<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
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
</TABLE>
VARI-LITE 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):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
[LOGO]
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Vari-Lite International, Inc., a Delaware corporation (the "Company"), to be
held at 10:00 a.m. local time, on Friday, March 10, 2000, at the Company's
offices at 201 Regal Row, Dallas, Texas 75247. A Notice of Annual Meeting, Proxy
Statement and form of proxy card are enclosed. A copy of the Company's 1999
Annual Report is also enclosed. At this meeting you will be asked to:
(i) Elect two Class III directors to serve until the annual meeting of
stockholders to be held in 2003;
(ii) Approve an amendment to the Company's 1997 Omnibus Plan to increase the
number of shares of Common Stock that may be issued upon exercise of
options granted under that plan from 800,000 shares to 1,200,000
shares; and
(iii) Transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
It is important that your shares be represented at the meeting. Whether or
not you expect to attend the meeting in person, however, please sign and date
the enclosed proxy card and return it in the enclosed envelope at your earliest
convenience.
<TABLE>
<S> <C>
Very truly yours,
[/S/ H.R. BRUTSCHE]
H.R. Brutsche III
CHAIRMAN OF THE BOARD
</TABLE>
Dallas, Texas
January 28, 2000
<PAGE>
VARI-LITE INTERNATIONAL, INC.
201 REGAL ROW
DALLAS, TEXAS 75247
------------------------
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 10, 2000
---------------------
The Annual Meeting of Stockholders of Vari-Lite International, Inc., a
Delaware corporation (the "Company"), will be held at the Company's offices at
201 Regal Row, Dallas, Texas 75247, on Friday, March 10, 2000 at 10:00 a.m.
local time, for the following purposes:
1. To elect two Class III directors to serve until the annual meeting of
stockholders to be held in 2003;
2. To approve an amendment to the Company's 1997 Omnibus Plan to increase
the number of shares of Common Stock that may be issued upon exercise of
options granted under that plan from 800,000 shares to 1,200,000 shares;
and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on January 14, 2000 are
entitled to notice of, and to vote at, the meeting or any adjournments or
postponements thereof. A list of stockholders entitled to vote at the meeting
will be available at the meeting for examination by any stockholder and at least
10 days prior to the meeting at the office of the Secretary of the Company at
the address listed above.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE DATE, EXECUTE AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD TO THE COMPANY IN THE ENCLOSED ADDRESSED
AND STAMPED ENVELOPE. You may revoke the proxy at any time before the proxy is
exercised by delivering written notice of revocation to the Secretary of the
Company, by delivering a subsequently dated proxy card or by attending the
meeting, withdrawing the proxy and voting in person.
By Order of the Board of Directors
[/S/ JEROME L. TROJAN III]
Jerome L. Trojan III
SECRETARY
Dallas, Texas
January 28, 2000
<PAGE>
VARI-LITE INTERNATIONAL, INC.
201 REGAL ROW
DALLAS, TEXAS 75247
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 10, 2000
---------------------
This Proxy Statement is furnished to stockholders of Vari-Lite
International, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of proxies to be used at the Annual Meeting of Stockholders of
the Company to be held on March 10, 2000 (the "Annual Meeting"). Shares
represented by proxy cards in the form enclosed will be voted at the Annual
Meeting if the proxy card is properly executed, returned to the Company before
the Annual Meeting and not revoked. Any stockholder may revoke a proxy at any
time before the proxy is exercised by delivering written notice of revocation to
the Secretary of the Company, by delivering a subsequently dated proxy card or
by attending the meeting, withdrawing the proxy and voting in person. Your
attendance at the meeting will not constitute automatic revocation of the proxy.
This Proxy Statement and the enclosed proxy card form are first being sent to
stockholders on or about January 28, 2000.
ACTION TO BE TAKEN AT MEETING
The shares represented by proxy cards will be voted according to the
instructions indicated therein when stockholders have appropriately specified
how their shares represented thereby should be voted. Unless the stockholder
otherwise specifies therein, the shares represented by his proxy card will be
voted (i) FOR the election as Class III directors of the nominees listed under
"Election of Directors", (ii) FOR the approval of the amendment to the Vari-Lite
International, Inc. 1997 Omnibus Plan which increases the number of shares of
Common Stock that may be issued upon exercise of options granted under that plan
from 800,000 shares to 1,200,000 shares and (iii) at the discretion of the proxy
holders, either FOR or AGAINST any other matter or business that may properly
come before the meeting. The Board of Directors does not know of any such other
matter or business.
PERSONS MAKING THE SOLICITATION
The accompanying proxy is being solicited by the Board of Directors of the
Company. The cost of soliciting your proxy will be borne entirely by the Company
and no other person or persons will bear such costs either directly or
indirectly. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by directors and regular officers and
employees of the Company.
<PAGE>
OUTSTANDING CAPITAL STOCK
The record date for stockholders entitled to notice of, and to vote at, the
Annual Meeting is January 14, 2000. At the close of business on that date the
Company had 7,800,003 shares of Common Stock, $0.10 par value per share ("Common
Stock"), issued and outstanding and entitled to vote at the Annual Meeting.
The following table sets forth, as of January 14, 2000, the number of shares
of Common Stock beneficially owned by (1) each person known by the Company to
own beneficially more than 5% of the outstanding shares of Common Stock,
(2) each director and each nominee for director, (3) the Company's Chief
Executive Officer and each of the Company's six other most highly compensated
executive officers for services rendered for the fiscal year ended
September 30, 1999 (collectively, the "Named Executive Officers") and (4) all
current directors and executive officers as a group:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-----------------------------
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENTAGE
- ------------------------ ---------------- ----------
<S> <C> <C>
H. R. Brutsche III(2).............................. 743,132 9.5%
James H. Clark, Jr.(3)(4).......................... 636,036 8.2%
John D. Maxson(3)(5)............................... 705,640 9.0%
C. Vincent Prothro(6).............................. 6,920 *
John R. Rettberg(6)................................ 6,920 *
J. Anthony Smith(7)................................ 762,944 9.8%
Anthony G. Banks(7)................................ 758,936 9.7%
Philip D.C. Collins(7)............................. 758,940 9.7%
Michael J.C.C. Rutherford(7)....................... 758,936 9.7%
James M. Bornhorst(8).............................. 232,398 3.0%
Loren J. Haas(9)................................... 30,958 *
Michael P. Herman(10).............................. 29,276 *
T. Clay Powers(11)................................. 22,452 *
Bert H.F. De Haes.................................. 0 *
Fuminori Kobayashi................................. 1,000 *
The Prudential Insurance Company of America(12).... 1,071,300 13.7%
All current directors and executive officers as a
group (15 persons)(13)........................... 2,961,185 38.0%
</TABLE>
- ------------------------
* Less than one percent.
(1) Except as otherwise indicated, each person named above has sole voting
power and investment power with respect to such Common Stock.
(2) Includes 45,164 shares held by Brutsche Family Trust, a trust of which
Brown Brothers Harriman & Co. ("BBH") serves as trustee, 1,584 shares held
by the Vari-Lite International, Inc. Employees' Stock Ownership Plan
("ESOP") for the benefit of Mr. Brutsche and 38,333 shares issuable upon
exercise of stock options exercisable within 60 days. Mr. Brutsche
disclaims beneficial ownership of the shares held by Brutsche Family Trust.
Mr. Brutsche's address is 201 Regal Row, Dallas, Texas 75247.
(3) The address of Messrs. Clark and Maxson is 3738 Oak Lawn, Suite 102,
Dallas, Texas 75219.
(4) Includes 603,657 shares held by Clark Partnership, Ltd., a limited
partnership of which Mr. Clark is the managing general partner, 3,764
shares held by Mr. Clark's wife and 4,800 shares issuable upon exercise of
stock options exercisable within 60 days. Mr. Clark disclaims beneficial
ownership of the shares owned by his wife.
2
<PAGE>
(5) Includes 50,731 shares held by Peggy Maxson 1996 Irrevocable Trust, a trust
of which BBH serves as trustee, and 4,800 shares issuable upon exercise of
stock options exercisable within 60 days. Mr. Maxson disclaims beneficial
ownership of such shares held by the trust.
(6) Includes 1,920 shares issuable upon exercise of stock options exercisable
within 60 days.
(7) The shares beneficially owned by Messrs. Banks, Collins, Rutherford and
Smith include 392,584 shares, 392,584 shares, 392,584 shares and 392,588
shares held by Walbrook Trustees (Jersey) Ltd., Re: G45 ("G45"), Walbrook
Trustees (Jersey) Ltd., Re: G46 ("G46"), Walbrook Trustees (Jersey) Ltd.,
Re: G47 ("G47") and Walbrook Trustees (Jersey) Ltd., Re: G48 ("G48"),
respectively. G45, G46, G47 and G48 are the stockholders of Ashtray Music
Ltd., a United Kingdom limited company. Ashtray Music Ltd. holds 292,059
shares which are included in the shares owned beneficially by each of
Messrs. Banks, Collins, Rutherford and Smith. Except for 74,293 shares,
74,297 shares, 74,293 shares and 74,297 shares, which are owned by
Messrs. Banks, Collins, Rutherford and Smith, respectively, Messrs. Banks,
Collins, Rutherford and Smith disclaim beneficial ownership of all such
shares. Of the shares held by Mr. Smith, 4,000 are issuable upon exercise
of stock options exercisable within 60 days. The address of Messrs. Banks,
Collins, Rutherford and Smith is 25 Ives Street, London SW3 2ND England.
(8) Includes 1,455 shares held by the ESOP for the benefit of Mr. Bornhorst and
10,000 shares issuable upon exercise of stock options exercisable within 60
days.
(9) Includes 1,140 shares held by the ESOP for the benefit of Mr. Haas and
11,000 shares issuable upon exercise of stock options exercisable within 60
days.
(10) Includes 1,258 shares held by the ESOP for the benefit of Mr. Herman and
9,200 shares issuable upon exercise of stock options exercisable within 60
days.
(11) Includes 1,362 shares held by the ESOP for the benefit of Mr. Powers and
11,000 shares issuable upon exercise of stock options exercisable within
60 days.
(12) The number of shares is based upon information contained in a Schedule 13G
filed with the Securities and Exchange Commission on January 29, 1999. The
Prudential Insurance Company of America's address is 751 Broad Street,
Newark, New Jersey 07102-3777.
(13) Includes 7,750 shares held by the ESOP for the benefit of some of such
persons and 97,973 shares issuable upon exercise of stock options
exercisable within 60 days.
QUORUM AND VOTING
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Annual Meeting. Abstentions and broker non-votes (i.e., shares held by a broker
or nominee which are represented at the meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) are counted
as shares that are present and entitled to vote for purposes of determining the
presence of a quorum. Abstentions are included in vote totals and, as such, will
have the same effect on each proposal, other than the election of directors, as
a negative vote. Abstentions as to the election of directors will not affect the
election of the candidates receiving a plurality of votes. Broker non-votes are
not included in vote totals and, as such, will have no effect on any proposal.
The holders of outstanding Common Stock are entitled to one vote per share on
each matter submitted to a vote of stockholders. Cumulative voting is prohibited
in the election of directors. To be elected a director, each nominee must
receive a plurality of all of the votes cast at the Annual Meeting for the
election of directors. A majority vote of the holders of outstanding shares of
Common Stock entitled to vote is required to approve the amendment of the
Vari-Lite International, Inc. 1997 Omnibus Plan (the "1997 Omnibus Plan"). All
other matters that properly come before the Annual
3
<PAGE>
Meeting must receive the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or by proxy and entitled to vote at the
Annual Meeting.
PROPOSAL ONE:
ELECTION OF DIRECTORS
Two Class III directors are to be elected at the Annual Meeting for a term
expiring at the annual meeting of stockholders to be held in 2003 or until their
respective successors are duly elected and qualified. Set forth below is certain
information concerning the persons nominated for election as directors of the
Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE NOMINEES.
CLASS III NOMINEES TO SERVE UNTIL THE ANNUAL MEETING TO BE HELD IN 2003:
H.R. BRUTSCHE III
H.R. Brutsche III, 55, is one of the founders of the Company and has served
as a director of the Company and certain of its subsidiaries since their
inception. Mr. Brutsche has served as Chairman of the Board and Chief Executive
Officer of the Company and its predecessors since 1980. Mr. Brutsche also serves
as Chairman of the Board and Chief Executive Officer of Vari-Lite, Inc.
("Vari-Lite") and, until August 1999, Mr. Brutsche served as Vari-Lite's
President.
J. ANTHONY SMITH
J. Anthony Smith, 55, has been a director of the Company and its
predecessors since 1981. Mr. Smith also serves as a director of various Company
subsidiaries. Mr. Smith has been the Managing Director of Hit & Run Music
(Publishing) Limited, an international independent music publisher, and Hit &
Run Music Limited, a professional manager of musicians, for over 20 years, and
Ives Street Developments Limited, a property management company, for more than
five years.
The present directors of the Company whose terms will expire after 2000 are
as follows:
CLASS I DIRECTORS WHO SERVE UNTIL THE ANNUAL MEETING TO BE HELD IN 2001:
JOHN D. MAXSON
John D. Maxson, 59, is one of the founders of the Company and has served as
a director of the Company and certain of its subsidiaries since their inception.
Mr. Maxson has served as Chairman of the Board of Showco, Inc. ("Showco") for
more than 25 years and as Chairman of IGNITION! Creative Group, Inc.
("Ignition") since its inception in September 1994.
C. VINCENT PROTHRO
C. Vincent Prothro, 57, has been a director of the Company since
April 1996. Mr. Prothro has been Chairman of the Board of Dallas Semiconductor
Corporation, a manufacturer of electronic chips and chip-based subsystems, since
1984 and its Chief Executive Officer and President since 1989. Mr. Prothro is
also a general partner of Southwest Enterprise Associates, L.P., a venture
capital fund. Mr. Prothro's daughter is married to Mr. Clark's son.
CLASS II DIRECTORS WHO SERVE UNTIL THE ANNUAL MEETING TO BE HELD IN 2002:
JAMES H. CLARK, JR.
James H. Clark, Jr., 63, has been a director of the Company and its
predecessors since 1978. Mr. Clark serves as Chairman of the Company's Executive
Committee and Audit Committee and is a director of
4
<PAGE>
various Company subsidiaries. Mr. Clark has been the Managing General Partner of
Clark Partnership, Ltd., an investment and venture capital partnership, since
1988, and serves as Chairman of the Board of Texas Freezer Co. Mr. Clark's son
is married to the daughter of Mr. C. Vincent Prothro.
JOHN R. RETTBERG
John R. Rettberg, 62, has been a director of the Company since April 1996
and serves as Chairman of the Company's Compensation Committee and Omnibus
Committee. Mr. Rettberg currently serves as a consultant to the Northrop Grumman
Corporation ("Northrop Grumman"), an advanced technology company operating
primarily in the fields of aircraft and military electronics design, development
and manufacturing. Mr. Rettberg has served in this capacity since his retirement
from Northrop Grumman on January 1, 1995. Mr. Rettberg joined Northrop Grumman
in 1962 and, prior to his retirement, was Corporate Vice President and
Treasurer. Mr. Rettberg is also a director of J.P. Morgan Investment Mgmt., a
manager of mutual funds.
5
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
H. R. Brutsche III................... Chairman of the Board and Chief Executive Officer of the
Company
James H. Clark, Jr................... Director of the Company
John D. Maxson....................... Director of the Company and Chairman of the Board of Showco
and Ignition
J. Anthony Smith..................... Director of the Company
C. Vincent Prothro................... Director of the Company
John R. Rettberg..................... Director of the Company
James A. Barnett..................... General Manager of Vari-Lite Production Services European
Operations
Richard W. Bratcher, Jr.............. President, Chief Executive Officer and Director of Showco
Loren J. Haas........................ Executive Vice President--Vari-Lite Production Services of
Vari-Lite
Tracy E. Key......................... Vice President and Corporate Controller of the Company
Fuminori Kobayashi................... President and Representative Director of Vari-Lite
Asia, Inc. (Vari-Lite Asia)
Janis C. Pestinger................... Vice President--Administration and Assistant Secretary of
the Company
T. Clay Powers....................... President and Chief Operating Officer of the Company
J. Scott Thompson.................... President, Chief Executive Officer and Director of Ignition
Jerome L. Trojan III................. Vice President--Finance, Chief Financial Officer, Treasurer
and Secretary of the Company
</TABLE>
- ------------------------
Information concerning the business experience of Messrs. Brutsche, Clark,
Maxson, Prothro, Rettberg and Smith is provided under "Election of Directors."
James A. Barnett, 49, joined the Company in September 1999 as General
Manager of Vari-Lite Production Services European Operations. From 1997 to 1999,
Mr. Barnett served as an independent Project Manager/Management Consultant for
various organizations, including ASB Bank Ltd., Auckland City Council, ProCare
Health, the Real Estate Institute of New Zealand and Advent TV Singapore, with
responsibilities that encompassed strategic analysis, market development and
management. From 1996 to 1997, Mr. Barnett was a Strategy Development Manager
with CLEAR Communications Limited, a telecommunications company. Mr. Barnett was
an independent Management Consultant to Radford Group from 1995 to 1996. Radford
Group is a consulting company specializing in market analysis, research and
strategic planning. From 1992 to 1995, Mr. Barnett was a General Manager and
Business Analyst for Television New Zealand, a broadcasting company.
Richard W. Bratcher, Jr., 39, has been the President and Chief Executive
Officer and a director of Showco since July 1996. He served as Vice President
and General Manager of Showco from August 1993 until July 1996 and as its shop
manager from August 1987 until August 1993. Mr. Bratcher has also served in
various other capacities with Showco since 1983.
Loren J. Haas, 41, has been the Executive Vice President--Vari-Lite
Production Services of Vari-Lite since December 1997. From February 1995 until
December 1997, Mr. Haas was Executive Vice President--North American Operations
of Vari-Lite. Prior to that from October 1992 until February 1995, he
6
<PAGE>
was General Manager--Dallas of Vari-Lite and was its Marketing Manager from
December 1990 until October 1992. Mr. Haas has served in various other
capacities with Vari-Lite since 1987.
Tracy E. Key, 38, has served as Vice-President and Corporate Controller of
the Company since August 1999. From April 1998 to August 1999, Ms. Key served as
Vice-President and Controller of International Operations of the Company. From
January 1997 to April 1998, Ms. Key served as Controller of International
Operations of the Company. Prior to January 1997, Ms. Key served as Manager of
Financial Planning and Reporting of the Company since August 1993. From June
1990 to August 1993, Ms. Key served in various financial positions within the
Corporate and International Divisions of Occidental Chemical Corp., a division
of Occidental Petroleum Corporation.
Fuminori Kobayashi, 57, has served as Representative Director (the
equivalent of chief executive officer) of Vari-Lite Asia since July 1998 and as
its President since October 1998. Mr. Kobayashi previously served as a Vice
President of Vari-Lite Asia since August 1997. From 1996 to June 1997,
Mr. Kobayashi served as General Manager to the Managing Director of the
International Marketing Division of Kenwood Corporation ("Kenwood"), and from
April 1994 to 1996 served as Kenwood's General Manager of the International
Logistics Department in Japan. Kenwood specializes in home and car audio
products, test and measuring equipment and telephone and communications
equipment. From September 1989 to March 1994, Mr. Kobayashi was the President
and Representative Director of Kenwood Electronics France S.A., a wholly owned
subsidiary of Kenwood in Japan.
Janis C. Pestinger, 48, has been Vice President--Administration and
Assistant Secretary of the Company since November 1996 and May 1993,
respectively. Ms. Pestinger also has served as Vice President--Administration of
Vari-Lite since December 1993 and for more than three years prior to that as its
Risk and Benefits Manager. Ms. Pestinger has served in various other positions
with Vari-Lite and Showco since 1979.
T. Clay Powers, 40, has been the President and Chief Operating Officer of
the Company and Vari-Lite since August 1999. From July 1996 until August 1999,
Mr. Powers served as Vice President--Product Development and Manufacturing of
Vari-Lite. Prior to that he served as the President and Chief Executive Officer
of Showco since April 1992. Mr. Powers also has served as a director of Showco
since December 1990. From January 1991 to April 1992, Mr. Powers served as Vice
President and General Manager of Showco and from January 1990 to January 1991
Mr. Powers served as its Vice President--Internal Operations. Mr. Powers has
served in various other capacities with Showco since 1982.
J. Scott Thompson, 47, has served as President and Chief Executive Officer
of Ignition since October 1994 and as a director of Ignition and its predecessor
since January 1992. Prior to October 1994, Mr. Thompson was a Vice President of
Showco since 1987 and served in various capacities with Showco since 1978.
Jerome L. Trojan III, 34, has served as Vice President--Finance, Chief
Financial Officer and Secretary of the Company since August 1999. From April
1998 until August 1999, Mr. Trojan was Vice-President--Corporate Development of
the Company and he has served as Treasurer of the Company since January 1997.
Mr. Trojan has also served as Vice President--Finance, Chief Financial Officer,
Treasurer and Secretary of Vari-Lite, Showco and Ignition since August 1999.
Prior to that, he served as Manager--Financial Analysis since joining the
Company in May 1995. From November 1993 to May 1995, Mr. Trojan served as the
Manager of Financial Analysis and Accounting for Heartland Capital Partners,
LLP, a private venture capital fund. From January 1989 to October 1993,
Mr. Trojan served in various positions with Deloitte & Touche LLP, including
Audit Manager immediately prior to his departure.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid to the Company's Named
Executive Officers for services rendered to the Company during each of the three
fiscal years then ended September 30, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------
FISCAL OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)
- --------------------------- -------- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
H.R. Brutsche III..................... 1999 $519,243 -- $104,375(1) $48,800(2)
Chairman of the Board and Chief 1998 $507,763 -- $167,000(1) $49,574(2)
Executive Officer of the Company 1997 $466,014 $51,864 $167,000(1) $48,180(2)
Clay Powers........................... 1999 $195,498 -- -- $ 7,398(3)
President and Chief Operating 1998 $161,310 -- -- $ 6,546(3)
Officer of the Company and Vari-Lite 1997 $150,000 $26,250 -- $ 6,222(3)
Loren J. Haas......................... 1999 $195,539 -- -- $ 6,823(4)
Executive Vice President--Vari-Lite 1998 $158,281 -- -- $ 6,030(4)
Production Services of Vari-Lite 1997 $123,445 $24,075 -- $ 5,286(4)
Fuminori Kobayashi.................... 1999 $147,068 $ 6,704 -- $ 1,231(5)
President and Representative 1998 $124,422 -- -- $ 1,231(5)
Director of Vari-Lite Asia 1997 $ 11,420 -- -- --
James M. Bornhorst.................... 1999 $168,243 -- -- $ 6,889(7)
Former Vice President and Chief 1998 $166,258 -- -- $ 6,845(7)
Science Officer of the Company and 1997 $154,995 $10,464 -- $ 6,637(7)
Vice President--Advanced Technology
of Vari-Lite(6)
Bert H.F. De Haes..................... 1999 $162,900 -- -- --
Former General Manager of Vari-Lite 1998 $ 81,720 -- -- --
Production Services European 1997 -- -- -- --
operations(8)
Michael P. Herman..................... 1999 $138,107 -- -- $31,397(10)
Former Vice President--Finance, 1998 $139,489 -- -- $ 5,719(10)
Chief Financial Officer and
Secretary 1997 $129,693 $19,672 -- $ 5,667(10)
of the Company(9)
</TABLE>
- ------------------------
(1) These amounts were paid to Mr. Brutsche pursuant to the Deferred
Compensation Agreement (as hereinafter defined). See "Executive
Compensation--Director Compensation."
(2) These amounts include $3,979, $3,727 and $3,542 in the fiscal years ended
September 30, 1999, 1998 and 1997, respectively, which were paid on behalf
of Mr. Brutsche for the Policies (as hereinafter defined) pursuant to the
Split-Dollar Agreements (as hereinafter defined); $22,525, $22,525 and
$22,525 for a term life insurance policy maintained on the life of
Mr. Brutsche for fiscal 1999, fiscal 1998 and fiscal 1997, respectively;
$15,685, $15,685 and $14,866 which were paid to reimburse Mr. Brutsche for
taxable income incurred with respect to the premiums paid on his behalf on
the term life insurance policy in fiscal 1999, fiscal 1998 and fiscal 1997,
respectively; $3,882, $5,000 and $4,610 which were contributed by the
Company on behalf of Mr. Brutsche to the Company's 401(k) plan in fiscal
1999, fiscal 1998 and fiscal 1997, respectively; and $2,729 (estimated),
$2,729 and $2,637 worth
8
<PAGE>
of Common Stock held in the ESOP which was allocated to Mr. Brutsche in
fiscal 1999, fiscal 1998 and fiscal 1997, respectively. See "Executive
Compensation--Employment Agreements."
(3) These amounts include $4,885, $4,033 and $3,750 which were contributed by
the Company on behalf of Mr. Powers to the Company's 401(k) plan in the
fiscal years ended September 30, 1999, 1998 and 1997, respectively, and
$2,513 (estimated), $2,513 and $2,472 worth of Common Stock held in the ESOP
which was allocated to Mr. Powers in fiscal 1999, fiscal 1998 and fiscal
1997, respectively.
(4) These amounts include $4,750, $3,957 and $3,061 which were contributed by
the Company on behalf of Mr. Haas to the Company's 401(k) plan in the fiscal
years ended September 30, 1999, 1998 and 1997, respectively, and $2,073
(estimated), $2,073 and $2,225 worth of Common Stock held in the ESOP which
was allocated to Mr. Haas in fiscal 1999, fiscal 1998 and fiscal 1997,
respectively.
(5) This amount includes the value of Common Stock held in the ESEP (as
hereinafter defined) which was allocated to Mr. Kobayashi (fiscal 1999
estimated).
(6) Mr. Bornhorst, while still an employee of the Company, resigned his
positions of Vice President and Chief Science Officer of the Company and
Vice President--Advanced Technology of Vari-Lite during the fiscal year
ended September 30, 1999.
(7) These amounts include $4,200, $4,156, and $4,000 which were contributed by
the Company on behalf of Mr. Bornhorst to the Company's 401(k) plan in the
fiscal years ended September 30, 1999, 1998 and 1997, respectively, and
$2,689 (estimated), $2,689 and $2,637 worth of Common Stock held in the ESOP
which was allocated to Mr. Bornhorst in fiscal 1999, fiscal 1998 and fiscal
1997, respectively.
(8) Mr. De Haes' employment with the Company terminated after the fiscal year
ended September 30, 1999. Prior to his departure, Mr. De Haes served as
General Manager of Vari-Lite Production Services European Operations.
(9) Mr. Herman's employment with the Company terminated during the fiscal year
ended September 30, 1999. Prior to his departure, Mr. Herman served as Vice
President--Finance, Chief Financial Officer and Secretary of the Company.
(10) The amount for 1999 includes a $14,689 severance payment and a $12,900
payment for accrued but unused vacation. The amounts for 1999, 1998 and 1997
include $3,808, $3,487 and $3,242 which were contributed by the Company on
behalf of Mr. Herman to the Company's 401(k) plan in the fiscal years ended
September 30, 1999, 1998, and 1997, respectively, and $-0-, $2,232 and
$2,425 worth of Common Stock held in the ESOP which was allocated to
Mr. Herman in fiscal 1999, fiscal 1998 and fiscal 1997, respectively.
9
<PAGE>
SUMMARY OF OPTION GRANTS
The following table provides certain summary information concerning grants
of options to the Named Executive Officers of the Company during the 1999 fiscal
year:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION PRESENT
NAME GRANTED (#) FISCAL YEAR PER SHARE ($) DATE VALUE $(1)
- ---- ----------- ------------ -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
H.R. Brutsche III................... -- -- -- -- --
T. Clay Powers...................... 25,000 3.28% $ 3.75 10/15/07 $28,898
5,000 0.66% $ 3.75 11/02/08 $ 6,099
50,000 6.56% $1.125 08/23/09 $21,160
Loren J. Haas....................... 25,000 3.28% $ 3.75 10/15/07 $28,898
5,000 0.66% $ 3.75 11/02/08 $ 6,099
40,000 5.25% $1.125 08/23/09 $16,928
Fuminori Kobayashi.................. -- 0.0% -- -- --
James M. Bornhorst(2)............... 25,000 3.28% $ 3.75 10/15/07 $28,898
Bert H.F. De Haes(3)................ -- 0.0% -- -- --
Michael P. Herman(4)................ 21,000 2.76% $ 3.75 10/15/07 $24,274
4,000 0.52% $ 3.75 11/02/08 $ 4,879
</TABLE>
- ------------------------
(1) The grant date present value was determined using a Black-Scholes option
pricing model with the following assumptions: dividend yield of zero;
volatility of 30%; risk-free interest rate of 6%; and expected life of five
years.
(2) Mr. Bornhorst, although still an employee of the Company, resigned his
positions of Vice President and Chief Science Officer of the Company and
Vice President--Advanced Technology of Vari-Lite during the fiscal year
ended September 30, 1999.
(3) Mr. De Haes' employment with the Company terminated after the fiscal year
ended September 30, 1999.
(4) Mr. Herman's employment with the Company terminated during the fiscal year
ended September 30, 1999. All of the options granted to Mr. Herman will
terminate as of August 25, 2000.
10
<PAGE>
The following table provides information on the stock options that the Named
Executive Officers held at September 30, 1999:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT FISCAL YEAR-END FISCAL YEAR-END
(#) ($)*
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- ------------------- ---------------
<S> <C> <C>
H.R. Brutsche III.............................. 38,333/36,667 --
T. Clay Powers................................. 11,000/69,000 --
Loren J. Haas.................................. 11,000/59,000 --
Fuminori Kobayashi............................. -- --
James M. Bornhorst............................. 10,000/15,000 --
Bert H. F. De Haes............................. -- --
Michael P. Herman.............................. 9,200/15,800 --
</TABLE>
- ------------------------
* Based on the closing price of the Common Stock on the Nasdaq Stock Market on
September 30, 1999 of $1.00 per share.
DIRECTOR COMPENSATION
Messrs. Smith, Clark and Maxson are each paid an annual fee of $61,000 for
serving on the Board of Directors and various Committees of the Board of
Directors. Each of the remaining directors is paid an annual fee of $30,000 for
serving on the Board of Directors and its various Committees. All fees are paid
monthly.
On October 16, 1997, pursuant to the 1997 Omnibus Plan, options to purchase
12,000 shares of Common Stock were granted to each of Messrs. Clark and Maxson,
options to purchase 10,000 shares were granted to Mr. Smith and options to
purchase 4,800 shares were granted to each of Messrs. Prothro and Rettberg. The
exercise price each of these options was $12.00 per share. The options vest in
five equal annual installments of 20%, commencing with the first anniversary of
the date of grant.
As of July 1, 1995, the Company entered into a Deferred Compensation
Agreement ("Deferred Compensation Agreement") with each of Messrs. Brutsche,
Clark, Maxson and Smith pursuant to which each of them receives $167,000
annually for six years, payable monthly. Effective November 2, 1998, each of the
Deferred Compensation Agreements was amended to reduce the monthly payment due
thereunder beginning on January 1, 1999 to an amount equal to one-half of the
original monthly payment and to extend the period during which the payments are
due and owing from July 1, 2001 to December 31, 2003. As of March 31, 1994, the
Company, Vari-Lite and Showco entered into Compensation Continuation Agreements
with each of Messrs. Brutsche, Clark and Maxson pursuant to which the Company,
Vari-Lite and Showco each agreed to continue paying for 60 days after the death
of any such individual the cash compensation that the deceased was receiving
from the companies at the time of his death.
Each of Messrs. Clark, Maxson and Smith (each a "Consultant") also has
entered into a Consulting Agreement with the Company, dated as of July 1, 1995,
providing that the Consultant will be available to provide consulting services
to the Company in consideration for the Company's payment to the Consultant of
an annual consulting fee. Pursuant to their Consulting Agreements,
Messrs. Clark and Maxson each receives an annual consulting fee of $100,000,
payable monthly, and Mr. Smith receives an annual consulting fee of $20,000,
payable monthly. Each Consulting Agreement has an initial term of three years
with an automatic extension of one year for each completed year of service by
the Consultant thereunder
11
<PAGE>
and may be terminated in the event of death, upon permanent disability, for
cause (as defined in the Consulting Agreement) or upon the occurrence of a
change of control (as defined in the Consulting Agreement). If a Consulting
Agreement is terminated without cause, because of permanent disability or
through an action by the Company that constitutes constructive termination, or
as a result of a change of control, the Consultant will receive the full
consulting fee he would have received through the remainder of the three-year
term.
In addition, each of Messrs. Brutsche, Clark and Maxson is eligible to
receive benefits under one or more life insurance policies (collectively
"Policies" and individually "Policy") pursuant to split-dollar agreements (the
"Split-Dollar Agreements") with the Company. The Split-Dollar Agreements each
provides for sharing the costs and benefits of the Policy between the Company
and Mr. Brutsche, Mr. Clark or Mr. Maxson, as the case may be. The Company pays
the entire premium on each Policy to the insurer. An irrevocable trust created
or an individual designated by Mr. Brutsche, Mr. Clark or Mr. Maxson, as the
case may be, who is the owner of the Policy (the "Owner") reimburses the Company
for the portion of the premium attributable to the death benefit protection of
each Policy (the "P.S. 58 Cost"). The Company pays the amount of the P.S. 58
Cost to Mr. Brutsche, Mr. Clark or Mr. Maxson, as the case may be, as additional
compensation and such person then gifts such amount to the Owner to use to
reimburse the Company. Except under certain circumstances, upon the termination
of each Split-Dollar Agreement, the Company will be reimbursed for the premiums
it has paid under the Policy that is subject to such Split-Dollar Agreement. All
of the Split-Dollar Agreements utilize the collateral assignment method to
secure the Company's right to repayment of the premiums it has paid under the
Policies. Under this method, the Owner owns the Policy, and a collateral
assignment (establishing the Company's right to such premium reimbursement from
the cash surrender value or death benefits payable under the Policies) is filed
with the insurer. The Owner has the right to designate the beneficiaries of the
Policies and may borrow and make withdrawals from the cash surrender value, to
the extent such cash surrender value exceeds the amount of premiums owed to the
Company. The Owner may cancel or surrender the Policies at any time, subject to
any applicable obligation to repay the premiums paid by the Company.
EMPLOYMENT AGREEMENT
As of July 1, 1995, the Company entered into an Employment Agreement (the
"Employment Agreement") with H. R. Brutsche III, Chairman of the Board and Chief
Executive Officer of the Company. The initial term of the Employment Agreement
is for five years, with an automatic extension of one year for each completed
year of service by Mr. Brutsche thereunder. Pursuant to the Employment
Agreement, Mr. Brutsche receives an annual salary of $433,000, subject to annual
review by the Compensation Committee, which may increase but not reduce his
annual salary, and is eligible to receive an annual bonus, long-term incentive
compensation and deferred compensation in accordance with plans established for
officers and directors of the Company. Mr. Brutsche is also entitled to receive
various life, medical and disability insurance benefits. Mr. Brutsche may be
terminated in the event of his death or permanent disability, for cause (as
defined in the Employment Agreement) or upon the occurrence of a change of
control (as defined in the Employment Agreement). If Mr. Brutsche is terminated
because of his death, his estate will receive his salary through the end of the
month in which his death occurs plus the prorated portion of any bonus due to
him pursuant to the Vari-Lite International, Inc. Annual Incentive Plan (the
"Annual Incentive Plan"). If Mr. Brutsche is terminated because of his permanent
disability, Mr. Brutsche will continue to receive his base salary through the
remainder of the five-year term of the Employment Agreement, less any disability
benefits he receives. If Mr. Brutsche is terminated without cause, through an
action by the Company that constitutes constructive termination (as defined in
the Employment Agreement) or as the result of a change of control, the Company
is obligated to continue to pay Mr. Brutsche his base salary in effect at the
time of termination through the remainder of the five-year term. In addition to
those provided for under the Employment Agreement, Mr. Brutsche is eligible to
receive certain other benefits. See "Executive Compensation--Director
Compensation."
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended September 30, 1999, the Compensation Committee
of the Board of Directors of the Company consisted of Messrs. Smith, Prothro and
Rettberg. Each of Messrs. Prothro and Rettberg is an independent director.
Mr. Smith has entered into a Consulting Agreement with the Company, dated as
of July 1, 1995, providing that Mr. Smith will be available to provide
consulting services to the Company in consideration for the Company's payment to
Mr. Smith of an annual consulting fee of $20,000, payable monthly. The
Consulting Agreement has an initial term of three years with an automatic
extension of one year for each completed year of service by Mr. Smith thereunder
and may be terminated in the event of death, upon permanent disability, for
cause (as defined in the Consulting Agreement) or upon the occurrence of a
change of control (as defined in the Consulting Agreement). If the Consulting
Agreement is terminated without cause, because of permanent disability or
through an action by the Company that constitutes constructive termination, or
as a result of a change of control, Mr. Smith will receive the full consulting
fee he would have received through the remainder of the three-year term.
Mr. Smith has also entered into the Deferred Compensation Agreement with the
Company, dated as of July 1, 1995, pursuant to which he receives $167,000
annually for six years, payable monthly. Effective November 2, 1998, the
Deferred Compensation Agreement was amended to reduce the monthly payment due
thereunder beginning on January 1, 1999 to an amount equal to one-half of the
original monthly payment and to extend the period during which the payments are
due and owing from July 1, 2001 to December 31, 2003.
REPORT OF THE COMPENSATION COMMITTEE AND OMNIBUS COMMITTEE ON EXECUTIVE
COMPENSATION
The principal elements of compensation provided to the executive officers of
the Company, including Mr. H.R. Brutsche III, the Chairman of the Board and
Chief Executive Officer of the Company, historically have consisted of a base
salary, supplemented with the opportunity to earn a bonus under the Annual
Incentive Plan if performance exceeds targeted levels. Options granted under the
Company's 1997 Omnibus Plan are also utilized as a component of compensation.
Mr. Brutsche is entitled to receive a minimum annual salary of $433,000
pursuant to the Employment Agreement. Subject to this minimum, Mr. Brutsche's
base salary rate may be increased at the discretion of the Board of Directors
based upon such factors as the Board of Directors deems appropriate.
Mr. Brutsche was paid $519,243 during the fiscal year ended September 30, 1999
as base salary. In addition, Mr. Brutsche receives additional annual
compensation of $104,375 pursuant to the terms of the Deferred Compensation
Agreement, certain other benefits under the Split-Dollar Agreement,
contributions under the ESOP and payment of term life insurance policies on his
life. Effective November 2, 1998, the Deferred Compensation Agreement was
amended to reduce the monthly payment due thereunder beginning on January 1,
1999 to an amount equal to one-half of the original monthly payment and to
extend the period during which the payments are due and owing from July 1, 2001
to December 31, 2003.
The Annual Incentive Plan is administered by the Omnibus Committee. Bonus
amounts for a year may be granted to eligible employees of the Company based on
predetermined targets or in the discretion of the Omnibus Committee, or a
combination of both. Bonuses are generally awarded to eligible employees based
on a combination of the Company achieving its defined operating income goals and
the eligible employee's individual performance. For the fiscal year ending
September 30, 1999, the Company did not pay any Annual Incentive Plan bonuses.
The Compensation Committee and Omnibus Committee believe that the Annual
Incentive Plan, ESOP, the Vari-Lite International, Inc. Employees' Stock
Equivalence Plan ("ESEP") and 1997 Omnibus Plan enable the Company to provide
total compensation to its management group comparable to rates paid by other
companies. The Compensation Committee and Omnibus Committee believe that basing
a
13
<PAGE>
portion of the compensation of its executives on achievement of defined Company
goals and improved stock price performance will properly motivate management and
lead to increased profitability.
Because the Common Stock did not become publicly traded until October 16,
1997, the Omnibus Plan and the Annual Incentive Plan will not be subject to
Section 162(m) of the Internal Revenue Code of 1986, as amended, until the
Company's annual meeting of stockholders in 2001 or such earlier time as a
material modification is made to these compensation plans. At such time, to the
extent that these compensation plans can be exempt from Section 162(m), the
Company will determine if it is necessary to institute procedures to permit the
exemption.
<TABLE>
<S> <C>
COMPENSATION OMNIBUS
COMMITTEE COMMITTEE
J. Anthony Smith C. Vincent Prothro
C. Vincent Prothro John R. Rettberg
John R. Rettberg
</TABLE>
In accordance with the rules and regulations of the Securities and Exchange
Commission, the foregoing report of the Compensation Committee and Omnibus
Committee and the performance graph appearing below shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission or subject to Regulations 14A or 14C of the Securities Exchange Act
of 1934 (the "Exchange Act") or to the liabilities of Section 18 of the Exchange
Act and shall not be deemed to be incorporated by reference into any filing
under the Securities Act of 1933 or the Exchange Act, notwithstanding any
general incorporation by reference of this Proxy Statement into any other filed
document.
14
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return of the
Common Stock for the period from October 16, 1997, the date of the Company's
initial public offering, to September 30, 1999, with the cumulative total return
of the Russell 2000 Index and the Standard & Poor's Entertainment Index from
September 30, 1997 to September 30, 1999. The graph assumes an investment of
$100.00 on October 16, 1997 or September 30, 1997, respectively, and assumes
reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VARI-LITE RUSSELL 2000 S & P ENTERTAINMENT
<S> <C> <C> <C>
INTERNATIONAL, INC.
10/16/97 100 100 100
9/1/98 23 83 127
9/1/99 8 95 161
DOLLARS
</TABLE>
15
<PAGE>
BOARD MEETINGS, COMMITTEES AND ATTENDANCE
The Board of Directors of the Company met five times during the fiscal year
ended September 30, 1999. Each director attended at least 75% of the meetings of
the Board of Directors and all committees of the Board of Directors on which he
served, except Mr. Smith who attended four of the six (or 67%) of the meetings
of the Board of Directors and all committees of the Board of Directors on which
he served. The Board of Directors currently has appointed four committees, the
Executive Committee, the Audit Committee, the Compensation Committee and the
Omnibus Committee.
EXECUTIVE COMMITTEE
The Executive Committee is composed of Messrs. Clark, Maxson and Brutsche,
with Mr. Clark serving as Chairman. The Executive Committee has the authority,
between meetings of the Board of Directors, to take all actions with respect to
the management of the Company's business that require action by the Board of
Directors, except with respect to certain specified matters that by law must be
approved by the entire Board. The Executive Committee met nine times during the
fiscal year ended September 30, 1999.
AUDIT COMMITTEE
The Audit Committee is composed of Messrs. Clark, Prothro and Rettberg, with
Mr. Clark serving as Chairman. The Audit Committee is responsible for
(a) reviewing the scope of, and the fees for, the annual audit, (b) reviewing
with the independent auditors the Company's accounting practices and policies,
(c) reviewing with the independent auditors their final report, (d) reviewing
with internal and independent auditors overall accounting and financial controls
and (e) being available to the independent auditors for consultation purposes.
The Audit Committee met one time during the fiscal year ended September 30,
1999.
COMPENSATION COMMITTEE
The Compensation Committee is composed of Messrs. Smith, Prothro and
Rettberg, with Mr. Rettberg serving as Chairman. With the exception of granting
awards under the 1997 Omnibus Plan and Annual Incentive Plan, the Compensation
Committee determines the compensation of the officers of the Company and
performs other similar functions. The Compensation Committee met one time during
the fiscal year ended September 30, 1999.
OMNIBUS COMMITTEE
The Omnibus Committee is composed of Messrs. Prothro and Rettberg, with
Mr. Rettberg serving as Chairman. The Omnibus Committee administers the 1997
Omnibus Plan and the Annual Incentive Plan, including the determination of
eligibility and the granting of awards under such plans. The Omnibus Committee
met one time during the fiscal year ended September 30, 1999 and took action on
two additional occasions by unanimous written consent.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than ten percent of the equity securities
of the Company to file with the Securities and Exchange Commission reports of
ownership and reports of changes in ownership in the equity and derivative
securities of the Company. Based solely on its review of copies of such reports
received or written representations from such officers, directors and persons
who own more than ten percent of the equity of the Company, the Company believes
that all Section 16(a) filing requirements applicable to such individuals were
complied with during the fiscal year ending September 30, 1999, except as
described below.
16
<PAGE>
The Statement of Changes in Beneficial Ownership on Form 4 was filed late
for Loren J. Haas (one report reflecting grant of options), an officer of the
Company, Michael P. Herman (one report reflecting grant of options), a former
officer of the Company, and James H. Clark, Jr. (one report reflecting the
purchase of shares by Clark Partnership, Ltd., a limited partnership of which
Mr. Clark is the managing general partner), a director of the Company.
TRANSACTIONS WITH DIRECTORS, OFFICERS AND AFFILIATES
During the fiscal year ended September 30, 1999, Philip D.C. Collins, who
beneficially owns more than five percent of the Common Stock of the Company,
paid $50,727 to the Company for the rental of automated lighting products and
other services for use in his concert tours. Hit & Run Music Limited, a
corporation owned by J. Anthony Smith, manages Mr. Collins. The Company believes
that the terms of the above transactions were at least as favorable to the
Company as those which could have been obtained in an arm's length transaction
with an unaffiliated third party.
In addition, certain directors of the Company receive deferred compensation
and consulting payments. See "Executive Compensation--Director Compensation."
PROPOSAL TWO:
AMEND VARI-LITE INTERNATIONAL, INC. 1997 OMNIBUS PLAN
BACKGROUND AND SUMMARY OF TERMS OF 1997 OMNIBUS PLAN
On August 27, 1997, the Company adopted the 1997 Omnibus Plan to attract and
retain qualified employees and non-employee directors. Employees and
non-employee directors of the Company and its subsidiaries are eligible to be
granted (a) stock options ("Options"), which may be designated as nonqualified
stock options ("NQSOs") or incentive stock options ("ISOs"), (b) stock
appreciation rights ("SARs"), (c) restricted stock awards ("Restricted Stock"),
(d) performance awards ("Performance Awards") or (e) other forms of stock-based
incentive awards (collectively, the "Awards"). An employee or non-employee
director who has been granted an Option is referred to herein as an "Optionee"
and an employee or non-employee director who has been granted any other type of
Award is referred to herein as a "Participant."
On December 8, 1999, the Board of Directors of the Company adopted an
amendment to the 1997 Omnibus Plan to increase the number of shares of Common
Stock that may be issued upon exercise of Options and SARs or pursuant to other
Awards under the 1997 Omnibus Plan from 800,000 shares to 1,200,000 shares. The
proposed increase will permit the Company to continue to provide incentives to
qualified employees and non-employee directors of the Company and its
subsidiaries by aligning their interests directly with those of the Company's
stockholders. At the Annual Meeting, the Company's stockholders will be asked to
approve that amendment to the 1997 Omnibus Plan.
The following description of the 1997 Omnibus Plan is only a summary; it
does not purport to be a complete or detailed description of all of the
provisions of the 1997 Omnibus Plan. A copy of the 1997 Omnibus Plan will be
furnished by the Company to any stockholder upon written request to the
Secretary of the Company at the Company's executive offices.
THE PLAN
The Omnibus Committee administers the 1997 Omnibus Plan and has full
discretion and exclusive power to (a) select the employees and non-employee
directors who will participate in the 1997 Omnibus Plan and grant Awards to such
employees and non-employee directors, provided that any Awards to be granted to
non-employee directors who are members of the Omnibus Committee must be granted
by the entire Board of Directors, (b) determine the time at which such Awards
shall be granted and any terms and conditions with respect to such Awards as
shall not be inconsistent with the provisions of the 1997
17
<PAGE>
Omnibus Plan, and (c) resolve all questions relating to the administration of
the 1997 Omnibus Plan. Members of the Omnibus Committee receive no additional
compensation for their services in connection with the administration of the
1997 Omnibus Plan.
The employees who are eligible to participate in the 1997 Omnibus Plan are
officers, management and other key employees of the Company and its subsidiaries
as the Omnibus Committee may from time to time determine. Non-employee directors
of the Company or any of its subsidiaries are also eligible to participate in
the 1997 Omnibus Plan. Approximately 450 of the employees of the Company and its
subsidiaries and four non-employee directors of the Company are eligible to
participate in the 1997 Omnibus Plan.
The Omnibus Committee may grant NQSOs or ISOs that are evidenced by stock
option agreements. A NQSO is a right to purchase a specific number of shares of
Common Stock during such time as the Omnibus Committee may determine, not to
exceed ten years, at a price determined by the Omnibus Committee that, unless
deemed otherwise by the Omnibus Committee, is not less than the fair market
value of the Common Stock on the date the NQSO is granted. An ISO is an Option
that meets the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). No ISOs may be granted under the 1997 Omnibus Plan to
(a) a non-employee director or (b) an employee who owns more than 10% of the
outstanding voting stock of the Company ("Ten Percent Stockholder") unless the
option price is at least 110% of the fair market value of the Common Stock at
the date of grant and the ISO is not exercisable more than five years after it
is granted. In the case of an employee who is not a Ten Percent Stockholder, no
ISO may be exercisable more than ten years after the date the ISO is granted and
the exercise price of the ISO shall not be less than the fair market value of
the Common Stock on the date the ISO is granted. Further, no employee may be
granted ISOs that first become exercisable during a calendar year for the
purchase of Common Stock with an aggregate fair market value (determined as of
the date of grant of each ISO) in excess of $100,000. An ISO (or any installment
thereof) counts against the annual limitation only in the year it first becomes
exercisable.
The exercise price of the Common Stock subject to a NQSO or ISO may be paid
in cash or, at the discretion of the Omnibus Committee, by a promissory note or
by the tender of Common Stock owned by the Option holder or through a
combination thereof. The Omnibus Committee may provide for the exercise of
Options in installments and upon such terms, conditions and restrictions as it
may determine. Options are generally exercisable in equal annual installments
over a five-year period. All installments that become exercisable are generally
cumulative and may be exercised at any time after they become exercisable until
the expiration of the term of the Option. The Omnibus Committee may provide for
termination of an Option in the case of termination of employment or
directorship or any other reason. If an Optionee dies or becomes disabled prior
to totally exercising the Option, the Option agreement may provide that the
Option may be exercised by (a) the Optionee's estate or by the person who
acquired the right to exercise the Option by bequest or inheritance or by reason
of the Optionee's death or (b) the Optionee or his personal representative in
the event of an Optionee's disability, provided that the Option is exercised
prior to the date of its expiration or not more than six months from the date of
the Optionee's death or disability, whichever first occurs.
An SAR is a right granted to a Participant to receive, upon surrender of the
right, but without payment, an amount payable in cash. The amount payable with
respect to each SAR shall be based on the excess, if any, of the fair market
value of a share of Common Stock on the exercise date over the exercise price of
the SAR, which will not be less than the fair market value of the Common Stock
on the date the SAR is granted. In the case of an SAR granted in tandem with an
ISO to an employee who is a Ten Percent Stockholder, the exercise price shall
not be less than 110% of the fair market value of a share of Common Stock on the
date the SAR is granted.
Restricted Stock is Common Stock that is issued to a Participant at a price
determined by the Omnibus Committee, which price per share may not be less than
the par value of the Common Stock, and
18
<PAGE>
is subject to restrictions on transfer and/or such other restrictions on
incidents of ownership as the Omnibus Committee may determine.
A Performance Award granted under the 1997 Omnibus Plan (a) may be
denominated or payable to the Participant in cash, Common Stock (including,
without limitation, Restricted Stock), other securities or other Awards and (b)
shall confer on the Participant the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Omnibus Committee shall establish. Subject to the terms of the
1997 Omnibus Plan and any applicable Award agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
the amount of any Performance Award granted and the amount of any payment or
transfer to be made pursuant to any Performance Award shall be determined by the
Omnibus Committee.
The Omnibus Committee may grant Awards under the 1997 Omnibus Plan that
provide the Participants with the right to purchase Common Stock or that are
valued by reference to the fair market value of the Common Stock (including, but
not limited to, phantom securities or dividend equivalents). Such Awards shall
be in a form determined by the Omnibus Committee (and may include terms
contingent upon a change of control of the Company); provided that such Awards
shall not be inconsistent with the terms and purposes of the 1997 Omnibus Plan.
The Omnibus Committee determines the price of any such Award and may accept any
lawful consideration.
The Omnibus Committee may at any time amend, suspend or terminate the 1997
Omnibus Plan; provided, however, that (a) no change in any Awards previously
granted may be made without the consent of the holder thereof and (b) no
amendment (other than an amendment authorized to reflect any merger,
consolidation, reorganization or the like to which the Company is a party or any
reclassification, stock split, combination of shares or the like) may be made
increasing the aggregate number of shares of the Common Stock with respect to
which Awards may be granted or changing the class of persons eligible to receive
Awards, without the approval of the holders of a majority of the outstanding
voting shares of the Company.
In the event a Change in Control (as defined in the 1997 Omnibus Plan)
occurs, then, notwithstanding any provision of the 1997 Omnibus Plan or of any
provisions of any Award agreements entered into between the Company and any
Optionee or Participant to the contrary, all Awards that have not expired and
which are then held by any Optionee or Participant (or the person or persons to
whom any deceased Optionee's or Participant's rights have been transferred)
shall, as of such Change of Control, become fully and immediately vested and
exercisable and may be exercised for the remaining term of such Awards.
If the Company is a party to any merger, consolidation, reorganization or
the like, the Omnibus Committee has the power to substitute new Awards or have
the Awards be assumed by another corporation. In the event of a
reclassification, stock split, combination of shares or the like, the Omnibus
Committee shall conclusively determine the appropriate adjustments.
No Award granted under the 1997 Omnibus Plan may be sold, pledged, assigned
or transferred other than by will or the laws of descent and distribution, and
except in the case of the death or disability of an Optionee or a Participant,
Awards shall be exercisable during the lifetime of the Optionee or Participant
only by that individual.
No Awards may be granted under the 1997 Omnibus Plan on or after August 27,
2007, but Awards granted prior to such date may be exercised in accordance with
their terms.
The 1997 Omnibus Plan and all Award agreements shall be construed and
enforced in accordance with and governed by the laws of the State of Texas.
As of January 18, 2000, options to purchase a total of 762,200 shares of
Common Stock under the 1997 Omnibus Plan (excluding expired or terminated
options) had been granted, no options to purchase shares had been exercised,
options to purchase a total of 762,200 shares were outstanding, and a total of
37,800 shares were available for future option grants. As of January 18, 2000,
the total market value of all
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shares of Common Stock subject to outstanding options was $762,200 (based upon
the closing price of the Common Stock of $1.00 per share as reported on The
Nasdaq Stock Market on that date).
UNITED STATES TAX CONSEQUENCES OF AWARDS
The following summarizes the major United States tax consequences to United
States individuals that are expected to occur in connection with Awards granted
under the 1997 Omnibus Plan.
ISOS. An Optionee has no taxable income, and the Company is not entitled to
a deduction, at the time of the grant of an Option. All Options that qualify
under the rules of Section 422 of the Code will be entitled to ISO treatment. To
receive ISO treatment, an Optionee must not dispose of the acquired Common Stock
within two years after the ISO is granted or within one year after the ISO is
exercised. In addition, the Optionee must have been an employee of the Company
or any of its subsidiaries (or their predecessors) for the entire time from the
date the ISO is granted until three months (one year if the Optionee is
disabled) before the date of exercise. The requirement that the Optionee be an
employee and the two-year and one-year holding periods are waived in the case of
death of the Optionee. If all such requirements are met, no tax will be imposed
upon exercise of the ISO, and any gain upon sale of the Common Stock will be
entitled to capital gain treatment. The Optionee's gain on exercise (the excess
of the fair market value of the Common Stock at the time of exercise over the
exercise price) of an ISO is a tax preference item and, accordingly, is included
in the computation of alternative minimum taxable income.
If an Optionee does not meet the two-year and one-year holding requirements
(a "disqualifying disposition"), tax will be imposed at the time of sale of the
Common Stock. In such event the Optionee's gain on exercise of the ISO will be
compensation to him taxed as ordinary income rather than capital gain to the
extent the fair market value of the acquired Common Stock on the date of
exercise of the ISO exceeds the aggregate exercise price paid for that Common
Stock, and the Company will be entitled to a corresponding deduction at the time
of sale. Any remaining gain on sale of that Common Stock (equal to the excess of
the amount realized on the disqualifying disposition of that Common Stock over
its fair market value on the date of exercise of the ISO) will be long-term
capital gain if the Optionee held that Common Stock for more than one year. If
the amount realized on the disqualifying disposition is less than the fair
market value of the Common Stock on the date of exercise of the ISO, the total
amount includible in the Optionee's gross income, and the amount deductible by
the Company, will equal the excess of the amount realized on the disqualifying
disposition over the exercise price.
If the Optionee pays all or a portion of the exercise price of an ISO by
tendering other shares of Common Stock he owns, then the following consequences
occur. If the tendered shares of Common Stock were acquired by the Optionee
through the prior exercise of an ISO (the "Prior ISO") and do not satisfy both
the two-year and one-year holding requirements ("Disqualified Payment Shares"),
then the tender by the Optionee of such shares constitutes a disqualifying
disposition that will result in compensation to the Optionee taxed as ordinary
income in an amount equal to the excess of the fair market value of such
Disqualified Payment Shares, determined when the Prior ISO was exercised, over
the exercise price previously paid for such Disqualified Payment Shares. Any
appreciation that has occurred in the Disqualified Payment Shares that is not
taxed to the Optionee as compensation income under the disqualifying disposition
rules is not recognized as gain under Section 1036 of the Code. The number of
shares of Common Stock received upon exercise of the ISO equal to the number of
Disqualified Payment Shares tendered in payment thereof will have a basis equal
to the Optionee's basis in the Disqualified Payment Shares plus any ordinary
income recognized by the Optionee as a result of the disqualifying disposition.
The number of shares of Common Stock received upon exercise of the ISO in excess
of the number of Disqualified Payment Shares will have a basis equal to the
amount of the exercise price of the ISO paid in cash (if any). The number of
shares of Common Stock received upon exercise of the ISO, equal to the number of
shares of Disqualified Payment Shares tendered, will have the same holding
period on the date that the ISO is exercised as such Disqualified Payment Shares
had on that date and the holding period of
20
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any additional shares of Common Stock received upon exercise of the ISO will
begin on that date. For purposes of the two-year and one-year holding
requirements relating to a disqualified disposition, however, the holding period
of all shares received on exercise of the ISO will begin on the date the ISO is
exercised.
Alternatively, if the exercise price of the ISO is funded by tendering
shares of Common Stock owned by the Optionee other than Disqualified Payment
Shares ("Qualified Payment Shares"), including shares of Common Stock received
by the Optionee from exercise of a prior ISO that satisfied both the two-year
and one-year holding requirements, shares of Common Stock acquired from exercise
of a NQSO or otherwise as an Award, and shares of Common Stock purchased on the
open market, then the following consequences occur. Under Section 1036 of the
Code, the Optionee will not recognize gain or loss on the tender of the
previously owned Qualified Payment Shares. The number of new shares of Common
Stock received upon exercise of the ISO, equal to the number of shares of
Qualified Payment Shares tendered, will have the same basis as such Qualified
Payment Shares had in the hands of the Optionee and the basis in any additional
shares of Common Stock received will equal the exercise price paid in cash (if
any). The number of shares of Common Stock received upon exercise of the ISO,
equal to the number of shares of Qualified Payment Shares tendered, will have
the same holding period on the date the ISO is exercised as such Qualified
Payment Shares had on that date and the holding period of any additional shares
of Common Stock received upon exercise of the ISO will begin on that date. For
purposes of the two-year and one-year holding requirements relating to a
disqualified disposition, however, the holding period of all shares received on
exercise of the ISO will begin on the date the ISO is exercised.
NQSOS. Upon exercise of a NQSO, an Optionee will recognize compensation
taxed to him as ordinary income to the extent the fair market value of the
acquired Common Stock on the date of exercise of the NQSO exceeds the aggregate
exercise price paid for that Common Stock. The exercise of a NQSO entitles the
Company to a tax deduction for the year in which the exercise occurred in the
same amount as is includible in the income of the Optionee. Any gain or loss
realized by an Optionee on subsequent disposition of the shares of Common Stock
acquired by exercise of a NQSO generally is a capital gain or loss and does not
result in any tax deduction to the Company.
If the Optionee pays all or a portion of the exercise price of a NQSO by
tendering other shares of Common Stock he owns ("Payment Shares"), then the
following consequences occur regardless if such Payment Shares are Disqualified
Payment Shares, Qualified Payment Shares or otherwise. With respect to the
number of shares of Common Stock received on exercise of the NQSO that exceeds
the number of Payment Shares used to exercise the NQSO, the Optionee will
recognize compensation taxed to him as ordinary income to the extent the fair
market value of such shares of Common Stock on the date of exercise of the NQSO
exceeds the aggregate exercise price paid in cash (if any). Under Section 1036
of the Code, no income, gain or loss is recognized upon the exchange of Payment
Shares for shares of Common Stock received upon the exercise of the NQSO to the
extent of the number of Payment Shares tendered. The number of shares of Common
Stock received upon exercise of the NQSO, equal to the number of shares of
Payment Shares tendered, will have the same basis as such Payment Shares had in
the hands of the Optionee. The basis of the Optionee in the number of any
additional shares of Common Stock received upon exercise of the NQSO will equal
the amount of the exercise price of the NQSO paid in cash plus any compensation
income recognized by the Optionee. The number of shares received upon exercise
of the NQSO, equal to the number of shares of Payment Shares tendered, will have
the same holding period on the date that the NQSO is exercised as such Payment
Shares had on that date and the holding period of any additional shares of
Common Stock received upon exercise of the NQSO will begin on that date.
CASHLESS EXERCISE--ISOS AND NQSOS. If an Optionee exercises an ISO or NQSO
through the cashless exercise method, the Optionee will authorize a broker
designated by the Company to sell a specified number of the shares of Common
Stock to be acquired by the Optionee on the exercise of the Option, having a
then fair market value equal to the sum of the exercise price of the ISO or
NQSO, as applicable, plus any transaction costs (the "Cashless Shares"). The
remainder of the shares not sold (the "Non-
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Cashless Shares") will be delivered to the Optionee. An Optionee who uses the
cashless exercise method will be treated as constructively receiving the full
amount of shares of Common Stock that otherwise would be issued upon payment of
the exercise price of the Option in cash, followed immediately by a sale of the
Cashless Shares by the Optionee. In the case of an ISO, the cashless exercise
method would result in a disqualifying disposition of the Cashless Shares with
the tax consequences set forth above under "ISOs." In the case of a NQSO, the
cashless exercise method would result in compensation to the Optionee with
respect to both the Cashless Shares and Non-Cashless Shares as discussed above
under "NQSOs." Since the Optionee's basis in the Cashless Shares that are
received and simultaneously sold on exercise of the NQSO is equal to the sum of
the exercise price and the compensation to the Optionee, no additional gain must
be recognized by the Optionee upon the simultaneous sale of the Cashless Shares.
SARS. A Participant has no taxable income, and the Company is not entitled
to a deduction, at the time of the grant of an SAR. On exercise of an SAR, a
Participant of an SAR will recognize compensation taxed as ordinary income in an
amount equal to the cash received under the SAR.
RESTRICTED STOCK. A Participant who receives a grant of Restricted Stock
will recognize compensation taxed as ordinary income equal to the excess of the
fair market value of the Restricted Stock over the price paid for the Restricted
Stock (a) as of the date of grant, if an election is properly made by the
Participant under Section 83(b) of the Code, or (b) at the time the restrictions
lapse, absent a proper election by the Participant under Section 83(b) of the
Code. If the Participant makes a proper election under Section 83(b) of the
Code, no additional income will be recognized by the Participant when the
restrictions lapse. If, however, the shares of Restricted Stock are forfeited
after a proper election under Section 83(b) of the Code is made by the
Participant, no loss may be recognized. Any compensation income recognized by
the Participant with respect to the Restricted Stock will be added to the
Participant's basis in the Restricted Stock. Gain or loss recognized by a
Participant upon a disposition of the shares of Restricted Stock will be capital
gain or loss, taxed as long-term capital gain or loss if the Restricted Stock
has been held by the Participant for more than one year. The one-year holding
period commences on the date the restrictions lapse or, if a proper election is
made by the Participant under Section 83(b) of the Code, when the Restricted
Stock is granted. The Participant must file any Section 83(b) election with the
Internal Revenue Service not later than 30 days after the date of grant of the
Restricted Stock. Each Participant who receives a grant of Restricted Stock is
urged to consult his or her own tax advisor with respect to whether an election
should be made under Section 83(b) of the Code and the manner of making a proper
election. The granting of an SAR or Restricted Stock entitles the Company to a
tax deduction for the year in which the compensation income is recognized by the
Participant in the same amount as is includible in the income of the
Participant.
PERFORMANCE AWARDS AND OTHER STOCK-BASED AWARDS. Under Section 83(a) of the
Code, a Participant who receives a grant of a Performance Award or other form of
stock-based incentive award that constitutes property and is payable in cash or
Common Stock will recognize compensation taxed as ordinary income generally when
such cash or Common Stock is received equal to the amount of cash or the excess
(if any) of the fair market value of Common Stock over the exercise price. If
the Common Stock is Restricted Stock or otherwise subject to forfeiture, then
generally such Common Stock is taxed as set forth above for Restricted Stock.
The tax status of the Performance Awards and other forms of stock-based
incentive awards will depend on the nature of such Awards and their specific
terms and conditions.
Under certain circumstances, the Company's tax deductions may be limited
under Section 162(m) of the Code.
The foregoing statements are based upon present United States federal income
tax laws and regulations and are subject to change if the tax laws and
regulations, or interpretations thereof, are changed.
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OPTIONS GRANTED UNDER UK SUB-PLAN
On August 27, 1997, the Board of Directors of the Company approved the
adoption of the Rules of UK Sub-Plan of the 1997 Omnibus Plan (the "Sub-Plan")
providing for grants of approved options ("Approved Options") to United Kingdom
employees of subsidiaries of the Company.
Grants of Approved Options under the Sub-Plan shall be evidenced by stock
option agreements containing applicable provisions of United Kingdom law. An
Approved Option may not be granted to any employee who, if the Approved Option
was granted, would hold Approved Options for shares with an aggregate
subscription price in excess of L30,000. If the Company desires to grant Options
to a United Kingdom employee in excess of the L30,000 limitation, unapproved
options may be granted to such employee under the 1997 Omnibus Plan in the form
of NQSOs. Generally, Approved Options granted under the Sub-Plan receive
favorable tax treatment under United Kingdom law if they are not exercised
earlier than three years or later than 10 years (or the expiration of the
Approved Option, if earlier) from the date of grant. A report must be filed with
the United Kingdom Inland Revenue each year regarding Approved Options granted
under the Sub-Plan and regarding unapproved options granted to United Kingdom
employees as NQSOs under the 1997 Omnibus Plan.
UNITED KINGDOM TAX CONSEQUENCES OF OPTIONS
The following summarizes the major United Kingdom tax consequences to United
Kingdom employees that are expected to occur in connection with Approved Options
and unapproved options granted as NQSOs.
If an Optionee does not exercise an Approved Option prior to three years
from the date of grant and the exercise is not earlier than three years after
the latest previous exercise by the Optionee of an Approved Option, the Optionee
will not recognize any income at the time of the grant or the exercise of the
Approved Option and the gain on the sale (equal to the excess of the amount
realized on disposition of the Common Stock over the exercise price of the
Approved Option) will be taxed as capital gain. The Company will be entitled to
a tax deduction equal to the spread on the date of exercise (the excess of the
fair market value of the Common Stock on the date of exercise of the Approved
Option over the exercise price), even though the Optionee will not have any
corresponding income tax recognition. If an Approved Option is exercised under
circumstances that do not qualify for tax exemption, such as an exercise within
three years of the date of grant, the Optionee would recognize ordinary income
equal to the difference between the fair market value of the Common Stock on the
date of exercise and the exercise price. In addition, if an Approved Option is
not exercised in a tax exempt manner, the Company must withhold from the
Optionee and account to the United Kingdom Inland Revenue the appropriate income
tax.
Upon exercise of an unapproved option granted under the 1997 Omnibus Plan as
a NQSO, the Optionee will recognize at the time of exercise of the unapproved
option income in an amount equal to the difference between the fair market value
of the Common Stock on the date of exercise and the exercise price, and the
Company will be entitled to a corresponding tax deduction at that time. Income
tax must be withheld from the Optionee and accounted for to the United Kingdom
Inland Revenue. The Company can withhold taxes by withholding a number of shares
of Common Stock having a market value equal to not less than the amount required
to be withheld.
The foregoing statements are based on present United Kingdom income tax laws
and regulations and are subject to change if the tax laws and regulations, or
interpretations thereof, are changed.
JAPANESE TAX CONSEQUENCES OF OPTIONS
The following summarizes the major Japanese tax consequences to Japanese
Optionees that are expected to occur in connection with Options granted under
the 1997 Omnibus Plan.
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<PAGE>
Japanese law does not provide for any special tax treatment for Options,
such as Approved Options under United Kingdom tax laws or ISOs under United
States tax laws. Accordingly, Options granted to Japanese employees will be
NQSOs under the 1997 Omnibus Plan. The Optionee will not recognize any income at
the time the NQSO is granted if the option exercise price is at least equal to
the fair market value of the Common Stock on the date of grant. At the time the
NQSO is exercised, however, an Optionee will recognize ordinary income in an
amount equal to the excess of the fair market value of the Common Stock received
upon exercise of the NQSO over the exercise price. For permanent residents of
Japan, this income will be treated as occasional income, which is subject to a
special tax calculation. This special tax calculation usually results in the
imposition of less tax than the normal graduated rates.
Under Japanese law, an employer is not allowed to deduct compensation paid
to its officers. Income related to NQSOs issued to officers is treated as
additional officers' compensation and, accordingly, income related to NQSOs is
not deductible as compensation expense. On the other hand, NQSOs issued by the
Company to employees other than officers will be deductible as compensation
expense to the same extent that the Optionee recognizes income.
The foregoing statements are based on present Japanese income tax laws and
regulations and are subject to change if the tax laws and regulations, or
interpretations thereof, are changed.
REQUIRED VOTE
The favorable vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote is required to approve the proposed amendment to
the 1997 Omnibus Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE 1997
OMNIBUS PLAN.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Deloitte & Touche LLP served as the independent auditors of the Company for
the fiscal year ended September 30, 1999. A representative of Deloitte & Touche
LLP is expected to be present at the Annual Meeting and will have the
opportunity to make a statement. The representative will be available to answer
appropriate stockholder questions.
STOCKHOLDERS' PROPOSALS
Any stockholder who may wish to present a proposal for consideration at the
2001 annual meeting of stockholders must submit the proposal in writing to the
Secretary of the Company at the address shown on the first page of this Proxy
Statement not later than October 2, 2000. That proposal must comply with Section
8 of Article II of the Company's By-Laws and, if it is to be included in the
Company's proxy materials, Rule 14a-8 under the Exchange Act. The By-Laws permit
the Board of Directors or the presiding officer of the 2001 annual meeting of
stockholders to reject any proposal submitted for that meeting after October 2,
2000 or that otherwise does not comply with the By-Laws. It is likely that an
untimely or noncomplying proposal will be rejected. If, however, an untimely or
noncomplying proposal is not rejected, then (subject to Rule 14a-4 under the
Exchange Act) the persons named as proxies in the proxy cards solicited by the
Board of Directors for that meeting will be entitled to vote the shares
represented by the proxy cards held by them regarding that proposal in their
discretion, if properly raised at the meeting.
MISCELLANEOUS
The Board of Directors knows of no business other than that set forth above
to be transacted at the Annual Meeting. If other matters requiring a vote of the
stockholders arise, the persons designated as proxies on such matters will vote
the shares of Common Stock represented by the proxies in accordance with their
best judgment and Rule 14a-4 under the Exchange Act.
24
<PAGE>
The information contained in the Proxy Statement relating to the occupations
and security holdings of the directors and officers of the Company and their
transactions with the Company is based upon information received from the
individual directors and officers. All information relating to any beneficial
owner of more than five percent of the Company's Common Stock is based upon
information contained in reports filed by such owner with the Securities and
Exchange Commission.
The Annual Report to Stockholders of the Company for the fiscal year ended
September 30, 1999, which includes financial statements and accompanies this
Proxy Statement, does not form any part of the materials for the solicitation of
proxies.
THE COMPANY HAS PROVIDED WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
SOLICITED HEREBY A COPY OF THE COMPANY'S 1999 ANNUAL REPORT TO STOCKHOLDERS,
WHICH INCLUDES A COPY OF THE COMPANY ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1999. EXHIBITS TO THE FORM 10-K ARE AVAILABLE UPON
REQUEST AT A REASONABLE CHARGE TO COVER THE COMPANY'S COST IN PROVIDING SUCH
EXHIBITS OR ON THE INTERNET AT HTTP://WWW.SEC.GOV. ADDITIONAL COPIES OF THE 1999
ANNUAL REPORT TO STOCKHOLDERS MAY BE OBTAINED WITHOUT CHARGE BY ANY PERSON WHOSE
PROXY IS SOLICITED HEREBY UPON WRITTEN REQUEST TO CORPORATE SECRETARY, VARI-LITE
INTERNATIONAL, INC., 201 REGAL ROW, DALLAS, TEXAS 75247.
<TABLE>
<S> <C>
By Order of the Board of Directors
[/S/ JEROME L. TROJAN III]
Jerome L. Trojan III
SECRETARY
Dallas, Texas
January 28, 2000
</TABLE>
25
<PAGE>
APPENDIX A
AMENDMENT NO. 1
TO THE
VARI-LITE INTERNATIONAL, INC.
1997 OMNIBUS PLAN
Pursuant to Section 17 of the Vari-Lite International, Inc. 1997 Omnibus
Plan (the "Plan"), the Plan is hereby amended as follows:
1. Section 2 of the Plan is hereby amended to read in its entirety as
follows:
2. Shares of Stock Subject to the Plan
The Awards may be granted with respect to Common Stock, $0.10 par
value of the Company (the "Common Stock"). Shares delivered upon exercise
of the Awards, at the election of the Committee (as hereinafter defined
in Section 3), may be Common Stock that is authorized but previously
unissued or stock reacquired by the Company or both. Subject to the
provisions of Section 15, the maximum number of shares of Common Stock
with respect to which the Awards may be granted under the Plan, including
to any individual employee, shall not exceed 1,200,000. Any shares
subject to an Award under the Plan, which Award for any reason expires or
is terminated unexercised as to such shares, shall again be available for
the grant of other Awards under the Plan; provided, however, that
forfeited Common Stock or other securities shall not be available for
further Awards if the Participant (as hereinafter defined in Section 4)
has realized any benefits of ownership from such Common Stock.
IN WITNESS WHEREOF, the undersigned has executed this Amendment effective as
of the 8th day of December, 1999.
VARI-LITE INTERNATIONAL, INC.
By: /s/ H.R. Brutsche III
--------------------------------------
H.R. Brutsche III
CHAIRMAN OF THE BOARD
A-1
<PAGE>
VARI-LITE INTERNATIONAL, INC.
The undersigned (i) acknowledges receipt of the Notice dated
January 28, 2000, of the Annual Meeting of Stockholders of Vari-Lite
International, Inc., a Delaware corporation (the ""Company''), to be held
on March 10, 2000, at 10:00 a.m., local time, at the offices of the
Company at 201 Regal Row, Dallas, Texas 75247, and the Proxy Statement in
connection therewith; and (ii) appoints H.R. Brutsche III and Jerome L.
Trojan III, and each of them, the undersigned's proxies with full power of
substitution, for and in the name, place and stead of the undersigned, to
vote upon and act with respect to all of the shares of Common Stock of the
Company standing in the name of the undersigned on January 14, 2000, or with
respect to which the undersigned is entitled to vote and act, at the meeting
and at any postponements or adjournments thereof, and the undersigned directs
that this proxy be voted as set forth on the reverse.
If more than one of the proxies named herein shall be present in person
or by substitute at the meeting or at any postponements or adjournments
thereof, both of the proxies so present and voting, either in person or by
substitute, shall exercise all of the powers hereby given.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
THE UNDERSIGNED HEREBY REVOKES ANY PROXY OR Please mark /X/
PROXIES HERETOFORE GIVEN TO VOTE UPON OR ACT your votes as
WITH RESPECT TO SUCH COMMON STOCK AND HEREBY indicated in
RATIFIES AND CONFIRMS ALL THAT THE PROXIES, this example
THEIR SUBSTITUTES, OR ANY OF THEM MAY
LAWFULLY DO BY VIRTUE HEREOF.
1. Proposal to elect two Class III directors to serve until the annual
meeting of stockholders to be held in 2003 or until their respective
successors are elected and qualified.
FOR all nominees WITHHOLD Nominees:
listed to the right AUTHORITY H.R. Brutsche III and
(except as marked to vote for all nominees J. Anthony Smith
to the contrary) listed to the right
/ / / /
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line below.)
- -------------------------------------------------------------------------------
2. Proposal to amend the Vari-Lite International, Inc. 1997 Omnibus Plan
to increase the number of shares of Common Stock that may be issued upon
exercise of options granted under the Plan from 800,000 shares to
1,200,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. In the discretion of the proxies on any other matters that may properly
come before the meeting or any postponements or adjournments thereof.
FOR AGAINST ABSTAIN
/ / / / / /
Please date this proxy and sign your name
exactly as it appears hereon. Where
there is more than one owner, each should
sign. When signing as an attorney,
administrator, executor, guardian or
trustee, please add your title as such.
If executed by a corporation, the proxy
should be signed by a duly authorized
officer.
Please mark, sign, date and return your
proxy promptly in the enclosed envelope
whether or not you plan to attend the
Meeting. No postage is required. You may
nevertheless vote in person if you do
attend.
Dated: __________________________, 2000
_______________________________________
Signature of Stockholder
_______________________________________
Signature of Stockholder
_______________________________________
Title, if applicable
- ------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
