<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SOLA INTERNATIONAL INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
SOLA INTERNATIONAL INC.
2420 SAND HILL ROAD, SUITE 200
MENLO PARK, CALIFORNIA 94025
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, AUGUST 14, 1998
----------------
To the Stockholders of Sola International Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of Sola
International Inc., a Delaware corporation, will be held at the Quadrus
Conference Center, 2400 Sand Hill Road, Menlo Park, California 94025, on
Friday, August 14, 1998 at 10:00 a.m. (local time) for the following purposes:
1. To elect a Board of Directors to serve until the next Annual Meeting of
Stockholders or until their successors are elected and qualified.
2. To consider a proposal to amend the 1998 Sola International Inc. Stock
Option Plan to, among other things, increase by 1,690,000 the number of
shares reserved for issuance pursuant to the exercise of stock options.
3. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending March 31, 1999.
4. To transact such other business as may properly be brought before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on June 18, 1998 as
the record date for determination of the stockholders entitled to notice and
to vote at the Annual Meeting and only holders of record of the Company's
common stock on said date will be entitled to receive notice of and to vote at
the meeting.
Stockholders are cordially invited to attend the Annual Meeting. Whether or
not you plan to attend the meeting, please mark, sign, date and return the
enclosed proxy. The giving of your Proxy will not affect your right to vote in
person in the event you find it convenient to attend the meeting. You may
revoke the Proxy at any time before the closing of the polls at the meeting by
delivery to the Company of a subsequently executed proxy or a written notice
of revocation or by voting in person at the meeting. Attendance at the Annual
Meeting will be limited to stockholders and invited guests of the Company.
By order of the Board of Directors,
Steven M. Neil
Secretary
June 30, 1998
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
<PAGE>
SOLA INTERNATIONAL INC.
----------------
PROXY STATEMENT IN CONNECTION WITH
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, AUGUST 14, 1998
This Proxy Statement is furnished to stockholders of Sola International
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company (the "Board of
Directors") of proxies to be voted at the Annual Meeting of Stockholders of
the Company to be held at the Quadrus Conference Center, 2400 Sand Hill Road,
Menlo Park, California 94025, on Friday, August 14, 1998, at 10:00 a.m. (local
time), and any adjournments thereof (the "Annual Meeting"). Action will be
taken at the Annual Meeting to elect Directors of the Company, to consider
amendments to the Sola International Inc. Stock Option Plan and to ratify the
appointment of the Company's independent auditors.
Holders of record of outstanding shares of the Company's Common Stock, $.01
par value (the "Common Stock"), at the close of business on June 18, 1998, are
entitled to vote at the Annual Meeting or any adjournments thereof. Voting
rights are vested exclusively in the holders of the Common Stock. Each share
of Common Stock outstanding on the record date will be entitled to one vote on
all matters to be voted upon. Shares held as treasury shares by the Company
are not entitled to vote. As of the close of business on the record date, June
18, 1998, 24,766,600 shares of Common Stock were outstanding. This Proxy
Statement, the accompanying form of proxy and the Company's annual report to
stockholders for the fiscal year ended March 31, 1998 are being mailed on or
about June 30, 1998 to each stockholder entitled to vote at the meeting.
VOTING AND REVOCATION OF PROXIES
When proxies in the enclosed form are returned properly executed, the shares
represented thereby will be voted at the meeting and, where instructions have
been given by the stockholder, will be voted in accordance therewith. If the
stockholder does not otherwise specify, the stockholder's shares of Common
Stock will be voted for the election of the nominees set forth in the Proxy
Statement as directors of the Company, for the amendments to the Sola
International Inc. Stock Option Plan and for the appointment of Ernst & Young
LLP as the Company's independent auditor for the fiscal year ending March 31,
1999. If any other matter is properly presented for action at the meeting, the
persons named in the enclosed proxy will vote on such matter in their
discretion.
The holders of a majority in number of the total outstanding shares of
Common Stock entitled to vote at the meeting, present in person or represented
by proxy, constitute a quorum. Assuming a quorum is present, the affirmative
vote of a plurality of the votes cast at the meeting and entitled to vote in
the election will be required for the election of directors and the
affirmative vote of a majority of the votes cast at the meeting and entitled
to vote thereon will be required to act on all other matters to come before
the Annual Meeting, including the amendments to the stock option plan and the
appointment of the independent auditor. Pursuant to the law of the State of
Delaware, where the Company is incorporated, as well as the provisions of the
Company's Certificate of Incorporation and By-Laws, abstentions, but not
broker non-votes, will be counted as votes cast against the proposal being
considered. Votes will be counted by employees of the First National Bank of
Boston, the Company's independent transfer agent and registrar.
Any proxy may be revoked by the stockholder, either by attending the meeting
and voting in person or by submitting a revocation in writing to the Company
(including a subsequent signed proxy) at any time prior to the closing of the
polls at the meeting.
1
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors currently consists of seven directors. Seven
directors are to be elected at the Annual Meeting to hold office as directors
until the 1999 Annual Meeting of Stockholders or until their respective
successors have been duly elected and qualified. Unless otherwise directed,
proxies in the accompanying form will be voted FOR the nominees listed below.
All nominees have consented to be named and to serve if elected. If any one or
more of the nominees is unable to serve or for good cause will not serve,
proxies will be voted for the substitute nominee or nominees, if any, proposed
by the Board of Directors. The Board has no knowledge that any nominee will or
may be unable to serve or will or may withdraw from nomination. Each nominee
will be elected if he receives the affirmative vote of a plurality of the
votes cast by holders of shares of Common Stock at the Annual Meeting.
The Board of Directors proposes the election of the following directors of
the Company for a term of one year. All of the nominees are presently
directors of the Company. Set forth below for each nominee is his name, age,
the year in which he became a director of the Company, all positions and
offices with the Company which he holds, if any, his principal occupations
during at least the last five years and any additional directorships in
publicly-held companies or registered investment companies. References to the
Company include the Company and its predecessors.
IRVING S. SHAPIRO, 81, has been Chairman of the Board of the Company since
December 1994. Mr. Shapiro is Of Counsel to Skadden, Arps, Slate, Meagher &
Flom LLP. He was Chairman and Chief Executive Officer of E.I. du Pont de
Nemours and Company from 1974 to 1981. He is Chairman of the Board of Marvin &
Palmer Associates, Inc., and is a director of J.P. Morgan Florida Federal
Savings Bank, Pediatric Services of America Inc., and Gliatech, Inc.
JOHN E. HEINE, 54, has served as Chief Executive Officer and President of
the Company since November 1981 and served as Chairman of the Board of the
Company from September 1993 to December 1994. Mr. Heine joined the Company in
1981 as Managing Director of Sola International Holdings, Ltd. and previously
held general management positions with Southern Farmers Holdings, Ltd. in
Adelaide and H.J. Heinz in Melbourne, Australia.
DOUGLAS D. DANFORTH, 75, has been a director of the Company since December
1994. He was Chairman and Chief Executive Officer of Westinghouse Electric
Corporation from 1983 to 1987. He is a director of Daltile Inc.
HAMISH MAXWELL, 71, has been a director of the Company since December 1994.
Mr. Maxwell was Chairman of the Executive Committee of the Board of Directors
of Philip Morris Companies Inc. from September 1991 through April 1995 and was
Chairman and Chief Executive Officer of such company from 1984 to 1991. He is
a director of Bankers Trust Company and Bankers Trust New York Corporation,
and Chairman of WPP Group plc.
JACKSON L. SCHULTZ, 72, has been a director of the Company since November
1995. Mr. Schultz joined Wells Fargo Bank in 1970, retiring in 1990 as Senior
Vice President responsible for Public and Governmental Affairs.
MAURICE J. CUNNIFFE, 65, has been a director of the Company since December
1996. He is Chairman and Chief Executive Officer of American Optical
Corporation, a company of which he has been sole shareholder since 1982.
A. WILLIAM HAMILL, 50, has been a director of the Company since December
1996. Mr. Hamill is Executive Vice President and Chief Financial Officer of
Union Camp Corporation, which he joined in 1996. From 1993 through 1996, he
was a partner in SCI Investors Inc. and a director of Custom Papers Group Inc.
From 1991 to 1993, he was Senior Vice President and Chief Financial Officer of
Specialty Coatings International Inc. From 1975 through 1990, Mr. Hamill was
with Morgan Stanley & Co. Incorporated, where he was a Managing Director.
2
<PAGE>
INFORMATION CONCERNING THE BOARD
OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company directs the management of the business
and affairs of the Company, as provided by Delaware law, and conducts its
business through meetings of the Board and two standing committees: Audit and
Compensation. In addition, from time to time, special committees may be
established under the direction of the Board when necessary to address
specific issues. The Company has no nominating or similar committee.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held four meetings during fiscal 1998.
Each current director attended 75% or more of the aggregate of (i) meetings of
the Board held during the period for which he served as a director and (ii)
meetings of all committees held during the period for which he served on those
committees.
The Compensation Committee is responsible for executive compensation,
including setting the Company's compensation philosophy and policies,
recommending to the Board of Directors the compensation to be paid to the
Chief Executive Officer and determining the compensation for all other
executive officers. The Compensation Committee is also responsible for
administering the Company's executive compensation plans and programs,
including the Sola Investors Inc. Stock Option Plan, the Sola International
Inc. Stock Option Plan and the Management Incentive Plan. The Committee
consists of Hamish Maxwell (Chairman) and Irving S. Shapiro. The Committee
held two meetings during fiscal 1998.
The Audit Committee's principal functions are to review the scope of the
annual audit of the Company by its independent auditors, review the annual
financial statements of the Company and the related audit report of the
Company as prepared by the independent auditors, recommend the selection of
independent auditors each year and review the Company's internal controls and
accounting policies and procedures. The Audit Committee reports its findings
and recommendations to the Board of Directors for appropriate action. The
Audit Committee consists of Douglas D. Danforth (Chairman), Jackson L. Schultz
and Irving S. Shapiro, who are not executive officers or employees of the
Company or any of its subsidiaries. The Company's Audit Committee held two
meetings during fiscal 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Decisions with respect to compensation are made by the Compensation
Committee of the Company. The members of the Compensation Committee as of
March 31, 1998 were Hamish Maxwell and Irving S. Shapiro.
DIRECTOR COMPENSATION
Directors who are full time employees of the Company receive no compensation
for serving on the Board of Directors or its committees. During fiscal 1998,
directors received an annual fee of $20,000, except for the Chairman who
received an annual fee of $40,000, and $500 for each Board meeting attended.
The same fee structure will be continued for fiscal 1999. Directors are
permitted to receive all or a portion of their annual retainer fee in the form
of options to acquire shares of Common Stock. Directors are reimbursed for
traveling costs and other out-of-pocket expenses incurred in attending
meetings. Directors who serve on the Audit Committee or the Compensation
Committee receive no additional compensation for committee meetings held on
the same date as a Board meeting and received $500 in fiscal 1998 (and will
receive $500 in fiscal 1999) for each committee meeting held on a date on
which there is or was no Board meeting.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock by (a) each person who is known to the
Company to be the beneficial owner of more than five percent of the Company's
Common Stock (based on a review by the Company of filings with the Securities
and Exchange Commission), (b) each director of the Company, (c) each of the
executive officers named in the Summary Compensation Table and (d) all
directors and executive officers of the Company as a group. Except as
otherwise indicated, the persons or entities listed below have sole voting and
investment power with respect to all shares of Common Stock beneficially owned
by them, except to the extent such power may be shared with a spouse.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
NAME BENEFICIALLY OWNED CLASS(1)
- ---- ------------------ -------------
<S> <C> <C>
DIRECTORS:
Irving S. Shapiro (2)......................... 27,253 *
Douglas D. Danforth(3)........................ 18,881 *
John E. Heine(4).............................. 473,636 1.9
Hamish Maxwell(5)............................. 70,805 *
Jackson L. Schultz(6)......................... 7,227 *
Maurice J. Cunniffe(7)........................ 41,959 *
A. William Hamill(8).......................... 4,959 *
NAMED EXECUTIVE OFFICERS:
James H. Cox(9)............................... 147,457 *
Colin M. Perrott(10).......................... 96,366 *
Stephen J. Lee(11)............................ 112,627 *
Theodore Gioia(12)............................ 79,334 *
Mark T. Mackenzie(13)......................... 96,480 *
All directors and executive officers as a
group (16 persons)(14)....................... 1,273,816 5.0
</TABLE>
- --------
* The percentage of shares of Common Stock beneficially owned does not exceed
one percent of the outstanding shares of Common Stock.
(1) Based on 24,738,165 shares of Common Stock outstanding on May 29, 1998.
Calculations of percentage of beneficial ownership assume the exercise by
only the respective named stockholder of all options for the purchase of
Common Stock held by such stockholder which are exercisable within 60
days of May 29, 1998.
(2) Mr. Shapiro's shares are held by a trust of which Mr. Shapiro is both
trustee and sole beneficiary. Includes 8,042 shares of Common Stock
issuable upon exercise of options that are exercisable within 60 days
from May 29, 1998.
(3) Includes 2,062 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from May 29, 1998.
(4) Includes 397,261 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from May 29, 1998 and 76,375 shares
of Common Stock held by a trust for which Mr. Heine and members of his
family are trustees and beneficiaries. Mr. Heine is also a Named
Executive Officer.
(5) Includes 805 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from May 29, 1998.
(6) Includes 4,227 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from May 29, 1998.
(7) Includes 1,959 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from May 29, 1998.
(8) Includes 1,959 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from May 29, 1998.
(9) Includes 114,270 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from May 29, 1998.
(10) Includes 86,366 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from May 29, 1998. In connection with
the relocation of Mr. Perrott to Adelaide, Australia in fiscal 1998, Mr.
Perrott ceased being an executive officer of the Company.
(11) Includes 84,457 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from May 29, 1998.
(12) Includes 67,747 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from May 29, 1998.
(13) Includes 84,730 shares of Common Stock issuable upon exercise of options
that are exercisable within 60 days from May 29, 1998.
(14) Excludes shares of Common Stock held by Colin Perrott, who was not an
executive officer of the Company at the end of the fiscal year.
4
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth in summary form all compensation for all
services rendered in all capacities to the Company paid or accrued during the
fiscal year ended March 31, 1998 ("fiscal 1998"), the fiscal year ended March
31, 1997 ("fiscal 1997") and the fiscal year ended March 31, 1996 ("fiscal
1996"), to the Chief Executive Officer of the Company, the four other most
highly compensated individuals who were serving as executive officers of the
Company on March 31, 1998 and one former executive officer who would have been
one of the four most highly compensated executive officers but was not serving
in such a capacity on March 31, 1998 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- ----------------
OTHER SECURITIES ALL OTHER
NAME AND BONUS ANNUAL UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) ($) COMPENSATION (1)($) OPTIONS/SARS (#) ($)
------------------ ---- ---------- -------- ------------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
John E. Heine........... 1998 $517,221 $607,716 $ 85,185 -- -- (2)
President and Chief 1997 460,661 206,057 102,102 -- --
Executive Officer 1996 430,048 432,427 103,592 -- --
James H. Cox............ 1998 $314,952 $347,828 $ 4,735 -- $ 4,750(3)
Executive Vice Presi-
dent, 1997 302,329 81,540 4,810 5,000 4,500
Assistant Secretary and 1996 261,725 207,368 4,192 -- 4,072
Assistant Treasurer;
President, Sola Optical
USA
Colin M. Perrott (4).... 1998 $224,444 $219,906 $ 88,693 -- -- (2)
Vice President, Tech-
nology 1997 248,948 85,422 83,262 -- --
and Development 1996 235,870 168,961 93,756 -- --
Stephen J. Lee.......... 1998 $247,056 $216,904 $ 74,275 -- $ 4,750(3)
Vice President, Human 1997 225,261 76,346 91,789 -- 4,500
Resources 1996 209,923 150,151 89,473 -- 4,500
Theodore Gioia.......... 1998 $188,264 $166,847 -- -- $ 4,750(3)
Vice President, Strate-
gic 1997 181,022 62,318 -- -- 4,500
Planning 1996 174,061 125,186 -- -- 4,500
Mark T. Mackenzie....... 1998 $165,168 $152,501 $ 89,504 -- $10,129(3)
Regional Director, Eu-
rope 1997 158,709 108,145 87,625 -- 845
1996 152,367 151,775 90,205 -- 12,157
</TABLE>
- --------
(1) The amounts indicated for Messrs. Heine, Perrott and Lee include an
expatriate accommodation allowance and benefits package of $78,445,
$67,277, and $64,341, respectively, for fiscal 1996; $83,330, $58,853, and
$62,455 respectively, for fiscal 1997 and $58,570, $45,974, and $44,051
respectively, for fiscal 1998. The amounts indicated for Mr. Mackenzie
include housing assistance amounting to $62,178, $62,179 and $66,602, in
fiscal 1998, 1997 and 1996, respectively.
(2) In lieu of participation in the Sola Superannuation Plan (the Sola
Australian Pension Plan), Mr. Heine and Mr. Perrott earned equivalent
pensions under separate Expatriate Superannuation Agreements with the
Company. Mr. Perrott again became a participant in the Sola Superannuation
Plan in fiscal 1998. See "--Pension Plan".
(3) Messrs. Cox, Lee and Gioia deferred portions of their annual salary
pursuant to the Sola Optical USA 401(k) Savings Plan. The amounts shown
represent cash contributions made by the Company to the plan for the
account of such Named Executive Officers for fiscal 1998 in the amounts of
$4,750, $4,750 and $4,750, respectively. Mr. Mackenzie joined the Sola
Optical U.K. defined contribution plan in fiscal 1997. The
5
<PAGE>
amount shown represents cash contributions made by the Company to the plan
for the account of Mr. Mackenzie in fiscal 1998.
(4) In connection with the relocation of Mr. Perrott to Adelaide, Australia in
fiscal 1998, Mr. Perrott ceased being an executive officer of the Company.
OPTION GRANT TABLE
No options to acquire Common Stock were granted to the Named Executive
Officers under the Company's option plans during fiscal 1998.
OPTION EXERCISE TABLE
The following table sets forth the number of shares covered by both
exercisable and unexercisable options to acquire Common Stock granted to the
Named Executive Officers under the Company's option plans as of March 31,
1998. No options to acquire Common Stock were exercised by the Named Executive
Officers during fiscal 1998.
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END FISCAL YEAR-END(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John E. Heine.............. 397,261 -- $12,605,092 $ --
James H. Cox............... 114,270 3,000 3,573,447 16,680
Colin M. Perrott........... 86,366 -- 2,740,393 --
Stephen J. Lee............. 86,366 -- 2,740,393 --
Theodore Gioia............. 69,092 -- 2,192,289 --
Mark T. Mackenzie.......... 69,092 17,273 2,192,289 548,072
</TABLE>
- --------
(1) Values for "in-the-money" options represent the positive spread between
$9.71, the exercise price of outstanding options (except for 2,000
exercisable and 3,000 unexercisable options held by James H. Cox for which
the per share exercise prices are $35.88), and the closing price of $41.44
per share of Common Stock at March 31, 1998, as reported on the New York
Stock Exchange.
EMPLOYMENT AGREEMENTS
The Company and Mr. Heine entered into a severance agreement dated November
20, 1996. If the Company elects to terminate Mr. Heine's employment other than
for Cause (cause is defined as willful misconduct, neglect of duties, or any
act or omission, any or all of which materially adversely affect the Company's
business; or conviction of a felony) or if Mr. Heine terminates his employment
under certain circumstances, the Company is required to continue his
compensation, including annual salary and an average of the past three years
Management Incentive Plan payments made to him, for a 24 month period. In
addition, for a 24 month period Mr. Heine may continue to participate in any
and all benefit plans the Company regularly provides its other executives,
including, but not limited to, health, dental, vision, pension and other
retirement plans, and receive outplacement assistance and consultation up to a
maximum of $25,000. If, within two years of a change of control (as defined in
the agreement), the Company elects to terminate Mr. Heine's employment other
than for Cause or if Mr. Heine terminates his employment with the Company
under certain circumstances, the Company shall pay Mr. Heine in cash an amount
equal to 2.99 times the sum of the amount of Mr. Heine's annual salary in
effect immediately prior to the date of such termination plus the average of
the Management Incentive Plan compensation paid to him over the immediately
prior three years. The agreement also contains covenants not to compete,
covenants not to solicit, and invention assignment and confidentiality
clauses.
6
<PAGE>
The Company and each of Messrs. Cox, Perrott, Lee and Gioia are parties to
an employment agreement, each dated as of February 26, 1993. Each agreement
has an initial term of three years and is automatically extended for an
indefinite term unless terminated upon prior notice by either party. If the
Company elects to terminate an agreement other than for Cause (i.e., a
material breach by the officer of the terms of his employment agreement,
failure to perform his duties as an officer of the Company or commission of
fraud or willful misconduct), the Company is required to give 12 months
notice. Each agreement provides for an annual base salary at a rate not less
than the rate in effect on the date of the agreement. Such salaries are
subject to discretionary increases in accordance with the Company's normal
review procedures and policies. The agreements also provide for participation
in various other plans and programs provided by the Company. In the event of a
transfer of all or substantially all of the stock or assets of the Company in
a privately negotiated transaction, the Company will assign its obligations
under the employment agreements to the transferee. For purposes of assignment
and transfer provisions in the agreements, a sale of stock of the Company as
part of a public offering will not be treated as pursuant to a privately
negotiated transaction.
Each of the agreements provides that the Company has no further obligations
under such agreement (other than for salary through the officer's termination
date) in the event of an officer's termination by the Company for Cause, by
the officer for other than Good Reason (i.e., diminution of the officer's
responsibilities within the Company) or as a result of the officer's death or
disability. If an officer is terminated by the Company for reason other than
Cause or if the officer terminates his employment for Good Reason, the Company
is required to continue to pay the salary of such officer until the expiration
of the 12-month period commencing with the date of termination.
The Company and one of its U.K. subsidiaries, Sola Optical UK Limited, have
entered into employment agreements with Mr. Mackenzie dated May 23, 1996. The
Company and such UK subsidiary and Mr. Mackenzie are each required to give
three months notice of termination of employment. In the event the Company or
such UK subsidiary terminates Mr. Mackenzie's employment he will continue to
be paid his base salary and employee benefits for a period of 12 months. The
agreements also provide for participation in various other plans and programs
provided by the Company.
PENSION PLANS
Prior to the sale by Pilkington plc of the Company in December 1993 (the
"Acquisition"), Mr. Cox and Mr. Gioia were participants in the Pilkington
Visioncare Pension Plan. In connection with the Acquisition, the Company
implemented the Sola Optical Pension Plan, which is currently intended,
together with the Pilkington Visioncare Pension Plan, to provide substantially
the same benefit that would have been payable had Mr. Cox and Mr. Gioia
continued active participation under the Pilkington Visioncare Pension Plan,
as it existed on December 1, 1993, until retirement. To that end, retirement
benefits under the basic formula of the Sola Optical Pension Plan currently
are substantially identical to the Pilkington Visioncare Pension Plan for a
given level of compensation and service. Mr. Heine does not participate in the
Sola Optical Pension Plan. In lieu of his participation in the Sola
Superannuation Plan (in Australia), Mr. Heine earns an equivalent pension
under a separate Expatriate Superannuation Agreement with the Company. Under
this agreement, the Company will be required to make a lump sum payment for
the benefit of Mr. Heine upon his termination of service or retirement from
the Company based on the benefits he would have accrued under the Sola
Superannuation Plan had he continued his participation therein. Payments under
the Sola Superannuation Plan generally are based on years of service and final
average compensation. The estimated lump sum benefit for the benefit of Mr.
Heine, including benefits accrued by Mr. Heine as a member of the Sola
Superannuation Plan prior to his relocation to Menlo Park, California, upon
normal retirement from the Company at age 65 is Australian $2,216,300
(U.S.$1,442,900 based on a conversion rate of 1.536 Australian $ to the
U.S.$). In connection with the relocation of Mr. Perrott to Adelaide,
Australia in fiscal 1998, Mr. Perrott rejoined the Sola Superannuation Plan.
The estimated lump sum benefit for the benefit of Mr. Perrott under the Sola
Superannuation Plan upon normal retirement from the Company at age 65 is
Australian $1,358,500 (U.S.$884,440 based on a conversion rate of 1.536
Australian $ to the U.S.$). Mr. Lee did not participate in the Pilkington
Visioncare Pension Plan; however, he does participate in the Sola Optical
Pension Plan.
7
<PAGE>
The following table shows estimated annual benefits payable upon retirement
to Messrs. Cox, Lee and Gioia under the Sola Optical Pension Plan in
combination (to the extent applicable) with the Pilkington Visioncare Pension
Plan. The Sola Optical Pension Plan will provide the amount of the benefit to
Messrs. Cox and Gioia in excess of a portion of the amount accrued by them
under the Pilkington Visioncare Pension Plan as of December 1, 1993; assuming
retirement at age 65, the amount of annual benefit payable by the Pilkington
Visioncare Pension Plan to Mr. Cox and Mr. Gioia which will be offset from the
Sola Optical Pension Plan will be $16,929.48 and $6,571.92, respectively.
Assets of the Pilkington Visioncare Pension Plan were not transferred to the
Company from Pilkington in connection with the sale of the Company from
Pilkington and the Company has no obligation under the Pilkington Visioncare
Pension Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000............................... $26,623 $35,498 $44,372 $53,247 $62,121
150,000............................... 32,346 43,128 53,910 64,692 75,474
175,000............................... 32,804 43,738 54,673 65,607 76,542
200,000............................... 32,804 43,738 54,673 65,607 76,542
225,000............................... 32,804 43,738 54,673 65,607 76,542
250,000............................... 32,804 43,738 54,673 65,607 76,542
300,000............................... 32,804 43,738 54,673 65,607 76,542
350,000............................... 32,804 43,738 54,673 65,607 76,542
400,000............................... 32,804 43,738 54,673 65,607 76,542
450,000............................... 32,804 43,738 54,673 65,607 76,542
500,000............................... 32,804 43,738 54,673 65,607 76,542
</TABLE>
The years of credited service as of March 31, 1998 for Messrs. Cox, Lee and
Gioia are 12.25, 4.25 and 8.36, respectively.
Benefits under the Sola Optical Pension Plan are not offset by Social
Security benefits. The amounts shown are based upon certain assumptions,
including retirement of the employee at exact age 65 on March 31, 1998 and
payment of the benefit under the basic form of the Sola Optical Pension Plan,
a single life annuity for the life of the participant. The amounts will change
if the payment is made under any other form permitted by the Sola Optical
Pension Plan, or if an employee's retirement occurs after March 31, 1998,
since the Social Security Wage Base of such an employee (one of the factors
used in computing the annual retirement benefits) will reflect higher Social
Security tax bases for years after 1998. The Sola Optical Pension Plan
provides a higher level of benefits for the portion of compensation above the
compensation levels on which Social Security benefits are based.
The remuneration levels shown represent the five year average of annual
compensation covered by the Sola Optical Pension Plan as of March 31, 1998.
Compensation covered by the Sola Optical Pension Plan includes regular base
salary, hourly wages, shift differentials, overtime, vacation and sick leave
pay, commissions, sales bonus, amounts deferred under any tax qualified plan
of the Company and amounts paid pursuant to management bonus plans or other
formally adopted incentive compensation plans. The current compensation
covered by the Sola Optical Pension Plan for Messrs. Cox, Lee and Gioia
differs substantially (by more than 10%) from that set forth in the Summary
Compensation Table under the aggregate of the "Salary" and "Bonus" columns
because the amount of compensation which may be covered under a tax qualified
pension plan is limited by the Internal Revenue Code.
The pension amounts shown for remuneration in excess of the compensation cap
($160,000 for 1997) are based upon the compensation cap in each year, as
required by law. The IRC Section 415 defined benefit limit was $125,000 for
1998, but it did not provide any further limitation on the amounts calculated.
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON
COMPENSATION OF EXECUTIVE
OFFICERS OF THE COMPANY
The Company's Compensation Committee is responsible for executive
compensation, including setting the Company's compensation philosophy and
policies, recommending to the Board of Directors the compensation to be paid
to the Chief Executive Officer and determining the compensation for the other
executive officers. The Compensation Committee is also responsible for
administering the Company's executive compensation plans and programs,
including the Company's stock option plans. The Compensation Committee reviews
the Company's executive compensation program on at least an annual basis to
ensure that the program continues to meet the goals of its compensation
policy.
COMPENSATION POLICY
The Compensation Committee has designed the Company's executive compensation
program (i) to attract qualified executive officers from a global pool of
talent, (ii) to reward, motivate and retain the Company's executive officers
and (iii) to align the interests of its executive officers with those of the
Company's stockholders by linking the executives' annual cash and long-term
incentive compensation to Company performance.
The Company's compensation program consists of three basic components: base
salary; annual cash incentive-based compensation; and long-term compensation
in the form of stock options. The Compensation Committee's goal has been to
base a greater portion of the executives' compensation on Company performance.
The Company also provides perquisites to its executive officers to maintain
the Company's competitive status in attracting and retaining executive
officers in a competitive global market.
BASE SALARY
The Compensation Committee reviews base salary levels of the executive
officers annually. Adjustments, if any, are made effective January 1. Salary
ranges for each executive officer are determined by the Compensation Committee
using a two-step process. First, the level and functional responsibilities of
the position held by each executive officer is evaluated using the Hay Guide
Chart Job Evaluation Method. Second, based on such evaluation, salary ranges
for each position are determined using marketplace data provided by Hay
Management Consultants and periodically cross-checked with other market
surveys published by Mercer, Cullen-Egan-Dell and other compensation
consultants. Historically, a mid-point base salary has been established around
the 75th percentile among a select group of companies, with a minimum salary
at 80% of the mid-point and a maximum salary at 120% of the mid-point. An
executive officer's progression through the salary range is based upon the
Compensation Committee's evaluation of the individual's job performance. In
fiscal 1998, salary increases for executive officers have been generally at
the market rate. Effective January 1, 1998 approximately sixty percent of the
annual housing allowance paid to Messrs. Heine and Lee is paid in the form of
base salary.
The group of companies to which the Company compares itself with respect to
base salary compensation of its executives is not the same as the group to
which it compares itself on the Performance Graph. For the U.S. market the
comparison group for base salary purposes is comprised of visioncare,
healthcare and technology companies whose businesses are concentrated on the
west coast of the United States. The Compensation Committee selected these
companies because it believes that they are the companies with respect to
which the Company must remain competitive in order to attract and retain
qualified executives to work at its Northern California locations. For other
market places worldwide the comparison group consists of all multinational and
medium to large local companies in the specific market place. The comparison
group used in the Performance Graph is comprised of the Company's worldwide
competitors.
ANNUAL CASH INCENTIVE COMPENSATION
The Compensation Committee views the annual cash incentive compensation
component of its program as a significant element in attaining its goal of
closely linking Company performance with executive compensation
9
<PAGE>
by providing additional annual cash compensation based on the Company's
achievement of objective financial performance targets.
During fiscal 1995, the Compensation Committee, with the approval of the
Board of Directors, adopted a management incentive plan (the "Management
Incentive Plan") for fiscal years commencing after fiscal 1995 to provide
annual performance-based cash bonuses to officers designated by the
Compensation Committee. Under the Management Incentive Plan, each designated
officer has the opportunity to receive a performance-based cash bonus based on
the Company's achievement of certain pre-established performance targets
related to "operating profit," "trading cash flow" and the ratio of working
capital to net sales, in each instance as measured on a Company-wide and/or
regional basis.
The Compensation Committee establishes target award percentages for each
participant, which is the percentage of a participant's salary that will be
awarded depending on the percentage of the performance target which is
attained. The Compensation Committee will determine whether to establish
maximum target award percentages. The maximum award which any participant may
receive in a fiscal year under the Management Incentive Plan is $1 million.
The Compensation Committee does not have discretion to increase the amount of
a participant's award payable under the plan after the establishment of the
relevant performance targets and target award percentages. Awards are paid
annually upon certification by the Compensation Committee of achievement of
the relevant performance targets at such time and in such manner as the
Compensation Committee shall determine.
The amount of an executive's bonus for fiscal 1998 was based on the
Company's level of achievement measured against its pre-established
performance targets. A bonus equal to 33% of the target bonus amount was
payable if 95% of the performance targets for "trading cash flow" and working
capital for fiscal 1998 were achieved. A bonus equal to 40% of the target
bonus was payable if "operating profit" attained fiscal 1997 levels. A bonus
in excess of 100% of the target bonus amount was payable if greater than 100%
of the performance targets was achieved. No bonus was payable if the Company
did not achieve at least 95% of its performance targets for "trading cash
flow" and working capital, and no bonus was payable if fiscal 1997 "trading
profit" was not achieved.
Prior to the commencement of fiscal 1998, the Compensation Committee
maintained target bonus awards equal to 80% of base salary for Mr. Heine and
equal to 60% of base salary for each of the other executive officers, in each
instance payable only upon attainment of 100% of the performance targets. The
Compensation Committee determined such percentages to be appropriate based on
market surveys of executive compensation, including the Executive Compensation
Reports published by Hay Management Consultants.
STOCK OPTION PLANS
The Compensation Committee believes that the stock option component of its
executive compensation program causes the executives' interests to be more
closely aligned with those of the Company's stockholders because the value of
the options is linked directly to the price of the Company's stock. The
Compensation Committee awarded stock options to the executive officers prior
to fiscal 1995 under the Company's then existing stock option plan. Such plan
has been amended to provide that no options would be granted thereunder after
February 28, 1995 and the International Stock Option Plan has been adopted by
the Company.
In light of previous awards made to Mr. Heine and the other named executive
officers, the Compensation Committee determined that it was not appropriate to
grant such persons options under the International Stock Option Plan during
fiscal 1998.
In fiscal 1998 the Board of Directors amended the Sola International Inc.
Stock Option Plan to provide for the issuance of an additional 1,690,000
shares of Common Stock, subject to the approval by the shareholders at the
Annual General Meeting. The amendment will enable the Compensation Committee
to make option grants to current optionholders and an expanded group of key
management worldwide over forthcoming years as well as to attract and retain
executive officers.
10
<PAGE>
PERQUISITES
The Company provides a company car allowance and supplemental medical
coverage to certain named executive officers and an expatriate allowance for
housing to each named executive officer who has relocated to California from
outside the United States. The foregoing perquisites are provided to executive
officers because the Compensation Committee believes that they are necessary
to attract and retain executive talent in a global market. Mr. Heine, a former
resident of Australia, is provided with each of the foregoing benefits.
CEO COMPENSATION
The Compensation Committee determines Mr. Heine's compensation on the same
basis and under the same philosophy it uses in determining the compensation of
other executive officers. As discussed above, the goal of the Compensation
Committee is to link a significant portion of the compensation of its
executive officers, including Mr. Heine, to Company performance. In fiscal
1998 Mr. Heine's salary was increased by 4%.
To further link Mr. Heine's compensation to Company performance, a
substantial amount of Mr. Heine's potential compensation for fiscal 1998 was
tied to the Company's achievement of certain objective financial targets
described above under the Management Incentive Plan. Based on the Company's
performance for fiscal 1998, Mr. Heine realized a bonus award equal to
approximately 119% of his base salary.
In deciding not to award additional stock options to its named executive
officers, including Mr. Heine, in fiscal 1998 the Compensation Committee
determined that in light of the awards made in December 1993 no awards were
appropriate.
SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a deduction to any publicly-held corporation for compensation paid
in excess of $1 million in a taxable year to its chief executive officer or
any of the four other most highly-compensated executive officers employed by
the Company on the last day of its taxable year.
During a transition period ending in 1999, the deduction limitation of
Section 162(m) does not apply to incentive compensation payable by the Company
pursuant to the management incentive plan. The Compensation Committee will
determine whether or not to administer the management incentive plan so that
compensation payable after the expiration of the transition period would be
subject to the deduction limitation. The Compensation Committee has
established and administered the Company's stock option plans with the intent
that compensation paid to the executive officers thereunder will not be
subject to the deduction limitation of Section 162(m).
Respectfully submitted,
Hamish Maxwell, Chairman
Irving S. Shapiro
11
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on $100 invested on
February 23, 1995 in each of the Common Stock of the Company, Standard &
Poor's 500 Index and the Dow Jones World Stock Index--Medical Supplies, the
latter of which the Company finds representative given the inclusion of
certain competitors of the Company in such index. The return of the Standard &
Poor's 500 Index is calculated assuming reinvestment of dividends. The Company
has not paid any dividends. The graph covers the period from February 23,
1995, when the Company's Common Stock was first offered to the public, through
March 31, 1998. The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF SOLA INTERNATIONAL INC., S&P 500 AND DOW JONES
WORLD STOCK INDEX-MEDICAL SUPPLIES
LINE GRAPH
<TABLE>
<CAPTION>
Measurement Period S&P 500 DJWSI
Fiscal Year Covered) SOLA INTERNATIONAL INC. INDEX MEDICAL SUPPLIES
- ------------------- ----------------------- --------- ----------------
<S> <C> <C> <C>
Measurement Pt-
02/23/95 $100 $100 $100
FYE 03/31/95 $130.3 $102.6 $104
FYE 03/31/96 $188.6 $132.2 $125.3
FYE 03/31/97 $140.2 $155.1 $153.4
FYE 03/31/98 $251.13 $225.65 $186.71
</TABLE>
12
<PAGE>
CERTAIN TRANSACTIONS
The Company has entered into agreements to provide indemnification for its
directors and executive officers in addition to the indemnification provided
for in the Company's Amended and Restated Certificate of Incorporation and
Amended and Restated By-Laws. The Company has also purchased directors and
officers insurance for its directors and executive officers.
The Company and Mr. Steven M. Neil, Executive Vice President, Finance, Chief
Financial Officer, Secretary and Treasurer, entered into an employment
agreement dated September 2, 1997. Under the terms of the agreement, amongst
other things, the Company loaned Mr. Neil $300,000, interest free, in
connection with his relocation to California.
The Company rents certain premises in Southbridge, Massachusetts from a
company owned by Mr. Maurice Cunniffe, a Director of the Company. Rents
payable under the terms of the rental agreement during fiscal 1998 amounted to
approximately $535,000.
APPROVAL OF AMENDMENTS TO THE 1998 SOLA INTERNATIONAL INC.
STOCK OPTION PLAN TO, AMONG OTHER THINGS, INCREASE
BY 1,690,000 THE NUMBER OF SHARES RESERVED FOR ISSUANCE
PURSUANT TO THE EXERCISE OF STOCK OPTIONS
INTRODUCTION
On March 5, 1998, the Board of Directors approved, subject to stockholder
approval, an increase of 1,690,000 in the number of shares of Common Stock
reserved for issuance pursuant to the exercise of stock options under the 1998
Sola International Inc. Stock Option Plan (the "Plan"). On June 23, 1998, the
Board of Directors also approved, subject to stockholder approval, amendments
to the Plan described below to provide the Compensation Committee greater
flexibility in administering the Plan. The Company is seeking stockholder
approval of the foregoing amendments. A copy of the Plan, as it is proposed to
be amended, is attached hereto as Appendix A. The material features of the
Plan, as it is proposed to be amended, are described below. Such description
is subject to, and is qualified in its entirety by, the full text of the Plan.
Capitalized terms not defined below have the meaning given to them in the
Plan.
The purpose of the proposed amendments is to permit the Compensation
Committee, through the grant of additional options to acquire shares of Common
Stock, to continue to promote the interests of the Company and its
stockholders by attracting, retaining and motivating key employees and
directors capable of furthering the success of the Company and by aligning
their economic interests more closely with those of the Company's
stockholders. To achieve these goals, the amendments also provide the
Compensation Committee more flexibility in administering the Plan. The
material features of the proposed amendments are described in greater detail
below. Stockholder approval of the Plan is required in order for compensation
attributable to grants thereunder not to be subject to the deduction
limitation of Section 162(m) of the Code. Section 162(m) of the Code generally
disallows a federal income tax deduction to any publicly-held corporation for
compensation paid in excess of $1 million in any taxable year to the chief
executive officer or any of the four other most highly compensated executive
officers who are employed by the corporation on the last day of the taxable
year. Section 162(m), however, does not disallow a federal income tax
deduction for qualified "performance based compensation," the material terms
of which are disclosed to and approved by stockholders. The Company has
established and administers the Plan with the intention that compensation
attributable to Options (as defined below) granted thereunder would not be
subject to the deduction limitation.
DESCRIPTION OF THE PLAN
The Company initially adopted the Plan effective February 15, 1995. The Plan
was amended effective April 1, 1996 to permit non-employee directors to elect
to receive their annual retainer in the form of stock options, and it was
amended again effective August 16, 1996 to provide for an increase by 500,000
in the number of shares reserved for issuance thereunder.
13
<PAGE>
The Plan is intended to provide an incentive for key employees and directors
to join and remain in the service of the Company, to maintain and enhance the
long-term performance and profitability of the Company and to provide key
employees and directors a proprietary interest in the success of the Company.
Pursuant to the Plan, key employees and directors of the Company
("Optionees") are eligible to receive awards of stock options ("Options") in
consideration of their services to the Company. Options granted under the plan
may be either nonqualified stock options or "incentive stock options," within
the meaning of Section 422 of the Code. Approximately 120 individuals are
currently eligible to participate in the Plan.
Subject to antidilution and similar provisions, as of June 15, 1998 the
total number of shares of Common Stock with respect to which Options may be
awarded under the Plan equals (i) 1,355,868 plus (ii) the number of shares of
Common Stock subject to options granted under the Sola Investors Inc. Stock
Option Plan which expire or terminate without exercise for any reason, which
number of shares shall not exceed 1,645,219. As of June 15, 1998, 161,895
shares of Common Stock remained available for the issuance of new stock
options under the Plan. The Board of Directors is seeking stockholder approval
to increase this amount by 1,690,000 shares.
The Plan is administered by the Compensation Committee. Subject to the
provisions of the Plan, the Compensation Committee will determine when and to
whom Options will be granted, the number of shares covered by each Option and
the other terms of the Options. The Compensation Committee may not grant
Options to any key employee under the Plan with respect to more than 500,000
shares of Common Stock in any fiscal year during the term of the Plan (subject
to antidilution and similar adjustments).
Each non-employee director may elect to receive all or a portion of his or
her annual cash retainer fee for services in the form of an Option (a
"Director Option"). Director Options are granted on the first business day
following the annual meeting of stockholders. The number of shares of Common
Stock granted in respect of a Director Option is equal to the cash value of
the fee the director elects to receive in the form of an Option divided by the
fair market value of a share of Common Stock on the date of grant, multiplied
by three. Each Director Option is fully exercisable upon grant. The per share
purchase price for shares of Common Stock underlying a Director Option is the
fair market value of a share on the date of grant.
Other than as provided in the Plan with respect to Director Options, an
Option may be granted on such terms and conditions as the Compensation
Committee may approve, provided that all Options must be granted with an
exercise price not less than the fair market value of the underlying Common
Stock on the date of grant (110% in the case of "incentive stock options"
granted to a "ten percent stockholder," as provided in Section 422 of the
Code). No Option may be exercised after the expiration of ten years from the
date of grant (five years in the case of an "incentive stock option" granted
to a "ten percent stockholder"). Options granted under the Plan will become
exercisable at such times and under such conditions as the Compensation
Committee shall determine at the time of grant or thereafter. Unless the
Agreement or the Compensation Committee otherwise provides, vested Options
lapse 45 days after termination of employment with the Company for any reason
other than death or disability. Vested Options terminate 180 days after
termination by reason of death or disability. Unless the Agreement or the
Compensation Committee otherwise provides, the portion of an Option that is
not vested will automatically lapse upon the Optionee's termination of
employment with the Company for any reason. All Options automatically lapse
upon the termination of the Optionee's employment for cause. Unless otherwise
determined by the Compensation Committee, in the event of certain change in
control transactions with respect to the Company, all outstanding Options
shall vest and, upon exercise, entitle the holder thereof to receive in
respect of each share of Common Stock subject to an Option, upon exercise
thereof, the same amount and kind of stock, securities, cash, property or
other consideration that each holder of a share of Common Stock was entitled
to receive in such transaction in respect of a share of Common Stock.
The Board of Directors may at any time and from time to time suspend, amend,
modify or terminate the Plan; provided, however, that, to the extent required
by Rule 16b-3 promulgated under the Exchange Act, or any other law, regulation
or stock exchange rule, no such change shall be effective without the
requisite approval of the Company's stockholders. In addition, no such change
may adversely alter or impair any rights or obligations under any awards
previously granted, except with the written consent of the Optionee.
14
<PAGE>
PROPOSED AMENDMENTS TO THE PLAN
The Board of Directors amended the Plan to increase by 1,690,000 the number
of shares of Common Stock reserved for issuance pursuant thereto, subject to
stockholder approval. The principal purpose of this amendment was to enable
the Company to continue to offer incentive compensation in the form of Options
to key employees and directors.
The Plan was also amended by the Board of Directors, subject to stockholder
approval, to provide greater flexibility to the Compensation Committee in
administering the plan. Under the Plan as it is proposed to be amended, the
Compensation Committee would have discretion to (i) vary the definition of
"cause" (upon the occurrence of which an Optionee's Options would be
forfeited) on a grant-by-grant basis, (ii) allow Options to remain outstanding
for longer than 45 days after an Optionee's employment is terminated, (iii)
modify the vesting schedule of Options subsequent to their grant, (iv) vary
the definition of certain change in control transactions (upon the occurrence
of which Options generally will vest) on a grant-by-grant basis and (v) allow
for Options to be transferred to members of an Optionee's immediate family or
to certain entities solely for their benefit.
NEW PLAN BENEFITS
The grant of Options under the Plan is subject to the discretion of the
Compensation Committee. The Committee has not granted any Options under the
Plan as it is proposed to be amended. Accordingly, the Company cannot
currently determine the number of shares of Common Stock that may be subject
to Options granted in the future to key employees and directors generally
under the Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of the principal United States
federal income tax consequences under current federal income tax laws relating
to Options. This summary is not intended to be exhaustive and, among other
things, does not describe state, local or foreign income and other tax
consequences.
An optionee will not recognize any taxable income upon the grant of a
nonqualified option and the Company will not be entitled to a tax deduction
with respect to such grant. Upon exercise of a nonqualified option, the excess
of the fair market value of the Common Stock on the exercise date over the
exercise price will be taxable as compensation income to the optionee. Subject
to the optionee including such excess amount in income or the Company
satisfying applicable reporting requirements, the Company should be entitled
to a tax deduction in the amount of such compensation income. The optionee's
tax basis for the Common Stock received pursuant to such exercise will equal
the sum of the compensation income recognized and the exercise price.
In the event of a sale of the Common Stock received upon the exercise of a
nonqualified option, any appreciation or depreciation after the exercise date
generally will be taxed as capital gain or loss, provided that any gain will
be subject to reduced rates of tax if the shares were held for more than
twelve months after exercise and will be subject to further reduced rates of
tax if the shares were held for more than eighteen months after exercise.
Generally, an optionee should not recognize taxable income at the time of
grant or exercise of an incentive stock option and the Company should not be
entitled to a tax deduction with respect to such grant or exercise. The
exercise of an incentive stock option generally will give rise to an item of
tax preference that may result in alternative minimum tax liability for the
optionee.
A sale or other disposition by an optionee of shares acquired upon the
exercise of an incentive stock option more than one year after the transfer of
the shares to such optionee and more than two years after the date of grant of
the incentive stock option should result in any difference between the net
sale proceeds and the exercise price being treated as long-term capital gain
or loss to the optionee with no deduction being allowed to the
15
<PAGE>
Company, provided that any gain will be subject to reduced rates of tax if the
shares were held for more than twelve months after exercise and will be
subject to further reduced rates of tax if the shares were held for more than
eighteen months after exercise. Upon a sale or other disposition of shares
acquired upon the exercise of an incentive stock option within one year after
the transfer of the shares to the optionee or within two years after the date
of grant of the incentive stock option (including the delivery of such shares
in payment of the exercise price of another incentive stock option within such
period), the excess of (a) the lesser of (i) the fair market value of the
shares at the time of exercise of the option and (ii) the amount realized on
such disqualifying sale or other disposition of the shares over (b) the
exercise price of such shares, should constitute ordinary income to the
optionee and the Company should be entitled to a deduction in the amount of
such income. The excess if any, of the amount realized on a disqualifying sale
over the fair market value of the shares at the time of the exercise of the
option generally will constitute short-term or long-term capital gain,
depending on whether the shares have been held for at least twelve months
after the date of exercise, with the lowest capital gains rates available if
shares are held for more than eighteen months after the date of exercise, and
the excess will not be deductible by the Company.
Special rules may apply to optionees who are subject to Section 16 of the
Securities Exchange Act of 1934.
Under certain circumstances the accelerated vesting or exercise of options
in connection with a change of control of the Company might be deemed an
"excess parachute payment" for purposes of the golden parachute tax provision
of section 280G of the Code. To the extent it is so considered, the Optionee
may be subject to a 20% excise tax and the Company may be denied a tax
deduction.
Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly-held corporation for compensation paid in excess of
$1 million in any taxable year to the chief executive officer or any of the
four other most highly compensated executive officers who are employed by the
Company on the last day of its taxable year. The Company has established and
administers the Plan with the intention that compensation attributable to
Options granted thereunder would not be subject to the deduction limitation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Ernst & Young LLP, as the firm of independent auditors to audit the
books and accounts of the Company for the fiscal year ending March 31, 1999.
Although the appointment of independent auditors is not required by law or the
Company's By-Laws to be approved by the Company's stockholders, the Board of
Directors believes that stockholders should participate in the selection of
the Company's independent auditors. Accordingly, the stockholders will be
asked at the Annual Meeting to ratify the appointment by the Board of
Directors of Ernst & Young LLP as the Company's independent auditors for the
fiscal year ending March 31, 1999. In the event the stockholders do not
approve the appointment of Ernst & Young LLP, the selection of other
independent auditors will be considered by the Board of Directors. A
representative of Ernst & Young LLP will be in attendance at the 1998 Annual
Meeting and will have an opportunity to make a statement if such
representative desires to do so, and will be available to respond to
appropriate questions.
16
<PAGE>
STOCKHOLDERS' PROPOSALS FOR THE
1999 ANNUAL MEETING OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received at the Company's principal offices,
2420 Sand Hill Road, Suite 200, Menlo Park, California 94025, Attention:
Secretary, for inclusion in the Company's Proxy Statement and form of proxy
relating to that Annual Meeting no later than March 2, 1999. Proposals, as
well as any questions related thereto, should be submitted in writing to the
Secretary of the Company. Proposals may be included in the proxy statement for
the 1999 Annual Meeting if they comply with certain rules and regulations
promulgated by the U.S. Securities and Exchange Commission and with certain
procedures described in the Company's By-Laws, a copy of which may be obtained
from the Secretary of the Company.
EXPENSES OF SOLICITATION
The solicitation of proxies in the form enclosed is made on behalf of the
Board of Directors of the Company. All expenses relating to the solicitation
will be borne by the Company. In addition to the solicitation of proxies by
use of the mails, some of the officers, directors and regular employees of the
Company and its subsidiaries, none of whom will receive additional
compensation therefor, may solicit proxies in person or by telephone,
telegraph or other means. As is customary, the Company will, upon request,
reimburse brokerage firms, banks, trustees, nominees and other persons for
their out-of-pocket expenses in forwarding proxy materials to their
principals.
OTHER MATTERS
The persons named in the enclosed form of proxy have no intention of
bringing before the meeting for action any matter other than as specifically
referred to above, nor has management or the Board of Directors any such
intention, and none of such persons, management or the Board of Directors is
aware of any matters which may be presented by others. If any such business
should properly come before the meeting, the persons named in the form of
proxy intend to vote thereon in accordance with their best judgment.
SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
The directors, executive officers and ten percent stockholders of the
Company are required to file reports of their ownership of the Company's
Common Stock with the Securities and Exchange Commission and the New York
Stock Exchange pursuant to Section 16(a) of the Securities Exchange Act of
1934. To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no
other reports were required, all of such reporting requirements were satisfied
during fiscal 1998; provided, however, that Mr. Steven M. Neil filed his
initial report on Form 3 late.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON WRITTEN REQUEST, A COPY OF ITS ANNUAL REPORT ON FORM 10-
K FOR THE FISCAL YEAR ENDED MARCH 31, 1998, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES BUT EXCLUDING EXHIBITS). COPIES OF ANY EXHIBITS THERETO ALSO WILL BE
FURNISHED UPON THE PAYMENT OF A REASONABLE DUPLICATING CHARGE. REQUESTS IN
WRITING FOR COPIES OF ANY SUCH MATERIALS SHOULD BE DIRECTED TO SOLA
INTERNATIONAL INC., 2420 SAND HILL ROAD, SUITE 200, MENLO PARK, CALIFORNIA
94025, ATTENTION: INVESTOR RELATIONS.
17
<PAGE>
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
ARE URGED TO DATE, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
ENCLOSED ENVELOPE.
By order of the Board of Directors,
Steven M. Neil
Secretary
Menlo Park, California
June 30, 1998
A copy of the Company's Annual Report for the fiscal year ended March 31,
1998, including financial statements, accompanies this Proxy Statement. The
Annual Report is not to be regarded as proxy soliciting material or as a
communication by means of which any solicitation is to be made.
18
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APPENDIX A
AMENDED AND RESTATED 1998
SOLA INTERNATIONAL INC.
STOCK OPTION PLAN
ARTICLE I
GENERAL
1.1 Purpose. The purpose of this 1998 Sola International Inc. Stock Option
Plan (the "Plan"), is to provide certain key employees and/or directors of
Sola International Inc., a Delaware corporation, its successors and assigns
and its subsidiaries and affiliates (collectively, the "Company"), an
incentive (i) to join and/or remain in the service of the Company, (ii) to
maintain and enhance the long-term performance and profitability of the
Company and (iii) to acquire a proprietary interest in the success of the
Company. The Plan is intended to meet the requirements of Rule 16b-3 of the
1934 Act (as hereinafter defined) at all times during which the Company and
Insiders (as hereinafter defined) are subject to the requirements of Section
16 of the 1934 Act (as hereinafter defined).
1.2 Definition of Certain Terms.
(a) "Agreement" means an agreement between International and an Optionee
issued pursuant to Section 2.1.
(b) "Board" means the Board of Directors of International.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee of the Board appointed to administer the
Plan in accordance with Section 1.3.
(e) "Common Stock" means the shares of Common Stock, par value $.01 per
share, of International, and any other shares into which such common stock
shall thereafter be exchanged by reason of a recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like.
(f) "Company" means Sola International Inc., a Delaware corporation, its
successors and assigns and its subsidiaries and affiliates.
(g) "Date of Grant" means the date as of which an Option is granted by the
Committee under an Agreement.
(h) "Fair Market Value" per share as of a particular date means (i) the
closing sales price per share of Common Stock on such date, including the Date
of Grant, on the national securities exchange on which the Common Stock is
principally traded, or if there was not a sale on such date, the closing sales
price for the last preceding date on which there was a sale of such Common
Stock on such exchange, or (ii) if the shares of Common Stock are not then
traded on a national securities exchange, the average of the closing bid and
asked prices for the shares of Common Stock in the over-the-counter market on
which the Common Stock is principally traded for the last date, including the
Date of Grant, on which there was a sale of such Common Stock in such market,
or (iii) if the shares of Common Stock are not then listed on a national
securities exchange or traded in an over-the-counter market, such value as the
Committee, in its sole discretion, shall determine.
(i) "Incentive Stock Option" means an Option satisfying the requirements of
Section 422 of the Code and designated by the Committee as an Incentive Stock
Option.
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(j) "Insider" means a person subject to potential liability with respect to
equity securities of International under Section 16(b) of the 1934 Act.
(k) "International" means Sola International Inc., its successors and
assigns.
(l) "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option or other type of statutory stock option under the Code.
(m) "Optionee" means an employee of the Company or a Nonemployee Director
who has been awarded any Option under this Plan.
(n) "Option" means a right to purchase Common Stock granted under the Plan.
(o) The terms "parent corporation" and "subsidiary corporation" as used
herein shall have the meaning given those terms in Code Section 424(e) and
(f), respectively. A corporation shall be deemed a parent corporation or a
subsidiary corporation only for such periods during which the requisite
ownership relationship is maintained.
(p) "Plan" means this 1998 Sola International Inc. Stock Option Plan.
(q) "Termination With Cause," with respect to any employee, means, unless
otherwise provided in an Agreement, termination by the Company of such
employee's employment for: (i) misappropriation of corporate funds, (ii)
conviction of a felony or a crime involving moral turpitude, (iii) willful
violation of directions of the Chief Executive Officer or the Board, (iv)
gross negligence or (v) willful misconduct, and with respect to any
Nonemployee Director, unless otherwise provided in an Agreement, the
commission of an act of fraud or intentional mispresentation or an act of
embezzlement, misappropriation or conversion of assets or opportunities of the
Company.
(r) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(s) "Director Option" means an Option issued pursuant to Section 2.6.
(t) "Nonemployee Director" means a director of International, including the
Chairman of the Board, who is not an officer or employee of the Company.
1.3 Administration.
(a) Subject to Section 1.3(e), the Plan shall be administered by the
Committee, which shall consist of at least two directors and which shall have
the power of the Board to authorize awards under the Plan. At all times during
which the Company and Insiders are subject to the requirements of Section 16
of the 1934 Act, all members of the Committee shall be "non-employee
directors" as described in Rule 16b-3 of the 1934 Act. The members of the
Committee shall be appointed by, and may be changed from time to time in the
discretion of, the Board.
(b) The Committee shall have the authority (i) to exercise all of the powers
granted to it under the Plan, (ii) to construe, interpret and implement the
Plan and any Agreement executed pursuant to Section 2.1, (iii) to prescribe,
amend and rescind rules and regulations relating to the Plan, (iv) to make all
determinations necessary or advisable in administering the Plan, and (v) to
correct any defect, supply any omission and reconcile any inconsistency in the
Plan.
(c) The determination of the Committee on all matters relating to the Plan
or any Agreement shall be final, binding and conclusive.
(d) No member of the Committee shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to this
Plan or any transaction hereunder, except for liability arising
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from his or her willful misfeasance, gross negligence or reckless disregard of
his or her duties. The Company hereby agrees to indemnify each member of the
Committee for all costs and expenses and, to the extent permitted by
applicable law, any liability incurred in connection with defending against,
responding to, negotiation for the settlement of or otherwise dealing with any
claim, cause of action or dispute of any kind arising in connection with any
actions in administering this Plan or the authorizing or denying authorization
to any transaction hereunder, other than actions involving willful
misfeasance, gross negligence or reckless disregard of the member's duties.
(e) Notwithstanding anything to the contrary contained herein, the Board
may, in its sole discretion, at any time and from time to time, resolve to
administer the Plan, with any members of the Board who are eligible to receive
awards (other than Director Options) hereunder not participating in decisions
relating to the Plan, in which event, the term "Committee" as used herein
shall be deemed to mean the Board.
1.4 Persons Eligible for Awards. Awards under the Plan may be made from time
to time to such key employees of the Company as the Committee shall in its
sole discretion select and to Nonemployee Directors in accordance with Section
2.6; provided, however, that, subject to Section 3.4 (relating to adjustments
upon changes in capitalization), the Committee may not award Options to any
such employee with respect to more than 500,000 shares of Common Stock in any
fiscal year during the term of the Plan.
1.5 Types of Awards Under the Plan. Awards may be made under the Plan in the
form of Options, which shall be Incentive Stock Options or Nonqualified Stock
Options.
1.6 Shares Available for Awards.
(a) Subject to Section 3.4 (relating to adjustments upon changes in
capitalization), the maximum number of shares of Common Stock with respect to
which Options may be awarded under the Plan shall be equal to (i) 3,045,868
shares, plus (ii) subject to the requirements of Rule 16b-3 of the 1934 Act,
if applicable, the number of shares of Common Stock subject to options which
have been granted under the Sola Investors Inc. Stock Option Plan (the
"Existing Options") which expire or terminate without exercise for any reason,
which number of shares underlying Existing Options shall not exceed 1,645,219.
Subject to the requirements of Rule 16b-3 of the 1934 Act, if applicable,
shares of Common Stock covered by Options granted under the Plan which expire
or terminate for any reason shall again become available for award under the
Plan.
(b) Shares that are issued upon the exercise of Options awarded under the
Plan shall be authorized and unissued or treasury shares of Common Stock.
(c) Without limiting the generality of the preceding provisions of this
Section 1.6, the Committee may, but solely with the Optionee's consent, agree
to cancel any award of Options under the Plan and issue new Options in
substitution therefor, provided that the Options as so substituted shall
satisfy all of the requirements of the Plan as of the date such new Options
are awarded.
1.7 Option Price. The exercise price of each Option shall not be less than
100% of the Fair Market Value of the shares of Common Stock covered by the
Option as of the Date of Grant.
ARTICLE 2
STOCK OPTIONS
2.1 Agreements Evidencing Stock Options.
(a) Options awarded under the Plan shall be evidenced by Agreements which
shall not be inconsistent with the terms and provisions of the Plan, and which
shall contain such provisions as the Committee may in its sole discretion deem
necessary or desirable. Without limiting the generality of the foregoing, the
Committee may in
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any Agreement impose such restrictions or conditions upon the exercise of such
Option or upon the sale or other disposition of the shares of Common Stock
issuable upon exercise of such Option as the Committee may in its sole
discretion determine. By accepting an award pursuant to the Plan each Optionee
shall thereby agree that each such award shall be subject to all of the terms
and provisions of the Plan, including, but not limited to, the provisions of
Section 1.3(d).
(b) Each Agreement shall set forth the number of shares of Common Stock
subject to the Option granted thereby.
(c) Each Agreement relating to Options shall set forth the amount payable by
the Optionee to International upon exercise of the Option evidenced thereby,
subject to adjustment by the Committee to reflect changes in capitalization as
contemplated by Section 3.4.
(d) Each Agreement shall set forth the period during which the Option shall
be exercisable and any vesting provisions applicable to the Option, which
shall be determined by the Committee in its discretion; provided, however,
that no Option shall be exercisable after the expiration of ten years from the
Date of Grant.
(e) Each Agreement shall specify whether the Option is a Nonqualified Stock
Option or an Incentive Stock Option.
(f) Each Agreement shall set forth such other terms and conditions of the
Option, not inconsistent with the terms of the Plan, as the Committee shall
deem appropriate.
2.2 Incentive Stock Options. Incentive Stock Options granted under the Plan
shall be subject to the following special terms and conditions, in addition to
the general terms and conditions specified in the Plan.
(a) Value of Shares. The aggregate Fair Market Value (determined as of the
date the Incentive Stock Option is granted) of the shares of Common Stock with
respect to which Incentive Stock Options granted under this Plan and all other
option plans of International or any subsidiary corporation or parent
corporation become exercisable for the first time by each Optionee during any
calendar year shall not exceed $100,000.
(b) Ten Percent Stockholder. In the case of an Incentive Stock Option
granted to a "ten percent stockholder" (as provided in Section 422 of the
Code), (i) the option price shall not be less than one hundred ten percent
(110%) of the Fair Market Value of the shares of Common Stock on the Date of
Grant of such Incentive Stock Option, and (ii) the exercise period shall not
exceed five (5) years from the date of grant of such Incentive Stock Option.
2.3 Exercise of Options. Subject to the provisions of this Article 2, each
Option granted under the Plan shall be exercisable as follows:
(a) An Option shall become exercisable at such times and subject to such
conditions as the applicable Agreement may provide.
(b) Unless the applicable Agreement otherwise provides, an Option granted
under the Plan may be exercised from time to time as to all or part of the
shares as to which such Option shall then be exercisable.
(c) An Option shall be exercisable by the filing of a written notice of
exercise with International, on such form and in such manner as the
Committee shall in its sole discretion prescribe.
(d) Any written notice of exercise of an Option shall be accompanied by
payment of the exercise price for the shares being purchased. Except as
described below, such payment shall be made by certified or official bank
check payable to International (or the equivalent thereof acceptable to the
Committee). As soon as practicable after receipt of such payment,
International shall deliver to the Optionee a certificate or certificates
for the shares of Common Stock so purchased.
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2.4 Termination of Options.
(a) Except as the Agreement or the Committee may otherwise provide and as
set forth in this Section 2.4, notwithstanding anything to the contrary in
this Plan, an Optionee may not exercise his vested Options after (and his
Options shall terminate on) the first to occur of (i) the date which is 45
days after termination of his employment or directorship with the Company for
any reason other than death or disability; and (ii) 180 days following the
Optionee's termination of employment or directorship by reason of death or
disability.
(b) Notwithstanding anything to the contrary in this Plan, all Options
granted to an Optionee shall immediately expire and cease to be exercisable
and all rights granted to an Optionee under this Plan and such Optionee's
Agreement shall immediately expire in the event of a Termination With Cause of
the Optionee by the Company at any time.
(c) Unless the applicable Agreement or the Committee expressly provides
otherwise, Options (other than Director Options) awarded to Optionees under
the terms of the Plan will be exercisable only in accordance with the
following vesting schedule:
<TABLE>
<CAPTION>
CUMULATIVE
PERCENTAGE OF
APPLICABLE DATE TOTAL SHARES
--------------- -------------
<S> <C>
On the date of the applicable Agreement........................ 20%
On the first anniversary of the date of the Agreement.......... 40%
On the second anniversary of the date of the Agreement......... 60%
On the third anniversary of the date of the Agreement.......... 80%
On the fourth anniversary of the date of the Agreement......... 100%
</TABLE>
The Committee may modify this vesting schedule in any manner that it deems
appropriate in any Agreement or thereafter, and may provide different vesting
schedules in different Agreements in its sole discretion.
(d) Except as otherwise provided in the Plan, in an Agreement or by the
Committee, the portion of an Option that is not vested under Section 2.4(c)
above will automatically lapse upon the Optionee's termination of employment
or directorship with the Company for any reason.
2.5 Rule 16b-3.
Notwithstanding anything in the Plan to the contrary, the Plan shall be
administered, and Options shall be granted and exercised, in accordance with
the 1934 Act and, specifically, Rule 16b-3 of the 1934 Act.
2.6 Nonemployee Director Options.
(a) Ineligibility for Other Awards. Nonemployee Directors shall not be
eligible to receive Options pursuant to the Plan other than as set forth in
this Section 2.6.
(b) Election. Each Nonemployee Director may elect to receive all or a
portion of his or her annual cash retainer fee for services as a Nonemployee
Director (the "Fee") in the form of an Option (a "Director Option"). The
election must be made by written notice to the Committee by June 15 with
respect to the Fee that is otherwise payable for the immediately succeeding
four calendar quarters commencing on July 1; provided, however, that with
respect to the Fee that is payable for the period April 1, 1996 through June
30, 1997, the election must be made prior to April 30, 1996. The election
shall be irrevocable. No election shall be effective with respect to any
Director Option unless the Nonemployee Director making the election is a
Nonemployee
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Director on the relevant Date of Grant. Newly-elected directors may not elect
to receive Director Options in respect of the Fee payable for the calendar
year in which they are elected. A Nonemployee Director shall not be entitled
to receive in cash any portion of the Fee with respect to which an election
has been made to receive Director Options.
(c) Grant Date. Notwithstanding anything in this Plan to the contrary,
Director Options shall be granted on November 1, 1996 with respect to an
election made for the Fees payable for the period April 1, 1996 through June
30, 1997, and on the first business day following the next annual meeting of
stockholders following an election with respect to Fees payable for subsequent
periods.
(d) Shares Subject to Option. Notwithstanding anything in this Plan to the
contrary, the number of shares of Common Stock in respect of a Director Option
shall be equal to the product of (i) the quotient of (x) the cash value of the
Fee which the Nonemployee Director elects to receive in the form of an Option,
divided by (y) the Fair Market Value of a share of Common Stock on the Date of
Grant and (ii) three.
(e) Purchase Price. Notwithstanding anything in this Plan to the contrary,
the per share purchase price for shares of Common Stock underlying a Director
Option shall be the Fair Market Value of a share of Common Stock on the Date
of Grant.
(f) Vesting. Notwithstanding anything in this Plan to the contrary, each
Director Option shall be fully exercisable upon grant.
ARTICLE 3
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards.
(a) The Board may, without stockholder approval, from time to time suspend
or discontinue the Plan or revise or amend it in any respect whatsoever,
except that no such amendment shall adversely alter or impair any rights or
obligations under any award theretofore made under the Plan without the
consent of the person to whom such award was made; provided, further, that an
amendment which requires stockholder approval in order for the Plan to
continue to comply with Rule 16b-3 or any other law, regulation or stock
exchange requirement shall not be effective unless approved by the requisite
vote of stockholders.
(b) Subject to the terms and conditions of the Plan (including Section
3.1(a)), the Committee may amend outstanding Agreements with such Optionee,
for example, to (i) accelerate the time or times at which an Option may be
exercised or (ii) extend the scheduled expiration date of the Option.
3.2 Nonassignability. No Option shall be transferable by the Optionee
otherwise than by will or by the laws of descent and distribution or, in the
case of an Option other than an Incentive Stock Option, pursuant to a domestic
relations order (within the meaning of Rule 16a-12 promulgated under the
Exchange Act), and such Option shall be exercisable during the lifetime of
such Optionee only by the Optionee or his or her guardian or legal
representative. Notwithstanding the foregoing, the Committee may set forth in
the Agreement evidencing an Option (other than an Incentive Stock Option) at
the time of grant or thereafter, that an option may be transferred to members
of the Optionee's immediate family, to trusts solely for the benefit of such
immediate family members and to partnerships in which such family members
and/or trusts are the only partners. For purposes of this Plan, a transferee
of an Option shall be deemed to be the Optionee. Immediate family means the
Optionee's spouse, parents, children, stepchildren and grandchildren and the
spouses of such parents, children, stepchildren, and grandchildren.
3.3 Withholding of Taxes.
(a) Upon exercise of an Option, International shall be entitled to require
as a condition to delivery of shares of Common Stock that the Optionee remit
an amount sufficient to satisfy all federal, state and other governmental tax
withholding requirements related to such exercise. The Company shall be
entitled to withhold from any
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payments to an Optionee an amount sufficient to satisfy any federal, state and
other governmental tax requirements related to exercise of an Option which
have not previously been paid by the Optionee to the Company or to an
appropriate governmental authority.
(b) An Optionee may elect to have International retain that number of shares
of Common Stock that would satisfy all or a specified portion of the federal,
state and local withholding tax liabilities of the Optionee arising as a
result of the exercise of the Option. The Committee shall have sole discretion
to approve or disapprove any such election. If the Optionee is an Insider and
is subject to Section 16 of the 1934 Act, any such withholding shall be made
only in a manner so as to be exempt under Section 16(b) of the 1934 Act.
3.4 Adjustments Upon Certain Changes.
(a) If and to the extent specified by the Committee, the number of shares of
Common Stock issuable upon exercise of Options, the exercise price for
Options, and the number of shares available under the Plan may be
appropriately adjusted by the Committee for any increase or decrease in the
number of issued shares of Common Stock resulting from the subdivision or
combination of shares of Common Stock or other capital adjustments, or the
payment of a stock dividend after the effective date of this Plan, or other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company, or in the event of any
recapitalization, merger, consolidation or other similar transaction;
provided, however, that any Options to purchase fractional shares of Common
Stock resulting from any such adjustment shall be eliminated. The Committee's
determination as to what adjustments shall be made under this Section, and the
extent thereof, shall be final, binding and conclusive.
(b) Unless otherwise determined by the Committee, in the event of a
Transaction (as hereinafter defined), each Optionee shall be entitled to
receive in respect of each share of Common Stock subject to the Option, upon
exercise of such Option, the same amount and kind of stock, securities, cash,
property or other consideration that each holder of a share of Common Stock
was entitled to receive in the Transaction in respect of a share. Unless
otherwise determined by the Committee, in the event of a Transaction which
does not also constitute a Non-Control Transaction (as hereinafter defined),
all Options outstanding on the effective date of such transaction shall become
fully vested and exercisable.
"Transaction" means, unless otherwise provided in an Agreement, (i) the
approval by stockholders of the liquidation or dissolution of International,
(ii) a sale or other disposition of 80% or more of the outstanding voting
stock of International, or (iii) the merger or consolidation of International
with or into any entity. "Non-Control Transaction" means (i) a merger or
consolidation in which International is the surviving corporation and the
shares of its outstanding Common Stock are not changed into other securities
or property pursuant to such merger or consolidation, (ii) a merger or
consolidation with an affiliate of International following which those persons
who owned directly or indirectly a majority of the outstanding shares of
voting stock immediately prior to such merger or consolidation will own a
majority of the outstanding shares of voting stock of the surviving
corporation, or (iii) a sale or other disposition of capital stock of
International following which those persons who owned directly or indirectly a
majority of the outstanding shares of voting stock immediately prior to such
sale will own a majority of the outstanding shares of voting stock of the
purchasing entity.
3.5 Right of Discharge Reserved. Nothing in this Plan or in any Agreement
shall confer upon any employee, Optionee or other person the right to continue
in the employment or service of the Company or affect any right which the
Company may have to terminate the employment or service of such employee or
other person.
3.6 No Rights as a Stockholder. No Optionee or other person holding an
Option shall have any of the rights of a stockholder of International with
respect to shares subject to an Option until the issuance of a stock
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certificate to him for such shares. Except as otherwise provided in Section
3.4, no adjustment shall be made for dividends, distributions or other rights
(whether ordinary or extraordinary, and whether in cash, securities or other
property) for which the record date is prior to the date such stock
certificate is issued.
3.7 Nature of Payments.
(a) Any and all payments of shares of Common Stock hereunder shall be
granted, transferred or paid in consideration of services performed by the
Optionee for the Company.
(b) All such grants, issuances and payments shall constitute a special
incentive payment to the Optionee and shall not, unless otherwise determined
by the Committee, be taken into account in computing the amount of salary or
compensation of the Optionee for the purposes of determining any pension,
retirement, death or other benefits under (i) any pension, retirement, life
insurance or other benefit plan of the Company or (ii) any agreement between
the Company and the Optionee.
3.8 Non-Uniform Determinations. Except as to grants of Director Options, the
Committee's determinations under the Plan need not be uniform and may be made
by it selectively among persons who receive, or are eligible to receive,
awards under the Plan (whether or not such persons are similarly situated).
Without limiting the generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Agreements, as to
(i) the persons to receive awards under the Plan, and (ii) the terms and
provisions of awards under the Plan.
3.9 Other Payments or Awards. Nothing contained in the Plan shall be deemed
in any way to limit or restrict the Company, any subsidiary of the Company or
the Committee from making any award or payment to any person under any other
plan, arrangement or understanding, whether now existing or hereafter in
effect.
3.10 Restrictions.
(a) If the Committee shall at any time determine that any Consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights thereunder or the taking of any other
action thereunder (each such action being hereinafter referred to as a "Plan
Action"), then such Plan Action shall not be taken, in whole or in part,
unless and until such Consent shall have been effected or obtained to the full
satisfaction of the Committee.
(b) The term "Consent" as used herein with respect to any Plan Action means
(i) any and all listings, registrations or qualifications in respect thereof
upon any securities exchange or under any federal, state or local law, rule or
regulation, (ii) any and all written agreements and representations by the
grantee with respect to the disposition of shares, or with respect to any
other matter, which the Committee shall deem necessary or desirable to comply
with the terms of any such listing, registration or qualification or to obtain
an exemption from the requirement that any such listing, qualification or
registration be made and (iii) any and all consents, clearances and approvals
in respect of a Plan Action by any governmental or other regulatory bodies.
3.11 Section Headings. The section headings contained herein are for the
purposes of convenience only and are not intended to define or limit the
contents of said sections.
3.12 Effective Date and Term of Plan.
(a) The Plan is effective as of June 23, 1998, subject to approval by a
majority of the votes cast and entitled to vote thereon at a meeting of the
stockholders of International.
(b) The Plan shall terminate ten years after the earlier of the date on
which it becomes effective or the date on which it is so approved by the
stockholders of International, and no Options shall be granted after its
termination. Notwithstanding the foregoing, all Options granted before the
date the Plan terminates shall remain in effect until such Options have been
exercised or terminated in accordance with the terms of the Plan and the
Agreements.
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3.13 Disposition of Incentive Stock Options. If an Optionee makes a
disposition, within the meaning of Section 424(c) of the Code and regulations
promulgated thereunder, of any share or shares of Common Stock issued to such
Optionee pursuant to the exercise of an Option granted as an Incentive Stock
Option within the two-year period commencing on the day after the Date of
Grant or within the one-year period commencing on the date after the date of
transfer of such share or shares of Common Stock to the Optionee pursuant to
such exercise, the Optionee shall, within ten (10) days of such disposition,
notify the Company thereof, by delivery of written notice to the Company at
its principal executive office.
A-9
<PAGE>
IMPORTANT INFORMATION
SOLA INTERNATIONAL INC.
1998 ANNUAL MEETING
Sola International Inc.'s Annual Meeting of
Stockholders will be held at the Quadrus
Conference Center, 2400 Sand Hill Road, Menlo
Park, California 94025 on Friday, August 14,
1998, at 10:00 a.m. (local time).
1377-PS-98
<PAGE>
PROXY
SOLA INTERNATIONAL INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF SOLA INTERNATIONAL INC. FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON AUGUST 14, 1998
The undersigned hereby appoints John E. Heine, James H. Cox and Steven
M. Neil, and each of them, as attorneys and proxies with full power of
substitution, to vote for and on behalf of the undersigned all shares of common
stock of Sola International Inc. held of record by the undersigned on June 18,
1998, at the Sola International Inc. Annual Meeting of Stockholders to be held
on August 14, 1998 and any adjournment thereof, upon the following matters and
upon any other business that may properly come before the meeting, as set forth
in the related Notice of Annual Meeting and Proxy Statement, both of which have
been received by the undersigned.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHARE OWNER. IF THIS PROXY IS EXECUTED BUT NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR
NOMINEES, IN FAVOR OF THE AMENDMENT TO THE SOLA INTERNATIONAL INC. STOCK OPTION
PLAN AND FOR RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS FOR
FISCAL 1999.
Please indicate your vote for the election of directors on the other
side. The nominees for director are: Maurice J. Cunniffe, Douglas D. Danforth,
A. William Hamill, John E. Heine, Hamish Maxwell, Irving S. Shapiro and Jackson
L. Schultz.
[SEE REVERSE] CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE]
[ SIDE ] [ SIDE ]
<PAGE>
DETACH HERE
[X]Please mark
votes as in
this example.
<TABLE>
<CAPTION>
The Board of Directors recommends a vote "For All Nominees" on proposal 1 and a
vote "For" proposals 2 and 3.
<S> <C>
1. Election of seven directors FOR AGAINST ABSTAIN
Nominees: Maurice J. Cunniffe, Douglas D. Danforth, 2. Amendment of the Sola [ ] [ ] [ ]
A. William Hamill, John E. Heine, Hamish Maxwell, International Inc. Stock Option Plan
Irving S. Shapiro and Jackson L. Schultz to, among other things, increase the
number of shares reserved for
[ ] FOR [ ] WITHHELD issuance pursuant to the exercise of
ALL FROM ALL stock options.
NOMINEES NOMINEES
FOR AGAINST ABSTAIN
[ ] 3. Ratification of Ernst & Young LLP [ ] [ ] [ ]
-------------------------------------------- as independent public accountants
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign this proxy and return it promptly whether or not you
expect to attend the meeting. You may nevertheless vote in
person if you attend. Give full title if an Attorney, Executor,
Administrator, Trustee, Guardian, etc. If a corporation, please
sign in full corporate name by authorized officer. If a partnership,
please sign in partnership name by authorized person. For an
account in the name of two or more persons, each should sign,
or if one signs, he or she should attach evidence of authority.
Signature: Date: Signature: Date:
---------------------------- ------------------ ----------------------------- --------------------
</TABLE>
