1993, respectively (other than certain
information set forth under Other Financial Data), are derived from the
audited financial statements for such periods. The selected financial data set
forth below as of March 31, 1993 and for the fiscal year ended March 31, 1993
(other than certain information set forth under Other Financial Data) are
derived from the audited combined financial statements for such fiscal year.
The financial information for all periods prior to December 1, 1993, the date
of the Company's purchase of the Sola business unit (the "Predecessor
Business") of Pilkington plc, are those of the Predecessor Business. The
historical data of the Predecessor Business and the Company are not comparable
in all respects.
<TABLE>
<CAPTION>
SOLA INTERNATIONAL INC. PREDECESSOR BUSINESS
------------------------------------------------------------------------ ----------------------
FOUR EIGHT FISCAL
MONTHS MONTHS YEAR
NINE MONTHS ENDED FISCAL YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, MARCH 31, MARCH 31, NOV. 30, MARCH 31,
--------------------- --------------------------------- --------- ---------- ----------
1997 1996 1997 1996 1995 1994 1993 1993
-------- -------- -------- -------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Net sales............... $402,624 $357,451 $488,689 $387,709 $345,631 $106,030 $ 200,025 $ 281,494
Cost of sales........... 211,591 195,731(3) 264,535(3) 201,991 185,626 93,428(1) 115,319 157,159
-------- -------- -------- -------- -------- -------- ---------- ----------
Gross profit............ 191,033 161,720 224,154 185,718 160,005 12,602 84,706 124,335
-------- -------- -------- -------- -------- -------- ---------- ----------
Research and development
expenses............... 13,744 12,767 17,539 13,329 14,051 3,877 7,246 10,785
Selling and marketing
expenses............... 72,529 67,133 92,387 66,345 61,143 19,146 33,483 51,183
General and
administrative
expenses............... 40,637 37,002 47,381 45,291 45,067(2) 10,584 23,438 32,041
In-process research and
development expense.... -- 9,500(3) 9,500(3) -- -- 40,000(1) -- --
-------- -------- -------- -------- -------- -------- ---------- ----------
Operating expenses...... 126,910 126,402 166,807 124,965 120,261 73,607 64,167 94,009
-------- -------- -------- -------- -------- -------- ---------- ----------
Operating income
(loss)................. 64,123 35,318 57,347 60,753 39,744 (61,005) 20,539 30,326
Interest expense, net... (13,387) (11,692) (15,961) (12,141) (18,522) (6,160) (3,071) (4,490)
Foreign currency
adjustments............ -- -- -- -- -- (167) (478) (814)
-------- -------- -------- -------- -------- -------- ---------- ----------
Income (loss) before
provision (benefit) for
income taxes, minority
interest and
extraordinary item..... 50,736 23,626 41,386 48,612 21,222 (67,332) 16,990 25,022
Provision (benefit) for
income taxes........... 16,946 6,655 10,737 13,623 6,649 (6,194) 5,833 8,507
Minority interest....... 312 -- 248 (401) (933) (256) (408) --
-------- -------- -------- -------- -------- -------- ---------- ----------
Income (loss) before
extraordinary item..... 34,102 16,971 30,897 34,588 13,640 (61,394) 10,749 16,515
Extraordinary items, net
of tax................. (5,923)(4) -- -- (912)(4) (3,915)(2) -- -- --
-------- -------- -------- -------- -------- -------- ---------- ----------
Net income (loss)....... $ 28,179 $ 16,971 $ 30,897 $ 33,676 $ 9,725 $(61,394) $ 10,749 $ 16,515
======== ======== ======== ======== ======== ======== ========== ==========
</TABLE>
S-7
<PAGE>
<TABLE>
<CAPTION>
SOLA INTERNATIONAL INC. PREDECESSOR BUSINESS
--------------------------------------------------- ----------------------
FOUR EIGHT FISCAL
MONTHS MONTHS YEAR
NINE MONTHS ENDED FISCAL YEAR ENDED ENDED ENDED ENDED
DECEMBER 31 MARCH 31, MARCH 31, NOV. 30, MARCH 31,
----------------- ----------------------- --------- ---------- ----------
1997 1996 1997(3) 1996 1995 1994 1993 1993
-------- -------- ------- ------- ------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA
EBITDA(5).............. $ 79,487 $ 48,853 $75,754 $75,075 $53,604 $(56,297) $ 27,556 $ 39,261
Ratio of EBITDA to
interest expense,
net................... 5.94 4.18 4.75 6.18 2.89 -- (6) (10) (10)
Ratio of earnings to
fixed charges(8)...... 4.30 2.75 3.24 4.36 2.03 -- (7) 4.86 4.86
Ratio of long-term debt
to capitalization (at
period end)(9)........ 0.39 0.36 0.36 0.34 0.40 0.75 (10) (10)
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR
SOLA INTERNATIONAL INC. BUSINESS
------------------------------------------------ -----------
AS OF AS OF MARCH 31,
DECEMBER 31, -----------------------------------------------
1997 1997 1996 1995 1994 1993
------------ -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets........... $644,798 $605,508 $416,849 $383,457 $360,631 $246,944
Long-term debt......... 191,689 162,797 97,890 107,407 186,740 9,744
Parent company
investment............ -- -- -- -- -- 117,129
Total shareholders'
equity................ 303,793 284,298 192,241 159,443 63,495 --
</TABLE>
- --------
(1) For the four months ended March 31, 1994, the Company recorded two non-
recurring, non-cash charges associated with the Company's purchase of the
Predecessor Business in December 1993: (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 Company's initial public offering of the Company's
Common Stock in March 1995 (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) For fiscal 1997, the Company recorded two non-recurring charges in
connection with the Company's acquisition of the worldwide ophthalmic
lens business of American Optical Corporation in June 1996: (i) a $7.2
million charge for the amortization associated with an inventory write-up
to fair value that was reflected in cost of sales; and (ii) a $9.5
million charge for the write-off of in-process research and development
expense that was reflected in in-process research and development
expense.
(4) For fiscal 1996 and the nine months ended December 31, 1997, the
extraordinary items comprise losses due to the repurchase of senior
subordinated notes, net of tax.
(5) "EBITDA" represents, for any period, income (loss) before interest
(including amortization of original issue discount and debt issuance
costs), income taxes, depreciation and amortization. EBITDA is presented
because it is an accepted financial indicator of a company's ability to
service and/or incur indebtedness and management believes that its
presentation is helpful to investors. However, the EBITDA measure should
not be considered as an alternative to net income as a measure of the
Company's operating results or to cash flows as a measure of liquidity.
Because EBITDA is not calculated identically by all companies, the
presentation herein may not be comparable to other similarly titled
measures of other companies.
(6) EBITDA was insufficient to cover interest expense, net by $56.3 million
due to the Company recording two non-recurring, noncash charges. See Note
1 above.
(7) Earnings were insufficient to cover fixed charges by $60.4 million due to
the Company recording two non-recurring, noncash charges. See Note 1
above.
(8) See "Ratio of Earnings to Fixed Charges" in the accompanying Prospectus
for information regarding the computation of the ratio of earnings to
fixed charges.
(9) For purposes of this ratio, capitalization is defined as the sum of long-
term debt plus total shareholders' equity.
(10) The ratios for the Predecessor Business are not comparable to those of
the Company.
S-8
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The 6 7/8% Notes due 2008 (the "Notes") offered hereby are a series of "Debt
Securities" as defined and described in the accompanying Prospectus, and the
following description of the terms of the Notes supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Debt Securities set forth in the accompanying Prospectus.
The following statements relating to the Notes and the Indenture (as defined
below) are summaries of certain provisions of the Notes and the Indenture and
do not purport to be complete. Such statements are qualified by reference to
the provisions of the Notes and the Indenture, copies of which have been or
will be filed as exhibits to or incorporated by reference in the Registration
Statement (as defined in the accompanying Prospectus) and may be obtained as
described under "Available Information" in the accompanying Prospectus. Unless
otherwise expressly stated or the context otherwise requires, all references
to the "Company" or "Sola" appearing under this caption "Description of the
Notes" and under the caption "Description of Debt Securities" in the
accompanying Prospectus mean Sola International Inc. excluding its
subsidiaries. Other capitalized terms used herein but not defined shall have
the meanings given to them in the accompanying Prospectus or, if not defined
in the Prospectus, in the Indenture.
The Notes will be senior unsecured obligations of the Company. The Notes
will be issued pursuant to the provisions of an Indenture (the "Indenture"),
entered into between the Company and State Street Bank and Trust Company of
California, N.A., as trustee (the "Trustee").
The Notes will mature on March 15, 2008. The Notes will bear interest from
March 19, 1998 (at the rate of interest referred to above) payable on March 15
and September 15 of each year, commencing on September 15, 1998. Subject to
certain exceptions therein set forth, the Indenture provides for the payment
of interest on any interest payment date only to persons in whose names the
Notes are registered at the close of business on the corresponding regular
record date, which is the March 1 or September 1, as the case may be (whether
or not a Business Day), next preceding such interest payment date. Interest
payments on the Notes will include interest accrued to, but excluding, the
applicable interest payment date, redemption date or maturity date. Interest
on the Notes will be computed on the basis of a 360-day year consisting of
twelve 30-day months.
The Notes will be a separate series of Debt Securities under the Indenture,
limited initially in aggregate principal amount to $100 million. However, the
Company may from time to time, without the consent of the holders of the
Notes, provide for the issuance of additional Notes (which may constitute part
of the same series of Debt Securities as the Notes offered hereby) or other
Debt Securities under the Indenture in addition to the Notes offered hereby.
The Indenture will not limit the amount of other indebtedness that may be
issued by the Company or any of its subsidiaries. The Notes are not subject to
any sinking fund.
The Notes will be issued only in fully registered form without coupons, in
denominations of $1,000 and integral multiples thereof. The Notes will be
evidenced by one or more global Notes (the "Global Securities") in book-entry
form, except under the limited circumstances described in the accompanying
Prospectus under "Description of Debt Securities--Book-Entry Debt Securities."
The Global Securities will be registered in the name of a nominee of The
Depository Trust Company, as depositary for the Notes. Notices or demands to
or upon the Company in respect of the Notes and the Indenture may be served
and, in the event that Notes are issued in definitive certificated form, Notes
may be surrendered for payment, registration of transfer or exchange, at the
office or agency of the Company maintained for such purpose in the Borough of
Manhattan, The City of New York, which shall initially be the office of an
affiliate of the Trustee, which on the date of this Prospectus Supplement is
located at 61 Broadway, 15th Floor, New York, New York 10006.
OPTIONAL REDEMPTION
The Notes will be redeemable, as a whole or from time to time in part, at
the option of the Company on any date (a "Redemption Date") at a redemption
price equal to the greater of (i) 100% of the principal amount of the Notes to
be redeemed and (ii) the sum of the present values of the Remaining Scheduled
Payments (as
S-9
<PAGE>
hereinafter defined) thereon discounted to such Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate (as hereinafter defined) plus 20 basis points, plus in
either case accrued interest on the principal amount being redeemed to such
Redemption Date; provided that installments of interest on Notes which are due
and payable on an interest payment date falling on or prior to the relevant
Redemption Date shall be payable to the Holders of such Notes, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant regular record date according to their terms and the provisions of
the Indenture.
"Treasury Rate" means, with respect to any Redemption Date for the Notes,
the rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means, with respect to any Redemption Date for
the Notes, the United States Treasury security selected by an Independent
Investment Banker as having a maturity comparable to the remaining term of the
Notes to be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of such
Notes. "Independent Investment Banker" means one of the Reference Treasury
Dealers appointed by the Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any Redemption Date for
the Notes, (i) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal
amount) on the third Business Day preceding such Redemption Date, as set forth
in the daily statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for U.S. Government Securities" or (ii) if such release (or any
successor release) is not published or does not contain such prices on such
Business Day, the average of the Reference Treasury Dealer Quotations actually
obtained by the Trustee for such Redemption Date. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
Redemption Date, the average, as determined by the Trustee, of the bid and
asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m. (New York City time) on the third
Business Day preceding such Redemption Date.
"Reference Treasury Dealer" means each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Morgan Stanley & Co. Incorporated and BancAmerica
Robertson Stephens and their respective successors; provided, however, that if
any of the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), the Company shall
substitute therefor another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any Note to be
redeemed, the remaining scheduled payments of the principal thereof and
interest thereon that would be due after the related Redemption Date but for
such redemption; provided, however, that, if such Redemption Date is not an
interest payment date with respect to such Note, the amount of the next
succeeding scheduled interest payment thereon will be reduced by the amount of
interest accrued thereon to such Redemption Date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after
the Redemption Date, interest will cease to accrue on the Notes or portions
thereof called for redemption.
Except as described under "--Certain Covenants" below and under "Description
of Debt Securities-- Consolidation, Merger or Transfer of Assets" in the
accompanying Prospectus, the Indenture does not contain any provisions that
would afford holders of the Notes protection in the event of (i) a highly
leveraged or similar transaction involving the Company, (ii) a change in
control or (iii) a reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect the holders of the
Notes.
S-10
<PAGE>
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Liens. The Company will not, and will not permit any
Subsidiary to, create, incur, assume or guarantee any Debt secured by a Lien
on any Principal Property or by a Lien on any Debt or shares of capital stock
of, or other ownership interests in, any Restricted Subsidiary ("Secured
Debt") (whether such Principal Property, Debt, shares of capital stock or
ownership interests are owned or outstanding on the Original Issuance Date or
thereafter acquired or issued, as the case may be) if, immediately after
giving effect thereto, the sum, without duplication, of (a) the aggregate
principal amount of all Secured Debt (other than Excluded Debt (as defined
below)) and (b) the aggregate amount of all Attributable Debt in respect of
Sale and Leaseback Transactions (other than Excluded Transactions (as defined
below)) would exceed 15% of the Company's Consolidated Net Tangible Assets as
of the date of determination, unless the Company provides, concurrently with
or prior to the creation, incurrence, assumption or guarantee of such Secured
Debt, that the Notes shall be secured equally and ratably with (or, at the
option of the Company, prior to) such Secured Debt (for so long only as such
Secured Debt is so secured).
The provisions set forth in the immediately preceding paragraph shall not
apply to Debt secured by the following Liens ("Excluded Debt"):
(i) Liens existing on the Original Issuance Date;
(ii) Liens on any Principal Property, Debt, shares of capital stock or
other ownership interests existing at the time of acquisition thereof
(whether by merger, acquisition of stock or assets or otherwise) by the
Company or any of its Subsidiaries (whether or not the obligations secured
by such Liens are assumed by the Company or a Restricted Subsidiary),
provided that such Liens were not created in contemplation of or in
connection with such acquisition;
(iii) Liens upon or with respect to any Principal Property acquired,
constructed, improved, developed or expanded by the Company or any of its
Subsidiaries after the Original Issuance Date which (A) are created,
incurred or assumed contemporaneously with, or not later than 270 days
after, the latest to occur of the acquisition (whether by merger,
acquisition of stock or assets or otherwise), or the completion of
construction, improvement, development or expansion, as the case may be, of
such Principal Property, and (B) secure Debt incurred or assumed to finance
all or any part of the purchase price of such Principal Property or the
cost of such construction, improvement, development or expansion, as the
case may be;
(iv) Liens on shares of capital stock of or other ownership interests in
or property of a Restricted Subsidiary to secure Debt incurred or assumed
to finance all or any part of the acquisition cost of such Restricted
Subsidiary, provided that such Debt is incurred or assumed and the related
Liens are created not later than 270 days after such Restricted Subsidiary
first becomes a Subsidiary;
(v) Liens on the property of any Subsidiary securing Debt owing by such
Subsidiary to the Company or to any other Subsidiary;
(vi) Liens in favor of domestic or foreign governments or governmental
bodies to secure partial, advance, progress or other payments pursuant to
any contract or statute and Liens in favor of any domestic or foreign
government or governmental body incurred in connection with industrial
revenue, pollution control, private activity bond or similar financing;
(vii) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(viii) Liens for taxes, assessments or governmental charges or levies not
yet due or which are being contested by the Company in good faith and for
which appropriate reserves have been established in accordance with GAAP;
(ix) Permitted Liens; and
S-11
<PAGE>
(x) Liens for the sole purpose of extending, renewing or replacing in
whole or in part the Debt secured thereby referred to in the foregoing
clauses (i) through (ix), inclusive, or in this clause (x); provided,
however, that the Debt excluded pursuant to this clause (x) shall be
excluded only in an amount not to exceed the principal amount of Debt so
secured at the time of such extension, renewal or replacement (together
with any premium, fee or expense payable in connection with any such
replacement, extension or renewal), and that such extension, renewal or
replacement shall be limited to all or part of the Principal Property,
Debt, shares of capital stock or other ownership interests, as the case may
be, subject to the Lien so extended, renewed or replaced.
Limitation on Sale and Leaseback Transactions. The Company will not, and
will not permit any of its Restricted Subsidiaries to, enter into, assume,
guarantee or otherwise become liable with respect to any Sale and Leaseback
Transaction involving any Principal Property or a significant portion thereof
(whether such Principal Property is owned on the Original Issuance Date or
thereafter acquired), if, immediately after giving effect thereto, the sum,
without duplication, of (a) the aggregate principal amount of all Secured Debt
(other than Excluded Debt) and (b) the aggregate amount of all Attributable
Debt in respect of Sale and Leaseback Transactions (other than Excluded
Transactions) would exceed 15% of the Company's Consolidated Net Tangible
Assets as of the date of determination.
The provisions set forth in the immediately preceding paragraph shall not
apply to any Sale and Leaseback Transaction (an "Excluded Transaction") if:
(i) not later than 270 days from the date of such Sale and Leaseback
Transaction, the Company or such Subsidiary applies an amount not less than
the greater of (A) the net proceeds of the sale of the Principal Property
(or portion thereof) sold pursuant to such Sale and Leaseback Transaction
and (B) the fair value (as determined by the Board of Directors by Board
Resolution) of such Principal Property (or portion thereof) to retire
Funded Debt of the Company or any Subsidiary, or to purchase other property
having a fair value (as determined by the Board of Directors by Board
Resolution) at least equal to the fair value (as determined by the Board of
Directors by Board Resolution) of the Principal Property (or portion
thereof) sold in such Sale and Leaseback Transaction and which other
property constitutes a Principal Property (or portion thereof);
(ii) such Sale and Leaseback Transaction occurs not later than 270 days
after the latest to occur of the date of acquisition by the Company or such
Subsidiary or the completion of construction of the Principal Property (or
portion thereof) sold pursuant to such transaction;
(iii) such Sale and Leaseback Transaction is between the Company and any
Subsidiary or between any Subsidiaries;
(iv) at the time such Sale and Leaseback Transaction is entered into, the
term of the related lease to the Company or such Subsidiary of the
Principal Property (or portion thereof) sold pursuant to such transaction
is three years or less;
(v) such Sale and Leaseback Transaction is a transaction in which the
relevant Principal Property (or significant portion thereof) is sold to and
leased back from any domestic or foreign government or governmental body in
connection with pollution control, industrial revenue, private activity
bond or similar financing;
(vi) such Sale and Leaseback Transaction involves the extension, renewal
or replacement (or successive extensions, renewals or replacements) in
whole or in part of a lease pursuant to a Sale and Leaseback Transaction
referred to in the above clauses (i) through (v); provided, however, that
such lease extension, renewal or replacement shall be limited to all or any
part of the same property leased under the lease so extended, renewed or
replaced (plus improvements to such property).
The Indenture does not restrict (i) the incurrence of unsecured debt by the
Company or any of its Subsidiaries or (ii) except as described under
"Description of Debt Securities--Consolidation, Merger and Transfer of Assets"
in the accompanying Prospectus, the transfer of a Principal Property to a
Subsidiary or any third party.
S-12
<PAGE>
CERTAIN DEFINITIONS
"Attributable Debt" in respect of a Sale and Leaseback Transaction means, as
of the time of determination, the present value (discounted at a rate per
annum equal to the rate per annum at which, at the inception of the lease
involved in such Sale and Leaseback Transaction, the lessee would have been
able to borrow monies in an amount equal to the proceeds of the Principal
Property (or portion thereof) sold pursuant to such Sale and Leaseback
Transaction and for a term substantially similar to the term of such lease
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended)) of the obligation of the lessee thereunder
for rental payments (excluding, however, any amounts required to be paid by
such lessee, whether or not designated as rent or additional rent, on account
of maintenance and repairs, insurance, taxes, assessments, water rates or
similar charges or any amounts required to be paid by such lessee thereunder
contingent upon the amount of sales or similar contingent amounts) during the
remaining term of such lease (including any period for which such lease has
been extended or may, at the option of the lessor, be extended). In the case
of any lease which is terminable by the lessee upon the payment of a penalty,
such rental payments shall also include the lesser of (i) the total amount of
rental payments required to be paid under such lease from the later of the
first date upon which such lease may be so terminated and the date of the
determination of such Attributable Debt, through the remaining term of such
lease (including any period for which such lease has been extended or may, at
the option of the lessor, be extended) and (ii) the amount of such penalty.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Consolidated Net Tangible Assets" means, with respect to the Company and as
of any date of determination, the total assets of the Company and its
consolidated Subsidiaries determined in accordance with GAAP as they appear on
the then most recently prepared consolidated balance sheet of the Company as
of the end of a fiscal quarter, less (i) all liabilities shown on such
consolidated balance sheet that are classified and accounted for as current
liabilities or, in the event that such consolidated balance sheet does not
separately classify current liabilities, that otherwise would be considered
current liabilities under GAAP (excluding current maturities of long-term debt
and current maturities of capitalized lease obligations) and (ii) all assets
shown on such consolidated balance sheet that are classified and accounted for
as intangible assets and all other assets reflected in such consolidated
balance sheet which, although not identified as intangible assets, would be
considered intangible assets under GAAP, including, without limitation,
franchises, patents and patent applications, trademarks, brand names and
goodwill.
"Debt" means indebtedness for borrowed money or indebtedness evidenced by
bonds, notes, debentures or other similar instruments given to finance the
acquisition of any businesses, properties or assets of any kind (including,
without limitation, capital stock or other equity interests in any Person).
"Funded Debt" means, as of any date of determination, any Debt of the
Company or any of its Subsidiaries which, under GAAP, would appear as
indebtedness on a consolidated balance sheet of the Company as of such date
and which matures (or by its terms is extendable or renewable at the option of
the Company or such Subsidiary for a period ending) more than 12 months from
such date.
"GAAP" means generally accepted accounting principles in the United States
as in effect on the date of application thereof.
"Lien" means any mortgage, pledge, lien, charge, security interest,
conditional sale or other title retention agreement or other encumbrance of
any nature whatsoever.
"Original Issuance Date" means March 19, 1998, the date on which the Notes
were originally issued.
"Permitted Lien" means (i) statutory liens or landlords', carriers',
warehousemens', mechanics', suppliers', materialmens', repairmens' or other
like Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate
proceedings, if a reserve or other
S-13
<PAGE>
appropriate provisions, if any, required by GAAP shall have been made
therefor, (ii) pledges or deposits to secure surety, stay, appeal, indemnity,
customs or performance bonds which do not involve indebtedness for borrowed
money and (iii) Liens incurred in connection with repurchase, swap or other
similar agreements entered into for hedging purposes and not for speculation.
"Person" means any individual, corporation, business trust, partnership,
joint venture, joint-stock company, limited liability company, association,
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Principal Property" means any manufacturing, processing, distribution,
research, research and development, warehousing or principal administration
facility (including, without limitation, land, fixtures and equipment) owned
or leased by the Company or any Subsidiary (including any of the foregoing
acquired or leased after the Original Issuance Date) and located within the
United States of America, the gross book value of which exceeds 1% of the
Company's Consolidated Net Tangible Assets at the date of determination, in
each case other than any of the foregoing which the Board of Directors by
Board Resolution determines, together with all other manufacturing,
processing, distribution, research, research and development, warehousing and
principal administration facilities (including, without limitation, land,
fixtures and equipment) previously so determined, are not of material
importance to the business conducted by the Company and its Subsidiaries taken
as an entirety.
"Restricted Subsidiary" means any Subsidiary of the Company which (i) owns
or leases a Principal Property (or portion thereof) and (ii) (A) substantially
all of the property of which is located, or substantially all of the business
of which is carried on, within the United States of America or (B) which is
incorporated or organized under the laws of the United States of America, any
state thereof or the District of Columbia.
"Sale and Leaseback Transaction" means any direct or indirect arrangement,
in one transaction or a series of related transactions, with any Person
providing for the leasing to the Company or a Subsidiary of any Principal
Property (or significant portion thereof), whether owned on the Original
Issuance Date or thereafter acquired, which has been or is to be sold or
transferred by the Company or such Subsidiary to such Person with the
intention of taking back a lease of such Principal Property (or significant
portion thereof).
"Subsidiary" means (i) any corporation at least a majority of the total
voting power of whose outstanding Voting Stock is owned, directly or
indirectly, at the date of determination by the Company and/or one or more
other Subsidiaries of the Company, (ii) any partnership in which the Company
and/or one or more other Subsidiaries of the Company owns, directly or
indirectly, at the date of determination at least a majority interest in the
equity capital or profits of such partnership, or (iii) any other Person in
which the Company and/or one or more other Subsidiaries of the Company,
directly or indirectly, at the date of determination, (x) owns at least a
majority ownership interest or (y) has the power to elect or direct the
election of at least a majority of the directors or other governing body of
such Person.
"Voting Stock" means, with respect to any corporation, securities of any
class or series of such corporation, the holders of which are ordinarily, in
the absence of contingencies, entitled to vote for the election of directors
of the corporation.
DEFEASANCE AND COVENANT DEFEASANCE; SATISFACTION AND DISCHARGE
The Notes will be subject to defeasance and covenant defeasance as described
in the accompanying Prospectus under "Description of Debt Securities--
Satisfaction, Discharge and Defeasance--Defeasance and Covenant Defeasance."
In that regard, the covenants described above under "--Certain Covenants" and
certain other covenants in the Indenture, will be subject to such covenant
defeasance. If the Company elects to effect defeasance or covenant defeasance
with respect to the Notes, the Company will be required to effect such
defeasance or covenant defeasance, as the case may be, with respect to all of
the Notes then Outstanding. The provisions described in the accompanying
Prospectus under "Description of Debt Securities--Satisfaction, Discharge and
Defeasance--Satisfaction and Discharge" will also be applicable with respect
to the Notes.
S-14
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company has agreed to sell to the Underwriters
named below (the "Underwriters"), and the Underwriters have severally agreed
to purchase, the principal amount of Notes set forth opposite their respective
names below.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITERS AMOUNT
------------ ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................... $ 40,000,000
Morgan Stanley & Co. Incorporated.............................. 40,000,000
BancAmerica Robertson Stephens................................. 20,000,000
------------
Total..................................................... $100,000,000
============
</TABLE>
In the Purchase Agreement, the several Underwriters named therein have
agreed, subject to the terms and conditions set forth therein, to purchase all
of the Notes being sold pursuant to the Purchase Agreement if any such Notes
are purchased. The Purchase Agreement provides that, in the event of a default
by an Underwriter named therein, the purchase commitments of the non-
defaulting Underwriters named therein may in certain circumstances be
increased.
The Underwriters have advised the Company that they propose initially to
offer the Notes offered hereby to the public at the public offering price set
forth on the cover page of this Prospectus Supplement and to certain dealers
at such price less a concession not in excess of .4% of the principal amount
thereof. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of .25% of the principal amount thereof on sales to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The Notes constitute a new issue of securities with no established trading
market. The Company does not intend to apply for listing of the Notes on a
national securities exchange. The Company has been advised by the Underwriters
that the Underwriters intend to make a market in the Notes, but the
Underwriters are not obligated to do so and may discontinue market-making at
any time without notice. No assurance can be given as to whether or not a
trading market for the Notes will develop or as to the liquidity of any
trading market for the Notes which may develop.
Until the distribution of the Notes is completed, rules of the Securities
and Exchange Commission may limit the ability of the Underwriters and certain
selling group members, if any, to bid for and purchase the Notes. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Notes. Such transactions consist
of bids or purchases for the purpose of pegging, fixing or maintaining the
price of the Notes.
If the Underwriters create a short position in the Notes in connection with
this offering (i.e., they sell more Notes than are set forth on the cover page
of this Prospectus Supplement), the Underwriters may reduce that short
position by purchasing Notes in the open market.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members, if any. This means that if the Underwriters purchase
Notes in the open market to reduce the Underwriters' short position or to
stabilize the price of the Notes, they may reclaim the amount of the selling
concession from any Underwriter or selling group member who sold those Notes
as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
S-15
<PAGE>
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Notes. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Underwriters will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
As described above under "Use of Proceeds," the Company intends to apply the
net proceeds from the offering made hereby to repay borrowings under the
Credit Agreement. Bank of America National Trust and Savings Association
("BofA") is a lender and agent for the other lenders under the Credit
Agreement. Because BofA is an affiliate of one of the Underwriters, and
because more than 10% of the net proceeds from the offering made hereby will
be used to repay loans made by BofA under the Credit Agreement, this offering
is being made pursuant to Conduct Rule 2710(c)(8) of the National Association
of Securities Dealers, Inc.
LEGAL MATTERS
The validity of the Notes will be passed upon by Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations), New
York, New York. Brown & Wood LLP, San Francisco, California, will act as
counsel to the Underwriters.
EXPERTS
The consolidated financial statements of Sola International Inc. appearing
in Sola International Inc.'s Annual Report (Form 10-K) for the year ended
March 31, 1997, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein
by reference. Such consolidated 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.
The combined financial statements of the Worldwide Ophthalmic Group of
American Optical Corporation appearing in Exhibit 99.2 of Sola International
Inc.'s Current Report (Form 8-K/A) dated as of May 6, 1996, 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.
S-16
<PAGE>
PROSPECTUS
$250,000,000
SOLA INTERNATIONAL INC.
DEBT SECURITIES AND COMMON STOCK
----------------
Sola International Inc. (the "Company" or "Sola") may offer, issue and sell
from time to time, together or separately, (i) senior, senior subordinated or
subordinated debt securities (the "Debt Securities"), consisting of
debentures, notes and/or other evidences of indebtedness, and (ii) shares of
its common stock, $.01 par value per share (the "Common Stock"), in each case,
in amounts, at prices and on such terms to be determined at the time of the
offering. The Common Stock and the Debt Securities are collectively called the
"Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series and/or issuances and will have an aggregate public offering price
of up to $250,000,000 (or the equivalent thereof, based on the applicable
exchange rate at the time of sale, in one or more foreign currencies, currency
units or composite currencies as shall be designated by the Company). Certain
specific terms of the particular Securities in respect of which this
Prospectus is being delivered are set forth in the accompanying Prospectus
Supplement (the "Prospectus Supplement"), including, where applicable, (i) in
the case of Debt Securities, the specific title, the aggregate principal
amount, the aggregate offering price, ranking as senior debt or subordinated
debt, the denomination, the maturity, the premium, if any, the interest rate
(which may be fixed, floating or adjustable), if any, the time and method of
calculating payment of interest, if any, the place or places where principal
of, premium, if any, and interest, if any, on such Debt Securities will be
payable, the currency in which principal of, premium, if any, and interest, if
any, on such Debt Securities will be payable, any terms of redemption at the
option of the Company or repayment at the option of the holder thereof, any
sinking fund provisions, the terms, if any, for conversion or exchange into
other securities, listing, if any, on a securities exchange, any other special
terms and the public offering price and any other terms of the offering and
sale thereof and (ii) in the case of Common Stock, the aggregate number of
shares offered, the public offering price and other terms of the offering and
sale thereof. If so specified in the applicable Prospectus Supplement, Debt
Securities of a series may be issued in whole or in part in the form of one or
more temporary or permanent global securities.
Unless otherwise specified in a Prospectus Supplement, the Debt Securities,
when issued, will be unsecured and unsubordinated obligations of the Company
and will rank pari passu in right of payment with all other unsecured and
unsubordinated indebtedness of the Company. The Common Stock is listed on the
New York Stock Exchange (the "NYSE") under the trading symbol "SOL." Any
Common Stock sold pursuant to a Prospectus Supplement will be listed on such
exchange, subject to official notice of issuance. This Prospectus may not be
used to consummate sales of Securities unless accompanied by a Prospectus
Supplement.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.
----------------
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.
----------------
The Securities may be sold to or through underwriters or dealers as
designated from time to time, to other purchasers directly or through agents
designated from time to time or through a combination of such methods. If
agents of the Company or any dealers or underwriters are involved in the sale
of the Securities in respect of which this Prospectus is being delivered, the
names of such agents, dealers or underwriters and any applicable commissions
or discounts will be set forth in or may be calculated from the Prospectus
Supplement with respect to such Securities. See "Plan of Distribution."
----------------
The date of this Prospectus is March 10, 1998.
<PAGE>
Certain persons, including any underwriters, participating in this offering
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Securities. Such transactions may include stabilizing, the
purchase of Securities to cover syndicate short positions and the imposition
of penalty bids. For a description of these activities, see "Plan of
Distribution."
----------------
AVAILABLE INFORMATION
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, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material can 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. The Commission also maintains a Web site
(http://www.sec.gov) from which such reports, proxy statements and other
information may be obtained. In addition, reports, proxy statements and other
information concerning the Company may be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of which this Prospectus constitutes a part. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which were omitted in accordance with
the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement and to the schedules
and exhibits filed therewith. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission are not necessarily complete, and in
each instance reference is made to the copy of such document so filed. Each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company pursuant to
the Exchange Act are incorporated herein by reference:
1. the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997 (the "Form 10-K");
2. the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997;
3. the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997;
4. the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997;
5. the Company's Current Report on Form 8-K, dated as of February 23,
1998; and
6. Exhibit 99.2 to the Company's Current Report on Form 8-K/A, dated as
of May 6, 1996.
All other documents filed by the Company pursuant to Sections 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 the offering of the Securities shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the respective dates of the filing of such documents.
2
<PAGE>
Any statement contained herein or in a document all or a portion of which is
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, in the accompanying Prospectus Supplement
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
such 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 each person, including a
beneficial owner of the Securities, to whom a copy of this Prospectus has been
delivered, upon the written or oral request of any such person, a copy of any
and all of the documents incorporated by reference in this Prospectus, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should
be directed to: Corporate Secretary, Sola International Inc., 2420 Sand Hill
Road, Suite 200, Menlo Park, California 94025; telephone number: (650) 324-
6868.
THE COMPANY
Sola designs, manufactures and distributes a broad range of eyeglass lenses,
primarily focusing on the 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 (comprised primarily of Australia, Asia and
South America).
The Company's principal executive offices are located at 2420 Sand Hill
Road, Suite 200, Menlo Park, California 94025 and its telephone number at that
location is (650) 324-6868.
3
<PAGE>
RISK FACTORS
In addition to the other information contained and incorporated by reference
in this Prospectus, prospective investors should carefully consider the
following risk factors before making an investment in the Notes offered
hereby.
HIGHLY COMPETITIVE INDUSTRY AND EFFECT OF NEW PRODUCTS ON RESULTS
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. The Company's quarterly results
can be affected by the ability to generate sales from new products as
anticipated and the costs of such introductions.
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" included 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.
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 results of operations 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. 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.
INTERNATIONAL OPERATIONS
The Company operates manufacturing and distribution sites in three 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 the fiscal year ended March 31, 1997
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.
4
<PAGE>
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 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" included in the Company's Form 10-K.
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.
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 Credit Agreement with Bank of America
National Trust and Savings Association restricts and limits the payment of
dividends on the Common Stock. See "Market for the Registrant's Common Equity
and Related Stockholder Matters" in the Company's Form 10-K.
ANTITAKEOVER PROVISIONS
The Company's Amended and Restated Certificate of Incorporation and Amended
and Restated 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, 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.
5
<PAGE>
USE OF PROCEEDS
Unless otherwise indicated in any accompanying Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, which may include capital expenditures, the
repayment of indebtedness, working capital and acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the periods indicated. The ratios for the periods ended prior to December 1,
1993, the date of the Company's purchase of the Sola business unit (the
"Predecessor Business") of Pilkington plc, are those of the Predecessor
Business. The historical financial data, including the ratios set forth below,
of the Predecessor Business and the Company are not comparable in all
respects.
<TABLE>
<CAPTION>
PREDECESSOR
SOLA INTERNATIONAL INC. BUSINESS
-------------------------------------------- -----------------
NINE FOUR EIGHT FISCAL
MONTHS MONTHS MONTHS YEAR
ENDED ENDED ENDED ENDED
DEC. 31, FISCAL YEAR ENDED MAR. 31, MAR. 31, NOV. 30, MAR. 31,
-------- -------------------------- -------- -------- --------
1997 1997 1996 1995 1994(2) 1993 1993
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges(1)....... 4.30 3.24 4.36 2.03 -- 4.86 4.86
</TABLE>
- --------
(1) In calculating this ratio, earnings consist of income (loss) before income
taxes plus fixed charges. Fixed charges consist of interest expense, and
amortization of deferred financing fees, whether expensed or capitalized,
plus the portion of rental expense under operating leases which has been
deemed by the Company to be representative of the interest factor.
(2) Earnings were insufficient to cover fixed charges by $60.4 million due to
the Company recording two non-recurring, noncash charges associated with
the acquisition by the Company of the Sola business unit of Pilkington plc
on December 1, 1993: (i) a $32.9 million charge for the amortization
associated with an inventory write up to fair value and (ii) a $40.0
million charge for the write-off of in-process research and development.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by a Prospectus Supplement (the "Offered Debt Securities") will be
described in the applicable Prospectus Supplement. To the extent that any
particular terms of the Debt Securities described in a Prospectus Supplement
differ from any of the terms described herein, then such terms described
herein shall be deemed to have been superseded by such Prospectus Supplement.
The Offered Debt Securities are to be issued in one or more series under an
Indenture as amended or supplemented from time to time (the "Indenture")
between the Company and State Street Bank and Trust Company of California,
N.A., as Trustee. The term "Trustee," as used herein shall mean State Street
Bank and Trust Company of California, N.A.; if at any time there is more than
one Trustee acting under the Indenture, the term "Trustee" as used herein with
respect to Debt Securities of any particular series shall mean the Trustee
with respect to the Offered Debt Securities of such series. The Indenture has
been filed as an exhibit to the Registration Statement of which this
Prospectus is a part and is subject to and governed by the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"). The following summaries of
certain provisions of the Indenture and the Offered Debt Securities do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all provisions of the Indenture, including the definitions
therein of certain terms and of those terms made a part thereof by the Trust
Indenture Act. Wherever particular provisions or defined terms of the
Indenture are referred to, such provisions or defined terms are incorporated
herein by reference.
6
<PAGE>
GENERAL
The Debt Securities will be unsecured obligations of the Company. Unless
otherwise stated in a Prospectus Supplement, the Debt Securities will be
unsubordinated obligations of the Company and will rank pari passu in right of
payment with all other unsecured and unsubordinated indebtedness of the
Company. The Company may also issue Debt Securities ("Subordinated Debt
Securities") which are subordinated in right of payment, in the manner and to
the extent described in the applicable Prospectus Supplement, to all existing
and future Senior Indebtedness (as defined in the applicable Prospectus
Supplement) of the Company.
The Company conducts a significant portion of its business through its
direct and indirect, domestic and foreign subsidiaries. Accordingly, the cash
flow of the Company and the consequent ability to service its debt, including
the Debt Securities, are partially dependent on the earnings of such
subsidiaries and the Debt Securities will be effectively subordinated to all
existing and future indebtedness, guarantees and other liabilities of such
subsidiaries.
The Debt Securities to be offered by this Prospectus are limited to
$250,000,000 in aggregate public offering price. The Indenture does not limit
the amount of Debt Securities that may be issued thereunder and provides that
Debt Securities may be issued thereunder from time to time in one or more
series. All Debt Securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent
of any Holder, for issuances of additional Debt Securities of such series.
(Section 301) The Indenture provides that there may be more than one Trustee
thereunder, each with respect to one or more series of Debt Securities.
Reference is made to the Prospectus Supplement relating to the Offered Debt
Securities for the following terms, where applicable, of the Offered Debt
Securities: (1) the title of the Offered Debt Securities or series of which
they are a part; (2) the aggregate principal amount of the Offered Debt
Securities and any limit on the aggregate principal amount of the Offered Debt
Securities; (3) the Person to whom any interest on an Offered Debt Security of
the series shall be payable, if other than the Person in whose name that
Offered Debt Security (or one or more predecessor Debt Securities) is
registered at the close of business on the Regular Record Date for such
series, (4) the date or dates, or the method or methods, if any, by which such
date or dates shall be determined, on which the principal of (and premium, if
any, on) such Offered Debt Securities will be payable; (5) the rate or rates
(which may be fixed, floating or adjustable) or the method of determination
thereof, at which the Offered Debt Securities will bear interest, if any, the
date or dates from which such interest will accrue or method by which such
date or dates shall be determined, the Interest Payment Dates on which any
such interest will be payable, the Regular Record Date, if any, for any such
interest payable on any Interest Payment Date, or the method by which such
date or dates shall be determined, whether and under what circumstances
Additional Amounts on such Offered Debt Securities will be payable and the
basis upon which interest shall be calculated if other than that of a 360-day
year of twelve 30-day months; (6) the place or places where the principal of
and any premium and interest on such Offered Debt Securities will be payable;
(7) the period or periods within which, the price or prices at which, the
currencies, currency units or composite currencies in which, and the other
terms and conditions upon which such Offered Debt Securities may be redeemed,
in whole or in part, at the option of the Company; (8) the obligation, if any,
of the Company to redeem, repay or purchase any of such Offered Debt
Securities pursuant to any sinking fund or analogous provisions or at the
option of a Holder thereof, and the period or periods within which, the price
or prices at which and the other terms and conditions upon which any of such
Offered Debt Securities will be redeemed, repaid or purchased, in whole or in
part, pursuant to any such obligation; (9) the denominations in which such
Offered Debt Securities will be issuable, if other than denominations of
$1,000 and any integral multiple thereof; (10) if other than the currency of
the United States of America, the foreign currencies, currency units or
composite currencies in which the principal of or any premium or interest on
such Offered Debt Securities will be payable (and the manner in which the
equivalent of the principal amount thereof in the currency of the United
States of America is to be determined for any purpose, including for the
purpose of determining the principal amount deemed to be outstanding at any
time); (11) if the amount of payments of principal of or any premium or
interest on such Offered Debt Securities ("Indexed Debt Securities") may be
determined with reference to an index, pursuant to a formula, or pursuant to
other methods,
7
<PAGE>
the manner in which such amounts will be determined; (12) if the principal of
or any premium or interest on such Offered Debt Securities is to be payable,
at the election of the Company or a Holder thereof, in one or more currencies,
currency units or composite currencies other than those in which the Offered
Debt Securities are stated to be payable, the currencies, currency units or
composite currencies in which payment of any such amount as to which such
election is made will be payable, and the periods within which and the terms
and conditions upon which such election is to be made; (13) if other than the
entire principal amount thereof, the portion of the principal amount of such
Offered Debt Securities which will be payable upon declaration of acceleration
of the Maturity thereof pursuant to the Indenture or, if applicable, the
portion of the principal amount of Offered Debt Securities that is convertible
into or exchangeable for other securities or the method by which such portion
will be determined; (14) if applicable, that such Offered Debt Securities are
subject to defeasance or covenant defeasance (each as hereinafter defined) as
provided in the Indenture; (15) whether such Offered Debt Securities are
convertible into or exchangeable for Common Stock or other securities and the
terms and conditions upon which such conversion or exchange may be effected;
(16) whether any of the Offered Debt Securities will be issued in whole or in
part in book-entry form and, in such case, the depositary for such book-entry
security or securities and the circumstances, if any, in addition to the
circumstances (if applicable) described below under "--Book-Entry Debt
Securities," under which any such book-entry Debt Securities may be registered
in the name of a Person other than such depositary or its nominee; (17)
whether Offered Debt Securities are to be issuable as registered securities,
as bearer securities or alternatively as bearer and registered securities and
whether the bearer securities are to be issuable with coupons, without coupons
or both, and any restrictions applicable to the offer, sale or delivery of the
bearer securities and the terms, if any, upon which bearer securities of the
series may be exchanged for registered securities of the series and vice
versa; (18) if any of the Offered Debt Securities are to be issuable as bearer
securities, the date as of which any such bearer securities shall be dated, if
other than the date of original issuance of the first of such bearer
securities to be issued; (19) provisions, if any, granting special rights to
the Holders of such Offered Debt Securities upon the occurrence of such events
as may be specified; (20) any addition to, or modification or deletion of, any
Events of Default or covenants provided for with respect to the Offered Debt
Securities; (21) the terms, if any, pursuant to which the Offered Debt
Securities will be made subordinate in right of payment to all Senior
Indebtedness of the Company, and the definition of any such Senior
Indebtedness; (22) whether the payment of principal, premium and interest, if
any, Additional Amounts, if any, and other amounts due under the Indenture,
and performance of the Company's other obligations under the Indenture, will
be guaranteed by one or more guarantors, including subsidiaries of the
Company; and (23) any other terms of such Offered Debt Securities, whether or
not consistent with the provisions of the Indenture. (Section 301)
Unless otherwise indicated in the Prospectus Supplement relating to Offered
Debt Securities, the principal of, premium, if any, or interest, if any, on
the Debt Securities initially will be payable, and the Debt Securities
initially will be exchangeable and transfers thereof initially will be
registrable, at the office of the Trustee specified under "--Concerning the
Trustee," provided that, at the option of the Company, payment of interest may
be made by check mailed to the address of the Person entitled thereto as it
appears in the Security Register or by wire transfer to an account located in
the United States maintained by the Person entitled thereto. (Sections 305,
307 and 1002). Any payment of principal and any premium or interest required
to be made on an Interest Payment Date, Redemption Date or at Maturity which
is not a Business Day at any Place of Payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the Interest Payment Date, Redemption Date or at
Maturity, as the case may be, and no interest shall accrue for the period from
and after such Interest Payment Date, Redemption Date or Maturity. (Section
113)
All monies paid by the Company to the Trustee for the payment of principal
of (and premium, if any) or interest, if any, on any Debt Security that remain
unclaimed by the Holder of such Debt Security at the end of two years after
such principal, premium or interest shall become due and payable will be
repaid by the Trustee to the Company upon Company Request, and such Holder
will thereafter look only to the Company for payment thereof. (Section 1003)
Unless otherwise indicated in the Prospectus Supplement relating to Offered
Debt Securities, the Debt Securities will be issued only in fully registered
form, without coupons, in denominations of $1,000 or any
8
<PAGE>
integral multiple thereof. (Section 302). No service charge will be made for
registration of any transfer or exchange of the Debt Securities, but the
Company may, subject to certain exceptions, require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. (Section 305)
Debt Securities may be issued under the Indenture as Original Issue Discount
Securities (as defined below) to be offered and sold at a substantial discount
from their stated principal amount. In addition, under Treasury Regulations it
is possible that Debt Securities which are offered and sold at their stated
principal amount would, under certain circumstances, be treated as issued at
an original issue discount for federal income tax purposes. Federal income tax
consequences and other special considerations applicable to any such Original
Issue Discount Securities (or other Debt Securities treated as issued at an
original issue discount) will be described in the Prospectus Supplement
relating thereto. "Original Issue Discount Security" means a security,
including any security that does not provide for the payment of interest prior
to Maturity, which is issued at a price lower than the principal amount
thereof and which provides that upon redemption or acceleration of the Stated
Maturity thereof an amount less than the principal amount thereof shall become
due and payable. (Section 101)
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to Debt
Securities of any series: (a) failure to pay principal of or premium, if any,
on any Debt Security of that series when due; (b) failure to pay any interest
on any Debt Security of that series when due, continued for 30 days; (c)
failure to deposit any sinking fund payment, when due, in respect of any Debt
Security of that series; (d) failure to perform any other covenant of the
Company in the Indenture (other than a covenant included in the Indenture
solely for the benefit of a series of Debt Securities other than that series),
continued for 60 days after written notice as provided in the Indenture; (e)
default under any bond, debenture, note, mortgage, indenture or other
instrument under which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by the Company (or by a
Significant Subsidiary of the Company, the repayment of which the Company has
guaranteed or for which the Company is directly responsible or liable as
obligor or guarantor), having an aggregate principal amount outstanding of at
least $20,000,000, whether such indebtedness exists at the date of the
Indenture or shall thereafter be created, which default shall have resulted in
such indebtedness being declared due and payable prior to the date on which it
would otherwise have become due and payable, without such indebtedness being
discharged or such acceleration having been rescinded or annulled within 30
days after written notice as provided in the Indenture; (f) certain events in
bankruptcy, insolvency or reorganization of the Company; and (g) any other
Event of Default provided with respect to Debt Securities of that series.
(Section 501). No Event of Default with respect to a particular series of Debt
Securities issued under the Indenture necessarily constitutes an Event of
Default with respect to any other series of Debt Securities issued thereunder.
If an Event of Default with respect to Outstanding Debt Securities of any
series shall occur and be continuing, either the Trustee or the Holders of at
least 25% in aggregate principal amount of the Outstanding Debt Securities of
that series may declare the principal of (or, if any of the Debt Securities of
that series are Original Issue Discount Securities or Indexed Debt Securities,
such portion of the principal amount as may be specified in the terms of that
series) and accrued interest on all the Debt Securities of that series to be
due and payable immediately by notice in writing to the Company (and to the
Trustee, if given by the Holders). At any time after a declaration of
acceleration with respect to Debt Securities of any series has been made, and
before a judgment or decree based on acceleration has been obtained, the
Holders of a majority in principal amount of the Outstanding Debt Securities
of that series may, under certain circumstances, rescind and annul such
acceleration by written notice. (Section 502). For information as to waiver of
defaults, see "--Modification and Waiver."
Reference is made to the Prospectus Supplement relating to each series of
Offered Debt Securities which are Original Issue Discount Securities or
Indexed Debt Securities for the particular provisions relating to acceleration
of the Maturity of a portion of the principal amount of such Original Issue
Discount Securities or Indexed Debt Securities upon the occurrence of an Event
of Default and the continuation thereof.
9
<PAGE>
The Trustee shall, within 90 days after the occurrence of a default with
respect to Debt Securities of any series, give all Holders of Debt Securities
of such series then Outstanding notice of all uncured defaults known to it
(the term default to mean the events specified above without grace periods),
provided that, except in the case of a default in the payment of principal of
or any premium or interest on any Debt Security of any series, or in the
payment of any sinking fund installment with respect to Debt Securities of any
series, the Trustee shall be protected in withholding such notice if it in
good faith determines that the withholding of such notice is in the interest
of all Holders of Debt Securities of such series then outstanding. (Trust
Indenture Act of 1939)
The Indenture provides that the Trustee will be under no obligation, subject
to the duty of the Trustee during a default to act with the required standard
of care, to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders of the Debt Securities of any
series, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against costs, expenses and liabilities which might be
incurred by it in compliance with such request. (Section 601). Subject to such
provisions for indemnification of the Trustee and to certain other conditions,
the Holders of a majority in principal amount of the Outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Debt Securities of that series. (Section 512)
Under the Indenture, the Company is required to furnish to the Trustee
annually a statement by certain officers of the Company to the effect that to
the best of their knowledge the Company is not in default in the fulfillment
of any of its obligations under the Indenture or, if there has been a default
in the fulfillment of any such obligation, specifying the nature and status of
such default. (Section 1005)
COVENANTS
The particular covenants, if any, relating to any series of Debt Securities
will be described in the Prospectus Supplement relating to such series. If any
such covenants are described, the Prospectus Supplement will also state
whether the "covenant defeasance" provisions described below also apply.
CONSOLIDATION, MERGER AND TRANSFER OF ASSETS
Under the Indenture, the Company may not consolidate with or merge with or
into any other Person, and the Company may not sell, lease or convey all or
substantially all of its assets to another Person, unless (i) (a) in the case
of a merger, the Company is the surviving corporation in the merger, or (b)
the Person (if other than the Company) surviving the merger, formed by such
consolidation or which acquires such assets is an entity organized and
existing under the laws of the United States of America, any state thereof or
the District of Columbia and expressly assumes payment of the principal of and
any premium and interest on the Debt Securities and the performance and
observance of all of the covenants and conditions of the Indenture to be
performed or observed by the Company and (ii) immediately thereafter, no Event
of Default or event which, with notice or lapse of time or both, would
constitute an Event of Default shall have occurred and shall be continuing.
(Article Eight)
In the event of any transaction described in and complying with the
conditions listed in the immediately preceding paragraph in which the Company
is not the surviving company, the successor entity would be substituted for,
and may exercise every right and power of the Company and, except in the case
of a lease, the Company would be relieved of any obligations and covenants
under the Indenture and the Debt Securities.
SATISFACTION, DISCHARGE AND DEFEASANCE
Satisfaction and Discharge. The Indenture, with respect to any series of
Debt Securities (except for certain specified surviving obligations, including
(A) any rights of registration of transfer or exchange and (B) rights to
receive the principal, premium, if any, and interest, if any, on the Debt
Securities) will be discharged and canceled upon the satisfaction of certain
conditions, including the following: (i) all Debt Securities of such series
10
<PAGE>
that have been theretofore authenticated and delivered shall have been
delivered to the Trustee for cancellation or (ii) (a) all Debt Securities of
such series not theretofore delivered to the Trustee for cancellation have
become due or payable, will become due and payable at their Stated Maturity
within one year or are to be called for redemption within one year and (b) the
deposit with such Trustee of an amount sufficient to pay the principal,
premium, if any, and interest, if any, to the Stated Maturity or Redemption
Date, as the case may be, of all Debt Securities of such series. (Section 401)
Defeasance and Covenant Defeasance. If so specified in the Prospectus
Supplement with respect to Debt Securities of any series, the Company at its
option, (i) will be discharged from any and all obligations in respect of the
Debt Securities of or any Debt Securities within such series (except for
certain obligations to register the transfer or exchange of Debt Securities of
such series, replace stolen, lost or mutilated Debt Securities of such series,
maintain certain offices or agencies in each Place of Payment and hold moneys
for payment in trust) ("defeasance"), or (ii) will not be subject to certain
restrictive covenants included in the Indenture and, if applicable, the
applicable Prospectus Supplement with respect to the Debt Securities of or any
Debt Securities within such series ("covenant defeasance"), in each case if
the Company irrevocably deposits with the Trustee, in trust, money or
Government Obligations which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money in an
amount sufficient (in the opinion of independent public accountants or an
independent investment banking firm) to pay all the principal (including any
mandatory sinking fund payments) of, and premium, if any, and interest, if
any, on, the Debt Securities of such series on the dates such payments are due
in accordance with the terms of such Debt Securities. To exercise either
defeasance or covenant defeasance, among other things, (1) in the case of
defeasance, the Company shall have delivered to the Trustee an opinion of
independent counsel stating that (a) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (b) since the
date of the Indenture, there has been a change in the applicable federal
income tax law or the judicial interpretation thereof by a U.S. federal court
of competent jurisdiction, in either case to the effect that, and based
thereon such opinion of independent counsel shall confirm that, the Holders of
the Outstanding Debt Securities of such series will not recognize income, gain
or loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance had not
occurred, (2) in the case of covenant defeasance, the Company shall have
delivered to the Trustee an opinion of independent counsel to the effect that
the Holders of the Outstanding Debt Securities of such series will not
recognize income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such covenant defeasance had not occurred and (3) no Event of Default, or
event which with notice or lapse of time or both would become an Event of
Default, with respect to the Debt Securities of such series shall have
occurred and shall be continuing on the date of such deposit or, insofar as
Events of Default of the type described in clause (f) of the first paragraph
under "Events of Default" above are concerned, at any time during the period
ending on the 91st day after the date of such deposit (it being understood
that the condition contained in this clause (3) shall not be deemed satisfied
until the expiration of such period). Unless otherwise indicated in the
Prospectus Supplement relating to the Offered Debt Securities, the provisions
for subordination of Subordinated Debt Securities are subject to the
provisions for satisfaction and discharge, defeasance and covenant defeasance.
(Article Fourteen)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of each series affected by
such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby, (a) change the Stated Maturity of the principal of
(or premium, if any) or any installment of principal of or interest on any
Debt Security or the date, if any, on which any Debt Security is subject to
repayment at the option of the Holder, (b) reduce the principal amount of, or
any premium or interest on, or the rate of interest on, any Debt Security, (c)
reduce the amount of principal of an Original Issue Discount Security or other
Debt Security payable upon acceleration of the Maturity thereof, (d) change
the place or currency of payment of principal of, or any premium
11
<PAGE>
or interest on, any Debt Security, (e) impair the right to institute suit for
the enforcement of any payment on or after the Maturity thereof, (f) reduce
the percentage in principal amount of Outstanding Debt Securities of any
series, the consent of whose Holders is required for modification or amendment
of the Indenture, (g) reduce the percentage in principal amount of Outstanding
Debt Securities of any series, the consent of whose Holders is required for
any waiver (of compliance with certain provisions of the Indenture or certain
defaults thereunder and their consequences) provided for in the Indenture or
(h) modify any of the provisions relating to supplemental indentures, waiver
of past defaults or waiver of certain covenants, except to increase any such
percentage or to provide that certain other provisions of the Indenture cannot
be modified or waived without the consent of the Holder of each outstanding
Debt Security affected thereby or, in the case of the Subordinated Debt
Securities, modify any of the provisions of the Indenture relating to the
subordination or to the applicable definition of "Senior Indebtedness" in a
manner adverse to the Holders of such Subordinated Debt Securities. (Section
902)
Modifications and amendments of the Indenture may be made by the Company and
the Trustee without the consent of any Holder of Debt Securities for, among
other things, any of the following purposes: (i) to evidence the succession of
another Person to the Company and the assumption by any such successor of the
covenants of the Company in the Indenture and in the Debt Securities as
obligor under the Indenture; (ii) to add to the covenants of the Company for
the benefit of the Holders of all or any series of Debt Securities or to
surrender any right or power conferred upon the Company in the Indenture;
(iii) to add additional Events of Default; (iv) to add to or change any
provisions of the Indenture to such extent as shall be necessary to permit or
facilitate the issuance of Debt Securities in bearer form, registrable or not
registrable as to principal, and with or without coupons, to change or
eliminate any restrictions on the payment of principal of, or any premium or
interest on, bearer securities, to permit bearer securities to be issued in
exchange for registered securities, to permit bearer securities to be
exchanged for bearer securities of other authorized denominations, or to
permit or facilitate the issuance of Debt Securities in uncertificated form,
provided that any such action shall not adversely affect the interests of the
Holders of Debt Securities of any series in any material respect; (v) to add
to, change or eliminate any of the provisions of the Indenture in respect of
one or more series of Debt Securities, provided that, any such addition,
change or elimination (1) shall neither (A) apply to any Debt Security of any
series created prior to the execution of such supplemental indenture and
entitled to the benefit of such provision nor (B) modify the rights of the
Holder of any such Debt Security with respect to such provision or (2) shall
become effective only when there is no such Debt Security outstanding; (vi) to
evidence and provide for the acceptance of appointment under the Indenture by
a successor Trustee with respect to the Debt Securities of one or more series
and to add to or change any of the provisions of the Indenture as shall be
necessary to provide for or facilitate the administration of the trusts under
the Indenture by more than one Trustee; (vii) to secure the Debt Securities;
(viii) to supplement any of the provisions of the Indenture to such extent as
shall be necessary to permit or facilitate the defeasance, covenant defeasance
or satisfaction and discharge of any series of Debt Securities pursuant to the
Indenture; provided, that any such action shall not adversely affect the
interests of the Holders of Debt Securities of such series or any other series
of Debt Securities in any material respect; (ix) to cure any ambiguity, to
correct or supplement any provision in the Indenture which may be inconsistent
with any other provision in the Indenture, or to make any other provisions
with respect to matters or questions arising under the Indenture, provided
that such action shall not adversely affect the interests of the Holders of
Debt Securities of any series in any material respect; (x) to add a guarantor
or guarantors for any or all series of Debt Securities; (xi) to comply with
the requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act of 1939; and
(xii) to establish the form or terms of any series of Debt Securities.
(Section 901)
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
Debt Securities of that series waive any past default under the Indenture with
respect to that series, except a default in the payment of the principal of or
premium, if any, or interest on any Debt Security of that series or in respect
of a covenant or provision which under the Indenture cannot be modified or
amended without the consent of the Holder of each Outstanding Debt Security of
that series affected. (Section 513)
12
<PAGE>
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or any other security will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Stock or any other
security, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option
of the Holders or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Debt Securities.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the law of the State of New York, but without regard to
principles of conflicts of law. (Section 112)
CONCERNING THE TRUSTEE
State Street Bank and Trust Company of California, N.A., through its
affiliate's corporate trust office currently located at 61 Broadway, 15th
Floor, New York, New York 10006, will act as Trustee for the benefit of the
Holders of the Debt Securities under the Indenture.
The Trustee may resign or be removed with respect to one or more series of
Debt Securities and a successor Trustee may be appointed to act with respect
to such series. (Section 610). In the event that two or more Persons are
acting as Trustee with respect to different series of Debt Securities under
the Indenture, each such Trustee shall be a Trustee of a trust thereunder
separate and apart from the trust administered by any other such Trustee
(Section 611), and any action described herein to be taken by the "Trustee"
may then be taken by each such Trustee with respect to, and only with respect
to, the one or more series of Debt Securities for which it is Trustee.
BOOK-ENTRY DEBT SECURITIES
Debt Securities of a series may be issued in whole or in part in global form
that will be deposited with, or on behalf of, a depository identified in the
applicable Prospectus Supplement. Global Debt Securities may be issued in
either registered or bearer form and in either temporary or permanent form
(each a "Global Security"). Unless otherwise provided in the applicable
Prospectus Supplement, Debt Securities that are represented by a Global
Security will be issued in denominations of $1,000 and any integral multiple
thereof, and will be issued in registered form only, without coupons. Payments
of principal of (and premium, if any) and interest, if any, on Debt Securities
represented by a Global Security will be made by the Company to the Trustee,
and then by such Trustee to the depository.
The Company anticipates that any Global Securities will be deposited with,
or on behalf of, The Depository Trust Company ("DTC"), New York, New York,
that such Global Securities will be registered in the name of DTC's nominee,
and that the following provisions will apply to the depository arrangements
with respect to any such Global Securities. Additional or differing terms of
the depository arrangement will be described in the Prospectus Supplement.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the Debt Securities represented by such Global Security for all purposes under
the Indenture. Except as provided below, owners of beneficial interests in a
Global Security will not be entitled to have Debt Securities represented by
such Global Security registered in their names, will not receive or be
entitled to receive physical delivery of Debt Securities in certificated form
and will not be considered the owners or Holders thereof under the Indenture.
The laws of some states may require that certain purchasers of securities take
physical delivery of such securities in certificated form; such laws may limit
the transferability of beneficial interests in a Global Security.
If (i) DTC is at any time unwilling, unable or ineligible to continue as
depository for the Debt Securities of any series and a successor depository is
not appointed by the Company within 90 days following notice to the
13
<PAGE>
Company; (ii) the Company determines, in its sole discretion, not to have the
Debt Securities of any series represented by one or more Global Securities, or
(iii) an Event of Default under the Indenture has occurred and is continuing
with respect to the Debt Securities of any series, then the Company will issue
individual Debt Securities of such series in certificated form in exchange for
the relevant Global Securities. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to physical delivery of
individual Debt Securities of such series in certificated form of like tenor
and rank, equal in principal amount to such beneficial interest and to have
such Debt Securities in certificated form registered in its name. Unless
otherwise provided in the applicable Prospectus Supplement, Debt Securities so
issued in certificated form will be issued in denominations of $1,000 or any
integral multiple thereof and will be issued in registered form only, without
coupons.
The following is based on information furnished by DTC:
In the event that DTC acts as securities depository for any Debt
Securities, such Debt Securities will be issued as fully registered
securities registered in the name of Cede & Co. (DTC's nominee). One fully
registered Debt Security certificate may be issued with respect to up to
$200 million aggregate principal amount of the Debt Securities of a series,
and an additional certificate will be issued with respect to any remaining
principal amount of such series.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement
among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC
is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on
file with the Commission.
Purchases of Debt Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Debt
Securities on DTC's records. The ownership interest of each actual
purchaser of each Debt Security ("Beneficial Owner") is in turn recorded on
the Direct and Indirect Participants' records. A Beneficial Owner does not
receive written confirmation from DTC of its purchase, but such Beneficial
Owner is expected to receive a written confirmation providing details of
the transaction, as well as periodic statements of its holdings, from the
Direct or Indirect Participant through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in Debt Securities
are accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Debt Securities,
except in the limited circumstances described above.
To facilitate subsequent transfers, the Debt Securities are registered in
the name of DTC's nominee, Cede & Co. The deposit of the Debt Securities
with DTC and their registration in the name of Cede & Co. effects no change
in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Debt Securities; DTC's records reflect only the identity of
the Direct Participants to whose accounts Debt Securities are credited,
which may or may not be the Beneficial Owners. The Participants remain
responsible for keeping account of their holdings on behalf of their
customers.
Delivery of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial owners are
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
14
<PAGE>
Redemption notices shall be sent to Cede & Co. If less than all of the
Debt Securities within an issue are being redeemed, DTC's practice is to
determine by lot the amount of interest of each Direct Participant in such
issue to be redeemed.
Neither DTC nor Cede & Co. consents or votes with respect to the Debt
Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus
Proxy") to the issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Debt Securities are credited on
the record date (identified on a list attached to the Omnibus Proxy).
Payments of principal of (and premium, if any) and interest on the Debt
Securities will be made to DTC. DTC's practice is to credit Direct
Participants' accounts on the payable date in accordance with their
respective holdings as shown on DTC's records unless DTC has reason to
believe that it will not receive payment on the payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such Participant and not of DTC, any Paying
Agent or the Company, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of principal (and premium,
if any) and interest, if any, to DTC will be the responsibility of the
Company or the applicable Paying Agent, disbursement of such payments to
Direct Participants will be the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners will be the responsibility of Direct
and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Debt Securities at any time by giving reasonable notice to
the Company or the applicable Paying Agent. Under such circumstances, in
the event that a successor securities depository is not appointed, Debt
Securities in certificated form are required to be prepared and delivered
as described above.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that
event, Debt Securities in certificated form will be prepared and delivered
as described above.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that the Company believes to be
reliable, but neither the Company nor any underwriter or agent takes any
responsibility for the accuracy thereof.
None of the Company, any underwriter or agent, the Trustee or any applicable
Paying Agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial interests in a
Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
DESCRIPTION OF COMMON STOCK
GENERAL
The following summary 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 Company's Amended and Restated Certificate of Incorporation
(the "Amended and Restated Certificate of Incorporation") and the Company's
Amended and Restated By-Laws (the "Amended and Restated By-Laws"), copies of
which have been filed with the Commission and may be obtained as described
under "Available Information."
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"). As of January 30,
1998, 24,542,703 shares of Common Stock were issued and outstanding and no
shares of Preferred Stock were issued and outstanding. All outstanding shares
of Common Stock are fully paid and non-assessable.
The Common Stock is traded on the NYSE under the symbol "SOL."
15
<PAGE>
DIVIDEND RIGHTS
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.
VOTING RIGHTS
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. The Amended and Restated Certificate of Incorporation does not
provide for cumulative voting in the election of directors. The issuance of
any shares of Preferred Stock may result in dilution of voting power.
LIQUIDATION RIGHTS
In the event of the liquidation, dissolution or winding up of the Company,
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.
PREEMPTIVE RIGHTS
The Common Stock has no preemptive, conversion or redemption rights.
CERTAIN CHARTER AND BY-LAW PROVISIONS
The Amended and Restated Certificate of Incorporation, the Amended and
Restated 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.
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. 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.
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals. The Amended and Restated 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.
Section 203 of Delaware Law. Section 203 of the General Corporation Law of
the State of Delaware (the "DGCL") 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 upon
consummation of such transaction
16
<PAGE>
the interested stockholder owns 85% of the voting stock of the corporation
outstanding at the time the transaction commenced or unless the business
combination is, or the transaction in which such person became an interested
stockholder was, approved in a prescribed manner. A "business combination"
generally includes mergers, stock or asset sales and other transactions
resulting in a financial benefit to the "interested stockholder."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Boston Equiserve
L.P.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through one or more underwriters or
dealers, directly to institutional investors or other purchasers, through
agents, or through a combination of such or other methods. The distribution of
the Securities may be effected from time to time in one or more transactions
at a fixed price or prices, which may be changed, or at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices.
If underwriters are used in the sale, the Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
Securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to
a particular underwritten offering of Securities will be named in the
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth
on the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement, the obligations of the underwriters to purchase the
Securities will be subject to certain conditions precedent and the
underwriters will be obligated to purchase all the Securities if any are
purchased.
The Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer
or sale of the Securities in respect of which this Prospectus is delivered
will be named, and any commissions payable by the Company to such agent will
be set forth, in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a
best efforts basis for the period of its appointment.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Securities for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on
the resale of Securities by them may be deemed to be underwriting discounts
and commissions, under the Securities Act. Any such underwriter or agent will
be identified, and any such compensation received from the Company will be
described, in the related Prospectus Supplement.
If so indicated in the related Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
at the public offering price set forth in the Prospectus Supplement pursuant
to contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but in all cases such
institutions must be approved by the Company. The
17
<PAGE>
obligations of any purchaser under any such contract will be subject to the
condition that the purchase of the Securities shall not at the time of
delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject. The underwriters and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain civil liabilities, including
liabilities under the Securities Act, or to contribution by the Company with
respect to payments they may be required to make in respect thereof.
Certain of the underwriters or agents and their affiliates may engage in
transactions with and perform services for the Company or its affiliates in
the ordinary course of their respective businesses.
If underwriters or dealers are used in the sale, until the distribution of
the Securities is completed, rules of the Securities and Exchange Commission
may limit the ability of any such underwriters and certain selling group
members, if any, to bid for and purchase the Securities. As an exception to
these rules, representatives of any underwriters are permitted to engage in
certain transactions that stabilize the price of the Securities. Such
transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Securities.
If the underwriters create a short position in the Securities in connection
with the offerings, i.e., if they sell more Securities than are set forth on
the cover page of the Prospectus Supplement, the representatives of the
underwriters may reduce that short position by purchasing Securities in the
open market. The representatives of the underwriters may also elect to reduce
any short position by exercising all or part of any over-allotment option, if
any, described in the Prospectus Supplement.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. Neither the Company nor any
underwriter or agent makes any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the price of the Securities. In addition, neither the Company nor any
underwriter or agent makes any representation that the representatives of any
underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The representatives of the underwriters may also impose a penalty bid on
certain underwriters and selling group members, if any. This means that if the
representatives of the underwriters purchase Securities in the open market to
reduce the underwriters' short position or to stabilize the price of the
Securities, they may reclaim the amount of the selling concession from the
underwriters and selling group members who sold those Securities as part of
the offering. The imposition of a penalty bid might also have an effect on the
price of the Securities to the extent that it discourages resales of the
Securities.
The Debt Securities may or may not be listed on a national securities
exchange or traded in the over-the-counter market. Any Common Stock sold
pursuant to a Prospectus Supplement will be listed on the NYSE, subject to
official notice of issuance. No assurances can be given as to the liquidity of
the trading market for any of such securities.
18
<PAGE>
LEGAL MATTERS
The validity of the Debt Securities and the Common Stock will be passed upon
for the Company by Fried, Frank, Harris, Shriver & Jacobson (a partnership
including professional corporations), New York, New York.
EXPERTS
The consolidated financial statements and schedule of Sola International
Inc. appearing in Sola International Inc.'s Annual Report (Form 10-K) for the
year ended March 31, 1997, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated 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.
The combined financial statements of the Worldwide Ophthalmic Group of
American Optical Corporation appearing in Exhibit 99.2 of Sola International
Inc.'s Current Report (Form 8-K/A) dated as of May 6, 1996, 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.
19
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR IN THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, AT ANY TIME OR UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR IN THE ACCOMPANYING PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Forward-Looking Statements................................................. S-2
The Company................................................................ S-3
Use of Proceeds............................................................ S-5
Capitalization............................................................. S-6
Selected Financial Information............................................. S-7
Description of the Notes................................................... S-9
Underwriting............................................................... S-15
Legal Matters.............................................................. S-16
Experts.................................................................... S-16
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Risk Factors............................................................... 4
Use of Proceeds............................................................ 6
Ratio of Earnings to Fixed Charges......................................... 6
Description of Debt Securities............................................. 6
Description of Common Stock................................................ 15
Plan of Distribution....................................................... 17
Legal Matters.............................................................. 19
Experts.................................................................... 19
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$100,000,000
SOLA INTERNATIONAL INC.
6 7/8% NOTES DUE 2008
---------------
PROSPECTUS SUPPLEMENT
---------------
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
BANCAMERICA ROBERTSON STEPHENS
MARCH 13, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
