-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HspL9t0uPAp15gJwMIMqgNGfqzMa+N0DemmUXDXIj/vtkh77nJmTRP9t5VOwN6Lb fErsYXsgWMhVyjC/KzrVDg== 0001047469-03-001377.txt : 20030114 0001047469-03-001377.hdr.sgml : 20030114 20030114172741 ACCESSION NUMBER: 0001047469-03-001377 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20030114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARI LITE INTERNATIONAL INC CENTRAL INDEX KEY: 0001033491 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 752239444 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23159 FILM NUMBER: 03513967 BUSINESS ADDRESS: STREET 1: 201 REGAL ROW CITY: DALLAS STATE: TX ZIP: 75247 BUSINESS PHONE: 2146301963 10-K 1 a2100010z10-k.htm 10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2002
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 0-23159

Vari-Lite International, Inc.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		75-2239444 (I.R.S. Employer Identification No.)
201 Regal Row, Dallas, Texas (Address of principal executive offices)		75247 (Zip Code)

Registrant's telephone number including area code: (214) 630-1963

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.10 par value

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive Proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

The aggregate market value of the voting stock held by non-affiliates of the registrant on January 9, 2003 was $6,022,372. As of that date, 7,800,003 shares of the registrant's Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Certain information required by Part III of this Annual Report on Form 10-K is incorporated by reference from the registrant's definitive Proxy Statement for its annual meeting of stockholders to be held on March 7, 2003.

INDEX TO ANNUAL REPORT ON FORM 10-K
For the fiscal year ended September 30, 2002

		Page
Part I
Item 1.	Business	3
Item 2.	Properties	6
Item 3.	Legal Proceedings	7
Item 4.	Submission of Matters to a Vote of Security Holders	7
Part II
Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters	8
Item 6.	Selected Consolidated Financial Data	10
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 8.	Financial Statements and Supplementary Data	22
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	22
Part III
Item 10.	Directors and Executive Officers of the Registrant	23
Item 11.	Executive Compensation	23
Item 12.	Security Ownership of Certain Beneficial Owners and Management	23
Item 13.	Certain Relationships and Related Transactions	23
Part IV
Item 14.	Controls and Procedures	24
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	24
SIGNATURES		33
INDEX TO FINANCIAL STATEMENTS		F-1

PART I

Item 1. Business

General

The Company is a leading worldwide professional lighting rental and production company. The Company distributes lighting systems and provides services primarily to the entertainment industry, serving such markets as concert touring, theater, television and film and corporate events.

The Company's predecessor was incorporated in 1988 in the State of Texas as a holding company for operations, which began in 1981 and was reincorporated in the State of Delaware in 1997. During 2003, the Company expects to be renamed "VLPS Lighting Services International, Inc." The Company's principal executive offices are located at 201 Regal Row, Dallas, Texas 75247 and its telephone number is (214) 630-1963.

Operations

Rental Operations

The Company's rental operations offer complete lighting packages that include a wide variety of automated and conventional lighting and rigging equipment, including numerous types of lighting fixtures, or "luminaires," and control consoles, large search lights, automatic gel scrollers, trusses, motors, dimmers, smoke machines, power and control signal distribution equipment and cables. The Company specializes in an extensive line of VARI*LITE® automated spot and wash luminaires. Spot luminaires create a hard-edged, crisp beam which can be used for precisely focused illumination and visual effects, as well as for projecting custom light images and designs through the use of "gobos", designs etched into a piece of glass or cut into a piece of metal through which a light beam is directed to create an image. Wash luminaires project a soft-edge light beam for even illumination of objects and areas. The Company rents the following VARI*LITE automated lighting products:

Series 200™ Luminaires. The Series 200 luminaires consist of the VL2C™ spot luminaire and VL4™ wash luminaire. The VL2C spot luminaire can change light color in one-tenth of a second and can produce more than 120 separate light colors. The VL4 luminaire's color changing system allows the user to select 30 preset and 160 programmable colors from thousands of available colors and to change these colors in less than three-tenths of a second, or program the system for timed color cross-fades. In addition, the VL4 luminaire features precisely timed control of light intensity, including the ability to instantaneously turn the light fixture on and off. Continuous adjustment of diffusion and beam angle provides enhanced control of the beam shape.

Series 300™ Luminaires. The Series 300 luminaires are virtually silent, light weight automated lighting instruments with sophisticated color changing features. The Series 300 luminaires includes the VL5™, VL5Arc™ and VL5B™ wash luminaires, and the VL6™, VL6B™, VL6C™, VL7™ and VL7B™ spot luminaires. The VL5 luminaire is lighter than the VL4 luminaire, and its cold-mirror reflector both eliminates the need for noisy cooling fans and reduces the amount of heat the lights emit onto the stage. Color changes for the VL5 are controlled by a system that allows color cross-fades in as little as seven-tenths of a second and interchangeable lenses work with an internal diffusing mechanism to provide a wide variety of beam sizes and shapes. The VL5Arc luminaire uses a 575 watt arc source rather than the 1000 watt tungsten source used in the VL5 luminaire. The VL5B luminaire uses the same tungsten source as the VL5 luminaire, but contains a different color palate. The VL6 spot luminaire is the companion to the VL5 wash luminaire, and uses a 400 watt arc lamp and has two interchangeable 12-position wheels of dichroic color filters and gobos for split second color and image changes and multi-color beams. The VL6B spot luminaire adds a 3:1 zoom optics system and two fixed 11-position wheels for interchangeable dichroic color and gobo selections, as well as one five-position rotating wheel for gobos or effects to the VL6 luminaire. The VL6C luminaire has the same features as the VL6B luminaire, except it contains a 700 watt

arc lamp. The VL7 spot luminaire has a revolutionary collection optics system that produces a bright beam and provides an 8:1 zoom. Other features of the VL7 include full color spectrum crossfades with unparalleled precision and repeatability via the unique CVF™ System, strobe, image morphing and fixed and rotating gobos. The VL7B spot luminaire adds a four frame shuttering system to the VL7 fixture.

Series 1000™ Ellipsoidal Reflector Spotlight. The VL1000™ ERS is the only automated version of one of the most popular lighting tools in use today, the ellipsoidal reflector spotlight. There are currently four versions of the VL1000 ERS that combine either a tungsten or arc lamp source with the absence or presence of automated shutters. Features of the VL1000 ERS include CYM color mixing, five rotating and indexing gobo positions, zoom optics with an imaging range from 19° to 36° and a non-imaging zoom range out to a 70° beam field, pan and tilt capability and an optional beam size iris. Another unique feature of the VL1000 ERS is a variable diffusion mechanism to soften the edges of the beam or image all the way out to a total wash beam. This allows the same fixture to function as a spot or a wash luminaire. The VL1000 ERS offers a unique optical system which enables this luminaire to be the only automated spotlight to utilize a tungsten source to produce professional level output at the popular 3200°K color temperature. As such, the VL1000 ERS can be used for applications traditionally dominated by conventional lighting fixtures. The tungsten lamp versions of the VL1000 ERS produce approximately 10,000 lumens of output which can be controlled using traditional remote dimmers or an optional internal dimmer. The 575 watt arc lamp versions of the VL1000 ERS produce over 15,000 lumens of output at a 5600°K color temperature and include mechanical dimming and an external arc power supply.

Series 2000™ Luminaires. The Series 2000 luminaires consist of the VL2000™ spot luminaire, the VL2000™ wash luminaire and the VL2416™ wash luminaire. The VL2000 spot luminaire is small, lightweight and virtually silent and offers the same features as the VL6C luminaire but also features an upper enclosure that houses the control electronics, as well as a power factor corrected arc power supply for a 700 watt lamp. The VL2000 wash luminaire is identical in configuration and size to the VL2000 spot luminaire and features an innovative zoomable beam spreading optics system which can provide accurate, repeatable control of the beam. The VL2000 wash luminaire includes three color wheels for smooth, full spectrum color crossfades as well as a fixed color wheel for rapid, "snap" color changes. Smooth dimming and strobe effects are also permitted. Like the VL2200™ spot luminaire, the Series 2000 wash luminaires include an upper enclosure that houses the control electronics, as well as a power factor corrected arc power supply for the lamp. The VL2416 wash luminaire features a 1200 watt arc lamp and the same zoomable beam spreading optics offered in the VL2000 wash luminaire. A rotatable, indexable front lens assembly that accepts standard PAR 64 lenses can be used for many unique beam effects. The DICHRO*TUNE™ radial color changer employs enhanced dichroic color filters to produce smooth, full spectrum color crossfades as well as very quick color changes. An internal douser allows intensity control as well as strobe effects.

Series 3000™ Luminaires. The Series 3000 luminaires were introduced in September, 2002, and are expected to be available to the market during the first half of 2003. The Series 3000 luminaires consist of the VL3000™ spot luminaire and the VL3000™ wash luminaire. Both luminaires feature an upper enclosure that houses the control electronics, as well as a power factor corrected arc power supply for a 1200 watt lamp. The VL3000 spot luminaire includes three color wheels for smooth, full spectrum color crossfades as well as a fixed color wheel for rapid, "snap" color changes, variable color temperature correction, two rotating gobo wheels, one rotating effects wheel, a beam size iris, a mechanical dimmer, an extremely fast strobe mechanism and an optical system that provides a 6:1 zoom range. The VL3000 wash luminaire is identical in configuration and size to the VL3000 spot luminaire, except the gobo and effects wheels and beam size iris have been removed and the optics have been configured to achieve a 10:1 zoom range using the same beam control optics system offered in the Series 2000 wash luminaires.

All of the VARI*LITE luminaires will operate from the various line voltages around the world and are compatible with industry standard DMX-512 control consoles as well as proprietary VARI*LITE control consoles.

Virtuoso™ Control Console. The Virtuoso control console was designed to control VARI*LITE luminaires, DMX automated lights and conventional fixtures. The console is capable of controlling up to 2,000 luminaires with up to 10,000 cues per channel, depending on the types of luminaires being used, and includes an advanced, 3-D graphical interface that allows users to have a real-time view of system status and performance. The 3-D graphical interface can also be used to program cues while the luminaires are off-line to maximize programming efficiency for busy production environments or for pre-production work before the actual lighting system is available. Multiple Virtuoso consoles can be connected and programmed simultaneously, a major advantage in very large productions or when time is very limited. Advance fiber optic connections are provided for maximum performance. The Virtuoso DX™ console offers all of the performance and features as the original Virtuoso console in a much smaller, less expensive platform. The Virtuoso DX console connects directly into the lighting system with either traditional network wiring or with the same advanced fiber optics used in the Virtuoso console. The Virtuoso DX console also offers the additional advantage of outputting eight universes of DMX-512 control directly from the console. This allows the console to be used with equal ease with VARI-LITE luminaries, DMX automated lights or conventional fixtures. The Company's Visionary 3D™ software package allows users to create actual Virtuoso cues and showfiles, using the 3-D graphical interface, without the presence of a console or lighting system, using only a personal computer. These showfiles can then be transported to the Virtuoso or Virtuoso DXconsole for use with the lighting system.

In addition to the automated and conventional equipment provided by the Company, the Company uses a unique stackable, plastic injection-molded storage case for transporting its equipment. The case is custom-designed to protect VARI*LITE equipment and lasts longer than other cases, thereby reducing transportation costs. To complement the integrated product packages, customers can utilize the VLPS CAD/WYSIWYG studio facilities to assist with pre- and post-production design work. In addition, the Company provides trained personnel to operate its automated lighting systems and offers training courses, maintenance and other related production services.

The Company emphasizes the quality and reliability of its products and services and, accordingly, submits all products to vigorous testing after termination of each rental agreement. The Company uses an inventory control and management system to locate its rental equipment at all times anywhere in the world. Each piece of equipment is assigned a serial number for identification purposes. Equipment utilization is monitored at the Company's headquarters to determine which products are in highest demand in various geographic markets and whether certain equipment should be relocated to increase utilization and revenue, whether product shortages exist, whether current pricing is at the appropriate level, and whether excess quantities exist that may be sold. The maximum utilization rates of the Company's rental equipment are affected by production scheduling requirements of the customers' various markets. Utilization rates are also impacted by the quantity of inventory, maintenance requirements and shipping time. The Company's inventory control system helps the Company optimize its utilization rates in light of these factors in order to satisfy customer requirements, maximize revenue and optimize equipment levels.

Sales Operations

On November 18, 2002, the Company sold its manufacturing and sales division to Genlyte Thomas Group LLC ("Genlyte"). The sale included all of the sales, marketing, manufacturing and engineering operations associated with this division, as well as the VARI*LITE® trademark and all patents and other intellectual property associated with VARI*LITE products. As part of this transaction, the Company entered into a supply agreement, pursuant to which Genlyte agreed to manufacture and sell to the Company, for a minimum of ten years, all VARI*LITE equipment and parts to support existing and future

VARI*LITE products and appointed the Company as the exclusive distributor of VARI*LITE products in Europe and Japan and a non-exclusive dealer in North America.

Marketing, Sales and Distribution

The Company operates through its offices located in New York, Los Angeles, Nashville, Orlando, Las Vegas, London and Tokyo. The Company markets its products and services to the entertainment industry, including concert touring, theatre, television and film and corporate events markets, through various means including, but not limited to, trade shows, trade advertising and direct marketing. The Company solicits business from lighting and set designers, other specifiers and consultants, artist managers, producers, production managers, end users and production companies, promoters, rental companies, corporations and business associations. The Company believes that its quality products, reputation, customer relationships, worldwide distribution capability and excellent service are the keys to its success. No customer has accounted for more than 10% of the Company's revenues for at least the last three fiscal years.

The Company relies heavily on its reputation for quality service, which is enhanced by its high visibility projects and customers. The Company reinforces this reputation by occasionally advertising in trade and specialty magazines. Although most of the Company's business is procured through a bidding process, the Company believes that competition for both sales and rental of lighting equipment is based on expertise, quality, price, reputation and full service capabilities.

Research and Development; Intellectual Property

A substantial portion of the Company's research and development capabilities and all of its intellectual property was sold to Genlyte on November 18, 2002. The Company's remaining research and development group consists of six engineers and technicians, who continue to support and improve existing products and develop new technology to meet the needs of its customers. In the fiscal years ended September 30, 2000, 2001 and 2002, the Company's research and development expenditures totaled $5.2 million, $5.3 million and $4.3 million, respectively.

Competition

The lighting industry is highly competitive. The Company primarily competes with Production Resource Group, PLC and many other automated and conventional lighting rental companies. Competitive factors primarily include reputation, product capabilities, quality, reliability, price, worldwide distribution, full service capabilities, brand name recognition and customer service and support. The VARI*LITE brand name has been recognized for years as the preeminent brand name for automated lighting and the Company has the largest inventory of VARI*LITE products in the world and has more experience than any of its competitors in renting, selling, operating and supporting VARI*LITE automated lighting products.

Employees

The Company has 237 full-time employees. In addition, the Company has 93 part-time and temporary employees. None of the Company's employees is a party to any collective bargaining agreement and the Company has never experienced a work stoppage. The Company considers its relations with its employees to be good.

Item 2. Properties

The Company leases all of its facilities, including one facility comprising approximately 60,000 square feet in Dallas, Texas under a lease that expires in April 2003. The Dallas facility contains the Company's executive offices, maintenance and research and development facilities. Due to the sale of the Company's manufacturing and sales division to Genlyte, the Company expects the Dallas facility to be relocated into

an office and warehouse facility with approximately 13,300 square feet, in April 2003, pursuant to a lease which expires in April 2007. The executive offices and warehouse space of Vari-Lite Europe, Ltd. are located in London, England in one facility comprising approximately 57,000 square feet under a lease that expires in April 2010. The executive offices of Vari-Lite Asia, Inc. as well as its technical center, are located in Tokyo in two facilities aggregating approximately 23,300 square feet, under leases which expire in February 2005 and November 2004, respectively. The Company also leases office and warehouse space in New York and Los Angeles of 35,300 and 58,000 square feet, respectively, under leases which expire in August 2010 and April 2004, respectively. In addition, the Company leases sales offices in Las Vegas, Nashville and Orlando. The Company believes it maintains generally adequate insurance with respect to its properties.

Item 3. Legal Proceedings

In the ordinary course of its business, the Company is from time to time threatened with or named as a defendant in various lawsuits, including patent infringement claims. Additionally, the Company has filed lawsuits claiming infringements of its patents by third parties for which the Company has been subject to counterclaims. The Company is not currently involved in any material legal proceedings incidental to the conduct of its business.

Item 4. Submission of Matters to a Vote of Security Holders

Not Applicable.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

The Company's Common Stock trades on the Nasdaq National Market under the symbol "LITE." The Company consummated its initial public offering of Common Stock on October 16, 1997. The following table sets forth, on a per share basis for the periods indicated, the high and low sale prices for the Common Stock as reported by the Nasdaq National Market:

		Price Range
		High		Low
Fiscal Year 2001
	First Quarter	$	2.500	$	0.625
	Second Quarter	$	2.250	$	0.750
	Third Quarter	$	2.000	$	1.210
	Fourth Quarter	$	1.540	$	0.780
Fiscal Year 2002
	First Quarter	$	1.350	$	0.940
	Second Quarter	$	1.850	$	1.010
	Third Quarter	$	1.790	$	1.000
	Fourth Quarter	$	1.460	$	0.810
Fiscal Year 2003
	First Quarter	$	1.340	$	0.920
	Second Quarter (through January 9, 2003)	$	1.330	$	1.130

There were 74 stockholders of record of Common Stock on January 9, 2003.

Since 1997, the Company has not paid any cash dividends. The Company may in the future use earnings or available financing to pay cash dividends. Currently, the payment of cash dividends is limited under the terms of the amended New Credit Facility (as hereinafter defined). The payment of cash dividends is subject to the determination and declaration by the Company's Board of Directors and depends on a number of factors, including future earnings, results of operations, financial condition, capital requirements, any contractual restrictions, general economic conditions and other factors that the Company's Board of Directors deems relevant. No assurance can be given that dividends will be declared or, if declared, what the amount of dividends will be, or whether such dividends will continue. See "Liquidity and Capital Resources".

Equity Compensation Plan Information

The following table sets forth information about the Common Stock that may be issued upon exercise of options, warrants and rights under all of the Company's equity compensation plans as of September 30, 2002, including the Vari-Lite International, Inc. 1997 Omnibus Plan, as amended. The Company's stockholders have approved this plan.

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	719,200	$	2.182	480,800
Equity compensation plans not approved by security holders(1)	296,057	$	3.75	—

Total	1,015,257	$	2.639	480,800

(1): Represents shares of Common Stock that may be issued pursuant to warrants issued by the Company to the Company's lenders.

The material features of the warrants referenced in footnote (1) above are as follows:

In connection with the Company's Old Credit Facility (as hereinafter defined), the Company issued warrants to purchase up to 296,057 shares of Common Stock at $3.75 per share. The terms of the warrants also provide for registration rights and adjustments to the price and number of shares in certain circumstances. The warrants expire on December 31, 2004 and as of September 30, 2002, no warrants had been exercised.

Item 6. Selected Consolidated Financial Data

The following selected consolidated financial data for the Company as of and for each of the five fiscal years in the period ended September 30, 2002, have been derived from the audited consolidated financial statements of the Company. This data should be read in conjunction with the information set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and related notes thereto included elsewhere in this report.

			Year Ended September 30,
			1998			1999			2000			2001			2002
			(in thousands except per share data)
Income Statement Data:(1)
Rental revenues			$	73,235		$	78,520		$	76,366		$	55,597		$	44,092
Product sales and service revenues				15,141			13,012			17,322			17,466			21,983

		Total revenues		88,376			91,532			93,688			73,063			66,075
	Rental costs			33,172			39,557			35,990			25,534			22,027
	Product sales and service costs			10,472			7,393			10,881			11,518			14,891
	Reserve for excess, slow moving and obsolete inventory			—			—			—			—			4,900

	Gross profit			44,732			44,582			46,817			36,011			24,257
	Selling, general and administrative expense			35,014			38,724			37,102			31,551			27,120
	Research and development expense			6,690			5,586			5,152			5,260			4,287
	Impairment of assets			3,542			—			3,850			—			3,500
	Restructuring costs			1,080			600			—			—			—
	Gains on lawsuit settlement and sale of lease			—			(500	)		(3,993	)		—			—
	Gain on sale of concert sound reinforcement business			—			—			—			(7,100	)		—
	Write-off of receivables related to premiums paid under split-dollar life insurance			—			—			—			—			1,348

	Operating income (loss)			(1,594	)		172			4,706			6,300			(11,998	)
	Interest expense (net)			2,881			4,540			5,180			2,294			1,614

	Income (loss) before taxes, extraordinary loss and cumulative effect of change in accounting principle			(4,475	)		(4,368	)		(474	)		4,006			(13,612	)
	Income taxes (benefit)			(1,785	)		(1,725	)		(187	)		1,556			(1,276	)

	Income (loss) before extraordinary loss and cumulative effect of change in accounting principle			(2,690	)		(2,643	)		(287	)		2,450			(12,336	)
	Extraordinary loss from early extinguishment of debt			(737	)		—			—			—			—
	Cumulative effect of change in accounting principle			(195	)		—			—			—			—

	Net income (loss)		$	(3,622	)	$	(2,643	)	$	(287	)	$	2,450		$	(12,336	)

	Net income (loss) per basic share		$	(0.47	)	$	(0.34	)	$	(0.04	)	$	0.31		$	(1.58	)
	Net income (loss) per diluted share		$	(0.47	)	$	(0.34	)	$	(0.04	)	$	0.31		$	(1.58	)
	Weighted average basic shares outstanding			7,712			7,800			7,800			7,800			7,800
	Weighted average diluted shares outstanding			7,712			7,800			7,800			7,865			7,800
Other Data:(1)
EBITDA(2)			$	11,921		$	15,402		$	18,547		$	16,761		$	(1,158	)
Net cash provided by operations				6,474			8,494			9,653			3,347			7,087
Net cash provided (used) by investing activities				(27,576	)		(10,040	)		4,314			9,054			(5,662	)
Net cash provided (used) by financing activities				23,673			(2,181	)		(10,284	)		(12,334	)		(2,337	)
Capital expenditures				25,841			12,914			3,980			8,267			5,750

	As of September 30,
	1998		1999		2000		2001		2002
Balance Sheet Data:(1)
Total assets	$	114,627	$	107,700	$	94,703	$	80,218	$	64,300
Total long-term obligations		50,333		48,050		37,735		23,256		20,826
Stockholders' equity		44,704		43,235		41,748		45,327		33,258

(1): The results of operations for the fiscal year ended September 30, 1998 include charges totaling $4.6 million for the write-down of the assets of the Company's architectural lighting division to their net realizable value and employee terminations costs associated with restructuring the Company's operations. The results of operations for the fiscal year ended September 30, 1999 include charges totaling $0.6 million for the employee terminations costs associated with restructuring the Company's operations and a gain of $0.5 million on the sale of a land lease. The results of operations for the fiscal year ended September 30, 2000 include charges totaling $3.9 million for the write-down of the assets of the Company's continental European operations to their net realizable value and gains of $4.0 million on the settlement of a patent infringement lawsuit and the sale of a building lease. The results of operations for the fiscal year ended September 30, 2001 include a gain of $7.1 million related to the sale of the Company's concert sound reinforcement business. The results of operations for the fiscal year ended September 30, 2002 include charges of $4.9 million for a reserve on excess, slow moving and obsolete inventory, $1.3 million for the write-off of receivables related to premiums paid under split-dollar life insurance policies and $3.5 million for the write-down of the assets of the Company's manufacturing and sales division to their net realizable value.
(2): EBITDA is calculated herein as income before income taxes, extraordinary loss and cumulative effect of change in accounting principle plus depreciation, amortization and net interest expense. The Company believes that EBITDA serves as an important financial analysis tool for measuring and comparing financial information such as liquidity, operating performance and leverage. EBITDA should not be considered an alternative to net income or other cash flow measures determined under accounting principals generally accepted in the United States of America as an indicator of the Company's performance or liquidity. EBITDA as disclosed herein may not be comparable to EBITDA as disclosed by other companies.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Critical Accounting Policies and Estimates

Principles of Consolidation and Use of Estimates—The consolidated financial statements of Vari-Lite International, Inc. include the accounts of its wholly-owned subsidiaries which consist of operating and holding companies. The operating companies consist of VLPS Lighting Services, Inc., Vari-Lite Asia, Inc. and Vari-Lite Europe, Ltd. All material intercompany transactions and balances have been eliminated.

On June 30, 2000, the Company sold its entire interest in Vari-Lite Production Services, S.A. ("VLPS Madrid") and the VARI*LITE equipment used in the operations for a loss of $0.7 million. October 26, 2000, the Company sold its continental European operations, which resulted in a pre-tax charge of $3.2 million, including the write-off of all the associated goodwill. On November 17, 2000, the Company sold all of the assets of Showco, Inc. ("Showco") to Clearsho, Inc. ("Clearsho"), a wholly owned subsidiary of Showco. Showco sold 100% of its interest in Clearsho to Clair Acquisition Corporation for $12.7 million. The net book value of the assets sold was $4.9 million and the company incurred transaction costs of $0.7 million for total costs of $5.6 million which resulted in a net pre-tax gain of $7.1 million. Showco was dissolved in September 2002. In April 2001, the Company closed IGNITION! Creative Services, Inc. ("Ignition"). Ignition was dissolved in September 2002. Ignition provided design and production management services to corporations and business associations for conventions, business meetings and special events.

On November 18, 2002, the Company sold substantially all of the assets of its manufacturing and sales division to Genlyte. This transaction resulted in a pre-tax loss of $4.5 million, of which $3.5 million related to an impairment of the value of the assets sold and was accrued as of September 30, 2002. The remaining $1.0 million, which represents severance paid to terminated employees, will be recorded in the first quarter of fiscal 2003. The sale included all of the sales, marketing, manufacturing and engineering operations associated with this division as well as the VARI*LITE® trademark and all patents and other intellectual property associated with VARI*LITE products. As part of this transaction, the Company entered into a supply agreement, pursuant to which Genlyte agreed to manufacture and sell to the Company, for a minimum of ten years, all VARI*LITE equipment and parts to support existing and future VARI*LITE products and appointed the Company as the exclusive distributor of VARI*LITE products in Europe and Japan and a non-exclusive dealer in North America.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from these estimates.

Inventory—Inventories are stated at the lower of cost (first-in, first-out method) or market. Cost includes certain indirect purchasing and handling costs incurred to acquire and manage inventory and certain overhead costs. Market for raw materials is based on replacement cost and for other inventory classifications on net realizable value. Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value.

Equipment and Other Property—Equipment and other property are stated at cost or, in the case of capitalized leases, at the lower of the present value of future lease payments or the fair value of the equipment. Depreciation and amortization are provided on the straight-line method over the estimated useful lives ranging from three to ten years of the various classes of equipment and other property.

Revenue Recognition—Revenues related to equipment rental and services are recognized using the straight-line method over the term of the rental agreements. Revenues related to the sale of products are recognized when title passes.

New Accounting Pronouncements—See Note B of the "Notes to Consolidated Financial Statements."

Results of Operations

Rental revenues were $76.4 million, $55.6 million and $44.1 million or 81.5%, 76.1% and 66.7% of total revenues during fiscal 2000, 2001 and 2002, respectively. The majority of the Company's rental revenues are generated from the rental of VARI*LITE automated lighting systems, with the remainder from the rental of conventional lighting equipment and related equipment, the provision of services and, through November 2000, the rental of concert sound systems. The Company's rental revenues are recorded as earned over the term of each lease. Rental costs consist of direct costs of maintaining, supporting and delivering the rental equipment and the depreciation costs of the capital expenditures incurred to manufacture or purchase the rental equipment. The Company depreciates rental equipment over periods of five to ten years.

The Company generates sales revenue from the sale of VARI*LITE automated lighting equipment as well as, through April 2001, providing design and production management services to corporations and business associations for conventions, business meetings and special events.

The following table reflects the percentages of total revenues by market:

		Years Ended September 30,
		2000		2001		2002
Concert Touring		26.9	%	22.1	%	17.0	%
Theatre		9.4		9.8		10.8
Television and Film		21.0		21.0		23.3
Corporate Events		25.5		21.0		13.6
Product Sales		13.4		20.0		33.3
Other		3.8		6.1		2.0

	Total Revenue	100.0	%	100.0	%	100.0	%

Although the Company expects revenues earned from concert touring (primarily rental revenues) to continue to represent a significant percentage of the Company's total revenues, from fiscal 2000 to fiscal 2002 concert touring revenues have decreased as a percentage of the Company's total revenues due to an increase in rental revenues generated from the Company's other customer markets, an increase in revenues from product sales and the sale in November 2000 of the Company's concert sound reinforcement business. The Company has experienced fluctuations in its concert touring revenues because of the unpredictable nature of the timing and duration of such tours and expects such fluctuations to continue in the future. The Company anticipates revenue from the theater market will continue to fluctuate with the development of new theatrical productions. Revenues earned from the television and film market have increased from fiscal 2000 to fiscal 2002 as a result of the expanding worldwide television market and the need to meet additional programming requirements. In addition, the Company has experienced a decrease in revenues from the corporate events market as a result of difficult market conditions caused by the effects of the September 11, 2001 attacks and an overall decrease in business in fiscal 2002 as companies in general have reduced marketing budgets and decreased the number and scope of company meetings and trade shows. The increase in product sales from fiscal 2000 to fiscal 2002 is the result of the Company's strategic decision to begin selling VARI*LITE products in fiscal 2000. Due to the Company's sale of the assets of its manufacturing and sales division to Genlyte, the Company anticipates that product sales will decrease as a percentage of overall sales in future years.

The following table reflects the Company's revenues as a percentage of total revenues (see Note N of the "Notes to Consolidated Financial Statements") by geographic region:

		2000		2001		2002
North America		60.9	%	59.4	%	58.0	%
Europe		28.0		25.7		23.5
Asia		11.1		14.9		18.5

	Total Revenue	100.0	%	100.0	%	100.0	%

The majority of European and Asian revenues are denominated in British pounds sterling and Japanese yen, respectively. The Company has offices in London and Tokyo. Prior to their sale in July and October 2000, the Company also had offices in Brussels, Paris, Madrid, Stockholm and Amsterdam. The increase in Asian revenues from fiscal 2000 to fiscal 2002 is primarily the result of increased revenues associated with product sales in Asia. Due to the Company's sale of the assets of its manufacturing and sales division to Genlyte, the Company anticipates that Asian revenues as a percentage of total revenues will decrease as Asian sales (other than those in Japan) will be made directly by Genlyte. Fluctuations in foreign currencies have impacted, and will continue to impact, the Company's consolidated results of operations due to the translation of foreign currencies into U.S. dollars. The Company has typically maintained foreign currency borrowings to act as an economic hedge against fluctuations in British pounds sterling and Japanese yen. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

The following table sets forth the percentages of total revenues (or as percentages of a component of total revenues as shown) represented by certain consolidated income statement data and other data for the indicated periods:

			Years Ended September 30,
			2000		2001		2002
Income Statement Data:
	Rental revenues		81.5	%	76.1	%	66.7	%
	Product sales and service revenues		18.5		23.9		33.3

		Total revenues	100.0		100.0		100.0
	Rental costs		38.4		34.9		33.3
	Product sales and service costs		11.6		15.8		22.6
	Reserve for excess, slow moving and obsolete inventory		—		—		7.4

	Gross margin		50.0		49.3		36.7
	Selling, general and administrative expense		39.6		43.2		41.0
	Research and development expense		5.5		7.2		6.5
	Impairment of assets		4.1		—		5.3
	Gains on lawsuit settlement and sale of lease		(4.2	)	—		—
	Gain on sale of concert sound reinforcement business		—		(9.7	)	—
	Write-off of receivables related to premiums paid under split-dollar life insurance		—		—		2.0

	Operating income		5.0		8.6		(18.1	)
	Interest expense (net)		5.5		3.1		2.4

	Income (loss) before income taxes		(0.5	)	5.5		(20.5	)
	Income tax expense (benefit)		(0.2	)	2.1		(1.9	)

	Net income (loss)		(0.3	)%	3.4	%	(18.6	)%

Other Data:
	Rental revenues		100.0	%	100.0	%	100.0	%
	Rental costs		47.1		45.9		50.0

	Rental gross margin		52.9	%	54.1	%	50.0	%

	Product sales and service revenues		100.0	%	100.0	%	100.0	%
	Product sales and service costs		62.8		65.9		67.7

	Product sales and service gross margin		37.2	%	34.1	%	32.3	%

	EBITDA(1)		19.8	%	22.9	%	(1.8	)%

(1): EBITDA is calculated herein as income before income taxes, extraordinary loss and cumulative effect of change in accounting principle plus depreciation, amortization and net interest expense. The Company believes that EBITDA serves as an important financial analysis tool for measuring and comparing financial information such as liquidity, operating performance and leverage. EBITDA should not be considered an alternative to net income or other cash flow measures determined under accounting principals generally accepted in the United States of America as an indicator of the Company's performance or liquidity. EBITDA as disclosed herein may not be comparable to EBITDA as disclosed by other companies.

Fiscal Year Ended September 30, 2002 Compared to Fiscal Year Ended September 30, 2001

Revenues. Total revenues decreased 9.6%, or $7.0 million, to $66.1 million in fiscal 2002, compared to $73.1 million in fiscal 2001. The revenue decrease was attributable primarily to the factors set forth below.

Rental Revenues. Rental revenues decreased 20.7%, or $11.5 million, to $44.1 million in fiscal 2002, compared to $55.6 million in fiscal 2001. This decrease was due to the weak economy combined with the continuing effects of the September 11, 2001 attacks, as well as the sale of the Company's concert sound reinforcement business in November 2000, which accounted for $1.6 million in revenues in fiscal 2001.

Product Sales and Services Revenues. Product sales and services revenues increased 25.9%, or $4.5 million, to $22.0 million in fiscal 2002, compared to $17.5 million in fiscal 2001. This increase was due to a $8.2 million increase in sales of VARI*LITE automated lighting equipment which the Company commenced selling in fiscal 2000. Despite the weak economy and the continuing effects of the September 11, 2001 attacks, the Company's product sales business continued to grow due to increases in the number of products available for sale, good demand for the products internationally and increased sales and marketing efforts. This increase was partially offset by a $3.7 million decrease in revenues due to the closing of the Company's corporate meeting and special events management business in April 2001.

Rental Costs. Rental costs decreased 13.7%, or $3.5 million, to $22.0 million in fiscal 2002, compared to $25.5 million in fiscal 2001. This decrease was due to the reduction in variable costs relating to reduced revenues as a result of a weak economy, continuing effects of the September 11, 2001, attacks and the sale of the Company's concert sound reinforcement business in November 2000. Rental costs as a percentage of rental revenues increased to 50.0% in fiscal 2002, from 45.9% in fiscal 2001. This increase was primarily due to depreciation expense representing a higher percentage of revenues during fiscal 2002 as a result of decreased revenues.

Product Sales and Services Costs. Product sales and services costs increased 29.3%, or $3.4 million, to $14.9 million in fiscal 2002, compared to $11.5 million in fiscal 2001. This increase was due to a $5.9 million increase in cost of sales of VARI*LITE automated lighting equipment offset by a $2.5 million decrease in product sales and services cost associated with the closing of the Company's corporate meeting and special events management business in April 2001. Product sales and services cost as a percentage of product sales and services revenues increased to 67.7% in fiscal 2002, from 65.9% in fiscal 2001.

Reserve for Excess, Slow Moving and Obsolete Inventory. In fiscal 2002, an additional reserve of $4.9 million was made for excess, slow moving and obsolete inventory primarily associated with repair and maintenance parts to support the Company's Series 200 and Series 300 automated lighting products, which are no longer produced by the Company but continue to be rented by the Company. The Company considered this reserve necessary as a result of the decreased likelihood that these components would ultimately be consumed due to the expected decreased rental revenues related to these aging lighting products.

Selling, General and Administrative Expense. Selling, general and administrative expense decreased 14.0%, or $4.5 million, to $27.1 million in fiscal 2002, compared to $31.6 million in fiscal 2001. This decrease was primarily due to the sale of the Company's concert sound reinforcement business in November 2000 and the closing of the Company's corporate meeting and special events management business in April 2001, as well as expense reduction efforts undertaken in the first and third quarters of fiscal 2002. This expense as a percentage of total revenues decreased to 41.0% in fiscal 2002, from 43.2% in fiscal 2001.

Research and Development Expense. Research and development expense decreased 18.5%, or $1.0 million, to $4.3 million in fiscal 2002, compared to $5.3 million in fiscal 2001, and as a percentage of

total revenues decreased to 6.5% in fiscal 2002, from 7.2% in fiscal 2001. This decrease was primarily due to expense reduction efforts undertaken in the first and third quarters of fiscal 2002.

Impairment of Assets. Although not completed until November 2002, during fiscal 2002, the Company made a strategic decision to dispose of its manufacturing and sales division. As a result of this decision, the manufacturing and sales assets were written down to their net realizable value, resulting in a pre-tax charge of $3.5 million during fiscal 2002.

Write-off of Receivables Related to Premiums Paid under Split-Dollar Life Insurance Policies. On June 30, 2002, the Company cancelled all consulting and deferred compensation agreements between the Company and certain directors of the Company, except one consulting agreement that was amended to terminate the Company's obligation to pay consulting fees. In addition, the Company assigned all of its rights and obligations under split-dollar agreements with certain directors, including its obligation to pay future premiums on life insurance policies and its interest in the collateral assignment of death benefits under those policies, to the respective directors or their designees. Under the collateral assignment, the Company was entitled to recoup the cumulative premiums paid by the Company from the cash surrender value or death benefits under the policies. As a result of the assignment, the Company expensed receivables related to premiums paid under those policies of $1.3 million during fiscal 2002. The cancellation of the deferred compensation and consulting agreements combined with reductions in directors fees and base compensation to the Company's CEO will result in annualized cash savings of $0.6 million. Additionally, the assignment of the Company's obligations under the split-dollar life insurance agreements will result in cash savings of $0.7 million.

Interest Expense. Interest expense decreased 29.6%, or $0.7 million, to $1.6 million in fiscal 2002, compared to $2.3 million in fiscal 2001, as a result of reduced borrowings and lower interest rates in fiscal 2002, as well as interest income in fiscal 2002 of $0.1 million from an income tax refund.

Income Taxes. The effective tax rates in fiscal 2002 and 2001 were 9.4% and 38.8%, respectively. The decrease in effective tax rates in fiscal 2002 was due to a valuation allowance of $1.7 million established against the Company's deferred tax asset. The Company considered this reserve necessary due to the uncertainty of the Company's ability to ultimately utilize the benefit of the deferred tax asset as a result of past operating losses.

Fiscal Year Ended September 30, 2001 Compared to Fiscal Year Ended September 30, 2000

Revenues. Total revenues decreased 22.0%, or $20.6 million, to $73.1 million in fiscal 2001, compared to $93.7 million in fiscal 2000. The revenue decrease was attributable primarily to the factors set forth below.

Rental Revenues. Rental revenues decreased 27.2%, or $20.8 million, to $55.6 million in fiscal 2001, compared to $76.4 million in fiscal 2000. This decrease was primarily due to the sale of the Company's continental European rental operations in October 2000 and concert sound reinforcement business in November 2000 which collectively accounted for $1.6 million of rental revenues in fiscal 2001 compared to $22.4 million in fiscal 2000.

Product Sales and Services Revenues. Although revenues generated from product sales and services increased in 2001 due, in part, to the sales of new and used VARI*LITE automated lighting equipment, the increase was partially offset by the closing of the Company's corporate meeting and special events management business in April 2001 which had revenues of $6.7 million in fiscal 2000 and $3.7 million in fiscal 2001. This resulted in product sales and services revenues in fiscal 2001 being virtually unchanged from fiscal 2000.

Rental Costs. Rental costs decreased 29.1%, or $10.5 million, to $25.5 million in fiscal 2001, compared to $36.0 million in fiscal 2000. Rental costs as a percentage of rental revenues decreased to

45.9% in fiscal 2001, from 47.1% in fiscal 2000. The decrease in rental costs as a percentage of total rental revenues was primarily due to the sale of the Company's continental European operations in October 2000 which had higher costs as a percent of respective revenues than the remainder of the Company's rental business.

Product Sales and Services Costs. Product sales and services costs increased 5.9%, or $0.6 million, to $11.5 million in fiscal 2001, compared to $10.9 million in fiscal 2000. Product sales and services costs as a percentage of product sales and services revenues increased to 65.9% in fiscal 2001, from 62.8% in fiscal 2000. The increase in product sales and services costs as a percentage of the related revenues was primarily due to the higher costs associated with the manufacture and sale of new automated lighting equipment sold in fiscal 2001 as compared to the lower costs associated with the sale of used automated equipment in fiscal 2000.

Selling, General and Administrative Expense. Selling, general and administrative expense decreased 15.0%, or $5.5 million, to $31.6 million in fiscal 2001, compared to $37.1 million in fiscal 2000. This decrease is primarily due to the sale of the Company's continental European rental operations in October 2000 and concert sound reinforcement business in November 2000 and the closing of the Company's Hong Kong rental operations in January 2001 and corporate meeting and special events management business in April 2001. This expense as a percentage of total revenues increased to 43.2% in fiscal 2001 from 39.6% in fiscal 2000.

Research and Development Expense. Research and development expense increased 2.1%, or $0.1 million, to $5.3 million in fiscal 2001, compared to $5.2 million in fiscal 2000. This expense as a percentage of total revenues increased to 7.2% in fiscal 2001, from 5.5% in fiscal 2000.

Impairment of Assets. In June and October 2000, the Company implemented a strategic decision to sell a portion of its European operations. As a result, these European assets were written down to their net realizable value, resulting in a pre-tax charge of $3.9 million for fiscal 2000.

Gains on Lawsuit Settlement and Sale of Lease. In August 2000, the Company settled a patent infringement lawsuit for $5.0 million which resulted in a net gain of $1.7 million and also negotiated the sale of a building lease in New York which resulted in a net gain of $2.3 million.

Interest Expense. Interest expense decreased 55.7%, or $2.9 million, to $2.3 million in fiscal 2001, compared to $5.2 million in fiscal 2000. This decrease was due to a lower debt balance and a lower interest rate in fiscal 2001.

Income Taxes. The effective tax rate in fiscal 2001 and 2000 were 38.8% and 39.5%, respectively.

Quarterly Fluctuations and Seasonality

The following table sets forth certain quarterly income statement data and EBITDA for each of the Company's last three fiscal years, which were derived from unaudited financial statements of the Company. In the opinion of the Company's management, this income statement data contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation thereof.

	Quarters Ended
	December 31			March 31			June 30			September 30			Fiscal Year
	(In thousands)
*Fiscal 2000*
Total Revenues	$	27,679		$	20,719		$	21,509		$	23,781		$	93,688
Operating income (loss)		3,362			(791	)		549			1,586			4,706
*Fiscal 2001*
Total Revenues	$	20,378		$	18,337		$	15,584		$	18,764		$	73,063
Operating income (loss)		8,229			115			(1,800	)		(244	)		6,300
*Fiscal 2002*
Total Revenues	$	16,775		$	14,612		$	15,585		$	19,103		$	66,075
Operating income (loss)		(385	)		(1,093	)		(7,775	)		(2,745	)		(11,998	)
*Other Data*
2000 EBITDA	$	6,938		$	2,714		$	4,004		$	4,891		$	18,547
2001 EBITDA		10,900			2,664			803			2,394			16,761
2002 EBITDA		2,219			1,523			(5,137	)		237			(1,158	)

EBITDA is calculated herein as income before income taxes, extraordinary loss and cumulative effect of change in accounting principle plus depreciation, amortization and net interest expense. The Company believes that EBITDA serves as an important financial analysis tool for measuring and comparing financial information such as liquidity, operating performance and leverage. EBITDA should not be considered an alternative to net income or other cash flow measures determined under accounting principles generally accepted in the United States of America as an indicator of the Company's performance or liquidity. EBITDA as disclosed herein may not be comparable to EBITDA as disclosed by other companies.

The Company has experienced and is expected to continue to experience fluctuations in quarterly operating results, both between different quarters within the same fiscal year and with respect to the same quarter between different fiscal years. These fluctuations arise from several factors, including the timing and dollar value of product sales with customers, the dependence of the Company on concert tours, which are unpredictable in timing and duration, the introduction of new products and general economic conditions both domestically and internationally. Because of the possibilities of significant fluctuations, results for any quarter may not be indicative of results that may be achieved in a full year. EBITDA and operating income for the quarter ended June 30, 2000, includes charges totaling $0.7 million for the impairment of assets used in the Company's Madrid, Spain operations which were sold. EBITDA and operating income for the quarter ended September 30, 2000, includes total gains on the settlement of the patent infringement lawsuit and the sale of a building lease in New York of $4.0 million partially offset by charges totaling $3.2 million for the impairment of assets used in the Company's continental European operations which were sold. EBITDA and operating income for the quarter ended December 31, 2000, includes a $7.1 million gain on the sale of the Company's sound reinforcement business. EBITDA and operating loss for the quarter ended June 30, 2002, includes a $4.9 million charge to increase the reserve for excess, slow moving and obsolete inventory and a $1.3 million write-off of receivables related to premiums paid under split-dollar life insurance policies. EBITDA and operating loss for the quarter ended September 30, 2002 includes charges totaling $3.5 million for the impairment of the Company's assets associated with its manufacturing and sales division, which were sold in November 2002.

Liquidity and Capital Resources

Historically, the Company has financed its operations and capital expenditures with cash flow from operations, bank borrowings and advances from customers. The Company's operating activities generated

cash flow of approximately $9.7 million, $3.3 million and $7.1 million during fiscal 2000, 2001 and 2002, respectively.

On December 19, 1997, the Company entered into a $50.0 million multicurrency revolving credit facility (the "Old Credit Facility"). On December 29, 2000, VLPS Lighting Services, Inc. ("VLPS") entered into a new credit facility which intially included a $12.0 million Term Loan, a $5.0 million Revolver and a $3.0 million Capital Expenditure Loan. This facility with all subsequent amendments is herein referred to as the "New Credit Facility." As of September 30, 2002, there was $11.5 million outstanding under the Term Loan and Capital Expenditure Loan and $1.0 million outstanding under the Revolver. On November 18, 2002, the Company used $5.0 million of the proceeds from the sale of the assets of its manufacturing and sales division to Genlyte to repay a portion of the borrowings outstanding under the Term Loan. The December 31, 2002, amendment to the New Credit Facility resulted in the repayment in full of the Term Loan and Capital Expenditure Loan and an increase in the Revolver commitment to $7.5 million, of which $1.6 million was outstanding immediately after this amendment. Due to the repayment of the Term Loan and Capital Expenditure Loan, the Company has classified $10.9 million as current as of September 30, 2002. Borrowings under the Revolver are subject to availability under a borrowing base of eligible lighting rental assets, inventory and accounts receivable (as defined in the New Credit Facility). Prior to June 30, 2002, all outstanding borrowings under the New Credit Facility accrued interest at the lender's base rate or LIBOR, plus a rate margin of 0.75% and 2.50%, respectively. From June 30, 2002 through December 30, 2002, all outstanding borrowings under the New Credit Facility accrued interest at the lender's base rate or LIBOR, plus a rate margin ranging from 1.25% to 1.75% or 3.00% to 3.50%, respectively, based upon the Company's ratio of Adjusted Funded Debt to EBITDA (as defined in the New Credit Facility). Beginning on December 31, 2002, all outstanding borrowings under the New Credit Facility accrue interest at the lender's base rate or LIBOR, plus a rate margin of 0.50% and 2.25%, respectively. The New Credit Facility is guaranteed by the Company and is secured by all of the stock and substantially all of the assets of VLPS, and a pledge of 65% of the outstanding capital stock of the Company's foreign subsidiaries. A commitment fee of 0.25% is charged on the average daily unused portion of the New Credit Facility. The New Credit Facility contains compliance covenants, including requirements that the Company achieve certain financial ratios. In addition, the New Credit Facility places limitations on annual capital expenditures and on the ability to incur additional indebtedness, make certain loans or investments, sell assets, pay dividends or reacquire the Company's stock. The New Credit Facility terminates on December 31, 2005. Upon termination of the New Credit Facility, the entire outstanding indebtedness thereunder becomes due and payable in full.

Beginning in fiscal 2001, the Company's London subsidiary began financing its capital expenditures with British pound sterling loans from a U. K. bank (collectively, the "London Bank Loans") that amortize over 48 to 60 months and accrue interest at various rates ranging from 7.60% to 9.10%. Proceeds received under this type of financing were approximately 4.5 million British pounds sterling (USD 6.5 million) and 0.8 million British pounds sterling (USD 1.1 million) for fiscal 2001 and 2002, respectively. The London Bank Loans are secured by all of the assets of the Company's London operations and include certain financial covenants, limitations on capital expenditures and intercompany payments and the guarantee of the Company.

The Company has typically hedged a portion of its currency fluctuation risk by borrowing foreign currencies. Cash generated from the Company's European and Asian operations is typically denominated in the local currencies of these foreign offices and is used to pay expenses incurred in those currencies and service the foreign currency borrowings. The London Bank Loans are serviced by cash generated from the Company's London operations and serves as an economic hedge for net cash generated from these operations. This would not qualify for hedge accounting under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." In the future, the Company may use other financial instruments to hedge its foreign currency fluctuation risk.

The following table sets forth the Company's contractual obligations as of September 30, 2002:

	Long-term Obligations		Operating Leases		Total
Year one	$	14,014	$	2,537	$	16,551
Year two		4,341		2,166		6,507
Year three		1,869		1,908		3,777
Year four		392		1,748		2,140
Year five		210		1,231		1,441
Thereafter		—		3,429		3,429

Total contractual obligations	$	20,826	$	13,019	$	33,845

See Notes E and H of the "Notes to Consolidated Financial Statements" for further discussion.

The Company has borrowed money to purchase computer equipment, office furniture and fixtures and conventional lighting equipment. These loans typically amortize over three years and bear interest at various rates ranging from 1.6% to 9.27%. Proceeds received under this type of financing were approximately $2.9 million, $0.2 million and $2.3 million for fiscal 2000, 2001 and 2002, respectively, and borrowings outstanding at September 30, 2000, 2001 and 2002 were approximately $3.8 million, $1.2 million and $2.7 million, respectively. In addition, in fiscal 2000, the Company borrowed an aggregate of $1.9 million through various capitalized leases which bear interest at rates of 10.35%. At September 30, 2001 and 2002, respectively, the Company's equipment borrowings outstanding (including capitalized leases) were $0.8 million and $0.1 million, respectively.

The Company uses customer advances to fund short-term working capital and immediate capital expenditure needs for specific contracts. As of September 30, 2000, 2001 and 2002, the Company had unearned revenue related to customer advances of approximately $3.3 million, $1.2 million and $1.6 million, respectively.

The Company's business requires on-going capital expenditures. Capital expenditures for fiscal 2000, 2001 and 2002 were approximately $4.0 million, $8.3 million and $5.8 million, respectively, of which approximately $2.6 million, $7.3 million and $5.3 million were for rental equipment inventories. The majority of the Company's revenues are generated through equipment rentals and, as such, the Company must maintain a significant amount of rental equipment to meet customer demands.

Inventory included in current assets consists primarily of raw materials, finished goods and spare parts inventory for the Company's automated lighting equipment. Raw materials represented 90%, 85% and 90% of total inventory at September 30, 2000, 2001 and 2002, respectively.

The Company had a working capital deficit of approximately $2.1 million and $0.4 million at September 30, 2000 and 2002 and a working capital surplus of $15.2 million at September 30, 2001. The Company has historically maintained working capital deficits since the bulk of its revenue generating assets are classified as long-term assets rather than current assets. The working capital surplus in 2001 was primarily the result of the refinancing of the Company's senior bank debt which resulted in more of the Company's debt being classified as long-term.

The Company did not pay dividends in fiscal 2000, 2001 and 2002. The Company may in the future use earnings or available financing to pay cash dividends or repurchase Company shares. The Company may spend between $0.5 million and $2.0 million over the next 12 months to repurchase shares of the Company's stock through open market purchases and/or private transactions.

factors, including the demand for the Company's products and services, competition, general and economic conditions and other factors beyond the Company's control, there can be no assurance that sufficient capital resources will be available to fund the expected expansion of its business beyond such period.

Inflation

The Company has generally been able to offset cost increases with increases in the rental rates charged for its products and services. Accordingly, the Company does not believe that inflation has had a material effect on its results of operations to date. However, there can be no assurance that the Company's business will not be adversely affected by inflation in the future.

Disclosure Regarding Forward-Looking Statements

This Report includes "forward-looking statements" as that phrase is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). When used in this Report, the words "anticipate," "believe," "estimate," "expect," "will," "could," "may" and similar expressions, as they relate to management or the Company, are intended to identify forward-looking statements. Such statements reflect the current views of management with respect to future events and are subject to certain risks, uncertainties and assumptions, including without limitation the following as they relate to the Company: fluctuations in operating results and seasonality; technological changes; dependence on the entertainment industry; competition; dependence on management; foreign exchange risk; international trade risk; and dependence on key suppliers. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to market risk primarily due to fluctuations in interest rates and foreign currency.

As of September 30, 2002, with all other variables held constant, a hypothetical one percentage point increase in interest rates would result in an increase in interest expense of approximately $0.1 million.

The Company has typically hedged a portion of its currency fluctuation risk by borrowing foreign currencies. Cash generated from the Company's European and Asian operations is typically denominated in the local currencies of these foreign offices and is used to pay expenses incurred in those currencies and service the foreign currency borrowings. The London Bank Loans are serviced by cash generated from the Company's London operations and serve as an economic hedge for net cash generated from these operations. Approximately $5.8 million was outstanding under the London Bank Loans as of September 30, 2002. These activities do not qualify for hedge accounting under Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." In the future, the Company may use other financial instruments to hedge its foreign currency fluctuation risk.

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements of the Company and its subsidiaries which are required by this Item 8 are listed in Part IV, Item 14(a) of this Report. Such consolidated financial statements are included herein beginning on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable.

PART III

Certain information required by Part III is omitted from this Report on the basis that the Company will file a definitive Proxy statement pursuant to Regulation 14A for its annual meeting of stockholders to be held on March 7, 2003 (the "Proxy Statement") not later than 120 days after the end of the fiscal year covered by this Report, and certain information included therein is incorporated herein by reference. Only those sections of the Proxy Statement which specifically address the items set forth herein are incorporated by reference. Such incorporation does not include the Report of the Compensation Committee and Omnibus Committee on Executive Compensation, the Report of the Audit Committee or the Stock Performance Graph included in the Proxy Statement.

Item 10. Directors and Executive Officers of the Registrant

The information concerning the Company's directors and executive officers required by this item is incorporated by reference to the sections entitled "Election of Directors" and "Management—Executive Officers" in the Proxy Statement.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference to the section entitled "Executive Compensation" in the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated by reference to the section entitled "Outstanding Capital Stock" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement.

Item 13. Certain Relationships and Related Transactions

The information required by this Item is incorporated by reference to the section entitled "Transactions with Directors, Officers and Affiliates" in the Proxy Statement.

PART IV

Item 14. Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act) as of a date (the "Evaluation Date"), which was within 90 days of this Report, have concluded in their judgment that, as of the Evaluation Date, the Company's disclosure controls and procedures were adequate and designed to ensure that material information relating to the Company and its subsidiaries would be made known to them.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

There were no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the Evaluation Date.

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a): Financial Statements

The Financial Statements listed below are filed as part of this Annual Report on Form 10-K.

(b): Financial Statement Schedule

Schedule		Description		Page
II		Valuation and Qualifying Accounts		S-1

The auditors' report with respect to the above-listed financial statement schedule appears on page F-2 of this Report. All other financial statements and schedules not listed are omitted either because they are not applicable or not required, or the required information is included in the consolidated financial statements.

(c): Reports on Form 8-K

No reports on Form 8-K were filed during the last quarter of the fiscal year ended September 30, 2002. A Form 8-K was filed on December 3, 2002 reporting on the sale of the Company's manufacturing and sales division.

(d): Exhibits

Exhibit No.				Description
3.1		—		Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1 No. 333-33559)
3.2		—		By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1 No. 333-33559)

3.3	—	Certificate of Desigation of Rights, Preferences and Privileges of Series A Junior Participating Preferred Stock, Dated September 22, 1999 (incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
3.4	—	Amendment to the By-Laws of the Company dated as of February 15, 2002. (incorporated by reference to Exhibit 3.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002)
4.1	—	Form of certificate representing shares of the Company's Common Stock (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1 No. 333-33559)
4.2	—	Warrant Agreement, dated as of July 31, 1996, among the Company, Brown Brothers Harriman & Co., NBD Bank, SunTrust Bank, Atlanta (formerly known as Trust Company Bank) and Comerica Bank Texas (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-1 No. 333-33559)
4.3	—	Supplement, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company and Chase Bank of Texas, N.A. (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
4.4	—	Amendment No. 1, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company and Brown Brothers Harriman & Co. (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
4.5	—	Amendment No. 1, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company and Suntrust Bank, Atlanta (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
4.6	—	Amendment No. 1, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company and Comerica Bank-Texas (incorporated by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
4.7	—	Amendment No. 1, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company and The First National Bank of Chicago (as successor to NBD Bank) (incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
4.8	—	Supplement, dated as of August 31, 1999, to the Warrant Agreement, dated as of July 31, 1996, between the Company, Brown Brothers Harriman & Co., the First National Bank of Chicago as successor to NBD Bank, Suntrust Bank, Comerica Bank-Texas, and Chase Bank of Texas, N.A. (CBT) (incorporated by reference to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
10.1	—	Employment Agreement, dated as of July 1, 1995, between the Company and H. R. Brutsché III (incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.2	—	Amendment No. 1, dated as of August 11, 1997, to the Employment Agreement, dated as of July 1, 1995, between the Company and H. R. Brutsché III (incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.3	—	Consulting Agreement, dated as of July 1, 1995, between the Company and J. Anthony Smith (incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-1 No. 333-33559)

10.4	—	Consulting Agreement, dated as of July 1, 1995, between the Company and John D. Maxson (incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.5	—	Amendment No. 1, dated as of August 11, 1997, to the Consulting Agreement, dated as of July 1, 1995, between the Company and John D. Maxson (incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.6	—	Consulting Agreement, dated as of July 1, 1995, between the Company and James H. Clark, Jr. (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.7	—	Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and H. R. Brutsché III (incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.8	—	Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and John D. Maxson (incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.9	—	Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and James H. Clark, Jr. (incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.10	—	Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and J. Anthony Smith (incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.11	—	Compensation Continuation Agreement, dated as of March 31, 1994, among the Company, Vari-Lite, Inc., Showco, Inc. and H. R. Brutsché III (incorporated by reference to Exhibit 10.11 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.12	—	Compensation Continuation Agreement, dated as of March 31, 1994, among the Company, Vari-Lite, Inc., Showco, Inc. and John D. Maxson (incorporated by reference to Exhibit 10.12 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.13	—	Compensation Continuation Agreement, dated as of March 31, 1994, among the Company, Vari-Lite, Inc., Showco, Inc. and James H. Clark, Jr. (incorporated by reference to Exhibit 10.13 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.14	—	Statement and Terms of Employment, dated as of April 1, 1994, between Vari-Lite Europe Ltd. and Brian L. Croft (incorporated by reference to Exhibit 10.14 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.15	—	Split-Dollar Agreement, dated as of October 12, 1995, among the Company, Brown Brothers Harriman Trust Company of Texas, trustee of the H. R. Brutsché III Insurance Trust, and H. R. Brutsché III (incorporated by reference to Exhibit 10.15 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.16	—	Amended and Restated Split-Dollar Agreement, dated as of October 12, 1995, among the Company, Brown Brothers Harriman Trust Company of Texas, trustee of the H. R. Brutsché III Insurance Trust, and H. R. Brutsché III (incorporated by reference to Exhibit 10.16 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.17	—	Amended and Restated Split-Dollar Agreement, dated as of October 12, 1997, among the Company, Brown Brothers Harriman Trust Company of Texas, trustee of the John D. Maxson 1995 Irrevocable Trust, and John D. Maxson (incorporated by reference to Exhibit 10.17 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.18	—	Split-Dollar Life Insurance Agreement, dated as of October 12, 1995, among the Company, James Howard Cullum Clark and James H. Clark, Jr. (incorporated by reference to Exhibit 10.18 to the Company's Registration Statement on Form S-1 No. 333-33559)

10.19	—	Amended and Restated Split-Dollar Agreement, dated as of October 12, 1995, between the Company, James Howard Cullum Clark and James H. Clark, Jr. (incorporated by reference to Exhibit 10.19 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.20	—	Vari-Lite International, Inc. 1997 Omnibus Plan (including forms of Incentive Stock Option Agreement and Nonqualified Stock Option Agreement) (incorporated by reference to Exhibit 10.20 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.21	—	Vari-Lite International, Inc. Employees' Stock Ownership Plan (incorporated by reference to Exhibit 10.21 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.22	—	Vari-Lite International, Inc. Employees' Stock Equivalence Plan (incorporated by reference to Exhibit 10.22 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.23	—	Vari-Lite International, Inc. Annual Incentive Plan (as amended and restated) (incorporated by reference to Exhibit 10.23 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.24	—	Employment Agreement, dated as of August 28, 1995, by and between the Company and James E. Kinnu (incorporated by reference to Exhibit 10.34 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.25	—	Severance Agreement, dated as of September 30, 1996, by and between the Company and James E. Kinnu (incorporated by reference to Exhibit 10.35 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.26	—	Ground Lease, dated as of December 21, 1995, among Brazos Beltline Development, Inc. and Vari-Lite, Inc., Showco, Inc., IGNITION! Creative Services, Inc., Concert Production Lighting, Inc. and Irideon, Inc. (incorporated by reference to Exhibit 10.36 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.27	—	Guaranty, dated as of December 21, 1995, by the Company (incorporated by reference to Exhibit 10.37 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.28	—	Form of Indemnification Agreement with Directors and Officers (incorporated by reference to Exhibit 10.38 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.29	—	Agreement and Plan of Merger, dated as of August 27, 1997, between the Company and Vari-Lite Texas (incorporated by reference to Exhibit 10.39 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.30	—	International Swap Dealers Association, Inc. Master Agreement, dated as of November 23, 1993, between the Company and Brown Brothers, Harriman & Co. (along with confirmation of Interest Rate Swap Transaction) (incorporated by reference to Exhibit 10.40 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.31	—	International Swap Dealers Association, Inc. Master Agreement, dated as of September 13, 1996, between Vari-Lite, Inc. and SunTrust Bank, Atlanta (along with confirmations of Interest Rate Transactions) (incorporated by reference to Exhibit 10.41 to the Company's Registration Statement on Form S-1 No. 333-33559)
10.32	—	Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the other banks thereunder (incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended September 30, 1997)

10.33	—	Amendment No.1, dated April 24, 1998 to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the other banks thereunder (incorporated by reference 10.33 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998)
10.34	—	Amendment No. 2, dated July 31, 1998 to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the other banks thereunder (incorporated by reference to Exhibit 10.34 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998)
10.35	—	Amendment No. 3, dated December 15, 1998 to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the other banks thereunder (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
10.36	—	Amendment No. 1, effective November 2, 1998, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and H. R. Brutsché III (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
10.37	—	Amendment No. 1, effective November 2, 1998, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and John D. Maxson (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
10.38	—	Amendment No. 1, effective November 2, 1998, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and James H. Clark, Jr. (incorporated by reference to Exhibit 10.38 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1998)
10.39	—	Amendment No. 1, effective November 2, 1998, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and J. Anthony Smith (incorporated by reference to Exhibit 10.39 to the Company's Quarterly Report on Form 10-Q for the quarterl ended December 31, 1998)
10.40	—	Amendment No. 1, effective January 1, 1998, to the Vari-Lite International, Inc. Employees' Stock Ownership Plan dated September 27, 1995 (incorporated by reference to Exhibit 10.40 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999)
10.41	—	Amendment No. 1, effective January 1, 1998, to the Vari-Lite International, Inc. Employees' Stock Ownership Trust dated September 27, 1995 (incorporated by reference to Exhibit 10.41 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999)
10.42	—	Amendment No. 4, dated April 1, 1999, to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the banks thereunder (incorporated by reference to Exhibit 10.42 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999)
10.43	—	Temporary Waiver Agreement, dated August 12, 1999, to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the banks thereunder (incorporated by reference to Exhibit 10.43 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999)
10.44	—	Rights Agreement, dated September 27, 1999, by and between the Company and Chase-Mellon Shareholder Services, L.L.C. (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed September 27, 1999)

10.45	—	Amendment No. 5, dated August 25, 1999, to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the banks thereunder (incorporated by reference to Exhibit 10.45 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
10.46	—	Amendment No. 6, dated January 11, 2000, to the Multicurrency Credit Agreement, dated as of December 19, 1997, among the Company and SunTrust Bank, Atlanta, as agent for the banks thereunder (incorporated by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended September 30, 1999)
10.47	—	Share Purchase Agreement, dated October 26, 2000, between Vari-Lite International, Inc. and First Events B.V. (incorporated by reference to Exhibit 2.1 to the Company's Form 8-K filed November 13, 2000)
10.48	—	Asset Purchase Agreement, dated October 26, 2000, between Vari-Lite, Inc. and First Events B.V. (incorporated by reference to Exhibit 2.2 to the Company's Form 8-K filed November 13, 2000)
10.49	—	Asset Transfer Agreement, dated November 17, 2000, by and among Vari-Lite International, Inc., Showco, Inc. and Clearsho, LLC (incorporated by reference to Exhibit 2.1 to the Company's Form 8-K filed December 4, 2000)
10.50	—	Equity Purchase Agreement, dated November 17, 2000 by and among Vari-Lite International, Inc., Showco, Inc., Clair Brothers Audio Enterprises, Inc. and Clair Acquisition Corp. (incorporated by reference to Exhibit 2.2 to the Company's Form 8-K filed December 4, 2000)
10.51	—	Financing Agreement, dated December 29, 2000, between Vari-Lite, Inc. and Firstar Bank, National Association (incorporated by reference to Exhibit 10.51 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000)
10.52	—	Security Agreement, dated December 29, 2000, between the Company and Firstar Bank, National Association (incorporated by reference to Exhibit 10.52 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000)
10.53	—	Guaranty Agreement, dated December 29, 2000, made by the Company in favor of Firstar Bank, National Association (incorporated by reference to Exhibit 10.53 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000)
10.54	—	Patent, Trademark and License Security Agreement, dated December 29, 2000, between Vari-Lite, Inc. and Firstar Bank, National Association (incorporated by reference to Exhibit 10.54 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000)
10.55	—	Chattel Mortgage Facility Offer, dated November 9, 2000, between Vari-Lite Production Services Ltd. and Barclays Mercantile Business Finance Limited (incorporated by reference to Exhibit 10.55 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000)
10.56	—	Mortgage, dated November 23, 2000, between Vari-Lite Production Services Ltd. and Barclays Mercantile Business Finance Limited (incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000)
10.57	—	Guarantee & Indemnity-Cross Border, dated November 23, 2000, between the Company and Barclays Mercantile Business Finance Limited on behalf of Vari-Lite Production Services, Ltd. (incorporated by reference to Exhibit 10.57 to the Company's Annual Report on Form 10-K for the year ended September 30, 2000)
10.58	—	Employment Agreement, dated January 1, 2001, between the Company and T. Clay Powers (incorporated by reference to Exhibit 10.58 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)

10.59	—	Employment Agreement, dated January 1, 2001, between the Company and Jerome L. Trojan III (incorporated by reference to Exhibit 10.59 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)
10.60	—	Employment Agreement, dated July 11, 2001, between the Company and Robert H. Schacherl (incorporated by reference to Exhibit 10.60 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001)
10.61	—	Amendment No. 1, dated March 30, 2001, to the Financing Agreement, dated as of December 29, 2000, between Vari-Lite, Inc. and Firstar Bank, National Association (incorporated by reference to Exhibit 10.61 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001)
10.62	—	Amendment No. 2, dated June 30, 2001, to the Financing Agreement, dated as of December 29, 2000, between Vari-Lite, Inc. and Firstar Bank, National Association (incorporated by reference to Exhibit 10.62 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001)
10.63	—	Amendment No. 1 to the Vari-Lite International, Inc. 1997 Omnibus Plan (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 No. 333-67664)
10.64	—	Amendment No. 3. Dated December 31, 2001, to the Financing Agreement, dated as of December 29, 2000, between Vari-Lite, Inc. and U.S. Bank National Association, formerly known as Firstar Bank, National Association (incorporated by reference to Exhibit 10.64 to the Company's Annual Report on Form 10-K for the year ended September 30, 2001)
10.65	—	Master Lease Purchase Agreement, dated September 27, 2001, between Vari-Lite Europe Ltd., formerly know as Vari-Lite Production Services, Ltd., and Barclays Mercantile Business Finance Limited (incorporated by reference to Exhibit 10.65 to the Company's Annual Report on Form 10-K for the year ended September 30, 2001)
10.66	—	Amendment No. 2, effective January 1, 2002, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and H. R. Brutsché III (incorporated by reference to Exhibit 10.66 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2001)
10.67	—	Amendment No. 2, effective January 1, 2002, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and James H. Clark, Jr. (incorporated by reference to Exhibit 10.66 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2001)
10.68	—	Amendment No. 2, effective January 1, 2002, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and John D. Maxson (incorporated by reference to Exhibit 10.66 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2001)
10.69	—	Amendment No. 2, effective January 1, 2002, to the Deferred Compensation Agreement, dated as of July 1, 1995, between the Company and J. Anthony Smith (incorporated by reference to Exhibit 10.66 to the Company's Quarterly Report in Form 10-Q for the quarter ended December 31, 2001)
10.70	—	Master Lease Purchase Agreement, dated March 25, 2002, between Vari-Lite Europe, Ltd. and Barclays Mercanttile Business Finance Limited (incorporated by reference to Exhibit 3.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002)
10.71	—	Amendment No. 4, dated March 31, 2002, to the Financing Agreement, dated as of December 29, 2000, between Vari-Lite, Inc. and U.S. Bank National Association, formerly known as Firstar Bank, National Association. (incorporated by reference to Exhibit 3.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002)

10.72	—	Deferred Compensation Termination Agreement, dated June 30, 2002, between the Company and H. R. Brutsché III (incorporated by reference to Exhibit 10.72 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.73	—	Deferred Compensation Termination Agreement, dated June 30, 2002, between the Company and John D. Maxson (incorporated by reference to Exhibit 10.73 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.74	—	Deferred Compensation Termination Agreement, dated June 30, 2002, between the Company and James H. Clark, Jr. (incorporated by reference to Exhibit 10.74 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.75	—	Deferred Compensation Termination Agreement, dated June 30, 2002, between the Company and J. Anthony Smith (incorporated by reference to Exhibit 10.75 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.76	—	Amendment No. 1, effective June 30, 2002, to the Consulting Agreement, dated as of July 1, 1995, between the Company and John D. Maxson (incorporated by reference to Exhibit 10.76 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.77	—	Termination of Consulting Agreement, dated June 30, 2002, between the Company and James H. Clark, Jr. (incorporated by reference to Exhibit 10.77 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.78	—	Termination of Consulting Agreement, dated June 30, 2002, between the Company and J. Anthony Smith (incorporated by reference to Exhibit 10.78 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.79	—	Amendment No. 2, dated as of June 30, 2002, to the Employment Agreement, dated as of July 1, 1995 between the Company and H. R. Brutsché III (incorporated by reference to Exhibit 10.79 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.80	—	Assignment and Assumption Agreement of Amended and Split-Dollar Life Insurance, dated as of June 30, 2002, among the Company, Brown Brothers Harriman Trust Company of Texas, trustee of the H. R. Brutsché III Insurance Trust, and H. R. Brutsché III (incorporated by reference to Exhibit 10.80 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 0, 2002)
10.81	—	Assignment and Assumption Agreement of Amended and Restated Split-Dollar Life Insurance, dated as of June 30, 2002, among the Company, Brown Brothers Harriman Trust Company of Texas, trustee of the H. R. Brutsché III Insurance Trust, and H. R. Brutsché III (incorporated by reference to Exhibit 10.81 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.82	—	Assignment and Assumption Agreement of Amended and Split-Dollar Life Insurance, dated as of June 30, 2002, among the Company, James Howard Cullum Clark, and James H. Clark, Jr. (incorporated by reference to Exhibit 10.82 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.83	—	Assignment and Assumption Agreement of Amended and Restated Split-Dollar Life Insurance, dated as of June 30, 2002, among the Company, James Howard Cullum Clark, and James H. Clark, Jr. (incorporated by reference to Exhibit 10.83 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.84	—	Assignment and Assumption Agreement of Amended and Restated Split-Dollar Life Insurance, dated as of June 30, 2002, among the Company, Brown Brothers Harriman Trust Company of Texas, trustee of the John D. Maxson Irrevocable Trust, and John D. Maxson (incorporated by reference to Exhibit 10.84 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)

10.85	—	Amendment No. 5, dated June 30, 2002, to the Financing Agreement, dated as of December 29, 2000, between Vari-Lite, Inc. and U.S. Bank National Association, formerly known as Firstar Bank, National Association (incorporated by reference to Exhibit 10.85 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.86	—	Asset Purchase Agreement, dated November 18, 2002, by and among the Company, Vari-Lite, Inc. and Genlyte Thomas Group LLC (incorporated by reference to Exhibit 2.1 to the Company's Report on Form 8K filed December 3, 2002)
10.87	—	Press Release by the Company dated November 18, 2002, announcing the completion of the sale of substantially all of the assets of the Company's manufacturing division to Genlyte Thomas Group LLC (incorporated by reference to Exhibit 99.1 to the Company's Report on Form 8K filed December 3, 2002)
*10.88	—	Amendment No. 6, dated November 18, 2002, to the Financing Agreement, dated as of December 29, 2000, between Vari-Lite, Inc., and U.S. Bank National Association, formerly known as Firstar Bank, National Association
+*10.89	—	Supply Agreement, as of November 18, 2002, by and among the Company, VLPS Lighting Services, Inc., formerly Vari-Lite, Inc. and Genlyte Thomas Group, LLC
*10.90	—	Amendment No. 7, dated December 31, 2002, to the Financing Agreement, dated as of December 29, 2000, between VLPS Lighting Services, Inc., formerly Vari-Lite, Inc., and U.S. Bank National Association, formerly known as Firstar Bank, National Association
*21.1	—	List of the Company's Subsidiaries
*23.1	—	Consent of Deloitte & Touche LLP

*: Filed herewith.
+: Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas and State of Texas on the 14^th day of January 2003.

		VARI-LITE INTERNATIONAL, INC.
		By:	/s/ H. R. BRUTSCHÉ III H. R. Brutsché III Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Company and in the capacities on the 14^th day of January, 2003.

/s/ H. R. BRUTSCHÉ III H. R. Brutsché III		Chariman of the Board and Chief Executive Officer (Principal Executive Officer)
/s/ JEROME L. TROJAN III Jerome L. Trojan III		Vice President—Finance, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)
/s/ JAMES H. CLARK, JR. James H. Clark, Jr.		Director
/s/ JOHN D. MAXSON John D. Maxson		Director
/s/ JOHN R. RETTBERG John R. Rettberg		Director
/s/ WILLIAM C. SCOTT William C. Scott		Director
/s/ J. ANTHONY SMITH J. Anthony Smith		Director
/s/ J.R.K. TINKLE J.R.K. Tinkle		Director

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Vari-Lite International, Inc. (the "Company") on Form 10-K for the fiscal year ended September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities and on the dates indicated below, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: January 14, 2003		By:	/s/ H. R. BRUTSCHÉ III H. R. Brutsché III Chairman of the Board and Chief Executive Officer
Date: January 14, 2003		By:	/s/ JEROME L. TROJAN III Jerome L. Trojan III Vice President—Finance, Chief Financial Officer, Treasurer and Secretary

CERTIFICATIONS

I, H. R. Brutsché III, certify that:

1.

I have reviewed this annual report on Form 10-K of Vari-Lite International, Inc.

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report.

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended) for the registrant and we have:

(a): designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b): evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
(c): presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

(a): all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
(b): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.

6.: The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: January 14, 2003
		/s/ H. R. BRUTSCHÉ III H. R. Brutsché III Chairman of the Board and Chief Executive Officer

I, Jerome L. Trojan III, certify that:

1.

I have reviewed this annual report on Form 10-K of Vari-Lite International, Inc.

2.

3.

4.

(a): designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b): evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
(c): presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

5.

(a): all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
(b): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.

6.: The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: January 14, 2003
		/s/ JEROME L. TROJAN III Jerome L. Trojan III Vice President—Finance, Chief Financial Officer, Treasurer and Secretary

INDEX TO FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS OF
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

Independent Auditors' Report		F-2
Consolidated Balance Sheets as of September 30, 2001 and 2002		F-3
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended September 30, 2000, 2001 and 2002		F-4
Consolidated Statements of Stockholders' Equity for the Years Ended September 30, 2000, 2001 and 2002		F-5
Consolidated Statements of Cash Flows for the Years Ended September 30, 2000, 2001 and 2002		F-6
Notes to Consolidated Financial Statements		F-7

The following financial statement supplementary schedule of the Company and its subsidiaries required to be included in Item 15(b) is listed below:

Schedule II—Valuation and Qualifying Accounts

S-1

F-1

INDEPENDENT AUDITORS' REPORT

To the Stockholders of
Vari-Lite International, Inc.
Dallas, Texas

We have audited the accompanying consolidated balance sheets of Vari-Lite International, Inc. and subsidiaries (herein referred to as "the Company") as of September 30, 2001 and 2002, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended September 30, 2002. Our audits also included the financial statement schedule listed in the index at Item 15(b). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2001 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2002, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Dallas, Texas
December 31, 2002

F-2

VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2001 and 2002

(In thousands except share data)

			2001			2002
ASSETS
CURRENT ASSETS:
	Cash		$	3,686		$	2,296
	Receivables, less allowance for doubtful accounts of $603 and $827			9,679			9,664
	Inventory, less valuation allowance of $408 and $2,773			15,388			10,411
	Prepaid expense and other current assets			783			1,436

		TOTAL CURRENT ASSETS		29,536			23,807
EQUIPMENT AND OTHER PROPERTY:
	Lighting and sound equipment			103,032			106,404
	Machinery and tools			3,578			3,765
	Furniture and fixtures			4,207			4,232
	Office and computer equipment			10,501			10,729

				121,318			125,130
		Less accumulated depreciation and amortization		72,712			85,236

				48,606			39,894
OTHER ASSETS				2,076			599

		TOTAL ASSETS	$	80,218		$	64,300

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
	Accounts payable		$	4,284		$	4,410
	Accrued liabilities			3,795			3,845
	Unearned revenue			1,201			1,632
	Income taxes payable			146			329
	Current portion of long-term obligations			4,893			14,014

		TOTAL CURRENT LIABILITIES		14,319			24,230
LONG-TERM OBLIGATIONS				18,363			6,812
DEFERRED INCOME TAXES				2,209			—

		TOTAL LIABILITIES		34,891			31,042
COMMITMENTS AND CONTINGENCIES (Note F)				—			—
STOCKHOLDERS' EQUITY:
	Preferred Stock, $0.10 par value (10,000,000 shares authorized; no shares issued)			—			—
	Common Stock, $0.10 par value (40,000,000 shares authorized; 7,845,167 shares issued; 7,800,003 shares outstanding)			785			785
	Treasury Stock, at cost			(186	)		(186	)
	Additional paid-in capital			25,026			25,026
	Accumulated other comprehensive income—foreign currency translation adjustment			791			1,058
	Retained earnings			18,911			6,575

		TOTAL STOCKHOLDERS' EQUITY		45,327			33,258

		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	80,218		$	64,300

See notes to consolidated financial statements.

F-3

VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Years Ended September 30, 2000, 2001 and 2002

(In thousands except share data)

		2000			2001			2002
Rental revenues		$	76,366		$	55,597		$	44,092
Product sales and services revenues			17,322			17,466			21,983

	TOTAL REVENUES		93,688			73,063			66,075
Rental cost			35,990			25,534			22,027
Product sales and services cost			10,881			11,518			14,891
Reserve for excess, slow moving and obsolete inventory			—			—			4,900

	TOTAL COST OF SALES		46,871			37,052			41,818

	GROSS PROFIT		46,817			36,011			24,257
Selling, general and administrative expense			37,102			31,551			27,120
Research and development expense			5,152			5,260			4,287
Impairment of assets			3,850			—			3,500
Write-off of receivables related to premiums paid under split-dollar life insurance policies			—			—			1,348
Gains on lawsuit settlement and sale of lease			(3,993	)		—			—
Gain on sale of concert sound reinforcement business			—			(7,100	)		—

	TOTAL OPERATING EXPENSES		42,111			29,711			36,255

OPERATING INCOME (LOSS)			4,706			6,300			(11,998	)
Interest expense (net)			5,180			2,294			1,614

INCOME (LOSS) BEFORE INCOME TAXES			(474	)		4,006			(13,612	)
Income tax expense (benefit)			(187	)		1,556			(1,276	)

NET INCOME (LOSS)			(287	)		2,450			(12,336	)
Other comprehensive income (loss)—foreign currency translation adjustment			(1,211	)		1,110			267

COMPREHENSIVE INCOME (LOSS)		$	(1,498	)	$	3,560		$	(12,069	)

WEIGHTED AVERAGE BASIC SHARES OUTSTANDING			7,800,003			7,800,003			7,800,003

WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING			7,800,003			7,864,850			7,800,003

PER SHARE INFORMATION
BASIC:
	Net income (loss)	$	(0.04	)	$	0.31		$	(1.58	)
DILUTED:
	Net income (loss)	$	(0.04	)	$	0.31		$	(1.58	)

See notes to consolidated financial statements.

F-4

VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended September 30, 2000, 2001 and 2002
(In thousands except share data)

	Preferred Stock			Common Stock			Treasury Stock										Accumulated Other Comprehensive Income (Loss)
	Preferred Stock			Common Stock			Treasury Stock					Additional Paid-in Capital		Stockholder Notes Receivable						Retained Earnings
	Shares	Amount		Shares	Amount		Shares		Amount			Additional Paid-in Capital		Stockholder Notes Receivable						Retained Earnings			Total
BALANCE, October 1, 1999	—	$	—	7,845,167	$	785	(45,164	)	$	(186	)	$	25,026	$	(30	)	$	892		$	16,748		$	43,235
Payments on stockholder notes receivable															11									11
Other comprehensive loss—foreign currency translation adjustment																		(1,211	)					(1,211	)
Net loss																					(287	)		(287	)

BALANCE, SEPTEMBER 30, 2000	—		—	7,845,167		785	(45,164	)		(186	)		25,026		(19	)		(319	)		16,461			41,748
Payments on stockholder notes receivable															19									19
Other comprehensive income—foreign currency translation adjustment																		1,110						1,110
Net income																					2,450			2,450

BALANCE, SEPTEMBER 30, 2001	—		—	7,845,167		785	(45,164	)		(186	)		25,026		—			791			18,911			45,327
Other comprehensive income—foreign currency translation adjustment																		267						267
Net loss																					(12,336	)		(12,336	)

BALANCE, SEPTEMBER 30, 2002	—	$	—	7,845,167	$	785	(45,164	)	$	(186	)	$	25,026	$	—		$	1,058		$	6,575		$	33,258

See notes to consolidated financial statements.

F-5

VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended September 30, 2000, 2001 and 2002

(In thousands)

				2000		2001		2002
Cash flows from operating activities:
	Net income (loss)			$	(287)	$	2,450		(12,336)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization			13,841		10,461		10,840
		Amortization of note discount and deferred loan fees			453		401		180
		Provision for doubtful accounts			178		366		336
		Impairment of assets			3,850		—		3,500
		Gain on sale of lease			(2,251)		—		—
		Deferred income taxes			(521)		1,216		(2,209)
		Gain on sale of equipment and other property			(626)		131		248
		Gain on sale of concert sound reinforcement business			—		(7,100)		—
		Reserve for excess, obsolete and slow moving inventory			—		—		4,900
		Write-off of receivables related to premiums paid under split-dollar life insurance policies			—		—		1,348
		Net change in assets and liabilities:
			Accounts receivable		(130)		(111)		(322)
			Inventory		(6,852)		(1,693)		515
			Prepaid expenses		324		483		(653)
			Other assets		2,583		(351)		(51)
			Accounts payable, accrued liabilities and income taxes payable		(1,588)		(1,168)		360
			Unearned revenue		679		(1,738)		431

		Net cash provided by operating activities			9,653		3,347		7,087
Cash flows from investing activities:
	Capital expenditures, including rental equipment				(3,980)		(8,267)		(5,750)
	Proceeds from sale of European company, lawsuit settlement and sale of lease				4,714		—		—
	Proceeds from sale of concert sound reinforcement business				—		11,946		—
	Proceeds from sale of European operations				—		5,258		—
	Proceeds from sale of equipment				3,580		117		88

		Net cash provided (used) by investing activities			4,314		9,054		(5,662)
Cash flows from financing activities:
	Proceeds from issuance of debt				29,198		62,203		59,006
	Principal payments on debt				(39,214)		(74,556)		(61,343)
	Principal payments on distributor advances				(279)		—		—
	Proceeds from payments on stockholder notes receivable				11		19		—

		Net cash used by financing activities			(10,284)		(12,334)		(2,337)
Effect of exchange rate changes on cash and cash equivalents					(1,337)		(696)		(478)

Net increase (decrease) during the year					2,346		(629)		(1,390)
Cash, beginning of year					1,969		4,315		3,686

Cash, end of year				$	4,315	$	3,686	$	2,296

Supplemental Cash Flow Information
	Cash paid for interest expense			$	5,459	$	2,374	$	1,453
	Cash paid for income taxes			$	427	$	96	$	944

See notes to consolidated financial statements.

F-6

VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 2000, 2001 and 2002
(In thousands except per share data)

NOTE A—ORGANIZATION:

Vari-Lite International, Inc. (together with its subsidiaries, herein referred to as the "Company") is a leading worldwide professional lighting rental and production company. The Company distributes lighting systems and provides services primarily to the entertainment industry, serving such markets as concert touring, theater, television and film and corporate events.

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation and Use of Estimates

The consolidated financial statements of Vari-Lite International, Inc. include the accounts of its wholly-owned subsidiaries which consist of operating and holding companies. The operating companies consist of VLPS Lighting Services, Inc., Vari-Lite Asia, Inc. and Vari-Lite Europe, Ltd. All material intercompany transactions and balances have been eliminated.

On June 30, 2000, the Company sold its entire interest in Vari-Lite Production Services, S.A. ("VLPS Madrid") and the VARI*LITE equipment used in the operations for a loss of $650. On October 26, 2000, the Company sold its continental European operations. This transaction resulted in a pre-tax charge of $3,200, including the write-off of all the associated goodwill. On November 17, 2000, the Company sold all of the assets of Showco, Inc. ("Showco") to Clearsho, Inc. ("Clearsho"), a wholly owned subsidiary of Showco. Showco sold 100% of its interest in Clearsho to Clair Acquisition Corporation for $12,700. The net book value of the assets sold was $4,900 and the company incurred transaction costs of $700 for total costs of $5,600 which resulted in a net pre-tax gain of $7,100. Showco was dissolved in September 2002. In April 2001, the Company closed IGNITION! Creative Services, Inc. ("Ignition"). Ignition was dissolved in September 2002. Ignition provided design and production management services to corporations and business associations for conventions, business meetings and special events.

On November 18, 2002, the Company sold substantially all of the assets of its manufacturing and sales division to Genlyte Thomas Group LLC ("Genlyte"). The sale included all of the sales, marketing, manufacturing and engineering operations associated with this division, as well as the VARI*LITE® trademark and all patents and other intellectual property associated with VARI*LITE products. As part of this transaction, the Company entered into a supply agreement, pursuant to which Genlyte agreed to manufacture and sell to the Company, for a minimum of ten years, all VARI*LITE equipment and parts to support existing and future VARI*LITE products and appointed the Company as the exclusive distributor of VARI*LITE products in Europe and Japan and a non-exclusive dealer in North America. See Note I for impairment of net assets held for sale.

All material intercompany transactions and balances have been eliminated.

F-7

Inventory

Inventories are stated at the lower of cost (first-in, first-out method) or market. Cost includes certain indirect purchasing and handling costs incurred to acquire and manage inventory and certain overhead costs. Market for raw materials is based on replacement cost and for other inventory classifications on net realizable value. Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value.

Equipment and Other Property

Equipment and other property are stated at cost or, in the case of capitalized leases, at the lower of the present value of future lease payments or the fair value of the equipment. Depreciation and amortization are provided on the straight-line method over the estimated useful lives ranging from three to ten years of the various classes of equipment and other property.

Long-Lived Assets

As required by Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and Assets to be Disposed Of," the Company assesses potential impairments to its long-lived assets when there is evidence that events or changes in circumstances have made recovery of the assets' carrying value unlikely. An impairment loss would be recognized when the sum of the expected future net cash flows is less than the carrying amount of the asset. See Note I for impairment of net assets held for sale.

Other Assets

The Company capitalizes and includes in other assets deferred financing costs and the costs of acquiring patents and trademarks on its products. Deferred financing costs are amortized over the term of the related debt. Amortization on patents and trademarks is computed on the straight-line basis over the lives of the patents or trademarks or the period of expected benefit, if shorter. In addition, the Company capitalizes legal costs associated with the pursuit of third parties for infringement of certain of the Company's patents, copyrights and trademarks when the Company is successful, or management believes it will be successful, and that these costs will be recovered pursuant to SFAS No. 121. These costs are amortized over the lives of the applicable patents, copyrights and trademarks.

Foreign Currency Translation

In accordance with SFAS No. 52, "Foreign Currency Translation," the asset and liability accounts of the Company's non-U.S. subsidiaries are translated into U.S. dollars using rates of exchange in effect at the balance sheet date. Revenues and expenses are translated at exchange rates which approximate the average rates prevailing during the year. The cumulative translation gains and losses are a component of comprehensive income (loss) and included in stockholders' equity.

F-8

Revenue Recognition

Revenues related to equipment rental and services are recognized using the straight-line method over the term of the rental agreements. Revenues related to the sale of products are recognized when title passes.

Research and Development

Costs incurred in connection with the development of new products are considered research and development costs and are charged to operations as incurred.

Derivative Instruments

As of September 30, 2002, the Company did not have any derivative financial instruments.

Fair Value of Financial Instruments

In assessing the fair value of financial instruments at September 30, 2001 and 2002, the Company has used available market information and other valuation methodologies. Some judgment is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

The carrying amounts of cash, receivables, payables and long-term obligations approximated fair value as of September 30, 2001 and 2002.

Equity-Based Compensation

SFAS No. 123, "Accounting for Stock Based Compensation," establishes a method of accounting whereby recognized option pricing models are used to estimate the fair value of equity-based compensation, including options. The Company has elected, as provided by SFAS No. 123, not to recognize compensation expense for employee equity-based compensation as calculated under SFAS No. 123, but will recognize any related expense in accordance with the provisions of Accounting Principles Board Opinion ("APB") No. 25 "Accounting for Stock Issued to Employees". Disclosure of amounts required by SFAS 123 are included in Note G.

Income Taxes

The Company accounts for income taxes under the provisions of SFAS No. 109, "Accounting for Income Taxes," and files a consolidated federal income tax return. Deferred tax assets and liabilities are recorded based on the difference between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Provision is made for deferred taxes relating to temporary differences in the recognition of income and expense for financial reporting and for income tax purposes. A valuation allowance is provided to reduce the deferred tax asset to its net realizable value.

F-9

Net Income (Loss) Per Share

Net income (loss) per share is calculated by dividing net income (loss) by the weighted average shares outstanding for the applicable period. Common Stock equivalents, including warrants and options, are included, to the extent considered dilutive, using the treasury stock method and are assumed to be outstanding for the full period in the period of issuance. Options to purchase 657,900, 743,700 and 719,200 shares of Common Stock at prices ranging from $13.20 to $1.01 were outstanding at September 30, 2000, 2001 and 2002, respectively. Warrants to purchase 296,057 shares of Common Stock at a price of $3.75 were outstanding at September 30, 2000, 2001 and 2002. None of the options or warrants in 2000 and 2002 were included in the computation of diluted EPS as they were antidilutive. At September 30, 2001, 64,847 options ranging from $1.125 to $1.375 were included in the computation of diluted EPS.

Segment Reporting

The Company operates in geographic segments located in North America, Europe and Asia. The Company markets its products and services to the entertainment industry, including concert touring, theater, television and film and corporate events markets, through various media including, but not limited to, trade shows, trade advertising and direct marketing. The Company solicits business from lighting and set designers, other specifiers and consultants, artist managers, producers, production managers, end users and production companies, promoters, rental companies, corporations and business associations. No customer has accounted for more than 10% of the Company's revenues for at least the last three fiscal years. The Company does not rely on any major customer for a significant amount of its operation. See Note N for segment information

New Accounting Pronouncements

SFAS No. 142, "Goodwill and Other Intangible Assets," must be adopted by the Company in the first quarter of its fiscal year 2003, and will be applied to all goodwill and other intangible assets recognized on the balance sheet, regardless of when those assets were initially recognized. Goodwill must be tested for impairment as of the beginning of the fiscal year of adoption and annually thereafter. Goodwill acquired in a business combination completed after June 30, 2001 cannot be amortized.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," effective for the Company in fiscal 2003. This standard requires entities to record the fair value of a liability for an asset retirement obligation when it is incurred by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the assets.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," that replaces SFAS No. 121 and certain provisions of APB No. 30 relating to reporting of discontinued operations, effective for the Company's fiscal 2003.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." It is effective for all such activities initiated after December 31, 2002. The statement requires that a liability for a cost associated with an exit or disposal activity be recognized at fair value only when incurred.

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Management does not anticipate that the adoption of SFAS Nos. 142, 143, 144 or 146 will significantly impact the results of operations or financial position of the Company.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees on Indebtedness of Others." This interpretation clarifies disclosures to be made by a guarantor in its financial statements and requires the guarantor to recognize at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The Company must apply the interpretation to all guarantees issued or modified after December 31, 2002. The Company has not entered into or modified any guarantees since December 31, 2002.

NOTE C—INVENTORY:

Inventory consists of the following:

	2001			2002
Raw materials	$	13,494		$	12,134
Inventory reserve		(408	)		(2,773	)
Work in progress		567			145
Finished goods		1,735			905

	$	15,388		$	10,411

During the period ended September 30, 2002, an additional reserve of $4,900 was made for excess, obsolete and slow moving inventory primarily associated with repair and maintenance parts to support the Company's Series 200 and Series 300 automated lighting products.

NOTE D—OTHER ASSETS:

Other assets consist of the following:

	2001			2002
Cash surrender value of officer and director life insurance	$	1,129		$	—
Patents and trademarks		231			231
Deferred financing costs		488			555
Other		561			322

		2,409			1,108
Less accumulated amortization		(333	)		(509	)

	$	2,076		$	599

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NOTE E—LONG-TERM OBLIGATIONS:

Long-term obligations expressed in U.S. dollars consist of the following:

	2001			2002
Revolving lines of credit	$	2,916		$	1,037
Obligations under capital lease with interest at 10.35%, maturities through 2003		820			123
Term loans with interest at 1.6% to 9.3%		19,520			19,666

		23,256			20,826
Less current portion		(4,893	)		(14,014	)

	$	18,363		$	6,812

Based on the total borrowings outstanding as of September 30, 2001 and 2002, the weighted average interest rates were 6.98% and 6.43%, respectively.

On December 19, 1997, the Company entered into a $50,000 multicurrency revolving credit facility (the "Old Credit Facility"). On December 29, 2000, VLPS Lighting Services, Inc. ("VLPS") entered into a new credit facility, which initially included a $12,000 Term Loan, a $5,000 Revolver and a $3,000 Capital Expenditure Loan. This facility with all subsequent amendments is herein referred to as the "New Credit Facility." As of September 30, 2002, there was $11,510 outstanding under the Term Loan and Capital Expenditure Loan and $1,037 outstanding under the Revolver. On November 18, 2002, the Company used $5,000 of the proceeds from the sale of the assets of its manufacturing and sales division to Genlyte to repay a portion of the borrowings outstanding under the Term Loan. The December 31, 2002, amendment to the New Credit Facility resulted in the repayment in full of the Term Loan and Capital Expenditure Loan and an increase in the Revolver commitment to $7,500, of which $1,600 was immediately outstanding after this amendment. Due to the repayment of the Term Loan and Capital Expenditure Loan, the Company has classified $10,900 as current as of September 30, 2002. Borrowings under the Revolver are subject to availability under a borrowing base of eligible lighting rental assets, inventory and accounts receivable (as defined in the New Credit Facility). Prior to June 30, 2002, all outstanding borrowings under the New Credit Facility accrued interest at the lender's base rate or LIBOR, plus a rate margin of 0.75% and 2.50%, respectively. From June 30, 2002 through December 30, 2002, all outstanding borrowings under the New Credit Facility accrued interest at the lender's base rate or LIBOR, plus a rate margin ranging from 1.25% to 1.75% or 3.00% to 3.50%, respectively, based upon the Company's ratio of Adjusted Funded Debt to EBITDA (as defined in the New Credit Facility). Beginning on December 31, 2002, all outstanding borrowings under the New Credit Facility accrue interest at the lender's base rate or LIBOR, plus a rate margin of 0.50% and 2.25%, respectively. The New Credit Facility is guaranteed by the Company and is secured by all of the stock and substantially all of the assets of VLPS, and a pledge of 65% of the outstanding capital stock of the Company's foreign subsidiaries. A commitment fee of 0.25% is charged on the average daily unused portion of the New Credit Facility. The New Credit Facility contains compliance covenants, including requirements that the Company achieve certain financial ratios. In addition, the New Credit Facility places limitations on annual capital expenditures and on the ability to incur additional indebtedness, make certain loans or investments, sell assets, pay dividends or reacquire

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the Company's stock. The New Credit Facility terminates on December 31, 2005. Upon termination of the New Credit Facility, the entire outstanding indebtedness thereunder becomes due and payable in full.

Beginning in fiscal 2001, the Company's London subsidiary began financing its capital expenditures with British pound sterling loans from a U. K. bank (collectively, the "London Bank Loans") that amortize over 48 to 60 months and accrue interest at various rates ranging from 7.60% to 9.10%. Proceeds received under this type of financing were approximately 4,500 British pounds sterling (USD 6,500) and 800 British pounds sterling (USD 1,100) for fiscal 2001 and 2002, respectively. The London Bank Loans are secured by all of the assets of the Company's London operations and include certain financial covenants, limitations on capital expenditures and intercompany payments and the guarantee of the Company.

The Company has typically hedged a portion of its currency fluctuation risk by borrowing foreign currencies. Cash generated from the Company's European and Asian operations is typically denominated in the local currencies of these foreign offices and is used to pay expenses incurred in those currencies and service the foreign currency borrowings. The London Bank Loans are serviced by cash generated from the Company's London operations and serves as an economic hedge for net cash generated from these operations. This would not qualify for hedge accounting under Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." In the future, the Company may use other financial instruments to hedge its foreign currency fluctuation risk.

Maturities of long-term obligations, including capital lease obligations, are approximately as follows:

2003	$	14,014
2004		4,341
2005		1,869
2006		392
2007		210

	$	20,826

Net interest expense consists of the following:

	Interest Expense		Interest Income		Net Interest Expense
Fiscal 2000	$	5,326	$	146	$	5,180
Fiscal 2001		2,434		140		2,294
Fiscal 2002		1,778		164		1,614

NOTE F—COMMITMENTS AND CONTINGENCIES:

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NOTE G—STOCKHOLDERS' EQUITY:

The Company authorized 10,000,000 shares of preferred stock which the Company's Board of Directors may issue for such consideration and on such terms as it deems desirable, including voting and conversion rights that could adversely affect the holders of Common Stock.

The Company has a Stockholders Rights Plan (the "Rights Plan") that is designed to provide protection against coercive or unfair takeover tactics. Under the Rights Plan, the Company made a dividend distribution of one preferred stock purchase right for each share of Common Stock held of record as of September 27, 1999. Each right entitles the holder to buy one-one thousandth of a share of the Company's Series A Junior Participating Preferred Stock at an initial exercise price of $8.50. The Rights will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company's Common Stock or announces a tender offer which would result in such a person or group beneficially owning 15% or more of the Company's Common Stock. At that time, each Right not owned by such person or group will entitle its holder to purchase, at the Rights' then current exercise price, shares of the Company's Common Stock having a value of twice the Rights' exercise price. The Rights are redeemable by the Company and expire on September 26, 2009.

The Company has a fixed option plan which allows for the issuance of stock options and reserves shares of Common Stock for issuance to executives, key employees and directors. No compensation cost has been recognized for the stock options all of which were issued at or above fair value at the date of grant in fiscal 2000, 2001 and 2002. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant date for awards in fiscal 2000, 2001 and 2002 consistent with the provisions in SFAS No. 123, the Company's net income and earnings per share would have been as follows:

		2000			2001			2002
Net income (loss)		$	(745	)	$	2,106		$	(12,648	)
Basic and diluted net income (loss) per share		$	(0.10	)	$	0.27		$	(1.62	)

The weighted-average fair value of the individual options granted during fiscal 2000, 2001 and 2002 was estimated at $0.47, $0.40 and $0.34, respectively, on the date of grant. The fair values were determined using a Black-Scholes option pricing model with the following assumptions:

	2000	2001	2002
Dividend yield	0	0	0
Volatility	30%	30%	30%
Risk-free interest rate	6%	4%	4%
Expected life	5 yrs.	5 yrs.	5 yrs.

Under the plan, the total number of stock options that may be granted is 1,200,000. The price of the options granted pursuant to the plan are equal to the fair market value of the Common Stock on the date

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of grant. The options vest over a two month to five year period and expire no later than ten years from the date of grant.

	2000				2001				2002
	Options (000)		Weighted- Average Exercise Price		Options (000)		Weighted- Average Exercise Price		Options (000)		Weighted- Average Exercise Price
Outstanding—Beginning of year	736		$	4.58	658		$	4.56	744		$	2.16
Granted	77			1.38	285			1.18	5			1.01
Exercised	—			—	—			—	—			—
Forfeited	(155	)		3.08	(199	)		8.66	(30	)		1.51
Canceled or expired	—			—	—			—	—			—

Outstanding—End of year	658			4.56	744			2.16	719			2.18

Exercisable—End of year	195			5.97	219			3.05	360			2.71

The exercise prices, number of options outstanding and remaining contractual life at September 30, 2002, are shown in the following table:

	Outstanding		Exercisable
Exercise Price	Number (000)	Remaining Contractual Life (years)	Number (000)
$ 1.01	5	9.7	—
$ 1.125	293	7.6	110
$ 1.20	30	8.8	6
$ 1.30	40	8.6	8
$ 1.375	64	7.2	26
$ 1.50	20	8.7	4
$ 3.75	264	5.2	203
$12.00	3	5.0	3

In connection with the Company's Old Credit Facility, the Company issued warrants to purchase up to 296,057 shares of Common Stock at $3.75 per share. The terms of the warrants also provide for registration rights and adjustments to the price and number of shares in certain circumstances. The warrants expire on December 31, 2004 and as of September 30, 2002, no warrants had been exercised.

NOTE H—LEASES:

As Lessor

The Company was a lessor under sales-type leases. Leases classified as sales-type leases generally stipulated that all lease payments be made within 30 days of the commencement of the lease term; however, the Company had also entered into certain sales-type leases that allowed for periodic payments throughout the term of the lease. The Company recorded revenues of $1,222, $0 and $0 and product sales

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and services costs of $683, $0 and $0 for the years ended September 30, 2000, 2001 and 2002, respectively, related to sales-type leases.

As Lessee

The Company leases certain computers and equipment. The following is a summary of assets held under capital leases:

	2001			2002
Computers and equipment under capital leases	$	2,131		$	2,131
Less accumulated depreciation		(2,129	)		(2,131	)

Property under capital leases, net	$	2		$	0

The Company also leases manufacturing facilities and office space. The future minimum lease payments as of September 30, 2002, including those which relate to capital leases which are included in long-term obligations, are as follows:

	Capital			Operating
Year one	$	125		$	2,537
Year two		—			2,166
Year three		—			1,908
Year four		—			1,748
Year five		—			1,231
Thereafter		—			3,429

Total minimum lease payments		125		$	13,019

Less amount representing interest		(2	)

Present value of net minimum lease payments		123
Less current portion		(123	)

Long-term lease obligations	$	—

Rental expense for the years ended September 30, 2000, 2001 and 2002 was $3,405, $2,976 and $2,965, respectively.

NOTE I—IMPAIRMENT OF ASSETS AND NET ASSETS HELD FOR SALE:

In fiscal 2000, the Company made the decision to sell its non-core continental European rental operations and Showco which represented the Company's North American concert sound reinforcement business. On June 30, 2000, the Company sold its Madrid, Spain operations and related assets for $2,394. On October 26, 2000, the Company sold the remainder of its continental European rental operations and related assets for $7,974. These transactions resulted in a pre-tax loss of $3,850 which was recognized in fiscal 2000 as an impairment of assets held for sale in accordance with SFAS No. 121. On November 17,

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2000, the Company sold its North American concert sound reinforcement business for 12,746, which resulted in a pre-tax gain of $7,100.

In the fourth quarter of fiscal 2002, the Company made the decision to sell its manufacturing and sales division. On November 18, 2002, the Company sold substantially all of the assets of that division to Genlyte for $10,641. This transaction resulted in a pre-tax loss of $4,500 of which $3,500 was recognized in fiscal 2002 as an impairment of net assets held for sale in accordance with SFAS No. 121. The remaining charge of $1,000, which represents severance payments, will be recognized in the first quarter of fiscal 2003.

At September 30, 2002, the consolidated balance sheet included the following net assets held for sale, which represented the assets of the Company's manufacturing and sales division:

ASSETS
CURRENT ASSETS:
	Cash			$	—
	Receivables, less allowance for doubtful accounts of $76				2,649
	Inventory, less valuation allowance of $2,773				9,689
	Prepaid expense and other current assets				129

		TOTAL CURRENT ASSETS			12,467
EQUIPMENT AND OTHER PROPERTY:
	Lighting and sound equipment				5,032
	Machinery and tools				2,596
	Furniture and fixtures				3,368
	Office and computer equipment				7,374

					18,370
		Less accumulated depreciation and amortization			17,759

					611
OTHER ASSETS					19

		TOTAL ASSETS		$	13,097

LIABILITIES
CURRENT LIABILITIES:
	Accounts payable			$	701
	Accrued liabilities				1,346
	Current portion of long-term obligations				10

		TOTAL CURRENT LIABILITIES			2,057
	LONG-TERM OBLIGATIONS				11

		TOTAL LIABILITIES			2,068

			NET ASSETS HELD FOR SALE	$	11,029

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The consolidated statements of operations and comprehensive income (loss) for the year ended September 30, 2002, includes the following operating results from the manufacturing and sales division:

		2002
Rental revenues		$	—
Product sales and services revenues			15,178

	TOTAL REVENUES		15,178
Rental cost			—
Product sales and services cost			10,441
Reserve for excess, slow moving and obsolete inventory			4,900

	TOTAL COST OF SALES		15,341

	GROSS LOSS		(163	)
Selling, general and administrative expense			6,859
Research and development expense			4,287
Impairment of assets			3,500

	TOTAL OPERATING EXPENSES		14,646

OPERATING LOSS			(14,809	)
Interest expense (net)			12

LOSS BEFORE INCOME TAXES			(14,821	)
Income tax benefit			(5,854	)

NET LOSS		$	(8,967	)

NOTE J—SALE OF BUILDING LEASE:

In August 2000, the Company sold the building lease for its New York office for $2,600, which resulted in a net gain of $2,300.

NOTE K—SETTLEMENT OF LAWSUIT:

In November 1998, the Company brought suit asserting a number of claims of infringement of several of its patents by Martin Gruppen A/S and Martin Professional A/S (collectively "Martin") seeking monetary damages and injunctive relief to prevent future patent infringement. In July 1999, the court entered a preliminary injunction prohibiting Martin from making, using, leasing or offering for sale or lease in the United States, certain products. In August 2000, the Company negotiated a settlement with Martin, the terms of which included a cash payment of $5,000 to the Company and authorization for Martin to continue to sell all existing products that were subject to the Company's patents. This settlement resulted in a net gain of $1,693 that was recognized in fiscal 2000.

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NOTE L—INCOME TAXES:

The provision for income taxes consists of the following:

		2000			2001		2002
Current:
	U.S. Federal	$	—		$	70	$	(211	)
	State		4			15		46
	International		330			255		1,100
Deferred:
	U.S. Federal		(494	)		84		(2,375	)
	State		(44	)		7		(210	)
	International		17			1,125		374

Income tax expense (benefit)		$	(187	)	$	1,556	$	(1,276	)

A reconciliation of income taxes computed at the U.S. Federal statutory tax rate to the provision for income taxes is as follows:

	2000			2001		2002
Income tax expense at U.S. Federal statutory rate	$	(161	)	$	1,362	$	(4,628	)
International taxes		(47	)		130		588
State taxes		(24	)		10		30
Conversion of foreign tax credits and adjustments		—			—		981
Increase in valuation reserve		—			—		1,715
Other		45			54		38

	$	(187	)	$	1,556	$	(1,276	)

Deferred income taxes reflect the net tax effects of deductible temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income

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tax purposes. The tax effects of significant items comprising the Company's net deferred income taxes consist of the following:

		2001			2002
Deferred tax asset
	Foreign tax credit carryover	$	2,531		$	—
	Net operating loss carryover		1,089			273
	Alternative minimum tax credit carryover		597			571
	General business credit		780			748
	Dividend from foreign operations		1,170			1,170
	Accrued impairment costs—sale of European operations		592			—
	Impairment costs—sale of manufacturing division		—			1,813
	Other tax asset items		368			306
	Inventory reserves		—			1,829
	Capitalized costs		805			909
	Vacation pay		305			431
Deferred tax liability
	Depreciation		(9,438	)		(5,843	)
	Other tax liability items		(215	)		301

Total			(1,416	)		2,508
Less: Valuation allowance			(793	)		(2,508	)

Net deferred income taxes		$	(2,209	)	$	—

For tax purposes, the Company has a net operating loss carryover of $737 that will expire in 2019 through 2021. In addition, approximately $571 of alternative minimum tax credits (which do not expire) are available to offset future regular tax liability. The Company also has general business credit carryforwards of $748 that will expire in 2011 through 2019. The benefit of this tax credit carryforward has been recognized for financial statement purposes as part of deferred taxes.

International income taxes relate to the Company's operations in England and Japan.

NOTE M—EMPLOYEE BENEFIT PLANS:

The Company has a defined contribution 401(k) plan in which substantially all of its U.S. employees can elect to be participants. Under the terms of the 401(k) plan, employees can defer up to 20% of their earnings up to the permitted maximum as defined by IRS regulations. The Company matches 50% of the employee's contribution up to 5% of the employee's earnings during the plan year. During the fiscal years ended September 30, 2000, 2001 and 2002, the Company's cost to match employee contributions was approximately $320, $208 and $244, respectively.

Substantially all employees of the Company's London-based operations may elect to be participants in the Vari-Lite Europe Pension Plan ("VLEH Pension Plan"). The plan is a defined contribution plan under which employees may contribute up to 3% of their base salaries. The Company makes contributions at a

F-20

rate of 200% of the employee contributions, with additional contributions made for certain key employees. The Company incurred costs of $154, $119 and $117, representing matching contributions for the years ended September 30, 2000, 2001 and 2002, respectively.

The Company adopted an employee stock ownership plan ("ESOP"), effective January 1, 1995, in which its U.S. employees are eligible to participate after completing one year of service, attaining age twenty-one and being a participant making elective deferrals in the Company's 401(k) Plan. Each year the Company may make discretionary contributions of cash to the ESOP as determined by the Board of Directors or a committee thereof. Participants' interests in the ESOP are distributed in the form of cash or stock upon normal retirement, disability, death or at a specific time after any other termination of employment.

Prior to January 1, 2001, the Company maintained an employee stock equivalence plan ("ESEP") for the Company's non-U.S. subsidiaries, which was effective January 1, 1995, in which its employees were eligible to participate after completing one year of service, attaining age 21 and for London-based employees, participating in the VLEH Pension Plan. Each year the Company made discretionary contributions of stock to the ESEP as determined by the Board of Directors or a committee thereof. Participants' interests in the ESEP were distributed in the form of cash upon normal retirement, disability, death or at a specific time after any other termination of employment.

In 2000, the Company accrued $250 for contribution to the ESOP and ESEP and subsequently in 2001 purchased 155,243 shares on the open market. In 2001, the Company accrued $250 for contribution to the ESOP and subsequently in 2002 purchased 108,384 shares on the open market. In 2002, the Company accrued $250 for contribution to the ESOP of which $124 was funded at September 30, 2002.

NOTE N—SEGMENT INFORMATION:

In 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise." SFAS No. 131 establishes standards for the reporting by public business enterprises of information about product lines, geographic areas and major customers. The method for determining what information to report is based on the way that management organizes the operation segments within the Company for making operational decisions and assessments of financial performance. The Company's chief operating decision maker is considered to be the Company's Chief Executive Officer ("CEO"). The CEO reviews financial information presented on a consolidated basis accompanied by disaggregated information about revenues by geographic region and by product lines for purposes of making operating decisions and assessing financial performance. The Company has three reportable segments: North America, Europe and Asia, which are organized, managed and analyzed geographically and operate in one

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industry segment. Information about the Company's operations for the fiscal years ended September 30, 2000, 2001 and 2002 is presented below:

		North America			Asia			Europe		Intercompany			Total
*September 30, 2000:*
Net Revenues from unaffliliated customers		$	57,004		$	10,430		$	26,254	$	—		$	93,688
Intersegment sales			19,668			251			1,139		(21,058	)		—

	Total net revenues		76,672			10,681			27,393		(21,058	)		93,688
Operating income (loss)			4,057			(8	)		657		—			4,706
Depreciation and amortization			11,654			182			2,005		—			13,841
Total assets			76,671			8,157			16,222		(6,347	)		94,703
*September 30, 2001:*
Net Revenues from unaffliliated customers		$	50,931		$	8,782		$	13,350	$	—		$	73,063
Intersegment sales			8,139			84			166		(8,389	)		—

	Total net revenues		59,070			8,866			13,516		(8,389	)		73,063
Operating income (loss)			2,102			875			3,323		—			6,300
Depreciation and amortization			7,816			249			2,414		(18	)		10,461
Total assets			62,267			8,963			18,048		(9,060	)		80,218
*September 30, 2002:*
Net Revenues from unaffliliated customers		$	38,320		$	12,227		$	15,528	$	—		$	66,075
Intersegment sales			13,789			76			114		(13,979	)		—

	Total net revenues		52,109			12,303			15,642		(13,979	)		66,075
Operating income (loss)			(14,646	)		1,415			1,233		—			(11,998	)
Depreciation and amortization			8,381			307			2,330		(178	)		10,840
Total assets			48,813			8,906			16,153		(9,572	)		64,300

NOTE O—RELATED PARTY TRANSACTIONS:

Certain directors provided consulting services to the Company and received fees totaling approximately $241, $236 and $165 for each of the years ended September 30, 2000, 2001 and 2002.

Certain directors received payments under deferred compensation agreements. Those amounts totaled approximately $334, $334 and $167 for each of the years ended September 30, 2000, 2001 and 2002, respectively.

The Company paid premiums for life insurance policies for certain directors which amounted to $172, $172 and $0 for the years ended September 30, 2000, 2001 and 2002, respectively.

On June 30, 2002, the Company cancelled all consulting and deferred compensation agreements between the Company and certain directors of the Company, except one consulting agreement that was amended to terminate the Company's obligation to pay consulting fees. In addition, the Company assigned all of its rights and obligations under split-dollar agreements with certain directors, including its obligation

F-22

to pay future premiums on life insurance policies and its interest in the collateral assignment of death benefits under those policies, to the respective directors or their designees. Under the collateral assignment, the Company was entitled to recoup the cumulative premiums paid by the Company from the cash surrender value or death benefits under the policies. As a result of the assignment, the Company expensed receivables related to premiums paid under those policies of $1,348 during fiscal 2002. The cancellation of the deferred compensation and consulting agreements, combined with reductions in directors fees and base compensation to the Company's Chief Executive Officer will result in annualized cash savings of $600. Additionally, the assignment of the Company's obligations under the split-dollar life insurance agreements will result in cash savings of $700.

From time to time, the Company purchases lighting and production products from and sells lighting products to a party related to one of the Company's office managers. Amounts purchased from the party totaled approximately $320, $1,252, $438 and amounts sold to the party totaled approximately $0, $105 and $400 for the fiscal years ended September 30, 2000, 2001, and 2002, respectively.

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NOTE P—QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):

The following summarizes the unaudited quarterly results of operations for the years ended September 30, 2000, 2001 and 2002:

		Year Ended September 30, 2000
		December 31		March 31			June 30			September 30
Total Revenues		$	27,679	$	20,719		$	21,509		$	23,781
Operating income (loss)			3,362		(791	)		549			1,586
Net income (loss)			1,272		(1,241	)		(392	)		74
Net income (loss) per basic and diluted share			0.16		(0.16	)		(0.05	)		0.01
Common Stock price per share
	High		1.688		4.000			2.750			1.500
	Low		0.938		0.938			0.875			0.688

		Year Ended September 30, 2001
		December 31		March 31			June 30			September 30
Total Revenues		$	20,378	$	18,337		$	15,584		$	18,764
Operating income (loss)			8,229		115			(1,800	)		(244	)
Net income (loss)			4,403		(229	)		(1,301	)		(423	)
Net income (loss) per basic and diluted share			0.56		(0.03	)		(0.17	)		(0.05	)
Common Stock price per share
	High		2.500		2.250			2.000			1.540
	Low		0.625		0.750			1.210			0.780

		Year Ended September 30, 2002
		December 31		March 31		June 30		September 30
Total Revenues		16,775		14,612		15,585		19,103
Operating income (loss)		(385	)	(1,093	)	(7,775	)	(2,745	)
Net income (loss)		(450	)	(812	)	(6,706	)	(4,368	)
Net income (loss) per basic and diluted share		(0.06	)	(0.10	)	(0.86	)	(0.56	)
Common Stock price per share
	High	1.350		1.850		1.790		1.460
	Low	0.940		1.010		1.000		0.810

The operating income for the quarter ended June 30, 2000, includes a $650 write-down of VLPS Madrid assets to their net realizable value. The operating income for the quarter ended September 30, 2000, includes gains on the settlement of the patent infringement lawsuit and the sale of a building lease in New York of $3,993 partially offset by charges of $3,200 for the impairment of assets used in the Company's continental European operations. The operating income for the quarter ended December 31, 2000, includes a $7,100 gain on the sale of the Company's concert sound reinforcement business. The operating loss for the quarter ended June 30, 2002, includes a reserve of $4,900 for excess, slow moving and obsolete inventory and the write-off of receivables related to premiums paid under split-dollar life insurance policies of $1,348. The operating loss for the quarter ended September 30, 2002, includes a $3,500 write-down of the manufacturing and sales division assets to their net realizable value.

F-24

NOTE Q—SUBSEQUENT EVENTS:

On November 18, 2002, the Company sold substantially all of the assets of its manufacturing and sales division to Genlyte for $10,641 of which $5,000 of the proceeds were used to repay a portion of the Term Loan (See Note E). The sale included all of the sales, marketing, manufacturing and engineering operations associated with this division as well as the VARI*LITE® trademark and all patents and other intellectual property associated with VARI*LITE products. This transaction resulted in a pre-tax loss of $4,500 of which $3,500 was recognized in fiscal 2002 as an impairment of net assets held for sale. The remaining charge of $1,000, which represents severance payments, will be recognized in the first quarter of fiscal 2003. As part of this transaction, the Company entered into a supply agreement, pursuant to which, Genlyte agreed to manufacture and sell to the Company, for a minimum of ten years, all VARI*LITE equipment and parts to support existing and future VARI*LITE products and appointed the Company as the exclusive distributor of VARI*LITE products in Europe and Japan and a non-exclusive dealer in North America.

On December 31, 2002, the Company amended the New Credit Facility which resulted in the repayment and termination of the Term Loan and Capital Expenditure Loan and increased the Revolver commitment to $7,500. (See Note E). This amendment also modified the financial covenants and extended the maturity date of the New Credit Facility from December 31, 2003 to December 31, 2005.

Management believes that cash flow generated from operations and borrowing capacity under the New Credit Facility will be sufficient to meet the anticipated operating cash needs and capital expenditures for the next 12 months. Because the Company's future operating results will depend on a number of factors, including the demand for the Company's products and services, the Company's ability to achieve competitive and technological advances, general and economic conditions and other factors beyond the Company's control, there can be no assurance the sufficient capital resources will be available to fund the business beyond such periods.

F-25

Schedule II

Vari-Lite International, Inc.
Valuation and Qualifying Accounts
For the Years Ended September 30, 2000, 2001 and 2002
(in thousands of dollars)

Description		Beginning Balance	Charged to Costs and Expenses	Write-offs and Discounts Allowed		Ending Balance
September 30, 2000
Allowances deducted from assets to which they apply
	Allowance for doubtful accounts	720	178	(158	)	740
	Allowance for excess and obsolete inventory	624	—	(232	)	392
	Allowance for foreign tax credits	544	—	(287	)	257
September 30, 2001
Allowances deducted from assets to which they apply
	Allowance for doubtful accounts	740	366	(503	)	603
	Allowance for excess and obsolete inventory	392	16	—		408
	Allowance for foreign tax credits	257	536	—		793
September 30, 2002
Allowances deducted from assets to which they apply
	Allowance for doubtful accounts	603	336	(112	)	827
	Allowance for excess and obsolete inventory	408	4,900	(2,535	)	2,773
	Allowance for deferred tax assets	793	1,715	—		2,508

S-1

EX-10.88 3 a2100010zex-10_88.htm EXHIBIT 10.88
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Exhibit 10.88

AMENDMENT NO. 6
TO
FINANCING AGREEMENT

This AMENDMENT NO. 6 TO FINANCING AGREEMENT (this "Amendment"), made as of November 18, 2002, between U.S. BANK NATIONAL ASSOCIATION (formerly known as Firstar Bank, National Association), a national banking association ("Bank") and VARI-LITE, INC., a Delaware corporation ("Borrower"),

WITNESSETH:

WHEREAS, Borrower and Bank have entered into that certain Financing Agreement, dated as of December 29, 2000, as amended by that certain Amendment No. 1 to Financing Agreement, dated as of March 30, 2001, Amendment No. 2 to Financing Agreement, dated as of June 30, 2001, Amendment No. 3 to Financing Agreement, dated as of December 31, 2001, Amendment No. 4 to Financing Agreement, dated as of March 31, 2002, and Amendment No. 5 to Financing Agreement, dated as of June 30, 2002 (as so amended, the "Financing Agreement"), pursuant to which Bank has made certain loans and financial accommodations available to Borrower; and

WHEREAS, Borrower and Bank desire to further amend the Financing Agreement as hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Bank and Borrower agree as follows:

1. DEFINED TERMS.

Each defined term used herein and not otherwise defined herein has the meaning ascribed to such term in the Financing Agreement.

2. AMENDMENT TO FINANCING AGREEMENT.

The Financing Agreement is amended, effective as of the date of this Agreement, as follows:

2.1 Amendment to Section 1. Section 1 of the Financing Agreement shall be amended by adding the new definitions of "Acquired Assets," "Genlyte Acquisition" and "Genlyte Acquisition Agreement" as follows:

"Acquired Assets" means "Acquired Assets" as defined and described in the Genlyte Acquisition Agreement (which definition is set forth on Exhibit V hereto).

"Genlyte Acquisition" means the sale of the Acquired Assets and the other transactions contemplated by the Genlyte Acquisition Agreement.

"Genlyte Acquisition Agreement" means the Asset Purchase Agreement dated as of November 18, 2002, by and between International, the Borrower, as "Seller," and Genlyte Thomas Group LLC, a Delaware limited liability company, as "Buyer."

2.2 Amendment to Section 9.5. Section 9.5 of the Financing Agreement shall be amended by deleting Section 9.5 in its entirety and by substituting the following new Section 9.5 in lieu thereof:

9.5 Management; Ownership of Assets, Licenses, Patents, Etc.

Borrower possesses, either alone or through the services of its Affiliates, and shall continue to possess active, full-time, professional management adequate to handle its affairs and adequate employees, assets, governmental approvals, permits, licenses, patents, copyrights, trademarks and trade names to continue to conduct its business in a manner substantially similar to the manner as heretofore conducted by it, other than with respect to the consummation of the Genlyte

Acquisition, and all patents, copyrights, trademarks and trade names as of the date of the consummation of the Genlyte Acquisition are described in Schedule 1 attached hereto and incorporated herein by reference.

2.3 Amendment to Section 9.6. Section 9.6 of the Financing Agreement shall be amended by deleting Section 9.6 in its entirety and by substituting the following new Section 9.6 in lieu thereof:

9.6 Indebtedness.

Except for (i) Indebtedness disclosed in either the Financials delivered on or before the Effective Date or in Schedule 2 or Schedule 12 attached hereto and incorporated herein by reference, (ii) the Obligations, (iii) Indebtedness owing to trade creditors in the ordinary course of business, (iv) other Indebtedness permitted to be incurred or paid by Borrower pursuant to Section 10.11, (v) Indebtedness which is subordinated to the prior payment and performance of the Obligations pursuant to a subordination agreement in form and substance satisfactory to Bank in its sole discretion, (vi) tax liabilities to the extent not inconsistent with Section 9.13 hereof, (vii) obligations under operating leases, and (viii) indemnification obligations incurred pursuant to the Genlyte Acquisition Agreement, Borrower has no Indebtedness, and, except as otherwise set forth in Schedule 2 attached hereto, has not guaranteed the obligations of any other Person.

2.4 Amendment to Section 9.7. Section 9.7 of the Financing Agreement shall be amended by deleting Section 9.7 in its entirety and by substituting the following new Section 9.7 in lieu thereof:

9.7 Title to Property; No Liens.

Borrower has good, indefeasible and merchantable title to and ownership of, or leasehold interest in, all of its real and personal property (other than the Acquired Assets sold pursuant to the Genlyte Acquisition Agreement), including, without limitation, its Collateral, and other security for the Obligations, free and clear of all liens, claims, security interests, assignments, mortgages, pledges and encumbrances, except Permitted Liens and except as described in Schedule 3 attached hereto and incorporated herein by reference.

2.5 Amendment to Section 9.18. Section 9.18 of the Financing Agreement shall be amended by deleting Section 9.18 in its entirety and by substituting the following new Section 9.18 in lieu thereof:

9.18 Noncompetition Agreements.

Borrower is not subject to any contract or agreement containing a covenant not to compete restricting Borrower in any line of business with any Person, except as disclosed on Schedule 18 hereto and except for the noncompetition agreement entered into pursuant to Section 2.5 of the Genlyte Acquisition Agreement.

2.6 Amendment to Section 9.23. Section 9.23 of the Financing Agreement shall be amended by deleting Section 9.23 in its entirety and by substituting the following new Section 9.23 in lieu thereof:

9.23 Real Property and Leases.

Except as described in Schedule 12 attached hereto and incorporated herein by reference, as of the Effective Date Borrower owns no real property and is not a party to any lease, assignment, sublease, or other agreement relating to any real property or leasehold; provided, however, Schedule 12 does not reflect the Acquired Assets being sold pursuant to the Genlyte Acquisition Agreement.

2.7 Amendment to Section 10.11. Section 10.11 of the Financing Agreement shall be amended by deleting Section 10.11 in its entirety and by substituting the following new Section 10.11 in lieu thereof:

10.11 Indebtedness: Guaranties.

Borrower will not incur or pay any Indebtedness other than (i) the Obligations, (ii) subject to the terms of any applicable subordination agreement, Indebtedness reflected in the Financials delivered on or before the Effective Date or described in Schedule 2 or Schedule 12 attached

hereto, (iii) Indebtedness owing to trade creditors in the ordinary course of business, (iv) Indebtedness in respect of capitalized leases and purchase money Indebtedness so long as the aggregate amount of such Indebtedness incurred by Borrower (x) during its fiscal year ending September 30, 2001 does not exceed the amount of Zero Dollars ($0) and (y), thereafter, in any fiscal year of the Borrower does not exceed One Million Dollars ($1,000,000), and provided further, that at no time shall the aggregate amount of all purchase money Indebtedness (excluding that described in clause (ii) hereof) exceed Three Million Dollars ($3,000,000), (v) Indebtedness in respect of taxes, assessments or governmental charges to the extent that payment thereof shall not at the time be required to be made in accordance with the provisions of Section 10.10, (vi) Indebtedness which is subordinated to the prior payment and performance of the Obligations pursuant to a subordination agreement in form and substance satisfactory to Bank, in its sole discretion, but only so long as the payment of any such Indebtedness would not violate the terms of the applicable subordination agreement), (vii) operating leases, (viii) Intercompany Loans to Borrower from International and Vari-Lite Asia, Inc., and (ix) indemnification obligations incurred pursuant to the Genlyte Acquisition Agreement, providedthat no Indebtedness otherwise permitted to be incurred shall be permitted to be incurred if, after giving effect to the incurrence thereof, any Event of Default shall have occurred. No Borrower will guarantee the obligations of any other Person except as set forth on Schedule 2 or Schedule 15 attached hereto.

2.8 Amendment to Section 10.12. Section 10.12 of the Financing Agreement shall be amended by deleting Section 10.12 in its entirety and by substituting the following new Section 10.12 in lieu thereof:

10.12 Title to Property; No Liens.

Borrower will continue to maintain good, indefeasible and merchantable title to and ownership of, or interest (leasehold or otherwise) in, all of its real and personal property, including, without limitation, the Collateral and other security for the Obligations, free and clear of all liens, claims, security interests, assignments, mortgages, pledges and encumbrances, except (i) Acquired Assets being sold pursuant to the Genlyte Acquisition Agreement, (ii) Permitted Liens and (iii) as described on Schedule 3 attached hereto and incorporated herein by reference or as permitted under Section 10.27 hereto.

2.9 Amendment to Section 10.24. Section 10.24 of the Financing Agreement shall be amended by deleting Section 10.24 in its entirety and by substituting the following new Section 10.24 in lieu thereof:

10.24 Change in Business.

From and after the date of the Genlyte Acquisition, Borrower will not engage in any business other than the business of selling, renting or leasing automated lighting equipment.

2.10 Amendment to Section 10.27. Section 10.27 of the Financing Agreement shall be amended by deleting Section 10.27 in its entirety and by substituting the following new Section 10.27 in lieu thereof:

10.27 Title to Property; No Liens.

Borrower will not sell, lease or otherwise dispose of or transfer, whether by sale, merger, consolidation, liquidation, dissolution, or otherwise, any of its assets, including, without limitation, the Collateral and other security for the Obligations, except for (i) the sale of Inventory (other than Rental Inventory) in the ordinary course of business, and (ii) the sale of Rental Inventory as long as within sixty (60) days following the date of any such sale Borrower applies the portion of the proceeds of such sale in the amount equal to the net book value of the Rental Inventory sold either (x) to acquire or manufacture replacement Rental Inventory or (y) to make a prepayment of Term Loan A (subject to the Indemnification provision of Section 3.4 of this Agreement); (iii) the sale of the Acquired Assets pursuant to the Genlyte Acquisition Agreement, and (iv) the sale of any other assets not referred to in clauses (i), (ii) or (iii) with an aggregate net book value of Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal year of Borrower.

2.11 Amendment to Schedules to Financing Agreement. Each of Schedule 1, Schedule 2 and Schedule 12 to the Financing Agreement is amended in its entirety to read as set forth on the Schedule 1, Schedule 2 and Schedule 12, respectively, as attached hereto and by reference made a part hereof.

2.12 Amendment to Schedules to Patent Assignment. Each of Schedule A, Schedule B and Schedule C to the Patent Assignment is hereby amended in its entirety to read as set forth on the Schedule A, Schedule B and Schedule C, respectively, as attached hereto and by reference made a part hereof, and which shall be deemed to be attached to the Patent Assignment and by reference made a part thereof.

3. REPRESENTATIONS AND WARRANTIES.

Borrower represents and warrants to Bank as follows:

3.1 The Amendment. This Amendment has been duly and validly executed by an authorized executive officer of Borrower and constitutes the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms.

3.2 Financing Agreement. The Financing Agreement as amended by this Amendment remains in full force and effect and remains the valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms. Borrower hereby ratifies and confirms the Financing Agreement as amended by this Amendment.

3.3 Nonwaiver. Neither the execution, delivery, performance or effectiveness of this Amendment shall operate nor be deemed to be nor construed as a waiver (i) of any right, power or remedy of Bank under the Financing Agreement, nor (ii) of any term, provision, representation, warranty or covenant contained in the Financing Agreement or any other documentation executed in connection therewith. Further, none of the provisions of this Amendment shall constitute, or be deemed to be or construed as, a waiver of any Event of Default under the Financing Agreement as amended by this Amendment.

3.4 Reference to and Effect on the Financing Agreement. Upon the effectiveness of this Amendment, each reference in the Financing Agreement to "this Agreement", "hereunder", "hereof", "herein", or words of like import shall mean and be a reference to the Financing Agreement as amended hereby, and each reference to the Financing Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Financing Agreement shall mean and be a reference to the Financing Agreement as amended hereby.

3.5 Claims and Defenses. As of the date of this Amendment, Borrower has no defenses, claims, counterclaims or setoffs with respect to the Financing Agreement or its Obligations thereunder or with respect to any actions of the Bank or any of its officers, directors, shareholders, employees, agents or attorneys, and Borrower irrevocably and absolutely waives any such defenses, claims, counterclaims and setoffs and releases the Bank and each of its officers, directors, shareholders, employees, agents and attorneys from the same.

4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT NO. 6.

In addition to all of the other conditions and agreements set forth herein, the effectiveness of this Amendment is subject to the each of the following conditions precedent:

4.1 Amendment No. 6 to Financing Agreement. Bank shall have received an original counterpart of this Amendment No. 6 to Financing Agreement, executed and delivered by a duly authorized officer of Borrower; provided, however, that this Amendment will be effective upon Bank's receipt of an executed counterpart of this Amendment No. 6 to Financing Agreement sent by facsimile transmission

during normal business hours followed by an original counterpart, executed and delivered by a duly authorized officer of Borrower and sent by a nationally recognized overnight courier service..

4.2 Acknowledgment of Guarantor. Bank shall have received an original of the attached Acknowledgment of Vari-Lite International, Inc., a Delaware corporation, executed and delivered by a duly authorized officer of Vari-Lite International, Inc..

4.3 No Material Adverse Change. Other than with respect to the sale of the Acquired Assets pursuant to the Genlyte Acquisition Agreement, there shall have occurred no material and adverse change in the Borrower's assets, liabilities or financial condition since the date of the last Financials delivered by Borrower to Bank nor shall there have been any material damage to or loss of any of Borrower's assets or properties since such date.

4.4 Prepayment of Obligations. The Borrower shall have prepaid, with a portion of the net cash proceeds received by the Borrower from the Genlyte Acquisition, (i) a principal amount of Five Million Dollars ($5,000,000) to be applied at par with no premium to the Term Loan A, and (ii) a principal amount of Three Million Dollars ($3,000,000) to be applied at par with no premium to the Revolving Loans. In addition to the payments set forth in the previous sentence, Borrower shall, to the extent a Borrowing Base Deficiency exists as of the effectiveness of the Genlyte Acquisition and the application of such payments, pay an additional principal amount of the Revolving Loans from the net cash proceeds received from the Genlyte Acquisition in an amount equal to the amount of such Borrowing Base Deficiency.

5. MISCELLANEOUS.

5.1 Waiver of Prepayment Premiums and Penalties. Bank waives any and all prepayment premiums and penalties to the extent such premiums and penalties may accrue and be payable to Bank under the Financing Agreement in connection with the payment of obligations set forth in Section 4.4 above.

5.2 Borrower Name Change. Contemporaneous with the consummation of the Genlyte Acquisition, Borrower anticipates changing its name to "VLPS Lighting Services, Inc." Within three days after Borrower's receipt of an Amendment to Articles of Incorporation filed with, and certified by, the Office of the Secretary of State of Delaware, Borrower shall deliver a copy of such certified amendment to Bank. Upon Bank's receipt thereof, the Financing Agreement shall be amended so that each reference to "Vari-Lite, Inc." shall be replaced with "VLPS Lighting Services, Inc." and the term "Borrower" shall be amended to mean "VLPS Lighting Services, Inc., a Delaware corporation." Borrower hereby authorizes the Bank to file any UCC-1 financing statements or related filings to reflect such name change and agrees to reimburse the Bank for any costs or fees associated with such filings.

5.3 Governing Law. This Amendment has been delivered and accepted at and shall be deemed to have been made at Cleveland, Ohio. This Amendment shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the State of Ohio, without regard to principles of conflict of law, and all other laws of mandatory application.

5.4 Severability. Each provision of this Amendment shall be interpreted in such manner as to be valid under applicable law, but if any provision hereof shall be invalid under applicable law, such provision shall be ineffective to the extent of such invalidity, without invalidating the remainder of such provision or the remaining provisions hereof.

5.5 Counterparts. This Amendment may be executed in one or more counterparts, each of which, when taken together, shall constitute but one and the same agreement.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

IN WITNESS WHEREOF, Borrower has caused this Amendment No. 6 to Financing Agreement to be duly executed and delivered by its duly authorized officer as of the date first above written.

Signed and acknowledged in the presence of:		VARI-LITE, INC.
/s/ TRACY KEY		By:	/s/ JEROME L. TROJAN III
Name:	Tracy Key	Its:	Vice President—Finance, Chief Financial Officer
/s/ CHRISTI LAWING
Name:	Christi Lawing

STATE OF TEXAS	)
	) ss:
COUNTY OF DALLAS	)

The foregoing instrument was acknowledged before me this day of November, 2002, by , the of Vari-Lite, Inc., a Delaware corporation, on behalf of the corporation.

/s/ KAREN CRAFT

Notary Public

Accepted at Cleveland, Ohio, Effective as of November , 2002.
U.S. BANK NATIONAL ASSOCIATION
By: /s/ DARYL HAGSTROM
Its: Vice-President

ACKNOWLEDGMENT OF GUARANTOR

The undersigned, Vari-Lite International, Inc., a Delaware corporation, having guaranteed all of the obligations of Vari-Lite, Inc. to U.S. Bank National Association (formerly known as Firstar Bank, National Association) ("Bank"), hereby acknowledges and agrees, effective as of November , 2002, to the terms of the foregoing Amendment No. 6 to Financing Agreement. The undersigned represents and warrants to Bank that the Guaranty executed and delivered by the undersigned to Bank, dated as of December 29, 2000, remains the valid and binding obligation of the undersigned, enforceable against it in accordance with its terms.

		VARI-LITE INTERNATIONAL, INC.
		By:	/s/ JEROME L. TROJAN III
		Its:	Vice President—Finance, Chief Financial Officer

STATE OF TEXAS	)
	) ss:
COUNTY OF DALLAS	)

The foregoing instrument was acknowledged before me this 18th day of November, 2002, by Jerry Trojan, the VP-Finance, Chief Financial Officer of VARI-LITE INTERNATIONAL, INC., a Delaware corporation, on behalf of the company.

/s/ KAREN CRAFT

Notary Public

Exhibit V
Acquired Assets

"Acquired Assets" shall mean the following (with all capitalized terms used herein and not otherwise defined herein having the meaning ascribed to such term in that certain Asset Purchase Agreement dated as of November 18, 2002, by and between Vari-Lite International, Inc., a Delaware corporation, Vari-Lite, Inc., a Delaware corporation, as "Seller," and Genlyte Thomas Group LLC, a Delaware limited liability company, as "Buyer" (the "Genlyte Acquisition Agreement")):

all of Seller's right, title and interest in and to all of Seller's property and assets, real, personal or mixed, tangible and intangible, of every kind and description, wherever located, belonging to Seller and which relate to the Subject Business, which includes the design, manufacture and sale of its products and the furnishing of advisory and consulting services to customers as well as any goodwill associated therewith (but in each case excluding the Excluded Assets), including the following:

(A): all Tangible Personal Property;
(B): all Inventories;
(C): all Accounts Receivable;
(D): all Assumed Agreements and all outstanding offers or solicitations made by or to Seller to enter into any Contract relating to the Subject Business;
(E): all Governmental Authorizations and all pending applications therefor or renewals thereof, in each case to the extent transferable to Buyer, including those listed in Part 3.14 of the Disclosure Letter;
(F): all data and Records related to the operations of the Subject Business, including client and customer lists, credit information and receivable information relating to clients and customers of the Subject Business, referral sources, research and development reports and Records, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, financial and accounting Records relating to payables, receivables and the Assumed Agreements, creative materials, advertising materials, promotional materials, studies, and reports and other similar documents and Records;
(G): all of the intangible rights and property of Seller, including all the Intellectual Property Assets, going concern value, goodwill, the 1-877-Varilite telephone number and e-mail addresses and listings and those items listed in Parts 3.22(d) and 3.22(e) of the Disclosure Letter;
(H): all claims of Seller against third parties relating to the Acquired Assets, whether choate or inchoate, known or unknown, contingent or noncontingent;
(I): all rights of Seller relating to deposits and prepaid expenses, claims for refunds and rights to offset in respect thereof; and

all other properties and assets of every kind, character and description, tangible or intangible, owned by Seller and used or held for use in connection with the Subject Business, whether or not similar to the items specifically set forth above.

"Accounts Receivable"—means (a) all trade accounts receivable and other rights to payment from customers of Seller related to the Subject Business and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to customers of Seller and (b) any claim, remedy or other right related to any of the foregoing.

"Affiliate"—with respect to any specified Person, a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the specified

Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether by the ownership of voting securities, by contract or otherwise. Thus, the Parent and Seller are each Affiliates of the other.

"Assumed Agreements"—means the Contracts listed on Exhibit 2.1(e) to the Genlyte Acquisition Agreement.

"Contract"—means any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding.

"Disclosure Letter"—means the disclosure letter delivered by Seller to Buyer concurrently with the execution and delivery of this Agreement.

"Excluded Assets"—means the following

all assets used in or relating to the business of renting or leasing automated lighting equipment, including, without limitation, the following:

(A): all lighting equipment described and set forth in that certain Broadcast and Professional Audio Video Equipment Appraisal of Vari*Lite prepared for GE Capital by Micor Media Group on August 27, 2002
(B): all "Collateral" (as defined in that certain Security Agreement, dated as of December 29, 2000, between Seller and U.S. Bank National Association (formerly known as Firstar Bank, National Association), to the extent such Collateral is used in or relates to the business of renting or leasing automated lighting equipment
(C): cash and cash equivalents
(D): all receivables due from employees
(E): all receivables due from Affiliates
(F): the following Inventory:

All used Series 200 and Series 300 equipment

All Inventory listed on Schedule 2.1-a to the Genlyte Acquisition Agreement

All Virtuoso DX work in process and finished goods inventory

50% of all Lewis Lee picture books

(G): the following Tangible Property:

All Series 200 and Series 300 equipment including luminaires and consoles and related cable and other support equipment which are used in the operation on this equipment

All Virtuoso consoles and all Virtuoso DX consoles (except one which will be retained by Buyer) and related accessories for these consoles

All subassemblies for Series 200 and Series 300 equipment

All hanging artwork (or made for hanging), photographs, memorabilia and original photo negatives

All desks, file cabinets, office systems (cubicles) and other equipment and supplies located in the offices and/or cubicles of the employees that will remain employed by Seller

All video conferencing equipment and two of three Polycom conference telephones

All software and hardware associated with the Oracle system, the e-mail system and the Sellers web site (including the "fire wall")

All Tangible Personal Property listed on the attached Schedule 2.1-b to the Genlyte Acquisition Agreement

(H): all software (including source code(s)), drawings, parts lists, CAD files, vendor lists and other Records used in or relating to Virtuoso™ and Virtuoso DX™ and all trade secrets and copyrights related thereto (provided Buyer shall receive a fully paid non-exclusive license to the software)
(I): all right, title and interest in and to the names "Virtuoso" and "Virtuoso DX and the tradenames Virtuoso™ and Virtuoso DX™."
(J): all software licensed from third parties
(K): all insurance policies, proceeds and claims
(L): all right, title and interest in and to the domain name www.vlps.com
(M): all email addresses that incorporate "VLPS"
(N): all telephone numbers other than the 1-877-Varilite telephone number
(O): all prepaid assets and deposits other than those related to trade shows, advertising, marketing and payments to vendors for inventory, tooling or Tangible Personal Property
(P): all leasehold interests in real property
(Q): all minute books, stock record books, income tax records, and records relating to other taxes
(R): all personnel records
(S): License Agreement between Disney Enterprises, Inc. and Vari-Lite International, Inc. (dated December 10, 1998)
(T): License Agreement with Joseph N. Tawil, Trustee of the Joseph N. Tawil Separate Property Trust (dated September 1, 1998)
(U): all Settlement Agreement between High End Systems, Inc. and Vari-Lite, Inc. (executed November 19, 1998)
(V): employment agreements except for the Bob Schacherl Executive Employment Agreement
(W): all employee confidentiality and nondisclosure agreements
(X): all agreements between Seller and its Affiliates
(Y): Settlement Agreement among Martin Gruppen, AS, Martin Professional, Inc. and Vari-Lite, Inc. (executed August 25, 2000)
(Z): Settlement Agreement among Clay Paky S.p.A., Coemar S.p.A. and Vari-Lite, Inc. (executed December 24, 2000)
(AA): Web Site Development Agreement between Red Planet Design, Inc. and Vari-Lite, Inc. (effective June 11, 2002)
(BB): IKON Lease Agreement # 19308
(CC): Employee Benefit Plans

"Governmental Authorization"—means any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

(A)

"Intellectual Property Assets"—means those intellectual property assets, except those constituting Excluded Assets (whether owned, used or licensed by Seller as licensee or licensor) constituting:

(i): all issued and pending trademark and service mark registrations owned by Seller and used in the Subject Business (collectively, "Mark Registrations");
(ii): Seller's name, all fictional business names, trading names, and material unregistered trademarks and service marks used in the Subject Business (collectively, "Marks");
(iii): all patents and patent applications owned by Seller (collectively, "Patents");
(iv): all material patentable inventions and discoveries used in the Subject Business (collectively, "Inventions");
(v): all pending and issued copyright registrations owned by Seller and used in the Subject Business (collectively, "Copyright Registrations");
(vi): all material copyrightable published works and unpublished works used in the Subject Business (collectively, "Copyrightable Works");
(vii): all rights in registered mask works used in the Subject Business (collectively, "Rights in Mask Works"); and

all know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans, drawings, and blue prints used in the Subject Business and treated confidentially (collectively, "Trade Secrets")..

"Inventories"—means all inventories of Seller related to the Subject Business, wherever located, including all finished goods, work in process, raw materials, spare parts and all other materials and supplies to be used or consumed by Seller in the production of finished goods.

"Records"—means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

"Subject Business"—means the business of designing, manufacturing and selling automated lighting equipment.

"Tangible Personal Property"—means all machinery, equipment, tools, furniture, office equipment, computer hardware, supplies, materials, vehicles and other items of tangible personal property (other than Inventories) of every kind owned or leased by Seller (wherever located and whether or not carried on Seller's books), together with any express or implied warranty by the manufacturers or sellers or lessors of any item or component part thereof and all maintenance records and other documents relating thereto.

Schedule 1
Licenses, Patents, Trademarks, Etc.

Patents

None

Trademarks

None

Licenses

1.: License Agreement dated as of November 18, 2002, by and between Genlyte Thomas Group LLC, a Delaware limited liability company, as "Licensor," and Vari-Lite, Inc., a Delaware corporation, as "Licensee."

Schedule 2
Indebtedness

VARI-LITE, INC.
DEBT SCHEDULE
10/31/02

NOTES:			Amount Due
Financing Company	Hudson United Bank (4/00) (formerly United Capital)		126,121.77
Financing Company	A. I. Credit Corp (11/00)		47,796.71
Financing Company	A. I. Credit Corp (11/01)		0.00
Financing Company	The CIT Group (5/02)		1,990,495.49
Financing Company	GMAC Financing (11/01) (co 09)		20,667.36
Capital Lease	Comerica Leasing (9/01) (formerly Imperial Bank)		61,849.91
		TOTAL	2,246,931.24

Schedule 12
Indebtedness

VARI-LITE, INC.
LEASES SCHEDULE
10/31/02

Schedule A
To
Patent Assignment

Patents

None

Schedule B
To
Patent Assignment

Trademarks

None

Schedule C
To
Patent Assignment

Licenses

1.: License Agreement dated as of November 18, 2002, by and between Genlyte Thomas Group LLC, a Delaware limited liability company, as "Licensor," and Vari-Lite, Inc., a Delaware corporation, as "Licensee."

QuickLinks

Exhibit 10.88

AMENDMENT NO. 6 TO FINANCING AGREEMENT
1. DEFINED TERMS.
2. AMENDMENT TO FINANCING AGREEMENT.
3. REPRESENTATIONS AND WARRANTIES.
4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT NO. 6.
5. MISCELLANEOUS.
ACKNOWLEDGMENT OF GUARANTOR
Exhibit V Acquired Assets
Schedule 1 Licenses, Patents, Trademarks, Etc.
Schedule 2 Indebtedness
VARI-LITE, INC. DEBT SCHEDULE 10/31/02
Schedule 12 Indebtedness
VARI-LITE, INC. LEASES SCHEDULE 10/31/02
Schedule A To Patent Assignment
Schedule B To Patent Assignment
Schedule C To Patent Assignment
EX-10.89 4 a2100010zex-10_89.htm EXHIBIT 10.89
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Exhibit 10.89

* Confidential treatment has been requested for certain portions of this Agreement pursuant to a request for confidential treatment sent to the Securities and Exchange Commission. Such portions are omitted from this filing and have been filed separately with the Securities and Exchange Commission.

SUPPLY AGREEMENT

This Supply Agreement, dated as of 5:00 p.m. (Dallas, Texas time) on November 18, 2002, is by and between Genlyte Thomas Group LLC, a Delaware limited liability company ("GTG"), acting through its Genlyte Controls Division, and VLPS Lighting Services, Inc., a Delaware corporation formerly known as Vari-Lite, Inc. ("VLPS").

WITNESSETH:

WHEREAS, VLPS desires to purchase from GTG certain lighting and lighting control products; and

WHEREAS, GTG desires to sell certain lighting and lighting control products to VLPS upon the terms and conditions set forth in this Supply Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Definitions. The following terms when initially capitalized in this Supply Agreement shall have, unless the context requires otherwise, the following meanings:

(a) "Affiliate" means, with respect to any specified Person, a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the specified Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

(b) "Applicable Multiplier" has the meaning provided in Annex I hereto.

(c) "Asset Purchase Agreement" means the agreement entitled Asset Purchase Agreement and entered into by VLPS, GTG and the Sole Shareholder simultaneously with this Supply Agreement.

(d) "Assignment" means (a) with respect to any Buyer (i) a Change in Control of the Buyer or its Parent Entity or (ii) an agreement by Buyer to assign or transfer any of its rights or obligations under this Supply Agreement and (b) with respect to any Seller (i) a Change in Control of Seller or (ii) an agreement by Seller to assign or transfer any of its rights or obligations under this Supply Agreement.

(e) "Buyer" means VLPS or such other Person as may, at the relevant time, be entitled to exercise the rights initially granted to "Buyer" hereunder as a result of one or more Assignments or other transactions permitted by Section 15, none of which violated Section 15. Any reference to VLPS in Sections 1 through 25, inclusive, of this Supply Agreement is intended to mean specifically VLPS and not any assignee or other Person.

(f) "Buyer Authorized Designee" means a Person which, at the relevant time, is authorized by Buyer to exercise any of the rights of Buyer hereunder in a manner expressly authorized by Section 2(c).

(g) "Change in Control" means any of the following: (i) 50% or more of the voting power or stock or other equity interest in the subject Person is hereafter acquired by another Person (including all Affiliates of such acquiring Person), whether in one or more transactions, unless, prior to the first of such transactions, such other Person and the subject Person were both members of the same Controlled Group or (ii) the subject Person is merged or consolidated with any other Person, unless, (A) immediately prior to the merger or consolidation, the other Person and the subject Person were both members of the same Controlled Group or (B) the owners of the equity interests and voting power of the subject Person immediately prior to the merger or consolidation own more than 50% of both the equity interests and voting power of the surviving entity immediately following the merger or consolidation.

(h) "Controlled Group" means a Parent Entity and all of its Controlled Subsidiaries. Thus, VLPS and the Sole Shareholder are currently members of the same Controlled Group.

(i) "Controlled Subsidiary" means any Person with respect to which more than 50% of both the stock or other equity interest and the voting power is owned by the subject Person, directly or indirectly through one or more other Controlled Subsidiaries. Thus, VLPS is currently a Controlled Subsidiary of the Sole Shareholder since the Sole Shareholder owns all of the capital stock and voting power of VLPS.

(j) "Dealer Price" means the price at which Products and/or Division Products are or would typically be sold by Seller to dealers located in North America other than Buyer after taking into consideration the volume of purchases made by Buyer and such other dealers in North America and any other parameters reasonably considered by Seller in making pricing decisions, provided that the Dealer Price shall not reflect any special pricing as a result of or related to either (i) discounts, if any, afforded a dealer or dealers for purchases for resale or rental in a specific territory or area, or (ii) for one or more specific customers, projects and/or jobs unless such special pricing is offered under a program made available to all dealers of Seller generally or to an identified dealer or group of dealers of Seller and Buyer satisfies the criteria designated by Seller to participate in such program.

(k) "Delivered" means Products, Division Products and/or Parts, as applicable, shipped FOB from a Seller facility for delivery to Buyer or its designee at a specific location. Thus, by way of example, a Product "Delivered by Seller in the Japanese Market" would be a Product shipped FOB from a Seller facility for delivery in the Japanese Market.

(l) "Division Products" means products labeled by Seller with the "Entertainment Technology" or "ET" name, and not any other product or products of Seller.

(m) "European Market" means the countries in Europe identified on Exhibit "A" hereto.

(n) "European Market Purchase Price" means the amount of Paid Purchases for Products, Division Products and Parts sold by Seller to Buyer or any Buyer Authorized Designee and Delivered into the European Market at the time of such sale. For purposes of calculating the European Market Purchase Price, except as hereafter otherwise provided, all Products, Division Products and Parts that are subject to an unfilled purchase order submitted to Seller on or before October 31 of any year shall be deemed a Paid Purchase in the year such purchase order was submitted (and not any subsequent year), provided that (i) such purchase order may not be cancelled, (ii) such purchase order requests a Delivered date into the European Market prior to December 31 of that year, and (iii) Buyer or any Buyer Authorized Designee pays the purchase price under such purchase order by the later of (1) the end of February of the immediately following year or (2) sixty (60) days after any Products, Division Products or Parts under such pre-October 31 purchase order are Delivered. Notwithstanding the foregoing (but without modifying Seller's obligations under Section 2(a)), if Seller uses commercially reasonable efforts to

Deliver any Products, Division Products or Parts with respect to such pre-October 31 purchase order by June 1 of the immediately following year and still fails to do so, Paid Purchases for any such Products, Division Products or Parts which were not delivered by such June 1 will not be included as part of the "European Market Purchase Price" for the year in which such order was placed (but will be deemed to be part of the "European Market Purchase Price" for the year, if any, in which such Products, Division Products or Parts are Delivered into the European Market to the extent the invoice therefor is paid by the end of February of the immediately following year). For purposes of this definition of "European Market Purchase Price" any Products, Division Products or Parts Delivered between November 1 and December 31 of any year shall be deemed Paid Purchases for that year and no other year as long as the purchase price therefor is paid on or before the last day of February of the immediately following year.

(o) "European Market Purchase Price Minimum" means U.S.$4,500,000 for 2005, U.S.$4,725,000 for 2006, U.S.$4,961,250 for 2007, U.S.$5,209,313 for 2008, U.S.$5,469,778 for 2009, U.S.$5,743,267 for 2010, and U.S.$6,030,430 for 2011. The European Market Purchase Price Minimum for any year after 2011 shall be determined by compounding the European Market Purchase Price Minimum for 2011 (beginning January 1, 2012) using a growth rate of 5% per year (thus, by way of example, if applicable, the amount for 2012 would be U.S.$6,331,952 and the amount for 2013 would be U.S.$6,648,549).

(p) "Exact Copy" means any product manufactured using 50% or more of the same proprietary tooling which is used to manufacture a Product. As used in this definition of "Exact Copy", "manufactures" and "manufacturing" shall include manufacturing, assembling, arranging for another Person to manufacture or assemble on an OEM or private label basis or selling under its own trade name, trademark or other brand. As used in this definition, the term "proprietary tooling" means tooling which is owned by Seller or Seller's vendor and was designed by or under the direction of VLPS or Seller for the specific purpose of manufacturing Products.

(q) "Excluded Sale" means any sale or sales of Products purchased hereunder which: (i) follows an Assignment by Buyer in violation of or not expressly permitted by Section 15 or any other violation of any obligation of Buyer under Section 15, (ii) is or includes a sale or sales (exclusive of any Products delivered by Buyer or any Buyer Authorized Designee to its customers in the Exclusive Territory, if any) of any New/Nearly New Products to any Prohibited Participant, (iii) is or includes a sale or sales (exclusive of any Products delivered by Buyer or any Buyer Authorized Designee to its customers in the Exclusive Territory, if any) of more than U.S.$25,000 (or the equivalent in any foreign currency) in any calendar year of New/Nearly New Products to any Seller appointed dealer (including Affiliates of such dealer) of Products or any other dealer (including Affiliates of such dealer) of automated lighting products, or (iv) is or includes a sale or sales (exclusive of any Products delivered by Buyer and each Buyer Authorized Designee to its customers in the Exclusive Territory, if any) of New/Nearly New Products to a customer who or which is not an Existing Rental Customer of Buyer, or to a permanent installation (such as a theater, museum, theme park, etc.) or other automated luminaire lighting project, permanent installation or job that, prior to such sale or sales, had not been Registered for Spec Credit. A lease which is not a "true lease" or which would be expected to be capitalized under United States generally accepted accounting principles will be considered a sale and not a lease for purposes of this definition. As used in this definition of "Excluded Sale", (i) "Existing Rental Customer of Buyer" means a customer (together with such customer's Affiliates) of Buyer or any Buyer Authorized Designee which had, in the preceding 104-week period, leased or rented automated luminaires from Buyer or any Buyer Authorized Designee for which such customer had paid Buyer or any Buyer Authorized Designee at least U.S.$25,000 and (ii) "Registered for Spec Credit" means the registration by Buyer in writing with Seller of a project, permanent installation or job for "specification credit" in accordance with and subject to the then established Seller specification

credit procedures generally applicable to Seller's dealers of Products. By way of example, if Seller's specification credit procedures generally applicable to dealers of Products at the relevant time permits only the first Person to register for a particular project to be considered registered for specification credit for that project the Buyer could not be Registered for Spec Credit for that project unless the Buyer is the first Person to register for such project under Seller's procedures.

(r) "Exclusive Territory" means, except as hereafter otherwise provided, (i) during the balance of 2002 and during 2003, 2004 and 2005, the Japanese Market and the European Market, (ii) during each of 2006, 2007, 2008, 2009, 2010, 2011 and 2012 and during each subsequent year (if any) during the Term, the Japanese Market if the Japanese Market Purchase Price in each prior calendar year exceeded the Japanese Market Purchase Price Minimum for such prior calendar year and (iii) during each of 2006, 2007, 2008, 2009, 2010, 2011 and 2012 and during each subsequent year (if any) during the Term, the European Market if the European Market Purchase Price in each prior calendar year exceeded the European Market Purchase Price Minimum for such prior calendar year.

(s) "FAC" has the meaning provided in Annex I hereto (except as otherwise provided in Section 3), which is incorporated herein for all purposes.

(t) "FOR" has the meaning provided in Annex I hereto.

(u) "Japanese Market" means the country of Japan.

(v) "Japanese Market Purchase Price" means the amount of Paid Purchases for Products, Division Products and Parts sold by Seller to Buyer or any Buyer Authorized Designee and Delivered into the Japanese Market at the time of such sale. For purposes of calculating the Japanese Market Purchase Price, except as hereafter otherwise provided, all Products, Division Products and Parts that are subject to an unfilled purchase order submitted to Seller on or before October 31 of any year shall be deemed a Paid Purchase in the year such purchase order was submitted (and not any subsequent year), provided that (i) such purchase order may not be cancelled, (ii) such purchase order requests a Delivered date into the Japanese Market prior to December 31 of that year, and (iii) Buyer or any Buyer Authorized Designee pays the purchase price under such purchase order by the later of (1) the end of February of the immediately following year or (2) sixty (60) days after any Products, Division Products or Parts under such pre-October 31 purchase order are Delivered. Notwithstanding the foregoing (but without modifying Seller's obligations under Section 2(a)), if Seller uses commercially reasonable efforts to Deliver any Products, Division Products or Parts with respect to such pre-October 31 purchase order by June 1 of the immediately following year and still fails to do so, Paid Purchases for any such Products, Division Products or Parts which were not delivered by such June 1 will not be included as part of the "Japanese Market Purchase Price" for the year in which such order was placed (but will be deemed to be part of the "Japanese Market Purchase Price" for the year, if any, in which such Products, Division Products or Parts are Delivered into the Japanese Market to the extent the invoice therefor is paid by the end of February of the immediately following year). For purposes of this definition of "Japanese Market Purchase Price" any Products, Division Products or Parts Delivered between November 1 and December 31 of any year shall be deemed Paid Purchases for that year and in no other year as long as the purchase price therefor is paid on or before the last day of February of the immediately following year.

(w) "Japanese Market Purchase Price Minimum" means U.S.$500,000 for 2005, U.S.$525,000 for 2006, U.S.$551,250 for 2007, U.S.$578,813 for 2008, U.S.$607,753 for 2009, U.S.$638,141 for 2010 and U.S.$670,048 for 2011. The Japanese Market Purchase Price Minimum for any year after 2011 shall be determined by compounding the Japanese Market Purchase Price Minimum for 2011 annually (beginning January 1, 2012) using a growth rate of 5% per year (thus, by way of example,

if applicable, the amount for 2012 would be U.S.$703,550 and the amount for 2013 would be U.S.$738,728).

(x) "Minimum Charge" means U.S.$10.00 for each item of Parts (regardless of the quantity of each item of Parts ordered), but in no event less than U.S.$50.00 per purchase order.

(y) "New/Nearly New Product" means any and each Product (including any item which would be a Product but for the removal of the "VARI*LITE" label) which was Delivered hereunder within one year prior to the time of its sale by Buyer.

(z) "Noncompetition Agreement" means the agreement entitled Noncompetition Agreement which was entered into by GTG, VLPS and Sole Shareholder simultaneously with this Supply Agreement.

(aa) "Paid Purchases" means the amounts actually paid to Seller in U.S. dollars for Products, Division Products and Parts sold and Delivered hereunder for which Seller has received full payment; thus, the term "Paid Purchases" shall not include any amounts paid for taxes (sales, use, export, import, or otherwise), shipping, insurance or duties or for any item other than the purchase price of Products, Division Products and Parts.

(bb) "Parent Entity" means a Person which (a) has a Controlled Subsidiary which is the Buyer or Seller and (b) is not a Controlled Subsidiary of any Person (including all Affiliates of any Person). Thus, the Sole Shareholder is the Parent Entity of VLPS on the date hereof.

(cc) "Parts" means bulbs for the Products and Division Products (if any), parts and subassemblies for the Products and the Division Products (if Seller at the relevant time generally provides repair parts for Division Products), Gobos and parts and subassemblies for Gobos and, to the extent in Seller's stock at the relevant time, parts and subassemblies purchased by GTG from VLPS pursuant to the Asset Purchase Agreement, including, parts and subassemblies for VARI*LITE® Series 200™, Series 300™, Virtuoso™ and Virtuoso DX™ products.

(dd) "Permitted Amount" shall mean an amount equal to the greater of (i) the net purchase price (excluding rebates and refunds) paid for all Products purchased during the calendar year immediately preceding date of the Assignment of this Supply Agreement by the First Time Assignee (as hereinafter defined), or (ii) 40% of Seller's total annual production (determined on January 1 of each year based on the net purchase price (excluding rebates and refunds) paid for all Products shipped by Seller in the immediately preceding calendar year), provided that (1) after the amount calculated by the foregoing clause (ii) of this definition has been first determined, it shall increase thereafter using a growth rate of 5% per year compounded annually, and (2) if the Assignment by the First Time Assignee occurs on or before December 31, 2003, the amount determined pursuant to the foregoing clause (ii) of this definition shall be U.S.$10,000,000.

(ee) "Permitted Assignment" means any agreement of a Controlled Subsidiary of the Sole Shareholder to assign or transfer any rights under this Supply Agreement to an entity which is a Controlled Subsidiary of the Sole Shareholder if there has not then been a Change in Control of the Sole Shareholder.

(ff) "Person" means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or governmental body.

(gg) "Products" means, subject to the limitations hereafter provided, new entertainment lighting and lighting control products sold by Seller and labeled with "VARI*LITE" or a name confusingly similar thereto. Subject to the provisions of Section 7, Products are expected to include but may not necessarily be limited to VARI*LITE® Series 1000™, Series 2000™ and Series 3000™ products sold by Seller, the rights to which were purchased by GTG from VLPS pursuant to the

Asset Purchase Agreement. Notwithstanding anything contained herein to the contrary, the term "Products" does not include Division Products or Parts.

(hh) "Prohibited Participant" shall mean any Person and its Affiliates, taken as a whole, which, (i) as their primary business, manufactures lighting and/or lighting control products for sale to Persons other than Affiliates of such Person, or (ii) generated in one of the three most recent calendar years more than U.S.$10,000,000 in gross sales from the manufacturing of lighting and/or lighting control products for sale to Persons other than Affiliates of such Person. As used in this definition of "Prohibited Participant", "manufactures" and "manufacturing" shall include manufacturing, assembling, arranging for another Person to manufacture or assemble on an OEM or private label basis or selling under its own trade name, trademark or brand.

(ii) "Seller" means GTG or such other Person as may, at the relevant time, be entitled to exercise the rights initially granted "Seller" hereunder as a result of one or more Assignments, none of which violated Section 15. Any reference to GTG in Sections 1 through 25, inclusive, of this Supply Agreement is intended to mean specifically GTG and not any assignee or other Person.

(jj) "Sole Shareholder" means Vari-Lite International, Inc., a Delaware corporation, which is the sole shareholder of VLPS on the effective date of this Supply Agreement.

(kk) "Term" means the period of time commencing as of the date hereof through the termination of this Supply Agreement pursuant to Section 12.

(ll) "Terms and Conditions" means the terms and conditions extended by Seller hereunder as they may be modified from time to time, but in no case shall the terms and conditions generally extended by Seller to Persons other than Buyer be any more favorable to such Persons than the Terms and Conditions are to Buyer. The initial Terms and Conditions have been initialed by the parties as of the date hereof. Notwithstanding the foregoing, however, if and to the extent any provision of the Terms and Conditions conflict with any provision of this Supply Agreement, the provisions of this Supply Agreement shall govern during the Term and such Terms and Conditions shall govern following the Term.

(mm) "Third Party Service Center" means any Person appointed by Buyer to serve as a service center in the Exclusive Territory pursuant to Section 6.

2. Agreement to Supply Products.

(a) Subject to the provisions of Section 2(b), the provisions of Section 8 and the Terms and Conditions, Seller will, during the Term, use commercially reasonable efforts to supply and sell to Buyer any and all Products, Division Products and Parts then being sold by Seller to the extent Seller receives purchase orders from Buyer in form reasonably acceptable to Seller. Seller will not withhold shipment of Products with the primary purpose of avoiding or reducing payment of any amount otherwise payable under Section 4. Buyer will have no obligation to purchase any Products, Division Products or Parts hereunder except to the extent Buyer delivers non-cancelable purchase orders (based on Seller's policies) therefor to Seller. The parties agree that the Terms and Conditions will apply to any and all Products, Division Products and Parts sold by Seller hereunder.

(b) Subject to the provisions of this Supply Agreement, Seller hereby appoints Buyer as an authorized dealer of, with the right to sell to Buyer's customers, the Products and Division Products throughout the World other than the Exclusive Territory (including in the Middle East and Africa the right to appoint and sell or otherwise distribute to distributors and dealers). With respect to the Exclusive Territory, if any, as it may be constituted from time to time, subject to the provisions of this Supply Agreement, Seller hereby appoints Buyer as (i) the exclusive authorized distributor of the Products, with the right to sell to Buyer's customers and otherwise distribute the

Products in the Exclusive Territory, if any, including the right to sell to distributors and dealers appointed by Buyer in the Exclusive Territory, and (ii) a non-exclusive distributor of the Division Products, with the right to sell to Buyer's customers and otherwise distribute the Division Products in the Exclusive Territory, if any, including the right to sell to distributors and dealers appointed by Buyer in the Exclusive Territory, if any. Notwithstanding anything contained herein to the contrary, except as expressly provided in the immediately following sentence, Seller shall have no duty to qualify or take any action to qualify, permit or facilitate the sale or import of any Products, Parts or Division Products in any country, territory or other location. Seller will use commercially reasonable efforts to take the steps a manufacturer would normally be expected to take to qualify, cause or permit the Products and Parts to comply with applicable legal requirements so they may be sold and distributed in North America and the Exclusive Territory, if any. At such time as Buyer's exclusive rights to act as a distributor in any part of the Exclusive Territory shall terminate, the rights granted to distributors and dealers appointed by Buyer shall terminate and Buyer shall remain a non-exclusive dealer of the Products and Division Products in such part of the Exclusive Territory for the remainder of the Term. As a condition to any duty of Seller to supply or sell any Products, Division Products or Parts pursuant to this Supply Agreement, Buyer shall (i) sign and deliver such dealer and/or distributor agreements as Seller may from time to time reasonably request, provided such agreements are consistent with the terms of any agreements Seller generally has with other dealers or distributors (except as necessary to not be in conflict with the provisions of this Supply Agreement), and (ii) be current in all amounts owed to Seller. In the event of any conflict between this Supply Agreement and such dealer and/or distributor agreements, this Supply Agreement shall govern during the Term and such dealer and/or distributor agreements shall govern following the Term.

(c) Until there has been a Change in Control of Buyer's Parent Entity, Buyer may authorize Buyer's Parent Entity or any Person which is a Controlled Subsidiary of Buyer's Parent Entity at the relevant time to exercise, without duplication (although purchases and resales of Products, Division Products and Parts or the exercise of Buyer's rights under Section 6 by more than one Person will not be considered duplication), any of the rights of Buyer under this Supply Agreement upon notice to Seller and on the condition that Buyer and Buyer's Parent Entity are each jointly and severally liable to Seller (and document to Seller's reasonable satisfaction such joint and several liability) with respect to any failure to perform any obligation to Seller under this Supply Agreement, whether by Buyer and/or any such Person exercising such rights.

3. Purchase Prices.

(a) ****************************************************************************************** ************************************************************************************************* ************************************************************************************************* ************************************************************************************************* *************************************************************************************************

(b) For Parts Delivered during the Term, Seller will charge Buyer, and Buyer will pay Seller, an amount equal to the greater of either (i) the Minimum Charge or (ii) the FAC for each Part determined based on a process similar to the process set forth in Annex I hereto used to determine the FACs for Products, multiplied by the Applicable Multiplier; provided, however, with respect to each Part that was purchased by GTG from VLPS pursuant to the Asset Purchase Agreement and that is listed on the list dated this date, titled "FACS FOR CERTAIN PARTS", and initialed by GTG and VLPS, the FAC shall be as set forth therein. Except with respect to the Minimum Charge, in no case shall the price charged by Seller pursuant to this Section 3(b) be more than the price at which Seller does or would typically sell to dealers located in North America other than Buyer after taking into consideration the volume of purchases made by such dealer and any other parameters reasonably considered by Seller in making pricing decisions.

Except with respect to the Parts purchased by GTG from VLPS pursuant to the Asset Purchase Agreement that are listed on the "FACS FOR CERTAIN PARTS" list described above, the FAC for each Part shall be determined by Seller, and Buyer shall have audit rights with respect to Seller's determination of the FAC for each Part, consistent with the provisions set forth in Section 3 of Annex I hereto.

(c) All sales and use taxes, shipping costs from Seller's shipping dock, duties, import taxes, export taxes and insurance expenses shall be borne solely by Buyer, and will not be considered part of the purchase price for Products, Parts and Division Products.

4. Rebate Rights. Seller shall pay to Buyer (but not to Controlled Subsidiaries of Buyer's Parent Entity unless otherwise directed to do so by Buyer) rebates based on the Paid Purchases of Products (reduced by the amount of Paid Purchases of Products whether during or prior to the applicable period, to the extent of the Products which are or have been sold in such a manner as to constitute an Excluded Sale(s)), as provided in Annex I hereto, subject only to the express limitations and conditions in this Supply Agreement and said Annex I. Buyer shall pay to Seller any and all amounts required by Annex I hereto.

5. Exclusive Rights. During the Term, Seller will (a) not sell or deliver Products or Exact Copies into the Exclusive Territory, if any, except at the request of Buyer, (b) not knowingly sell or deliver Products or Exact Copies to any Person other than Buyer without the prior consent of Buyer if and to the extent Seller knows such Person is attempting to buy or obtain possession of such Products or Exact Copies for the purpose of selling or delivering them into the Exclusive Territory, and (c) include a legend in form and substance reasonably necessary to reflect that Seller reserves the right not to make future sales to any Person who buys or otherwise accepts delivery of Products for the purpose of selling or delivering them into the Exclusive Territory (although Seller shall have no obligation to refrain from making such future sales to such Person) and stating that the sale or delivery of the Products into the Exclusive Territory will void any product warranty (although such provision shall not preclude Seller, in its discretion, from providing warranty services or remedies as long as Seller does not maintain a physical presence (other than with respect to people and items used by them for servicing Products) in the Exclusive Territory, if any) in the following form documents with respect to Products, whether maintained in hard copy or electronic format, if and when maintained by Seller: written or electronic form dealer or distributor agreements, written or electronic form terms and conditions, written or electronic form warranty cards, and written or electronic form quote documents (with all such agreements, terms and conditions, warranty cards and quotes being considered a "written or electronic form" or "form documents" only if they are a form generally used by Seller to appoint dealers and distributors, specify terms and conditions, notify customers of warranties or provide quotes for Products). For purposes of this Section 5 only, the term "Products" shall be deemed to include any product that would be a Product but for the fact it is not new.

6. Appointment as Service Center; Indemnification.

(a) Subject to the provisions of this Supply Agreement, Seller hereby appoints Buyer, and Buyer agrees to act, as the exclusive service center for servicing, and Buyer agrees to service, Products during the Term to the extent necessary to provide warranty services Seller is obligated to provide in the Japanese Market as long as it remains a part of the Exclusive Territory and in the European Market as long as it remains a part of the Exclusive Territory (provided that nothing in this Section 6 shall prevent Seller from servicing Products in the Exclusive Territory, if any, as long as Seller does not maintain a physical presence (other than with respect to service people and items used by them for servicing Products) in the Exclusive Territory, if any). Buyer will sign and deliver such service center agreements as Seller may from time to time reasonably request (with respect to both part (a) and part (b) of this Section 6), provided such agreements are consistent with the terms of agreements Seller generally has with other service centers. In the event of any

conflict between this Supply Agreement and any such service center agreement, this Supply Agreement shall govern during the Term and such service center agreement shall govern following the Term. Buyer will have the right, at any time and from time to time, to appoint Third Party Service Centers to act as service centers in the Exclusive Territory, and Buyer shall advise Seller of such appointment within 30 days of the date it appoints any Third Party Service Center. As a condition to being so appointed, each Third Party Service Center will execute and deliver such documents as Seller may reasonably request, provided such documents are consistent with the terms of documents Seller generally has with other service centers, and agree to be permanently terminated and not reappointed as a Third Party Service Center if reasonably requested by Seller. Notwithstanding anything contained herein to the contrary, the appointment of Buyer and/or each Third Party Service Center shall terminate 90 days following written notice by Seller, Buyer or the Third Party Service Center, which written notice shall not be sent prior to the earlier of (i) the end of the Term or (ii) with respect to the European Market or Japanese Market, the date that it ceases to be a part of the Exclusive Territory. Seller will reimburse Buyer or any appropriate Third Party Service Center for all approved warranty services provided for Products pursuant to this Section 6(a) on the same basis Seller reimburses other service centers appointed by Seller, if any, or if none, on a reasonable basis for the services rendered. Neither Buyer nor any Third Party Service Center shall be obligated to provide any warranty or other service with respect to Products or Exact Copies sold as new products into the Exclusive Territory but which were neither (i) sold to or at the request of Buyer or any Affiliate of Buyer nor (ii) sold or delivered into the Exclusive Territory by, at the request of or with the approval of Buyer, any Affiliate of Buyer or any Person in Buyer's Controlled Group.

(b) In addition, at Buyer's option, which may be exercised at any time during the Term (and from time to time with respect to separate locations), Seller will appoint Buyer, on generally the same terms as other service centers authorized by Seller, to act as a non-exclusive service center during the Term for servicing Products at any Buyer location in North America and at any other locations throughout the world where Buyer has an office from time to time.

(c) Buyer will indemnify and hold harmless Seller from any and all losses, damages, claims and expenses (including reasonable attorneys fees and charges) arising from any breach of contract (including the provisions of this Supply Agreement and the contracts, if any, entered into by Buyer pursuant hereto) by, or any negligent, tortious or illegal act of, Buyer, including in connection with or related to serving as a service center. Seller will, except as hereafter otherwise provided, indemnify and hold harmless Buyer from any and all losses, damages, claims and expenses (including reasonable attorneys fees and charges) arising from any breach of contract (including the provisions of this Supply Agreement and the contracts, if any, entered into by Seller pursuant hereto) by, or any negligent, tortious or illegal act of, Seller, including in connection with or related to any product liability or patent infringement claim asserted against Buyer with respect to any Products, Division Products and/or Parts manufactured and sold by Seller to Buyer after the date hereof; provided, however, Seller will not be required to indemnify Buyer for any claim hereunder to the extent either (i) such claim would not be valid if all the representations in §3 of the Asset Purchase Agreement were accurate or (ii) VLPS and/or Sole Shareholder is obligated to indemnify GTG with respect to the subject matter of that claim under the Asset Purchase Agreement. Buyer will, as a condition of appointing a Third Party Service Center, include a provision in a contract with the Third Party Service Center which will require (for the benefit of Seller) such Third Party Service Center to indemnify and hold harmless Seller from any and all losses, damages, claims and expenses (including reasonable attorneys fees and charges) arising from any breach of contract by, or any negligent, tortious or illegal act of, such Third Party Service Center, including in connection with or related to serving as a service center.

7. Withdrawal Rights of Products and Division Products. If, during the Term, Seller should desire to withdraw any Product or Division Product from its product line offering, Seller shall use commercially reasonable efforts to give Buyer written notice at least ninety (90) days prior to the effective date of such withdrawal and shall use commercially reasonable efforts to fill any Buyer orders for such withdrawn Product and/or Division Product placed prior to such effective date. Minor changes which do not substantially affect the fit, form or function of the Product or Division Product shall not be deemed a "withdrawal" pursuant hereto, and Seller shall be entitled to make such minor changes without prior notice to Buyer.

8. Provision of Parts.

(a) Seller will maintain such inventory of Parts as Seller in its sole discretion determines appropriate. If in stock on the date of Delivery, Seller will sell Parts to Buyer on the terms provided in this Supply Agreement, although this provision shall not obligate Seller to maintain Parts in stock.

(b) If Seller fails to sell to Buyer on a reasonably prompt basis any Part (other than Parts for the Division Products) and such failure continues for 30 days after Buyer gives written notice thereof to Seller, Buyer shall have as its sole and exclusive remedy the rights expressly provided in this Section 8(b). Seller will, with a reasonable time following the receipt of written demand from Buyer, deliver to Buyer at its principal office, Seller's existing working drawings, specifications and list of suppliers for such Part, if any, as may be reasonably requested by Buyer. In addition, Seller shall authorize the use of tools by, and grant limited licenses (as reasonably determined appropriate by Seller) to, any Person (who shall not be a Prohibited Participant) designated by Buyer, all as may be reasonably necessary to enable Buyer to obtain, use and sell such Part. Seller will not be required to either (i) create any new engineering drawings, specifications and tooling if they do not exist or (ii) make available or authorize the use of tooling if such use would interfere with Seller's need for such tooling. All reasonable out-of-pocket third party costs Seller incurs in performing its obligations under this Section 8(b) shall be promptly reimbursed by Buyer.

9. Warranty; Limitation on Liability.

(a) Seller shall provide, with respect to all Products, Division Products and Parts sold by Seller hereunder, a warranty, as modified from time to time, on terms no less favorable than any other warranty generally offered by Seller with respect to the relevant Product, Division Product or Part. EXCEPT AS SPECIFICALLY SET FORTH IN THE IMMEDIATELY PRECEDING SENTENCE, (i) BUYER ACKNOWLEDGES THAT THE PRODUCTS, DIVISION PRODUCTS AND PARTS WILL BE TRANSFERRED TO BUYER WITHOUT ANY REPRESENTATION OR WARRANTY, IN "AS IS" CONDITION and (ii) BUYER HAS NOT RELIED AND WILL NOT RELY ON ANY REPRESENTATION OR WARRANTY OF SELLER, EXPRESS OR IMPLIED, AS TO THE PHYSICAL CONDITION OF THE PRODUCTS, DIVISION PRODUCTS AND PARTS OR OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. The initial warranty is set forth as part of the initial Terms and Conditions.

(b) Notwithstanding anything in this Supply Agreement to the contrary, no Person shall be liable for any incidental, consequential or exemplary damages in connection with any breach of this Supply Agreement or any duty hereunder.

10. Export or Re-Export of Technical Information. The parties acknowledge that export or re-export of technical data or any product that is produced as a result of the use of such technical data is subject to the requirement of a license under the U.S. Export Administration Act of 1969, as amended, and its implementation regulations, as amended, and is possibly further regulated by the laws, rules and regulations of other countries and jurisdictions. Buyer will not knowingly export or

re-export technical data furnished by Seller or any of its Affiliates or any product that is produced as a result of the use of such technical data to any country or other area determined by the United States of America or other applicable governmental authority to be a prohibited destination, unless Buyer has first obtained all necessary export licenses and satisfied all governmental requirements so that such destination is no longer prohibited by applicable law or authority.

11. Right to Use "Vari-Lite" Trade Name in Japan. As long as the Exclusive Territory includes the Japanese Market, Seller shall not object to the use in Japan by Buyer or its Affiliates of the trade name "Vari-Lite Japan". Seller shall not (a) for two (2) years from and after the date hereof, object to the use by Buyer or its Affiliates of the trade name "Vari-Lite Asia", (b) from and after the date hereof, use the trade name "Vari-Lite Asia" or (c) during the Term, use or authorize any other Person to use the trade name "Vari-Lite" or any other name confusingly similar thereto in Japan except as contemplated by the immediately following sentence. Notwithstanding the foregoing, Seller may use the name "Vari-Lite" in connection with the labeling of and/or promotion of the Products in Japan and elsewhere. At all times during and after the Term, any trademark rights or any benefits arising out of any usage of the trademark or trade name "Vari-Lite" or any confusingly similar trademark shall inure to the sole benefit of GTG, the acknowledged owner of "Vari-Lite" trademark.

12. Term and Termination.

(a) Subject to Section 12(d), this Supply Agreement shall commence on the date hereof and terminate upon termination pursuant to Section 12(b), (c) or (d), whichever first occurs.

(b) Seller may terminate this Supply Agreement upon the occurrence of any of the following:

(i) Buyer shall default in the performance of any of its obligations under this Supply Agreement or VLPS shall default in the performance of any of its obligations under the Noncompetition Agreement, and such default is not cured within 30 days after receipt by Buyer or VLPS of written notice from Seller in the case of a monetary default or within 90 days after receipt by Buyer or VLPS of written notice from Seller in the case of any other default;

(ii) Buyer shall make a general assignment for the benefit of creditors or shall become or be adjudicated a bankrupt or shall voluntarily file a petition in bankruptcy, or file an answer admitting the material allegations of a petition filed against it for an adjudication in bankruptcy, or shall apply for or suffer the appointment of a receiver of its property and assets and such receiver so appointed shall not be discharged within 60 days after his appointment;

(iii) at the time Buyer or any Affiliate of Buyer is or becomes a Prohibited Participant;

(iv) if Buyer or any Affiliate of Buyer or any assignee of any of the rights of Buyer hereunder violates any provision of Section 15, makes or agrees to make (even if null and void under this last sentence of Section 15) any assignment of its rights or obligations under this Supply Agreement or takes or permits any action to be taken which results in an Assignment or other action (even if null and void under this last sentence of Section 15) which violates any requirement of or is not expressly permitted by Section 15.

(c) This Supply Agreement shall automatically terminate upon the later of ten years after the date hereof or 30 months following notice from Seller to Buyer of Seller's election to terminate this Supply Agreement.

(d) Buyer may terminate this Supply Agreement at any time and for any reason upon 30 days prior written notice to Seller.

(e) The obligation of Buyer to pay for Products, Division Products and Parts sold during or after the Term, the obligation of Seller and Buyer, if any, to pay amounts due under Section 4 for or relating to Products Delivered during the Term and the obligation (if any) of Seller to use commercially reasonable efforts to fill any accepted (during the Term) but unfilled purchase orders, the duties of the parties under any other agreement and the provisions of Sections 6(c), 9, 10, 11 and 13 through 25 shall survive the termination of this Supply Agreement and, if applicable, the provisions of Section 6(a) shall survive the termination of this Supply Agreement until expiration of the 90-day period provided for in Section 6(a). In all other cases, the parties shall have no obligations under this Supply Agreement following the termination hereof.

(f) Termination of this Supply Agreement and the other remedies provided in this Section 12 shall not be the exclusive remedies for any breach of this Supply Agreement, and each party shall be entitled to all other remedies available at law or in equity, subject to the limitations in Section 9.

13. Independent Contractors. This Supply Agreement does not make either Buyer or Seller the employee, agent or legal representative of the other for any purpose whatsoever. Neither Buyer nor Seller is granted any right or authority to assume or to create any obligation or responsibility, express or implied, on behalf or in the name of the other. In fulfilling its obligations or exercising its rights pursuant to this Supply Agreement each of Buyer and Seller shall be acting as an independent contractor. No partnership or joint venture arrangement shall exist between the Buyer and Seller as a result of this Supply Agreement.

14. Confidentiality.

(a) VLPS has entered into confidentiality and related obligations under the Asset Purchase Agreement, which confidentiality and related obligations apply to information currently known to VLPS. However, as an additional obligation (and not in lieu of any other obligation of Buyer), all Seller Confidential Information (as defined below) relating to or obtained from Seller or its Affiliates shall be held in confidence by Buyer and each Buyer Authorized Designee to at least as great an extent and in at least the same manner as Buyer protects its own confidential or proprietary information but using no less than reasonable care. Except as otherwise required by law, neither Buyer nor any Buyer Authorized Designee shall disclose, publish, release, transfer or otherwise make available Seller Confidential Information in any form to, or for the use or benefit of, any person or entity without Seller's prior written consent during the Term and for a period of three years thereafter. "Seller Confidential Information" for purposes of this Section 14(a) means all proprietary information (whether or not specifically labeled or identified as confidential), in any form or medium, that is disclosed by Seller or its agents or representatives to Buyer or any Buyer Authorized Designee in the performance of this Supply Agreement that relates to the business, products, services, research or development of Seller, its suppliers, distributors or customers. Seller Confidential Information includes the following: (i) internal business information (including information relating to strategic and staffing plans and practices, marketing, promotional and sales plans, practices and programs, training practices and programs, cost, rate and pricing structures and accounting and business methods); (ii) identities of, individual requirements of, specific contractual arrangements with, and information about, suppliers, distributors and customers and their confidential information, (iii) trade secrets, trade dress, ideas, inventions, designs, developments, devices, methods, processes and systems (whether or not patentable or copyrighted and whether or not reduced to practice or fixed in a tangible medium), and (iv) the specific terms and conditions of this Supply Agreement. Notwithstanding the foregoing, Seller Confidential Information shall not include any information (i) that is publicly available other than through the disclosure by Buyer or the Buyer Authorized Designee, (ii) that was previously known to Buyer or the Buyer Authorized Designee free of any obligation to keep it confidential, excluding any such information that GTG purchased from VLPS pursuant to the Asset Purchase Agreement or which

otherwise relates primarily to the assets or business acquired by GTG from VLPS pursuant thereto, or (iii) that was lawfully received by Buyer or the Buyer Authorized Designee from a party other than Seller without an obligation of non-disclosure, excluding any such information that GTG purchased from VLPS pursuant to the Asset Purchase Agreement or which otherwise relates primarily to the assets or business acquired by GTG from VLPS pursuant thereto.

(b) In addition to any confidentiality obligation imposed on Seller under the Asset Purchase Agreement, all Buyer Confidential Information (as defined below) hereafter received by Seller and relating to or obtained from Buyer or its Affiliates shall be held in confidence by Seller to at least as great an extent and in at least the same manner as Seller protects its own confidential or proprietary information but using no less than reasonable care. Except as otherwise required by law, Seller shall not disclose, publish, release, transfer or otherwise make available Buyer Confidential Information in any form to, or for the use or benefit of, any person or entity without Buyer's prior written consent during the Term and for a period of three years thereafter. "Buyer Confidential Information" for purposes of this Section 14(b) means all proprietary information (whether or not specifically labeled or identified as confidential), in any form or medium, that is disclosed by Buyer or its agents or representatives to Seller in the performance of this Supply Agreement that relates to the business, products, services, research or development of Buyer, its suppliers, distributors or customers. Buyer Confidential Information includes the following: (i) internal business information (including information relating to strategic and staffing plans and practices, marketing, promotional and sales plans, practices and programs, training practices and programs, cost, rate and pricing structures and accounting and business methods); (ii) identities of, individual requirements of, specific contractual arrangements with, and information about, suppliers, distributors and customers and their confidential information, (iii) trade secrets, trade dress, ideas, inventions, designs, developments, devices, methods, processes and systems (whether or not patentable or copyrighted and whether or not reduced to practice or fixed in a tangible medium), and (iv) the specific terms and conditions of this Supply Agreement. Notwithstanding the foregoing, Buyer Confidential Information shall not include any information (i) that is publicly available other than through the disclosure by Seller, (ii) that was previously known to Seller free of any obligation to keep it confidential, (iii) that was lawfully received by Seller from a party other than Buyer without an obligation of non-disclosure, or (iv) that was purchased by GTG pursuant to the Asset Purchase Agreement or which otherwise relates solely to the assets or business acquired by GTG from VLPS pursuant thereto.

(c) If a Person receives confidential information which is subject to the provisions of this Section 14 while such Person is a Buyer or Seller and such Person discontinues being a Buyer or Seller, as the case may be, the confidentiality obligations of this Section 14 shall continue to apply to such Person for the remainder of the Term and three years thereafter. If Buyer or Seller (or a previous Buyer or Seller) breaches the provisions of this Section 14, the party aggrieved thereby shall be entitled to specific performance and injunctive or other equitable relief as a remedy for such breach and the breaching party (or its predecessor(s)) waives any requirement for the securing or posting of any bond in connection with such remedy. Such remedy shall not be deemed to be the exclusive remedy for a breach of this Section 14, but shall be in addition to all other remedies available at law or in equity.

15. Assignment. Subject to the terms of this Section 15, neither Buyer nor Seller shall have the right to assign or take or permit any action to be taken which results in an Assignment or other transfer any of its rights or obligations under this Supply Agreement except with the prior written consent of the other. Notwithstanding the foregoing, subject to the limitations hereafter provided (and subject to the impact on the Applicable Multiplier), upon prior or contemporaneous written notice to the other party (a) Buyer shall be entitled (without such prior written consent) to assign any or all of its rights and obligations hereunder to any Controlled Subsidiary of its Parent Entity if and only if

Buyer and such assignee shall be (and document to Seller's reasonable satisfaction that they are) jointly and severally liable to Seller for the performance of all obligations to Seller hereunder, (b) Buyer shall be entitled (without such prior written consent) to assign all of its rights and obligations under this Supply Agreement to a purchaser of all or substantially all of the business and assets of Buyer or in connection with a sale of all of the capital stock of Buyer or a Change in Control of Buyer's Parent Entity if and only if the purchaser of such business and assets, purchaser of such stock or Person succeeding the Buyer's Parent Entity as a result of such Change in Control is not a Prohibited Participant and becomes liable (in a document reasonably acceptable to Seller) for the performance of all obligations to Seller hereunder (the assignee pursuant to the first assignment by Buyer pursuant to this clause (b) is referred to herein as the "First Time Assignee"), (c) Seller shall be entitled (without such prior written consent) to assign any or all of its rights and obligations hereunder to any of its Affiliates if and only if Seller and such assignee shall be (and document to Buyer's reasonable satisfaction that they are) jointly and severally liable to Buyer for the performance of all obligations to Buyer hereunder, and (d) Seller shall be entitled (without such prior written consent) to assign all of its rights and/or obligations under this Supply Agreement to a purchaser of all or substantially all of the business of Seller or in connection with a sale of all of the capital stock of Seller or a Change in Control of Seller if and only if the purchaser of such business and assets, purchaser of such stock or Person succeeding Seller (or its successor) as a result of such Change in Control is not primarily engaged in the lighting products rental business and becomes liable (in a document reasonably acceptable to Buyer) for the performance of all obligations to Buyer hereunder. Notwithstanding anything in this Supply Agreement to the contrary, unless Seller consents otherwise (which consent may be granted or withheld by Seller in its sole discretion), the first and all subsequent assignees of the First Time Assignee and each subsequent assignee shall not be entitled to any payment pursuant to Section 4 or Annex I to this Supply Agreement with respect to any Paid Purchases of Products in excess of the Permitted Amount. Any Assignment not expressly authorized by this Section 15 is prohibited and shall be null and void.

16. Captions. Captions and section headings used herein are for convenience only and are not a part of this Supply Agreement and shall not be used in construing this Supply Agreement.

17. Notices and Other Communications. Any notice required to be given pursuant to this Supply Agreement shall be in writing, which may include telecopy or other electronic transmission reduced to written form. Notice given by telecopy or other electronic transmission shall be deemed to have been given and received when sent. Notice by mail shall be deemed to have been given and received four calendar days after the day first deposited in the United States mail, certified mail, first class postage prepaid, return receipt requested, and as addressed as shown below. Notices by overnight courier service shall be deemed to have been given and received the day after they are sent. All notices shall

be to the following addresses, unless changed in writing pursuant to this Section 17 by the respective addressee:

If to Buyer:		VLPS Lighting Services, Inc. 201 Regal Row Dallas, Texas 75247 Attn: H.R. Brutsché III
with a copy (which shall not constitute notice) to:
		Gardere Wynne Sewell LLP 3000 Thanksgiving Tower 1601 Elm Street Dallas, Texas 75201 Attn: Alan J. Perkins Telecopier: (214) 999-3683
If to Seller:		Genlyte Controls Division 2413 Shiloh Road Garland, Texas 75041 Attn: Steve Carson
with a copy (which shall not constitute notice) to:
		Genlyte Thomas Group, LLC 10350 Ormsby Park Place Suite 601 Louisville, Kentucky 40223 Attn: Dan Fuller

18. Entire Agreement. This Supply Agreement constitutes the full understanding of the parties, a complete allocation of risks between them and a complete and exclusive statement of the terms and conditions of their agreement relating to the subject matter hereof and supersedes any and all prior negotiations, understandings and agreements, whether written or oral, between the parties with respect thereto.

19. Amendments; Waivers.

(a) This Supply Agreement shall not be deemed or construed to be modified, amended, rescinded or canceled, in whole or in part, except by written amendment signed by the parties hereto.

(b) No waiver by either party of any breach of the covenants set forth herein or any claim, right or remedy provided for hereunder and no course of dealing shall be deemed a waiver of the same or any other breach, claim, right or remedy, unless, and then only to the extent, such waiver is in writing and is signed by the party sought to be bound. The failure of a party to assert or exercise any claim, right or remedy shall not be deemed a waiver of such claim, right or remedy in the future.

20. Force Majeure. Any delays in or failure of performance of either party, other than delay in or failure to make any payment required by this Supply Agreement or honor a claim for indemnification of a third-party claim, shall not constitute a default hereunder or give rise to any claims for damages if, to the extent that, and for such period that such delays or failures of performance are caused by the following occurrences or circumstances (but only to the extent such occurrences or circumstances are beyond the reasonable control of the party not in compliance): acts of God or the public enemy, expropriation or confiscation of facilities, compliance with any duly promulgated law, order or regulation of any governmental authority, acts of war, rebellion or sabotage or damage

resulting therefrom, fires, floods, explosion, riot, strikes, unavailability of any products or materials needed to manufacture any products, work stoppages, slow downs or other occurrences or circumstances beyond the reasonable control of such party.

21. Governing Law; Venue. This Supply Agreement shall be governed by, and interpreted and construed in accordance with, the laws of the State of Texas, without reference to the conflict of laws principles of any jurisdiction. The parties hereto hereby irrevocably and unconditionally submit to the exclusive jurisdiction of the state and federal courts located in or having jurisdiction over the State of Texas, for any actions, suit or proceedings arising out of or relating to this Supply Agreement and the transactions contemplated hereby (and the parties hereto agree not to commence any action, suit or proceeding relating thereto except in such courts), and further agree that service of any process, summons, notice or document by United States registered mail to its address set forth above shall be effective service of process of any action, suit or proceeding brought against it in any such court. The parties hereto hereby irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this Supply Agreement or the transactions contemplated hereby in such state or federal courts as aforesaid and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

22. Dispute Resolution

(a) As used in this Section 22, "Dispute" means a claim or controversy arising out of or relating to this Supply Agreement, including the interpretation, breach, termination or invalidity thereof, and whether arising out of tort or contract, government statute, regulation or other applicable law, but not including any dispute to be resolved as provided in Annex I hereto.

(b) If a Dispute exists between the parties, each party will appoint an executive management representative to resolve such Dispute. Such representatives will negotiate in good faith to resolve the Dispute within 30 days without the necessity of any formal proceeding. The parties hereby waive the applicable statute of limitations during such 30-day period, the same being tolled for such period. Except where clearly prevented by the nature of the Dispute, both parties shall continue performance of this Supply Agreement during such 30 days or for as long as the parties may mutually agree, unless and until this Supply Agreement is terminated in accordance with its terms. Nothing contained in this Section 22(b) shall affect either party's right to deliver notice of a default pursuant to Section 12.

(c) If any Dispute is not settled by the informal procedures outlined in Section 22(b), such Dispute shall, as a condition precedent to any filing of legal action, be mediated by the parties. The mediation shall be conducted in Dallas, Texas. The parties shall mutually agree upon a mediator, and shall schedule and conduct a mediation at a mutually convenient time and place. If the parties cannot agree upon a mediator, each party shall select one mediator and the two mediators so selected shall select the mediator who shall conduct the mediation hereunder. Each party shall bear its own costs, fees and expenses associated with such mediation, except that the parties shall split equally the costs and expenses of the mediator and the conduct of the mediation itself.

23. Severability. If any provision of this Supply Agreement or the application thereof to any person, entity or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Supply Agreement and the application of such provision to such or other persons, entities or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. Furthermore, in lieu of such void or unenforceable clause(s), there shall be added automatically as a part of this Supply Agreement a clause as similar in terms to such void or unenforceable clause(s) as may be possible, valid and enforceable.

24. Counterparts; Interpretation.

(a) This Supply Agreement may be executed in counterparts, each of which shall be deemed an original for all purposes, and all of which together shall constitute one and the same instrument.

(b) All references to "Section" or "Sections" refer to the corresponding section or sections of this Supply Agreement. All references to "hereunder" refer to under or pursuant to this Supply Agreement. All words used in this Supply Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms.

25. Enforceability; No Third-Party Beneficiary. This Supply Agreement shall be enforceable by and against VLPS and GTG and their respective expressly permitted successors and expressly permitted assignees. No person not a party hereto shall be a third-party beneficiary of this Supply Agreement.

[The signature page is the next following page.]

This Supply Agreement is executed and delivered by the parties hereto as of the date first set forth above.

		GENLYTE THOMAS GROUP LLC
		By:	/s/ STEVEN R. CARSON Steven R. Carson Vice President and General Manager of the Genlyte Controls Division
		VLPS LIGHTING SERVICES, INC.
		By:	/s/ H.R. BRUTSCHÉ III H.R. Brutsché III, Chairman

GUARANTY

The undersigned hereby guarantees the performance by VLPS Lighting Services, Inc., a Delaware corporation formerly known as Vari-Lite, Inc., and each Controlled Subsidiary (as defined in this Supply Agreement) of the undersigned of each of their existing and future obligations under this Supply Agreement, and agrees that the provisions of Sections 21 and 22 apply to this guarantee.

		VARI-LITE INTERNATIONAL, INC.
		By:	/s/ H.R. BRUTSCHÉ III H.R. Brutsché III, Chairman
		November 18, 2002

ANNEX I
REBATES

1. Subject to the limitations and provisions hereafter provided and those provided in the Supply Agreement, Seller shall pay Buyer a rebate with respect to Paid Purchases of Products (reduced by the amount of Paid Purchases of Products whether during or prior to the applicable period, to the extent of the Products which are or have been sold in such a manner as to constitute an Excluded Sale(s)) purchased under the Supply Agreement to which this is attached (the "Supply Agreement") and Delivered by Seller pursuant to the Supply Agreement ************************************************** *************************************************************************************************** *************************************************************************************************** *************************************************************************************************** *************************************************************************************************** *********************************************. Notwithstanding anything herein to the contrary, if including the purchase of any particular Product in the computation of a rebate hereunder would reduce the aggregate rebate that would be payable but for the inclusion of the purchase of such Product, the purchase of such Product shall be excluded from the computation of the rebate (although such purchase shall be included for purposes of Section 2 below). The defined terms in the Supply Agreement shall have the meanings in this Annex that such terms have in the Supply Agreement and this Annex shall in all respects be deemed to be a part of the Supply Agreement. Buyer will promptly report to Seller any and all Excluded Sales and, in the event Seller pays or has paid any amounts as rebates with respect to Excluded Sales, the Buyer will promptly repay such amounts to Seller on demand from Seller. ******************************************** ************************************************************************************************** ************************************************************************************************** **************************************************************************************************.

2. Buyer will not be entitled to any rebate with respect to 2003 unless the total Paid Purchases for all Products (reduced by the amount of Paid Purchases of Products whether during or prior to the applicable period, to the extent of the Products which are or have been sold in such a manner as to constitute an Excluded Sale(s)) purchased under the Supply Agreement in 2003 equals or exceeds U.S.$5,000,000. Buyer will not be entitled to any rebate with respect to 2004 unless the total Paid Purchases for all Products (reduced by the amount of Paid Purchases of Products whether during or prior to the applicable period, to the extent of the Products which are or have been sold in such a manner as to constitute an Excluded Sale(s)) purchased under the Supply Agreement in 2004 equals or exceeds U.S.$5,500,000.

3. (a) Subject to the provisions of Section 3(b) below, (i) the FAC for each Product shall be determined by Seller (in accordance with Section 3(b) and (c) below) and, without duplication, shall be equal to (A) the material cost, plus (B) the direct labor cost, plus (C) the factory overhead cost allocable to such Product, plus (D) any royalties paid by Seller to any Person that is not an Affiliate of Seller that are applicable to such Product, and (ii) the factory overhead cost allocable to each Product shall be equal to the direct labor cost allocable to such Product multiplied by the factory overhead rate ("FOR") allocable to such Product, as determined by Seller in accordance with Section 3(b) or (c) below.

(b) The FAC of each Product sold through June 30, 2003 shall be determined, without duplication, in accordance with the following methodology (with such modifications as Seller reasonably determines appropriate):

Material Cost:

Material Cost will represent (i) Seller's standard material costs based upon the anticipated price Seller would pay in acquiring or replacing the material through June 2003 times (ii) 1.04 (to cover scrap, freight-in, floor stock and miscellaneous shipping material).

Labor:

Labor will be based upon Seller's budgeted standard labor rate for 2003 with labor hours set at VLPS's 2002 rates, approximately U.S.$7.90/hour.

Overhead:

Overhead will be calculated as (i) Labor (above) multiplied times (ii) Seller's standard overhead rate which will be the same as the overhead rate used on Division Products (approximately 500% or 5).

The final FAC will be determined using the above values in the following formula:

FAC = Material Cost + Labor + Overhead

In July 2003, the Buyer and Seller will review the FACs determined as described above and, if the actual or projected costs (determined by Seller in accordance with Section 3(c) below) vary by more than 10% from the amounts used through June 30, 2003, the FACs will be adjusted up or down effective July 1, 2003, for Products sold during the remainder of 2003; otherwise, the FAC for Products shall remain unchanged for the balance of 2003. For all Product sales during each calendar year beginning in 2004, the FAC for each Product will be determined or estimated by Seller (in accordance with Section 3(c) below) not later than November 30 of the preceding year.

(c) All determinations by Seller of the FAC for each Product shall be made in good faith and, except as provided otherwise in Section 3(b) above, shall be based Seller's books and records maintained in accordance with generally accepted and consistently applied accounting principles, as normally applied by Seller. Seller's determination of the FOR allocable to each Product will, except as provided otherwise in Section 3(b) above, be based on Seller's estimate of indirect costs that are properly allocable to the manufacture of such Product. Seller shall determine or estimate the FOR for the Products in a fair and reasonable manner, consistent with its determination thereof for Division Products. Notwithstanding anything contained herein to the contrary, if there is ever an extraordinary change in the costs incurred or which will be incurred by Seller from those used in establishing any FAC, Seller shall, except as hereafter otherwise provided, after Seller learns of such change and its impact on this provision, adjust the FAC on a prospective basis (until the next change is to take place and be effective) so that Seller is neither positively or negatively impacted by such change (taking into account the timing of the change(s) in costs incurred and/or to be incurred); provided, however, (i) a change shall be deemed to be extraordinary if and only if the impact is to cause the FAC for any such Product expected to be produced prior to the time the next change is to take place and be effective to be more than 10% higher or lower than the amount then being used and (ii) a change shall not take effect until the date reasonably established by Seller in a notice to Buyer which shall be at least ninety (90) days after the date of such notice by Seller to Buyer.

(d) Seller will deliver to Buyer a notice setting forth the FACs and the FORs determined by it pursuant hereto on each occasion that FACs and FORs are determined under Section 3(c) hereof. Such notice shall be accompanied by reasonably detailed calculations and estimates showing how the FACs and FORs were calculated.

(e) Buyer will, upon reasonable notice to Seller, have the right to have audited Seller's determination of its FACs and FORs for the Products (and nothing else, except that the audit may include such review of the FACs and FORs for Division Products as may be necessary to confirm Seller has complied with its obligations under this Annex) once with respect to each calendar year in the manner provided below. Buyer's audit right for each calendar year will expire unless Buyer delivers to Seller by March 31 of the year following the year to be audited notice of Buyer's intent to conduct an audit. With respect to each such audit:

(i) Buyer shall select a reputable, independent firm of certified public accountants which shall be reasonably acceptable to Seller (the "Buyer Auditor") to conduct the audit. Upon receipt of reasonable prior notice, Seller shall cooperate fully and completely in responding to reasonable questions and requests for information (including, if requested and reasonable, permitting the Buyer Auditor to have full access to all books and records of Seller related to the determination of the FACs or FORs being audited and any relevant accountants' work papers prepared in determining such FACs or FORs) submitted by the Buyer Auditor. However, the analysis by the Buyer Auditor will be limited to the Products only and confirming whether Seller complied with the provisions of Sections 3(a), (b) and (c) above in the determination of the FACs and the FORs.

(ii) If, following an audit, the Buyer Auditor determines that any of the FACs or FORs applied by Seller were not correct, based on the methodology and analysis to be applied pursuant to this Section 3, Buyer shall deliver written notice thereof to Seller, together with a statement setting forth the Buyer Auditor's calculations of the correct FACs or FORs. Within 15 days of the receipt of any such notice, Seller shall advise Buyer in writing that it either accepts or does not accept the calculations submitted by the Buyer Auditor.

(iii) If Seller and Buyer cannot agree on any FAC or FOR calculation within 10 days of the date the Buyer Auditor delivers its calculations to Seller, Seller and Buyer will select an independent auditor who is a certified public accountant to finally determine as quickly as possible the FAC and FOR calculations. If Buyer and Seller cannot agree on the independent auditor the independent auditor will be determined as the "Accountants" are determined under the Asset Purchase Agreement. Seller and Buyer shall share the costs of the independent auditor equally and the decision of the independent auditor shall be binding.

(iv) ****************************************************************************************** ************************************************************************************************** ************************************************************************************************** *************************************************************************************************.

4. Rebates shall be paid by Seller to Buyer within 60 days of the close of each calendar quarter with respect to Paid Purchases of Products (reduced by the amount of Paid Purchases of Products whether during or prior to the applicable period, to the extent of the Products which are or have been sold in such a manner as to constitute an Excluded Sale(s)) during such quarter. For rebates payable with respect to 2003 and 2004, if, as of the end of any calendar quarter, the annualized Paid Purchases of Products (reduced by the amount of Paid Purchases of Products whether during or prior to the applicable period, to the extent of the Products which are or have been sold in such a manner as to constitute an Excluded Sale(s)) for that calendar year (computed based upon all Paid Purchases of Products, less all Excluded Sales, during that year through the end of such quarter) would not satisfy the required annual minimum volume for Buyer to be entitled to a rebate in that calendar year as provided above, then the rebate otherwise payable for such quarter shall be deferred until the earlier to occur of the following: (i) 60 days following the end of the next calendar quarter in that year, if any, with respect to which the annualized Paid Purchases of Products (reduced by the amount of Paid Purchases of Products whether during or prior to the applicable period, to the extent of the Products which are or have been sold in such a manner as to constitute an Excluded Sale(s)) determined as

provided above through the end of such quarter would meet the required annual minimum, or (ii) 60 days following the end of such calendar year. If Seller pays any quarterly rebates for 2003 or 2004 and, based on actual Paid Purchases of Products (reduced by the amount of Paid Purchases of Products whether during or prior to the applicable period, to the extent of the Products which are or have been sold in such a manner as to constitute an Excluded Sale(s)), Buyer is not entitled to such rebates because its Paid Purchase of Products (reduced by the amount of Paid Purchases of Products whether during or prior to the applicable period, to the extent of the Products which are or have been sold in such a manner as to constitute an Excluded Sale(s)) do not satisfy the required minimum applicable to such year or for any other reason, then Buyer shall promptly repay to Seller any such rebate paid with respect to such year. Not later than 60 days after the close of each calendar quarter during the Term, Seller will deliver to Buyer a document reflecting the calculations (in reasonable detail) used by Seller in determining the rebate, if any, which is owed pursuant to this Supply Agreement. Such calculations shall be shown in such report in sufficient detail to enable Buyer to reasonably determine the accuracy thereof.

Exhibit A

European Market

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Exhibit 10.89

SUPPLY AGREEMENT
WITNESSETH
GUARANTY
ANNEX I REBATES
Exhibit A European Market
EX-10.90 5 a2100010zex-10_90.htm EXHIBIT 10.90
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Exhibit 10.90

AMENDMENT NO. 7
TO
FINANCING AGREEMENT

THIS AMENDMENT NO. 7 TO FINANCING AGREEMENT (this "Amendment") is made and entered into as of the 31st day of December, 2002, by and between VLPS LIGHTING SERVICES, INC. (formerly known as "Vari-Lite, Inc."), a Delaware corporation ("Borrower"), and U.S. BANK NATIONAL ASSOCIATION (formerly known as "Firstar Bank, National Association") ("Bank").

WITNESSETH:

WHEREAS, Borrower and Bank have heretofore entered into that certain Financing Agreement dated as of December 29, 2000, as amended by that certain Amendment No. 1 to Financing Agreement dated as of March 30, 2001, Amendment No. 2 to Financing Agreement dated as of June 30, 2001, Amendment No. 3 to Financing Agreement dated as of December 31, 2001, Amendment No. 4 to Financing Agreement dated as of March 31, 2002, Amendment No. 5 to Financing Agreement dated as of June 30, 2002, and Amendment No. 6 to Financing Agreement dated as of November 18, 2002 (as so amended, the "Financing Agreement"), pursuant to which Bank has made loans and financial accommodations available to Borrower in the aggregate principal amount of up to $24,500,000, consisting of a Revolving Loan Facility, a Term Loan A Facility and a CapEx Term Loan Facility; and

WHEREAS, Borrower and Bank desire to amend the Financing Agreement to reflect the elimination of the Term Loan A Facility and the CapEx Term Loan Facility, to reduce the Total Facility to a principal amount of up to $7,500,000 consisting of the Revolving Loan Facility and a new Letter of Credit Subfacility, and to effect such other changes as are hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Bank hereby agree as follows:

1. The following definitions in Section 1.1 of the Financing Agreement are amended and restated in their entirety to provide as follows:

"Applicable LIBOR Rate Margin" means a rate equal to 2.25% per annum.

"Applicable Prime Rate Margin" means a rate equal to 0.50% per annum.

"Permitted Payments" means the following payments, regardless of whether classified as dividends, distributions, stock redemptions or payments of Intercompany Loans:

(a)

payments to International in an amount not to exceed International's consolidated tax liability attributable to the net income of Borrower in any fiscal year of Borrower; and

(b)

so long as no Event of Default has occurred which is continuing:

(i): payments of interest at a market rate to Vari-Lite Asia, Inc. on Intercompany Loans from Vari-Lite Asia, Inc. to Borrower;
(ii): payments to International to cover certain employment, compensation, audits, director fees, legal and other overhead and administrative expenses not to exceed One Million Dollars ($1,000,000) in the aggregate in any fiscal year of Borrower; and
(iii): other payments:

(A) not in excess of $1,500,000 during Borrower's fiscal year ending September 30, 2003;

(B) in any fiscal quarter following receipt pursuant to Section 8.8 of Borrower's financial statements for its fiscal year ending September 30, 2003, in such amount as Borrower shall determine, provided that after giving effect to any such payment: (x) Borrower's Fixed Charge Coverage Ratio calculated as of the end of the immediately preceding quarter on a pro forma basis (including in Fixed Charges for this purpose, however, only such Permitted Payments as have been made pursuant to this clause (B) during the immediately preceding three (3) fiscal quarters plus the Permitted Payment in question and exclusive of any Permitted Payment or portion thereof made or to be made pursuant to clause (C) below) exceeds 1.35:1.0 and (y) Borrower will have Adjusted Revolving Loan Availability of at least $1,500,000; and

(C) in addition to Permitted Payments under clause (B) above, following receipt pursuant to Section 8.8 of Borrower's financial statements for any fiscal year ending on or after September 30, 2004, in such amount as Borrower shall determine, provided that after giving effect to any such payment: (x) Borrower's Fixed Charge Coverage Ratio calculated as of the end of such fiscal year on a pro forma basis inclusive of such payment but exclusive of any payments made during such fiscal year pursuant to this clause (C) based upon the prior fiscal year's Fixed Charge Coverage Ratio shall not be less than 1.25:1.0 and (y) Borrower will have Adjusted Revolving Loan Availability of at least $1,500,000.

For purposes of this definition, the term "Adjusted Revolving Loan Availability" shall mean Revolving Loan Availability after deducting Borrower's accounts payable exceeding sixty (60) days and Borrower's book overdraft.

"Revolving Loan Availability" means, as at any time, an amount, in Dollars, equal to:

(i): an amount equal to the lesser of: (a) the then Revolving Loan Borrowing Base or (b) $7,500,000.00;

less (ii) the then aggregate outstanding principal amount of all Revolving Loans and all due but unpaid interest on the Loans, and all fees, commissions, expenses and other charges posted to Borrower's loan account with Bank; and

less (iii) the then Letter of Credit Reserve.

"Revolving Loan Borrowing Base" shall mean an amount equal as at any time to the sum of (i) up to eighty percent (80%) of the net amount of Borrower's Eligible Receivables (the "Eligible Receivables Advance Rate"), plus (ii) up to fifty percent (50%) of the value of Borrower's Eligible Inventory (the "Eligible Inventory Advance Rate"), valued at the lower of cost or market value, determined on a first-in-first-out basis, consistently applied, plus (iii) up to fifty percent (50%) of the value of Borrower's Rental Inventory (the "Rental Inventory Advance Rate"), valued at its "Appraised Liquidation Value", minus (iv) the Reserve Amount then in effect. For purposes of this Agreement, the "Appraised Liquidation Value" of Rental Inventory shall mean its orderly liquidation value as determined annually on behalf of Bank at Borrower's expense, which amount, pending the annual appraisal, shall be adjusted from time to time to reflect (x) the deduction of a monthly amount based upon a 48-month, straight-line amortization, (y) the deduction of the net book value of items disposed of, and (z) the addition of newly acquired items at their cost.

2. Section 1.1 of the Financing Agreement is amended by adding the following new definitions:

"Letter of Credit" means a Standby Letter of Credit (as defined in Section 2.4) or a Commercial Letter of Credit (as defined in Section 2.4) issued by Bank pursuant to Section 2.4.

"Letter of Credit Availability" means, as at any time, an amount equal to the lesser of (i) an amount equal to (a) $500,000.00 less (b) the then Letter of Credit Exposure and (ii) the then Revolving Loan Availability.

"Letter of Credit Deficiency" means any failure of the Letter of Credit Availability to be greater than or equal to zero Dollars.

"Letter of Credit Documents" means, with respect to each and every Letter of Credit, (i) a letter of credit application and reimbursement agreement on Bank's then customary form (the "Letter of Credit Application") and (ii) any other agreements, certificates, documents and information as Bank may reasonably request relating to a Letter of Credit.

"Letter of Credit Exposure" means, as at any time, the sum of (i) the Letter of Credit Face Amount of all outstanding Letters of Credit and (ii) all unreimbursed drawings under any Letters of Credit (whether or not outstanding).

"Letter of Credit Face Amount" of any Letter of Credit means, at any time, the face amount of the Letter of Credit, after giving effect to all drawings paid thereunder and other reductions of the face amount and to all reinstatements of the face amount effected, pursuant to the terms of the Letter of Credit, prior to such time.

"Letter of Credit Obligations" means, at any time, the sum of (i) the aggregate Letter of Credit Face Amount for all Letters of Credit plus (ii) the aggregate amount of Borrower's unpaid obligations in respect of all Letters of Credit (whether or not outstanding) under this Agreement and the Letter of Credit Documents, including any Indebtedness incurred or arising in connection with any Letters of Credit (including any drafts or acceptances thereunder, all amounts charged or chargeable to Borrower or by Bank, including any and all Bank charges, expenses, fees and commissions, and all duties and taxes and costs of insurance which may pertain either directly or indirectly to such Letters of Credit).

"Letter of Credit Reserve" means, as at any time, the sum of (i) 100% of the then Letter of Credit Exposure with respect to all Standby Letters of Credit and (ii) that percentage which is equal to 100% minus the applicable Inventory Advance Rate (Eligible or Rental) of the then Letter of Credit Exposure with respect to all Commercial Letters of Credit.

3. Section 2.1 of the Financing Agreement is amended and restated in its entirety to provide as follows:

2.1: Total Facility. Subject to the terms and conditions of this Agreement, Bank will make up to $7,500,000.00 in total credit (the "Total Facility") available to, or for the benefit of, Borrower in the form of the following loans advanced or to be made under the following facilities: (i) revolving loans, and (ii) a letter of credit subfacility, all as more particularly described below (the "Loans").

4. Section 2.3 of the Financing Agreement is deleted and shall remain intentionally blank.

5. Section 2.4 of the Financing Agreement is deleted and shall be replaced with the following provisions:

2.4: Letters of Credit.

2.4.1 Letter of Credit Subfacility. Until the termination of this Agreement pursuant to Section 11 and subject to the other terms and conditions of this Agreement, Borrower may request Bank to issue one or more of its standby letters of credit ("Standby Letter of Credit") or its commercial letters of credit ("Commercial Letter of Credit") in favor of such beneficiary(ies) as are designated by Borrower by delivering to Bank: (i) a Letter of Credit Application completed to the satisfaction of Bank, together with the proposed form of the Letter of Credit (which, in all respects, will comply with the applicable requirements of Section 2.4.2), (ii) a Borrowing Base Certificate (as defined in Section 8.3) which calculates the Letter of Credit Availability after giving effect to the proposed Letter of Credit, and (iii) such other Letter of Credit Documents that Bank then requires. Bank, in addition to the other terms of this Agreement, will have no obligation to issue the proposed Letter of Credit if, after giving effect to such proposed Letter of Credit, the Letter of Credit Availability will be less than zero Dollars. The making of each Letter of Credit request by Borrower will be deemed to be a representation by Borrower that the Letter of Credit may be issued in accordance with, and will not violate the terms of, this Section 2.4.1.

2.4.2 Terms of Letter of Credit. Each Letter of Credit issued under this Agreement will, among other things, (i) be in such form requested by Borrower as is acceptable to Bank in its discretion exercised in good faith, (ii) be denominated in Dollars, Euros, Great British Pounds, or such other foreign currency as is acceptable to Bank in its discretion exercised in good faith, and (iii) be issued to support Borrower's obligations that finance its business needs incurred in the ordinary course of Borrower's business as presently conducted by it (and, in the case of Commercial Letters of Credit, solely in support of the purchase of Eligible Inventory or Rental Inventory). In no event will any Standby Letter of Credit have a term of more than one year or any Commercial Letter of Credit have a term of more than 180 days; furthermore, and, in addition to the foregoing term limitation, Bank will have no obligation to issue any Letter of Credit with an expiry date later than the earlier of (a) December 31, 2005 or (or such later date to which Bank renews the termination date of this Agreement as provided in Section 11.2) or (b) such earlier termination date of this Agreement which has resulted from the delivery to Bank by Borrower of a Termination Notice as provided in Section 11.3.

2.4.3 Advice of Issuance or Non-Issuance. Upon receipt of a request from Borrower to open any Letter of Credit and of all attendant Letter of Credit Documents satisfactorily completed, Bank, within three Business Days, may either (i) issue the requested Letter of Credit to the beneficiary thereof and transmit a copy to Borrower, or (ii) elect, in its discretion exercised in good faith, not to issue the proposed Letter of Credit. If Bank elects not to issue such Letter of Credit, Bank will communicate in writing to Borrower the reason(s) why Bank has declined such request.

2.4.4 Payment of Drafts. All obligations of Borrower under each Letter of Credit and all Letter of Credit Documents are payable on Bank's demand or payable as otherwise set forth in the applicable Letter of Credit Documents. Subject to the terms of Section 13.3, Borrower hereby irrevocably instructs Bank, on the same Business Day that Bank is obligated to fund a drawing or make any expenditure or any other payment under a Letter of Credit or incurs any cost or expense under any Letter of Credit, to reimburse Bank for any drawing, expenditure or other payment made, or cost or expense incurred, by Bank in respect of any Letter of Credit by debiting Borrower's loan account with Bank as an advance of the Revolving Loans

pursuant to Section 2.2 as a Prime Rate Loan. If the advance of a Revolving Loan to reimburse Bank for any drawing, expenditure or other payment made, or cost or expense incurred, by Bank in respect of any Letter of Credit results (or to the extent that it results) in any Deficiency, then Borrower will immediately eliminate any Deficiency in accordance with the terms of Section 2.10.

2.4.5 Letter of Credit Obligations. All Letter of Credit Obligations will constitute part of the Obligations and be secured by the Loan Collateral.

6. Section 2.5 of the Financing Agreement is amended and restated in its entirety to provide as follows:

2.5: Voluntary Prepayments. Borrower shall have the right to prepay at any time the Revolving Loans in whole or part without premium or penalty (except as provided in Section 3.4):

Whenever the Borrower desires to prepay any part of the Revolving Loans, it shall provide a prepayment notice to Bank at least two (2) Business Days prior to the date of prepayment of such Revolving Loans which are LIBOR Rate Loans and on or before 12:00 noon on the date of prepayment of such Revolving Loans which are Prime Rate Loans setting forth the following information:

(y) the date, which shall be a Business Day, on which the proposed prepayment is to be made; and

(z) the total principal amount of such prepayment, which shall not be less than One Hundred Thousand Dollars ($100,000).

All prepayment notices shall be irrevocable. The principal amount of the Revolving Loans for which a prepayment notice is given, together with interest on such principal amount, shall be due and payable on the date specified in such prepayment notices as the date on which the proposed prepayment is to be made. If the Borrower prepays a Revolving Loan but fails to specify the applicable Revolving Loans which the Borrower is prepaying, the prepayment shall be applied first to Revolving Loans which are Prime Rate Loans and then to Revolving Loans which are LIBOR Rate Loans. Any prepayment hereunder shall be subject to the Borrower's Obligations to indemnify the Bank under Section 3.4.

7. Section 2.8 of the Financing Agreement is deleted and shall remain intentionally blank.

8. Section 2.12(a) of the Financing Agreement is amended and restated in its entirety to provide as follows:

(a): Changes. Borrower acknowledges that Bank, from time to time, may do any one or more of the following in its discretion exercised in good faith: (i) decrease the dollar limits on outstanding advances against the Revolving Loan Borrowing Base or applicable to any one or more Inventory or Receivables advance sublimits or (ii) decrease the Eligible Receivables Advance Rate or the Eligible Inventory Advance Rate or the Rental Inventory Advance Rate (collectively, the "Advance Rates") if one or more of the following events occur or conditions exist: (a) an Event of Default has occurred; (b) with regard to the Eligible Receivables Advance Rates, (1) the dilution percentage with respect to Borrower's Eligible Receivables (i.e., reductions in the amount of accounts receivable because of returns, discounts, price adjustments, credit memoranda, credits, contras and other similar offsets) increases by an amount which Bank, in good faith, has determined is materially above that which existed as of December 31, 2002, (2) the percentage of accounts receivable which are 90 days or more past the date of the original invoices applicable thereto increases, in comparison to the percentage of accounts receivable which are within 90 days from the date of the original invoices applicable thereto, by an

amount which Bank, in good faith, determines is material, or (3) any material change occurs, determined by Bank in good faith, from December 31, 2002, in respect of the credit rating or credit quality of Borrower's account debtors; (c) with respect to the Eligible Inventory Advance Rate, there occurs a material change, as determined by Bank in its discretion exercised in good faith, in the type, quantity, or quality of Borrower's Eligible Inventory as the same is constituted on December 31, 2002, or (d) with respect to the Rental Inventory Advance Rate, there occurs a material change, as determined by Bank in its discretion exercised in good faith, in the type, quantity, or quality of Borrower's Rental Inventory as the same is constituted on December 31, 2002.

9. Section 3.8 of the Financing Agreement is deleted and shall remain intentionally blank.

10. The following is added as a new Section 3.13 to the Financing Agreement:

3.13: Letter of Credit Fees. Borrower will pay to Bank, with respect to each Letter of Credit, a fee ("LOC Fee") equal to 0.375% per annum on the amount available to be drawn under each Letter of Credit from, and including, the issuance date of the Letter of Credit to and including the expiry date thereof (or, if earlier, the date on which the Letter of Credit is returned to Bank and is canceled). In addition, Borrower will pay to Bank, on its demand for payment, Bank's then current issuance, opening, closing, transfer, amendment, draw, renewal, negotiation and other letter of credit administration fees, charges and out of pocket expenses with respect to each Letter of Credit. The LOC Fee is fully earned by Bank when paid and will be due and payable (a) in advance on the issuance of each Commercial Letter of Credit and (b) in respect of each Standby Letter Credit, monthly in arrears based on the amount available to be drawn under each Standby Letter of Credit during the previous calendar month, payable on the first (1st) day of each calendar month, commencing with the first calendar month occurring after the calendar month in which the Standby Letter of Credit is issued, and on the date this Agreement is terminated as provided in Section 11.

11. Section 10.22 of the Financing Agreement is amended and restated in its entirety to provide as follows:

10.22

Redemption of Stock. Borrower will not voluntarily or pursuant to any contractual or other obligations redeem, retire, purchase, repurchase or otherwise acquire, directly or indirectly, or exercise any call rights relating to, any of Borrower's capital stock or any other equity securities now or hereafter issued by Borrower (including, without limitation, any warrants for stock of Borrower), except to the extent any of the foregoing constitute Permitted Payments.

12. The second sentence of Section 11.1 of the Financing Agreement is amended and restated in its entirety to provide as follows:

Unless otherwise terminated or extended in accordance with the provisions of this Section 11, this Agreement shall terminate on December 31, 2005.

13. Section 11.3 of the Financing Agreement is amended and restated in its entirety to provide as follows:

11.3: Voluntary Termination by Borrower. Borrower may terminate this Agreement (i) by giving Bank written notice ("Termination Notice") of the date on which this Agreement is to terminate ("Voluntary Termination Date") at least ten (10) Business Days before the Voluntary Termination Date, and (ii) by paying on any such Voluntary Termination Date (a) all of the Obligations, (b) any amounts payable under Section 3.4, and (c) as

compensation to Bank for loss of bargain with respect to the credit advanced hereunder, and not as a penalty, a termination fee in amounts as set forth below:

Voluntary Termination Date		Termination Fee
On or Before December 31, 2003		Two Percent (2%) of the Total Facility;
After December 31, 2003 but on or before December 31, 2004		One and One-Fourth Percent (1.25%) of the Total Facility;
Between January 1, 2005 and September 30, 2005 (inclusive)		Three-Fourths Percent (0.75%) of the Total Facility;

provided, however, that no termination fee shall be due if: (1) the Voluntary Termination Date is on or after October 1, 2005, or (2) in response to an Additional Fee being charged to Borrower by Bank so long as the conditions set forth in Section 3.5 shall have been satisfied. Moreover, notwithstanding the foregoing provisions of this Section 11.3, in the event that Borrower terminates this Agreement in accordance with this Section 11.3 in connection with (y) a sale or transfer of all or substantially all of the stock or assets of International or the Borrower to a third party prior to September 30, 2005, or (z) a Change in Control of International or Borrower, then the termination fee payable by the Borrower upon such a termination will equal 0.5% of the Total Facility.

For the purposes of this Section 11.3, the term "Change in Control" shall be deemed to occur at any time when any of the following occurs: (a) any Unrelated Person or any Unrelated Persons, acting together, which would constitute a Group together with any Affiliates or Related Persons thereof (in each case also constituting Unrelated Persons) shall at any time either (1) Beneficially Own more than 50% of the aggregate voting power of all classes of voting stock of International, or (2) succeed in having a sufficient number of its or their nominees elected to the Board of Directors of International such that such nominees, when added to any existing director remaining on the Board of Directors of International after such election who is an Affiliate or Related Person of such Person or Group, shall constitute a majority of the Board of Directors of the Company, or (b) International ceasing to directly or indirectly own at least 51% of the issued and outstanding voting stock of Borrower. As used herein (1) "Beneficially Own" means "beneficially own" as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, or any successor provision thereto; (2) "Group" means a "group" for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended; (3) "Unrelated Person" means at any time any Person other than International, Borrower, or any of their Affiliates; (4) "Related Person" of any Person means any other Person owning (A) 10% or more of the outstanding common stock of such Person or (B) 10% or more of the Voting Stock of such Person; and (5) "Equity" means shares of capital stock or options, warrants, or other right to substitute for or otherwise acquire the capital stock of International or Borrower, as applicable.

14. The following is added as a new Section 13.3 to the Financing Agreement:

13.3: Actions in Respect of Letters of Credit. If any Event of Default shall have occurred and be continuing, Bank may, whether in addition to taking any of the actions described in Section 13.1 or otherwise, if any Letters of Credit shall have been issued, make demand upon Borrower to, and forthwith upon such demand Borrower will, pay to Bank in same day funds at Bank's office designated in such demand, for deposit in a special non-interest bearing cash collateral account (the "Letter of Credit Collateral Account") to be maintained at such office of Bank, an amount equal to the Letter of Credit Exposure from time to time in existence. The Letter of Credit Collateral Account shall be in the name of Bank (as a cash collateral account), and under the sole dominion and control of

Bank exercised in good faith (with sole right of withdrawal) and subject to the terms of this Agreement and the other Loan Documents. On each drawing under a Letter of Credit, Bank shall seek reimbursement from any amounts then on deposit in the Letter of Credit Collateral Account; however, if (i) no amounts are then on deposit in the Letter of Credit Collateral Account, (ii) the amount then on deposit in the Letter of Credit Collateral Account is insufficient to pay the amount of such drawing, or (iii) Bank is legally prevented or restrained from immediately applying amounts on deposit in the Letter of Credit Collateral Account, then the amount of each unreimbursed drawing under such Letter of Credit and payment required to be made under this Section 13.3 shall automatically be converted into a Loan made on the date of such drawing for all purposes of this Agreement. To the extent that Bank applies amounts on deposit in the Letter of Credit Collateral Account as provided in this Section 13.3, and, thereafter, such application (or any portion thereof) is rescinded or any amount so applied must otherwise be returned by Bank upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, then the amount so rescinded or returned shall automatically be converted into a Loan made on the date of such drawing for all purposes of this Agreement.

15. Exhibit G-2 to the Financing Agreement is deleted and shall remain intentionally blank, and all references thereto in the Financing Agreement shall be of no further force and effect.

16. Exhibit J to the Financing Agreement is amended in its entirety to read as set forth on Exhibit J attached hereto and by reference made a part hereof.

17. Exhibit T to the Financing Agreement is deleted and shall remain intentionally blank, and all references thereto in the Financing Agreement shall be of no further force and effect.

18. Subject to the provisions of Section 15.17 of the Financing Agreement, Bank acknowledges repayment in full of the Term Loan A Facility and the Capex Term Loan Facility, and all applicable fees or other charges related thereto, and Borrower acknowledges that it shall have no further right to borrow under either such facility. Any references in the Financing Agreement to either such facility shall be of no further force and effect.

19. Borrower hereby agrees to pay Bank a nonrefundable amendment fee in the amount of $37,500.00 (the "Fee") contemporaneously with the execution of this Amendment.

20. Borrower hereby agrees to reimburse Bank upon demand for all out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by Bank in the preparation, negotiation and execution of this Amendment and any and all other agreements, documents, instruments and/or certificates relating to the amendment of Borrower's existing credit facilities with Bank (collectively, the "Loan Documents"). Borrower further agrees to pay or reimburse Bank for any stamp or other taxes (excluding income or gross receipts taxes) which may be payable with respect to the execution, delivery, filing and/or recording of the Loan Documents. All of the obligations of Borrower under this paragraph shall survive the payment of the Borrower's Obligations and the termination of the Financing Agreement.

21. All references in the Financing Agreement to "this Agreement" and any other references of similar import shall henceforth mean the Financing Agreement as amended by this Amendment.

22. Except to the extent specifically amended by this Amendment, all of the terms, provisions, conditions, covenants, representations and warranties contained in the Financing Agreement shall be and remain in full force and effect and the same are hereby ratified and confirmed.

23. This Amendment shall be binding upon and inure to the benefit of Borrower and Bank and their respective successors and assigns, except that Borrower may not assign, transfer or delegate any of its rights or obligations under the Financing Agreement as amended by this Amendment.

24. Borrower hereby represents and warrants to Bank that:

(a) the execution, delivery and performance by Borrower of this Amendment are within the corporate powers of Borrower, have been duly authorized by all necessary corporate action and require no action by or in respect of, consent of or filing or recording with, any governmental or regulatory body, instrumentality, authority, agency or official or any other Person;

(b) the execution, delivery and performance by Borrower of this Amendment do not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under or result in any violation of, the terms of the Certificate of Incorporation or By-Laws of Borrower, any applicable law, rule, regulation, order, writ, judgment or decree of any court or governmental or regulatory body, instrumentality authority, agency or official or any agreement, document or instrument to which Borrower is a party or by which Borrower or any of its Property is bound or to which Borrower or any of its Property is subject;

(c) this Amendment has been duly executed and delivered by Borrower and constitutes the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);

(d) all of the representations and warranties made by Borrower and/or any other Obligor in the Financing Agreement and/or in any other Transaction Document are true and correct in all material respects on and as of the date of this Amendment as if made on and as of the date of this Amendment, provided that any representations and warranties which are made as of the Effective Date are only reaffirmed as of such date; and

(e) as of the date of this Amendment, no Default or Event of Default under or within the meaning of the Financing Agreement has occurred and is continuing.

25. In the event of any inconsistency or conflict between this Amendment and the Financing Agreement, the terms, provisions and conditions contained in this Amendment shall govern and control.

26. This Amendment shall be governed by and construed in accordance with the substantive laws of the State of Ohio (without reference to conflict of law principles).

27. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND BANK FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND BANK COVERING SUCH MATTERS ARE CONTAINED IN THE FINANCING AGREEMENT AS AMENDED BY THIS AMENDMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH FINANCING AGREEMENT AS AMENDED BY THIS AMENDMENT AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND BANK, EXCEPT AS BORROWER AND BANK MAY LATER AGREE IN WRITING TO MODIFY THEM.

28. Notwithstanding any provision contained in this Amendment to the contrary, this Amendment shall not be effective unless and until Bank shall have received:

(a) this Amendment, duly executed by Borrower;

(b) a Consent of Guarantor in form and substance satisfactory to Bank, duly executed by Vari-Lite International, Inc.; and.

IN WITNESS WHEREOF, Borrower and Bank have executed this Seventh Amendment to Financing Agreement as of the 31st day of December, 2002.

		VLPS LIGHTING SERVICES, INC.
		By:		/s/ JEROME L. TROJAN III
		Title:		Vice President—Finance, Chief Financial Officer
		U.S. BANK NATIONAL ASSOCIATION
		By		/s/ PAUL PIECHOWSKI
		Title:		Senior Vice-President

CONSENT OF GUARANTOR

The undersigned hereby consents to the terms, provisions and conditions contained in that certain Seventh Amendment to Financing Agreement dated as of December 31, 2002, by and between VLPS Lighting Services, Inc. (formerly known as Vari-Lite, Inc.), a Delaware corporation ("Borrower"), and U.S. Bank National Association ("Bank") (the "Amendment to Financing Agreement"). The undersigned hereby acknowledges and agrees that (a) the execution and delivery of the Amendment to Financing Agreement by Borrower to Bank will not adversely affect or impair any of its obligations to Bank under that certain Guaranty dated as of December 29, 2000, and executed by the undersigned in favor of Bank with respect to the indebtedness of Borrower to Bank (the "Guaranty"), (b) payment of all of the "Obligations" (as defined in that certain Financing Agreement dated December 29, 2000, by and between Borrower and Bank, as amended by the Amendment to Financing Agreement and as the same may from time to time be further amended, modified, extended, renewed or restated) is guaranteed to Bank by the undersigned pursuant to the terms of the Guaranty and (c) the Guaranty is in full force and effect on the date hereof and the same is hereby ratified and confirmed.

Executed as of the 31^st day of December, 2002.

		VARI-LITE INTERNATIONAL, INC., Guarantor
		By:		/s/ JEROME L. TROJAN III
		Title:		Vice President—Finance, Chief Financial Officer

EXHIBIT J

FINANCIAL COVENANTS

Section 1. Capital Expenditures. Borrower will not make nor permit International to make Net Capital Expenditures (as defined below) in a total amount that exceeds $7,000,000.00 in the aggregate for any Fiscal Year (as defined below).

Section 2. Minimum Fixed Charge Coverage Ratio.

2.1 Borrower will not permit the ratio ("Fixed Charge Coverage Ratio") resulting from dividing International's EBITDA (as defined below) by International's Fixed Charges (as defined below), both for the applicable fiscal period then ended, to be less than (i) 0.78:1.0 for the period from October 1, 2002, to December 31, 2002, (ii) 1.1:1.0 for the period from October 1, 2002, to March 31, 2003, and (iii) 1.2:1.0 for the period from October 1, 2002, to June 30, 2003. Thereafter, as of the end of each fiscal quarter of International, commencing with the fiscal quarter ending September 30, 2003, Borrower will not permit its Fixed Charge Coverage Ratio resulting from dividing International's 12 Month EBITDA (as defined below) by International's Fixed Charges (as defined below) for the applicable 12 Month Period (as defined below) to be less than 1.25:1.0.

2.2 For purposes of this Exhibit J:

(i) EBITDA means, for the period in question, the sum of International's (a) consolidated net income during such period plus (b) to the extent deducted in determining such net income, the sum of (i) interest expense during such period, plus (ii) all provisions for any Federal, state, local and/or foreign income taxes during such period (whether paid or deferred), plus (iii) all depreciation and amortization expenses during such period, plus (iv) any extraordinary losses during such period plus (v) any losses from the sale or other disposition of property other than in the ordinary course of business during such period minus (c) to the extent added in determining such net income, the sum of (i) any extraordinary gains during such period minus (ii) any gains from the sale or other disposition of property other than in the ordinary course of business during such period, all determined on a consolidated basis and in accordance with GAAP.

(ii) "Fixed Charges" shall mean, for the period in question, the sum of (a) the aggregate amount of all principal payments required to be made by International and its consolidated subsidiaries on all Indebtedness during such period (including the principal portion of payments in respect of capitalized leases but excluding principal payments on the Revolving Loans), plus (b) interest expense of International and its consolidated subsidiaries during such period, plus (c) 50% all Net Capital Expenditures made by International and its consolidated subsidiaries during such period (other than those financed with Indebtedness incurred by International and its consolidated subsidiaries), plus (d) all cash payments for any Federal, state, local and/or foreign income taxes made by Borrower during such period, plus (e) all dividends and other distributions paid by Borrower on or with respect to its capital stock, including for stock repurchases, during such period (whether for taxes or otherwise, but excluding $1,500,000 in Permitted Payments made during Borrower's fiscal year ending September 30, 2003), all determined on a consolidated basis and in accordance with GAAP.

(iv) "12 Month EBITDA " means EBITDA for the 12 Month Period for which the applicable Fixed Charge Coverage Ratio is then being determined. "12 Month EBITDA" will be calculated for each 12 Month Period ending as of the end of each Fiscal Quarter or Fiscal Year.

(iii) "Fiscal Quarter" means, in respect of a date as of which the applicable Financial Covenant is being calculated, any quarter of a Fiscal Year, the first Fiscal Quarter beginning

on October 1 and ending on December 31, the second Fiscal Quarter beginning on January 1 and ending on March 31, the third Fiscal Quarter beginning on April 1 and ending on June 30, and the fourth Fiscal Quarter beginning on July 1 and ending on September 30.

(iv) "Fiscal Year" means International's fiscal year for financial accounting purposes, beginning on October 1 and ending on September 30.

(v) "12 Month Period" means, in respect of a date as of which the applicable Financial Covenant is being calculated, the four consecutive Fiscal Quarters immediately preceding the date as of which the Financial Covenant is being calculated (i.e., a rolling four Fiscal Quarter (or 12 month) period).

(vi) "Net Capital Expenditures" means the sum of (a) International's consolidated capital expenditures (including, but not by way of limitation, expenditures for fixed assets or leases capitalized or required to be capitalized on International's consolidated books by purchase, lease-purchase agreement, option or otherwise), minus (b) the net book value of capital assets previously sold and replaced by such capital expenditures.

Section 3. Minimum Tangible Net Worth.

3.1 Borrower will not permit International's Tangible Net Worth (as defined below) to be less than the following amounts set opposite the following periods as of the end of any calendar month ended during the following periods (including any calendar month which ended on the first day of the following periods):

Period		Minimum Tangible Net Worth
December 31, 2002 through, and including, September 29, 2003		$	32,000,000
September 30, 2003 and thereafter		$	32,500,000

3.2 For purposes of this Exhibit J,

(i) "Tangible Net Worth" means the total of International's book net worth in Dollars, determined in accordance with GAAP consistently applied, based on FIFO accounting for its Inventory (including the sum of common stock, paid in capital, and earned surplus), net of any adjustment arising from foreign currency valuations, minus (without duplication) (a) all employee, officer or Affiliate Receivables; minus (b) all capitalized organizational or closing costs; minus (c) the then amount of deferred financing costs; minus (d) all advances to Affiliates or in respect of guarantees on their behalf; minus (e) all goodwill; minus (f) all deferred pension assets; minus (g) all investments in any stock, Indebtedness, or securities of, or any other Ownership Interest in, any Person; minus (h) any other asset considered under GAAP as an intangible asset; and minus (i) any (1) gain from the sale of capital assets outside the ordinary course of business, (2) gain from any write-up of assets, (3) gain from the acquisition of debt securities or Ownership Interests of International or from cancellation or forgiveness of Indebtedness, or (4) gain or income arising from accretion of any negative goodwill; and minus or plus, as applicable, (j) gain or loss recognized by International as earnings which relate to any extraordinary accounting adjustments or non-recurring items of income or include any amounts attributable to extraordinary gains or extraordinary items of income or any other non-operating, non-recurring gain from time to time occurring to the extent, in each case, the gains or items of income are non-cash.

Section 4. Definitions. Capitalized terms used, but not defined, in this Exhibit J have the meanings given to them in the Financing Agreement.

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Exhibit 10.90

AMENDMENT NO. 7 TO FINANCING AGREEMENT
CONSENT OF GUARANTOR
EXHIBIT J FINANCIAL COVENANTS
EX-21.1 6 a2100010zex-21_1.htm EXHIBIT 21.1
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EXHIBIT 21.1

LIST OF SUBSIDIARIES OF VARI-LITE INTERNATIONAL, INC.

NAME	JURISDICTION OF INCORPORATION	OWNER
VLPS Lighting Services, Inc.	Delaware	Vari-Lite International, Inc.
Vari-Lite Europe Holdings, Ltd.	United Kingdom	Vari-Lite International, Inc.
Vari-Lite Europe, Ltd.	United Kingdom	Vari-Lite Europe Holdings, Ltd.
Theatre Projects Lighting Services, Ltd.	United Kingdom	Vari-Lite Europe Holdings, Ltd.
B. S. Ltd.	United Kingdom	Vari-Lite Europe Holdings, Ltd.
Irideon, Ltd.	United Kingdom	Vari-Lite Europe Holdings, Ltd.
Vari-Lite Production Services Europe, NV	Belgium	Vari-Lite International, Inc.
Vari-Lite Asia, Inc.	Japan	Vari-Lite International, Inc.
Vari-Lite Production Services Hong Kong Limited	Hong Kong	Vari-Lite International, Inc.
Vari-Lite Hong Kong, Ltd.	Hong Kong	Vari-Lite International, Inc.

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EXHIBIT 21.1

LIST OF SUBSIDIARIES OF VARI-LITE INTERNATIONAL, INC.
EX-23.1 7 a2100010zex-23_1.htm EXHIBIT 23.1
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Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement No. 333-67664 of Vari-Lite International, Inc. on Form S-8 of our report dated December 31, 2002 appearing in this Annual Report on Form 10-K of Vari-Lite International, Inc. for the year ended September 30, 2002.

/s/ Deloitte & Touche LLP

Dallas, Texas
January 14, 2003

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Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT
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