10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.   20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES AND EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

COMMISSION FILE NUMBER:      0-23159

Vari-Lite International, Inc.

(Exact name of registrant as specified in its charter)

Delaware	75-2239444
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
201 Regal Row, Dallas, Texas	75247
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number including area code: (214) 630-1963

                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   Noo

Indicate the number of shares outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date: As of August 15, 2002, there were 7,800,003 shares of Common Stock outstanding.

VARI-LITE INTERNATIONAL, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2002

PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements:
	Condensed Consolidated Balance Sheets as of
	September 30, 2001 and June 30, 2002
	Condensed Consolidated Statements of Income and Comprehensive
	Income (Loss) for the three months ended June 30, 2001 and 2002.
	Condensed Consolidated Statements of Income and Comprehensive
	Income (Loss)  for the nine months ended June 30, 2001 and 2002.
	Condensed Consolidated Statements of Cash Flows for
	the nine months ended June 30, 2001 and 2002
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
PART II. - OTHER INFORMATION
Item 1.	Legal Proceedings
Item 3.	Defaults Upon Senior Securities
Item 6.	Exhibits and Reports on Form 8-K.
SIGNATURES

2

VARI–LITE INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands except share data)

ASSETS

	September 30, 2001			June 30, 2002
CURRENT ASSETS:
Cash	$	3,686		$	1,991
Receivables, less allowance for doubtful accounts of $603 and $849	9,679			9,550
Inventory, less valuation allowance of $407 and $5,307	15,388			12,071
Prepaid expense and other current assets	783			2,015
TOTAL CURRENT ASSETS	29,536			25,627
EQUIPMENT AND OTHER PROPERTY:
Lighting and sound equipment	103,032			104,805
Machinery and tools	3,578			3,570
Furniture and fixtures	4,207			4,788
Office and computer equipment	10,501			10,523
	121,318			123,686
Less accumulated depreciation and amortization	72,712			78,692
	48,606			44,994
OTHER ASSETS	2,076			655
TOTAL ASSETS	$	80,218		$	71,276
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	4,284		$	4,675
Accrued liabilities		3,795			3,960
Unearned revenue		1,201			1,769
Income taxes payable		146			27
Current portion of long-term obligations		4,893			18,229
TOTAL CURRENT LIABILITIES		14,319			28,660
LONG-TERM OBLIGATIONS		18,363			5,015
DEFERRED INCOME TAXES		2,209			—
TOTAL LIABILITIES		34,891			33,675
COMMITMENTS AND CONTINGENCIES  (Note 4)		—			—
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		(186	)		(186	)
Additional paid-in capital		25,026			25,026
Accumulated other comprehensive income - foreign currency translation adjustment		791			1,034
Retained earnings		18,911			10,942
TOTAL STOCKHOLDERS’ EQUITY		45,327			37,601
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	80,218		$	71,276

See notes to condensed consolidated financial statements.

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VARI–LITE INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE  INCOME  (LOSS)

For the Three Months Ended June 30, 2001 and 2002

(Unaudited)

(In thousands except share data)

	2001			2002
Rental revenues	$	12,572		$	10,007
Product sales and services revenues	3,012			5,578
TOTAL REVENUES	15,584			15,585
Rental cost	6,264			5,496
Product sales and services cost	1,892			3,887
TOTAL COST OF SALES	8,156			9,383
GROSS PROFIT	7,428			6,202
Selling, general and administrative expense	7,910			6,840
Research and development expense	1,318			889
Reserve for excess, slow moving and obsolete inventory	—			4,900
Write-off of receivables related to premiums paid under split-dollar life insurance policies	—			1,348
TOTAL OPERATING EXPENSES	9,228			13,977
OPERATING LOSS	(1,800		)	(7,775		)
Interest expense (net)	351			349
LOSS BEFORE INCOME TAX	(2,151		)	(8,124		)
Income tax benefit	(850		)	(1,418		)
NET LOSS	(1,301		)	(6,706		)
Other comprehensive income - foreign currency translation adjustment	118			1,265
COMPREHENSIVE LOSS.	$	(1,183	)	$	(5,441	)
WEIGHTED AVERAGE BASIC AND  DILUTED SHARES OUTSTANDING	7,800,003			7,800,003
PER SHARE INFORMATION
BASIC AND DILUTED:
Net loss	$	(0.17	)	$	(0.86	)

See notes to condensed consolidated financial statements.

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VARI–LITE INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE  INCOME  (LOSS)

For the Nine  Months Ended June 30, 2001 and 2002

(Unaudited)

(In thousands except share data)

	2001			2002
Rental revenues	$	41,908		$	31,577
Product sales and services revenues	12,391			15,395
TOTAL REVENUES	54,299			46,972
Rental cost	19,019			16,113
Product sales and services cost	8,118			10,011
TOTAL COST OF SALES	27,137			26,124
GROSS PROFIT	27,162			20,848
Selling, general and administrative expense	24,002			20,470
Research and development expense	3,716			3,384
Gain on the sale of concert sound reinforcement business	(7,100		)	—
Reserve for excess, slow moving and obsolete inventory	—			4,900
Write-off of receivables related to premiums paid under split-dollar life insurance policies	—			1,348
TOTAL OPERATING EXPENSES	20,618			30,102
OPERATING INCOME (LOSS)	6,544			(9,254		)
Interest expense (net)	1,913			957
INCOME (LOSS) BEFORE INCOME TAX	4,631			(10,211		)
Income tax expense (benefit)	1,758			(2,243		)
NET INCOME (LOSS)	2,873			(7,968		)
Other comprehensive income - foreign currency translation adjustment	679			242
COMPREHENSIVE INCOME (LOSS)	$	3,552		$	(7,726	)
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING	7,800,003			7,800,003
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING	7,876,463			7,800,003
PER SHARE INFORMATION
BASIC:
Net income (loss)	$	0.37		$	(1.02	)
DILUTED:
Net income (loss)	$	0.36		$	(1.02	)

See notes to condensed consolidated financial statements.

5

VARI–LITE INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended June 30, 2001 and 2002

(Unaudited)

(In thousands)

	2001			2002
Cash flows from operating activities:
Net income (loss)	$	2,873		$	(7,968	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	7,823			7,859
Amortization of note discount and deferred loan fees	362			129
Provision for doubtful accounts	138			244
Deferred income taxes	1,316			(2,209		)
Gain on sale of concert sound reinforcement business	(7,100		)	—
Reserve for excess, slow moving and obsolete inventory	—			4,900
Write-off of receivables related to premiums paid under split-dollar life insurance policies	—			1,348
Loss on sale of equipment and other property	80			214
Net change in assets and liabilities:
Accounts receivable	385			(114		)
Prepaid expenses	(124		)	(1,232		)
Inventory	(2,322		)	(1,126		)
Other assets	(460		)	(35		)
Accounts payable, accrued liabilities and income taxes payable	(1,272		)	438
Unearned revenue	(1,173		)	568
Net cash provided by operating activities	526			3,016
Cash flows from investing activities:
Capital expenditures, including rental equipment	(7,460		)	(4,615		)
Proceeds from sale of concert sound reinforcement business	11,946			—
Proceeds from sale of European operations	5,258			—
Proceeds from sale of equipment	71			87
Net cash provided by (used in) investing activities	9,815			(4,528		)
Cash flows from financing activities:
Proceeds from issuance of debt	49,288			45,894
Principal payments on debt	(60,603		)	(46,152		)
Proceeds from payments on stockholder notes receivable	19			—
Net cash used in financing activities	(11,296		)	(258		)
Effect of exchange rate changes on cash and cash equivalents	(866		)	75
Net decrease in cash during the period	(1,821		)	(1,695		)
Cash, beginning of period	4,315			3,686
Cash, end of period	$	2,494		$	1,991
Supplemental Cash Flow Information
Cash paid for interest expense	$	1,936		$	1,075
Cash paid for income taxes	$	267		$	674

See notes to condensed consolidated financial statements.

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VARI–LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands except share data)

1.             Interim Financial Information

The accompanying unaudited condensed consolidated financial statements of Vari-Lite International, Inc. (the “Company”) have been prepared by the Company in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, the condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary to present fairly the consolidated financial position, results of operations and cash flows of the Company. The results of operations for the three and nine-month periods ended June 30, 2002 are not necessarily indicative of the results of operations that may be expected for any other interim periods or for the fiscal year ending September 30, 2002.

Certain reclassifications have been made to the June 30, 2001 consolidated financial statements to conform to the presentation in the June 30, 2002 consolidated financial statements.

For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2001.

2.Inventory

                Inventory consists of the following:

	September 30, 2001			June 30, 2002
Raw materials	$	13,493		$	15,688
Inventory reserve	(407		)	(5,307		)
Work in progress	567			474
Finished goods	1,735			1,216
	$	15,388		$	12,071

In the three-month period ended June 30, 2002, an additional reserve of $4,900 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.

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3.Debt

                On December 19, 1997, the Company entered into a $50,000 multicurrency revolving credit  facility (the “Old Credit Facility”). Borrowings under the Old Credit Facility were $32,200 at September 30, 2000.  Subsequent to September 30, 2000, the Company used proceeds of $22,200 from the sale of the Company’s concert sound reinforcement business and continental European rental operations and the funding of the London Bank Loans (hereinafter defined) to reduce borrowings under the Old Credit Facility to $10,000.

On December 29, 2000, Vari-Lite, Inc. (“Vari-Lite”), entered a new credit facility (the “New Credit Facility”), which includes the $12,000 Term Loan, the $5,000 Revolver and the $3,000 Capital Expenditure Loan.  The Term Loan and Capital Expenditure Loan amortize over 84 months (subject to a balloon payment on termination of the New Credit Facility as discussed below). Borrowings under the Revolver are subject to availability under a borrowing base of eligible inventory and accounts receivable (as defined in the New Credit Facility).  As of June 30, 2002, there was $2,495 outstanding under the Revolver.  Prior to January 15, 2002, all outstanding borrowings under the New Credit Facility bore interest at the lender’s base rate or LIBOR, plus a rate margin of 0.75% and 2.50%, respectively.  From January 15, 2002 through July 31, 2002, all outstanding balances under the New Credit Facility bore interest at the lender’s base rate or LIBOR, plus a rate margin of 0.75% or 2.50%, respectively. Beginning August 1, 2002, all outstanding balances under the New Credit Facility bear 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).  The New Credit Facility is guaranteed by the Company and is secured by all of the stock and substantially all of the assets of Vari-Lite 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, as amended on June 30, 2002.  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, 2003.  Upon termination of the New Credit Facility, the entire outstanding indebtedness thereunder becomes due and payable in full.

As of June 30, 2002, all balances outstanding under the New Credit Facility were classified as current due to the likelihood that the Company will not be able to meet all of the financial ratio covenants under this facility beginning on December 31, 2002. After further evaluation, management also believes that as of March 31, 2002, it was unlikely that the Company was going to meet all of these covenants as of December 31, 2002. Therefore, the balances outstanding under the New Credit Facility as of March 31, 2002 should also have been classified as current. The Company’s management is currently negotiating an amendment to the New Credit Facility with modified financial covenants and is considering other financing options to replace the New Credit Facility. There can be no assurances regarding the Company’s ability

8

to obtain additional financing or the successful completion of an amendment to the New Credit Facility. If the Company is not successful in amending or refinancing the New Credit Facility, the lenders will be entitled to pursue all rights available under the New Credit Facility in the event the Company does not meet the financial ratio covenants or the terms of other compliance covenants.

On November 23, 2000, September 27, 2001 and March 25, 2002, the Company’s London subsidiary entered into British pounds sterling loans of 4,000 (USD 5,800), 500 (USD 727) and 400 (USD 570), respectively, with a U. K. bank (collectively, the “London Bank Loans”.)  The London Bank Loans accrue interest at the rate of 9.10%, 7.78% and 7.77% per annum, respectively, and amortize over 48 months, 60 months and 60 months, 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 borrowed money to purchase computer equipment and office furniture and fixtures and conventional lighting equipment.  These loans are typically amortized over three to five years and bear interest at various rates ranging from 1.50% to 10.35%.  Proceeds received under this type of financing were approximately $1,135 and $2,448 for the nine-month periods ending June 30, 2001 and 2002, respectively, and borrowings outstanding under this type of financing at June 30, 2001 and 2002 were approximately $2,367 and $3,720, respectively.

4.Commitments and Contingencies

                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. The Company is not currently involved in any material legal proceedings.

5.Segment Reporting

                The Company’s chief operating decision maker is considered to be the Company’s Chief Operating Officer (“COO”). The COO 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 a single industry segment.

9

Information about the Company’s operations for the three and nine-month periods ended June 30, 2001 and 2002 is presented below:

	Three Months Ended June 30, 2001
	North America			Asia			Europe		Intercompany			Total
Net revenues from unaffiliated customers	$	10,860		$	1,425		$	3,299	$	—		$	15,584
Intersegment sales	2,229			9			27		(2,265		)	—
Total net revenues	13,089			1,434			3,326		(2,265		)	15,584
Operating income (loss)	(1,621		)	(256		)	246		(169		)	(1,800		)
Depreciation and amortization	1,963			50			590		—			2,603
Total assets	66,493			7,703			17,020		(9,620		)	81,596

	Three Months Ended June 30, 2002
	North America			Asia			Europe		Intercompany			Total
Net revenues from unaffiliated customers	$	8,778		$	2,926		$	3,881	$	—		$	15,585
Intersegment sales	2,675			5			—		(2,680		)	—
Total net revenues	11,453			2,931			3,881		(2,680		)	15,585
Operating income (loss)	(7,855		)	(137		)	225		(8		)	(7,775		)
Depreciation and amortization	2,030			92			577		(61		)	2,638
Total assets	55,200			8,525			16,866		(9,315		)	71,276

	Nine Months Ended June 30, 2001
	North America		Asia		Europe		Intercompany			Total
Net revenues from unaffiliated customers	$	38,073	$	6,755	$	9,471	$	—		$	54,299
Intersegment sales	5,328		47		32		(5,407		)	—
Total net revenues	43,401		6,802		9,503		(5,407		)	54,299
Operating income	4,157		757		1,799		(169		)	6,544
Depreciation and amortization	5,838		172		1,813		—			7,823
Total assets	66,493		7,703		17,020		(9,620		)	81,596

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	Nine Months Ended June 30, 2002
	North America			Asia		Europe		Intercompany			Total
Net revenues from unaffiliated customers	$	27,891		$	8,156	$	10,925	$	—		$	46,972
Intersegment sales	10,166			22		42		(10,230		)	—
Total net revenues	38,057			8,178		10,967		(10,230		)	46,972
Operating income (loss)	(9,753		)	565		790		(856		)	(9,254		)
Depreciation and amortization	6,025			219		1,724		(109		)	7,859
Total assets	55,200			8,525		16,866		(9,315		)	71,276

6. Net Loss Per Share

Basic net loss per share is computed based upon the weighted average number of common shares outstanding.  Diluted net loss per share reflects the dilutive effect, if any, of stock options and warrants.

	Three Months ended June 30,		Nine Months ended June 30,
	2001	2002	2001	2002
Weighted average shares outstanding	7,800,003	7,800,003	7,800,003	7,800,003
Dilutive effect of stock options and warrants after application of treasury stock method	—	—	76,460	—
Shares used in calculating diluted net loss per share	7,800,003	7,800,003	7,876,463	7,800,003

For the three-month period ended June 30, 2001 and 2002, net loss per share excludes stock options of 739,700 and 729,200, respectively, and warrants of 296,057 and 296,057, respectively, which were anti-dilutive. For the nine-month period ended June 30, 2001, net income per share excludes stock options of 663,240 and warrants of 296,057 which were anti-dilutive, but includes 76,460 options which were dilutive.  For the nine-month period ended June 30, 2002, net loss per share excludes stock options of 729,200 and warrants of 296,057 which were anti-dilutive.

7.Dispositions

                On October 26, 2000, the Company sold 100% of its interest in Vari-Lite International Europe, B.V. (“VLI Europe”) and 0.4% of its interest in Vari-Lite Production Services, SAS, and Vari-Lite sold all of the VARI*LITEÒ lighting equipment used in those operations.  VLI Europe owned 100% of Vari-Lite Production Services, N.V., 99.6% of Vari-Lite Production Services, SAS and 100% of Vari-Lite Production Services, AB.  This transaction resulted in a pre-tax charge of $3,200 which was recorded as an asset impairment in the fourth quarter of fiscal year 2000.

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                On November 17, 2000, the Company transferred substantially all of the assets of Showco, Inc. to Clearsho, Inc. (“Clearsho”), which assumed certain of Showco’s contract liabilities, in exchange for the sole membership interest in Clearsho.  On November 17, 2000, Showco sold 100% of its interest in Clearsho which resulted in a net pre-tax gain of $7,100.

8.Write-off of Receivables related to Premiums paid under Split-Dollar Life Insurance Policies

On June 30, 2002, the Company and certain directors of the Company mutually agreed to terminate all of the outstanding deferred compensation and consulting agreements that existed between these parties.  In addition, the Company has 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 the Company’s interest in the collateral assignment of death benefits under those policies, to the respecive 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 wrote-off $1,348 at June 30, 2002, which represented a receivable related to premiums paid by the Company. 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 annual cash savings of $596. Additionally, the assignment of the Company’s obligations under the split-dollar life insurance agreements will result in additional cash savings of $757 that would have been due over the remaining term of those insurance policies.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Revenues.   Total revenues for the three-month period ended June 30, 2002 were $15.6 million compared to the three-month period ended June 30, 2001 of $15.6 million.  The components of these revenues are set forth below.

Rental Revenues. Rental revenues decreased 20.4%, or $2.6 million, to $10.0 million in the three-month period ended June 30, 2002, compared to $12.6 million in the three-month period ended June 30, 2001.  This decrease was due to the weak economy which continues to have a negative impact on live entertainment events.

Product Sales and Services Revenues.  Product sales and services revenues increased 85.2%, or $2.6 million, to $5.6 million in the three-month period ended June 30, 2002, compared to $3.0 million in the three-month period ended June 30, 2001. This increase was due to the increase in sales of VARI*LITEÒ automated lighting equipment which the Company commenced selling in fiscal 2000. Despite the weak economy, 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.

Rental Cost.  Rental cost decreased 12.3%, or $0.8 million, to $5.5 million in the three-month period ended June 30, 2002, compared to $6.3 million in the three-month period ended June 30, 2001.  However, rental cost as a percentage of rental revenues increased to 54.9% in the three-month period ended June 30, 2002, from 49.8% in the three-month period ended June 30, 2001.   This increase was due to depreciation expense representing a higher percentage of revenues during the three-month period ended June 30,2002 as a result of decreased revenues due to difficult economic conditions.

Product Sales and Services Cost.  Product sales and services cost increased 105.5%, or $2.0 million, to $3.9 million in the three-month period ended June 30, 2002, compared to $1.9 million in the three-month period ended June 30, 2001. This increase was primarily due to increased product sales revenue in the three-month period ended June 30, 2002. Product sales and services cost as a percentage of product sales and services revenues increased to 69.7% in the three-month period ended June 30, 2002, from 62.8% in the three-month period ended June 30, 2001 as a result of the increased sales of recently introduced products which generally have lower gross margins than the more mature products sold by the Company.

Selling, General and Administrative Expense. Selling, general and administrative expense decreased 13.5%, or $1.1 million, to $6.8 million in the three-month period ended June 30, 2002, compared to $7.9 million in the three-month period ended June 30, 2001. This decrease was due to the expense reduction efforts undertaken in the first and third quarters of fiscal 2002. This expense as a percentage of total revenues decreased to 43.9% in the three-month period ended June 30, 2002, from

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50.8% in the three-month period ended June 30, 2001 as a result of the aforementioned expense reductions.

Research and Development Expense.  Research and development expense decreased 32.5%, or $0.4 million, to $0.9 million in the three-month period ended June 30, 2002, compared to $1.3 million in three-month period ended June 30, 2001.  This decrease was primarily due to expense reduction efforts undertaken in the first and third quarters of fiscal 2002. This expense as a percentage of total revenues decreased to 5.7% in the three-month period ended June 30, 2002, from 8.5% in the three-month period ended June 30, 2001 as a result of the aforementioned expense reductions.

  Reserve for Excess, Slow Moving and Obsolete Inventory. In the three-month period ended June 30, 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 through the Company’s rental operations. The Company considered this reserve necessary as a result of the decreased likelihood that these components will ultimately be consumed due to decreased rental revenues related to these lighting products during the three-month period ended June 30, 2002 and the market uncertainty regarding economic conditions.

 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.  In addition, the Company has 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 the Company’s 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 the three-month period ended June 30, 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 annual cash savings of $0.6 million. Additionally, the assignment of the Company’s obligations under the split-dollar life insurance agreements will result in additional cash savings of $0.7 million that would have been due over the remaining term of those insurance policies.

Interest Expense.  Interest expense in the three-month period ended June 30, 2002 is unchanged from the three-month period ended June 30, 2001.

Income Taxes. The effective tax rates in the three-month periods ended June 30, 2002 and 2001 were 17.5% and 39.5%, respectively.  The decrease in the effective tax rate during the three-month period ended June 30, 2002 is due to a reserve of $1.8 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.

14

Nine Months Ended June 30, 2002 Compared to Nine Months Ended June 30, 2001

Revenues.   Total revenues decreased 13.5%, or $7.3 million, to $47.0 million in the nine-month period ended June 30, 2002, compared to $54.3 million in the nine-month period ended June 30, 2001.  The revenue decrease was attributable primarily to the factors set forth below.

Rental Revenues. Rental revenues decreased 24.7%, or $10.3 million, to $31.6 million in the nine-month period ended June 30, 2002, compared to $41.9 million in the nine-month period ended June 30, 2001. This decrease was due to the weak economy combined with the ongoing 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 the nine-month period ended June 30, 2001.

Product Sales and Services Revenues.  Product sales and services revenues increased 24.3%, or $3.0 million, to $15.4 million in the nine-month period ended June 30, 2002, compared to $12.4 million in the nine-month period ended June 30, 2001. This increase was due to a $6.7 million increase in sales of VARI*LITEÒ automated lighting equipment which the Company commenced selling in fiscal 2000. Despite the weak economy, 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 Cost.  Rental cost decreased 15.3%, or $2.9 million, to $16.1 million in the nine-month period ended June 30, 2002, compared to $19.0 million in the nine-month period ended June 30, 2001.  This decrease was due to reduced revenues as a result of a weak economy and the sale of the Company’s concert sound reinforcement business in November 2000.  Rental cost as a percentage of rental revenues increased to 51.0% in the nine-month period ended June 30, 2002, from 45.4% in the nine-month period ended June 30, 2001.  This increase was primarily due to depreciation expense representing a higher percentage of revenues during the nine-month period ended June 30, 2002 as a result of decreased revenues due to difficult economic conditions.

Product Sales and Services Cost.  Product sales and services cost increased 23.3%, or $1.9 million, to $10.0 million in the nine-month period ended June 30, 2002, compared to $8.1 million in the nine-month period ended June 30, 2001. This increase was due to a $4.4 million increase in cost of sales of VARI*LITEÒ 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 decreased to 65.0% in the nine-month period ended June 30, 2002, from 65.5% in the nine-month period ended June 30, 2001.

Selling, General and Administrative Expense. Selling, general and administrative expense decreased 14.7%, or $3.5 million, to $20.5 million in the nine-month period ended June 30, 2002, compared to $24.0 million in the nine-month period ended June 30, 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 43.6% in the nine-month period ended June 30, 2002, from

15

44.2% in the nine-month period ended June 30, 2002 as a result of the aforementioned expense reductions.

Research and Development Expense.  Research and development expense decreased 9.0%, or $0.3 million, to $3.4 million in the nine-month period ended June 30, 2002, compared to $3.7 million in nine-month period ended June 30, 2001.  This decrease was primarily due to expense reduction efforts undertaken in the first and third quarters of fiscal 2002. This expense as a percentage of total revenues increased to 7.2% in the nine-month period ended June 30, 2002, from 6.8% in the nine-month period ended June 30, 2001 as a result of decreased revenues.

  Reserve for Excess, Slow Moving and Obsolete Inventory. In the nine-month period ended June 30, 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 through the Company’s rental operations. The Company considered this reserve necessary as a result of the decreased likelihood that these components will ultimately be consumed due to decreased rental revenues related to these lighting products during the nine-month period ended June 30, 2002 and the market uncertainty regarding economic conditions.

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.  In addition, the Company has 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 the Company’s 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 the nine-month period ended June 30, 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 annual cash savings of $0.6 million. Additionally, the assignment of the Company’s obligations under the split-dollar life insurance agreements will result in additional cash savings of $0.7 million that would have been due over the remaining term of those insurance policies.

Interest Expense.  Interest expense decreased 50.0%, or $1.0 million, to $0.9 million in the nine-month period ended June 30, 2002, compared to $1.9 million in the nine-month period ended June 30, 2001, as a result of reduced borrowings and lower interest rates in the nine-month period ended June 30, 2002, as well as interest income of $0.1 million from an income tax refund.

Income Taxes. The effective tax rates in the nine-month periods ended June 30, 2002 and 2001 were 22.0% and 38.0%, respectively. The decrease in the effective tax rate during the nine-month period ended June 30, 2002 is due to a reserve of $1.8 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.

16

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 $0.5 million and $3.0 million, respectively, in the nine-month periods ending June 30, 2001 and 2002.

                On December 19, 1997, the Company entered into the Old Credit Facility. Borrowings under the Old Credit Facility were $32.2 million at September 30, 2000.  Subsequent to September 30, 2000, the Company used proceeds of $22.2 million from the sale of the Company’s concert sound reinforcement business and continental European rental operations and the funding of the London Bank Loans to reduce borrowings under the Old Credit Facility to $10.0 million.

On December 29, 2000, Vari-Lite entered into the New Credit Facility which includes the $12.0 Term Loan, the $5.0 million Revolver and the $3.0 million Capital Expenditure Loan. The Term Loan and Capital Expenditure Loan amortize over 84 months (subject to a balloon payment on termination of the New Credit Facility as discussed below).  Borrowings under the Revolver are subject to availability under a borrowing base of eligible inventory and accounts receivable (as defined in the New Credit Facility).  As of June 30, 2002, there was $2.5 million outstanding under the Revolver.  Prior to January 15, 2002,  all outstanding borrowings under the New Credit Facility bore interest at the lender’s base rate or LIBOR, plus a rate margin of 0.75% and 2.50%, respectively.  Since January 15, 2002, all outstanding balances under the New Credit Facility bear interest at the lender’s base rate or LIBOR, plus a rate margin ranging from 0.25% to 0.75% or 2.00% to 2.50%, respectively, based upon the Company’s ratio of Adjusted Funded Debt to EBITDA (as defined in the New Credit Facility). From January 15, 2002 through July 31, 2002, all outstanding balances under the New Credit Facility bore interest at the lender’s base rate or LIBOR, plus a rate margin ranging of 0.75% or 2.00%, respectively. Beginning August 1, 2002, all outstanding balances under the New Credit Facility bear 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). The New Credit Facility is guaranteed by the Company and is secured by all of the stock and substantially all of the assets of Vari-Lite 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, as amended on June 30, 2002.  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, 2003.  Upon termination of the New Credit Facility, the entire outstanding indebtedness thereunder becomes due and payable in full.

As of June 30, 2002, all balances outstanding under the New Credit Facility were classified as current due to the likelihood that the Company will not be able to meet all of the financial ratio covenants under this facility beginning on December 31, 2002. After further evaluation, management also believes that as of  March 31, 2002, it was unlikely that the Company was going to meet all of these covenants as of December 31, 2002. Therefore, the balances outstanding under the New Credit Facility as of March 31, 2002 should also have been classified as current. The Company’s management is currently negotiating an amendment to the New Credit Facility with modified financial covenants and is considering other financing options to replace the New Credit Facility. There can be no assurances regarding the

17

Company’s ability to obtain additional financing or the successful completion of an amendment to the New Credit Facility. If the Company is not successful in amending or refinancing the New Credit Facility, the lenders will be entitled to pursue all rights available under the New Credit Facility in the event the Company does not meet the financial ratio covenants or the terms of other compliance covenants.

On November 23, 2000, September 27, 2001 and March 25, 2002, the Company’s London subsidiary entered into British pounds sterling loans of 4.0 million (USD 5.8 million), 0.5 million (USD 0.7 million) and 0.4 million (USD 0.6 million), respectively, with a U. K. bank (collectively, the “London Bank Loans”.)  The London Bank Loans accrue interest at the rate of 9.10%, 7.78% and 7.77% per annum, respectively, and amortize over 48 months, 60 months and 60 months, 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 borrowed money to purchase computer equipment and office furniture and fixtures and conventional lighting equipment.  These loans are amortized over three to five years and bear interest at various rates ranging from 1.50% to 10.35%.  Proceeds received under this type of financing were approximately $1.1 million and $2.4 million for the nine-month periods ending June 30, 2001 and 2002, respectively, and borrowings outstanding under this type of financing at June 30, 2001 and 2002 were approximately $2.4 million and $3.7 million, respectively.

                The Company’s business requires significant capital expenditures.  Capital expenditures for the nine months ended June 30, 2001 and 2002 were approximately $7.5 million and $4.6 million, respectively, of which approximately $6.7 million and $4.4 million were for rental and demo equipment inventories.  The majority of the Company’s revenues are generated through the rental of automated lighting systems and, as such, the Company must maintain a significant amount of rental equipment to meet customer demands.

The Company’s ability to fund its anticipated operating needs and capital expenditures for at least the next twelve months is subject to the amount of cash flow generated from operations and the Company’s ability to negotiate adequate borrowing capacity under an amendment to the New Credit Facility and to access additional cash through other financing sources or asset sales. 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 market, sell and support products, competition, the success of the Company’s research and development programs, the ability to achieve competitive and technological advances, general and economic conditions and other factors beyond the Company’s control. While the Company’s management believes that they will negotiate an amendment to the New Credit Facility or obtain additional cash through other financing sources, there can be no assurance that sufficient capital resources will be available to fund the Company’s business during or after the next twelve months.

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. 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

18

subject to certain risks, uncertainties and assumptions, including without limitation the following as they relate to the Company: fluctuations in operating results and seasonality; the Company’s ability to market, sell and support products; technological changes; reliance on intellectual property; dependence on entertainment industry; competition; dependence on management; foreign exchange risk; international trade risk; dependence on key suppliers; dependence on manufacturing facility, customer demand and business and economic cycles; and changes in capital and financial markets, including the performance of companies listed on the Nasdaq National Market. 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 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                The Company does not believe that the market risks for the three- and nine-month periods ended June 30, 2002 substantially changed from those risks outlined for the year ended September 30, 2001 in the Company’s Form 10-K.

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PART II  OTHER INFORMATION

ITEM 1.  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.

ITEM 3.  DEFAULT UPON SENIOR SECURITIES

                As of June 30, 2002, all balances outstanding under the New Credit Facility were classified as current due to the likelihood that the Company will not be able to meet all of the financial ratio covenants under this facility beginning on December 31, 2002. After further evaluation, management also believes that as of  March 31, 2002, it was unlikely that the Company was going to meet all of these covenants as of December 31, 2002. Therefore, the balances outstanding under the New Credit Facility as of March 31, 2002 should also have been classified as current. The Company’s management is currently negotiating an amendment to the New Credit Facility with modified financial covenants and is considering other financing options to replace the New Credit Facility. There can be no assurances regarding the Company’s ability to obtain additional financing or the successful completion of an amendment to the New Credit Facility. If the Company is not successful in amending or refinancing the New Credit Facility, the lenders will be entitled to pursue all rights available under the New Credit Facility in the event the Company does not meet the financial ratio covenants or the terms of other compliance covenants.

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ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)Exhibits

10.72	Deferred Compensation Termination Agreement, dated June 30, 2002, between the Company and H. R. Brutsche’ III
10.73	Deferred Compensation Termination Agreement, dated June 30, 2002, between the Company and John D. Maxson
10.74	Deferred Compensation Termination Agreement, dated June 30, 2002, between the Company and James H. Clark, Jr.
10.75	Deferred Compensation Termination Agreement, dated June 30, 2002, between the Company and J. Anthony Smith
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
10.77	Termination of Consulting Agreement, dated June 30, 2002, between the Company and James H. Clark
10.78	Termination of Consulting Agreement, dated June 30, 2002, between the Company and J. Anthony Smith
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. Brutsche’ III
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. Brutsche’ III Insurance Trust, and H. R. Brutsche’ III
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. Brutsche’ III Insurance Trust, and H. R. Brutsche’ III
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.
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.
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
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

(b) No reports on Form 8-K were filed for the quarter ended June 30, 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

VARI-LITE INTERNATIONAL, INC.

Date:	August 15, 2002	By:	/s/ Jerome L. Trojan III
			Vice President - Finance,
			Chief Financial Officer, Treasurer
			and Secretary (Principal Financial
			and Accounting Officer)

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 Quarterly Report of Vari-Lite International, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 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 section 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:	August 15, 2002	By:	/s/ H.R. Brutsché III
			H.R. Brutsché III
			Chairman of the Board and Chief Executive Officer
Date:	August 15, 2002	By:	/s/ Jerome L. Trojan III
			Jerome L. Trojan III
			Vice President - Finance,
			Chief Financial Officer, Treasurer
			and Secretary

22

EX-10.72

Exhibit 10.72

DEFERRED COMPENSATION TERMINATION AGREEMENT

                This Deferred Compensation Termination Agreement, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”) and H.R. Brutsché III (the “Director”).

W I T N E S S E T H:

                WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.) and the Director entered into a Deferred Compensation Agreement, dated July 1, 1995, as amended by Amendment No. 1 to the Deferred Compensation Agreement, dated November 2, 1998 and Amendment No. 2 to the Deferred Compensation Agreement, dated December 28, 2001 (as amended, the “Deferred Compensation Agreement”); and

                WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have reviewed and made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

                WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to terminate the Deferred Compensation Agreement effective June 30, 2002; and

                WHEREAS, the Director is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to consent to the termination of the Deferred Compensation Agreement as proposed by the Compensation Committee;

                NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Deferred Compensation Agreement is cancelled and terminated and shall be of no further force or effect.

                IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
H.R. Brutsché III

EX-10.73

Exhibit 10.73

DEFERRED COMPENSATION TERMINATION AGREEMENT

                This Deferred Compensation Termination Agreement, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”) and John D. Maxson (the “Director”).

W I T N E S S E T H:

                WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.) and the Director entered into a Deferred Compensation Agreement, dated July 1, 1995, as amended by Amendment No. 1 to the Deferred Compensation Agreement, dated November 2, 1998 and Amendment No. 2 to the Deferred Compensation Agreement, dated December 28, 2001 (as amended, the “Deferred Compensation Agreement”); and

                WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have reviewed and made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

                WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to terminate the Deferred Compensation Agreement effective June 30, 2002; and

                WHEREAS, the Director is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to consent to the termination of the Deferred Compensation Agreement as proposed by the Compensation Committee;

                NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Deferred Compensation Agreement is cancelled and terminated and shall be of no further force or effect.

                IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
John D. Maxson

EX-10.74

Exhibit 10.74

DEFERRED COMPENSATION TERMINATION AGREEMENT

                This Deferred Compensation Termination Agreement, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”) and James H. Clark, Jr. (the “Director”).

W I T N E S S E T H:

                WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.) and the Director entered into a Deferred Compensation Agreement, dated July 1, 1995, as amended by Amendment No. 1 to the Deferred Compensation Agreement, dated November 2, 1998 and Amendment No. 2 to the Deferred Compensation Agreement, dated December 28, 2001 (as amended, the “Deferred Compensation Agreement”); and

                WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have reviewed and made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

                WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to terminate the Deferred Compensation Agreement effective June 30, 2002; and

                WHEREAS, the Director is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to consent to the termination of the Deferred Compensation Agreement as proposed by the Compensation Committee;

                NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Deferred Compensation Agreement is cancelled and terminated and shall be of no further force or effect.

                IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
James H. Clark, Jr.

EX-10.75

Exhibit 10.75

DEFERRED COMPENSATION TERMINATION AGREEMENT

                This Deferred Compensation Termination Agreement, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”) and J. Anthony Smith (the “Director”).

W I T N E S S E T H:

                WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.) and the Director entered into a Deferred Compensation Agreement, dated July 1, 1995, as amended by Amendment No. 1 to the Deferred Compensation Agreement, dated November 2, 1998 and Amendment No. 2 to the Deferred Compensation Agreement, dated December 28, 2001 (as amended, the “Deferred Compensation Agreement”); and

                WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have reviewed and made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

                WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to terminate the Deferred Compensation Agreement effective June 30, 2002; and

                WHEREAS, the Director is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to consent to the termination of the Deferred Compensation Agreement as proposed by the Compensation Committee;

                NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Deferred Compensation Agreement is cancelled and terminated and shall be of no further force or effect.

                IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
J. Anthony Smith

EX-10.76

Exhibit 10.76

AMENDMENT NO. 2

TO CONSULTING AGREEMENT BETWEEN

VARI-LITE INTERNATIONAL, INC. AND JOHN D. MAXSON

This Amendment No. 2 to Consulting Agreement, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”) and John D. Maxson (the “Consultant”).

W I T N E S S E T H:

WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.) and the Consultant entered into that certain Consulting Agreement, dated as of July 1, 1995, as amended by that certain Amendment No. 1 to the Consulting Agreement, dated August 11, 1997 (as amended, the “Consulting Agreement”); and

WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to amend the Consulting Agreement; and

WHEREAS, the Consultant is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to amend the Consulting Agreement as proposed by the Compensation Committee;

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree, effective as of the date hereof:

1.             Sections 3(a) and (b) of the Consulting Agreement are hereby deleted in their entirety.

2.             Except as amended hereby, the Consulting Agreement shall remain in full force and effect in accordance with its terms.

[The next following page is the signature page.]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
John D. Maxson

2

EX-10.77

Exhibit 10.77

TERMINATION OF CONSULTING AGREEMENT

This Termination of Consulting Agreement, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”) and James H. Clark, Jr. (the “Consultant”).

W I T N E S S E T H:

WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.) and the Consultant entered into that certain Consulting Agreement, dated as of July 1, 1995 (the “Consulting Agreement”); and

WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to terminate the Consulting Agreement effective as of June 30, 2002; and

WHEREAS, the Consultant is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to terminate the Consulting Agreement as proposed by the Compensation Committee;

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree, effective as of the date hereof, that the Consulting Agreement is cancelled and terminated and shall be of no further force or effect.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
James H. Clark, Jr.

EX-10.78

Exhibit 10.78

TERMINATION OF CONSULTING AGREEMENT

This Termination of Consulting Agreement, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”) and J. Anthony Smith (the “Consultant”).

W I T N E S S E T H:

WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.) and the Consultant entered into that certain Consulting Agreement, dated as of July 1, 1995 (the “Consulting Agreement”); and

WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to terminate the Consulting Agreement effective as of June 30, 2002; and

WHEREAS, the Consultant is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to terminate the Consulting Agreement as proposed by the Compensation Committee;

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree, effective as of the date hereof, that the Consulting Agreement is cancelled and terminated and shall be of no further force or effect.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
J. Anthony Smith

EX-10.79

Exhibit 10.79

AMENDMENT NO. 2

TO THE EMPLOYMENT AGREEMENT BETWEEN

VARI-LITE INTERNATIONAL, INC. AND H.R. BRUTSCHÉ III

This Amendment No. 2 to the Employment Agreement, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”) and H.R. Brutsché III (the “Executive”).

W I T N E S S E T H:

WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.) and the Executive entered into that certain Employment Agreement, dated as of July 1, 1995, as amended by Amendment No. 1 to the Employment Agreement, dated August 11, 1997 (as amended, the “Employment Agreement”); and

WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to amend the Agreement to reduce the “Base Salary” payable thereunder to $375,000; and

WHEREAS, the Executive is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to agree to the reduction in Base Salary proposed by the Compensation Committee; and

WHEREAS, the Company and the Executive have agreed that it is in the best interest of the Company to enter into (a) the Termination of Split Dollar Life Insurance Agreement, dated as of even date herewith, by and between the Company and Executive, (b) the Termination of Amended and Restated Split Dollar Life Insurance Agreement dated as of even date herewith, by and between the Company and Executive, and (c) the Deferred Compensation Termination Agreement, dated as of even date herewith, by and between the Company and Executive;

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree, effective as of the date hereof:

1.             The Executive’s Base Salary is hereby reduced from $507,000 to $375,000.

2.             The first sentence of  Section 5(a) of the Agreement is hereby amended to read in its entirety as follows:

“(a)BASE SALARY.  The Company shall pay the Executive an annual salary of $375,000 (the “Base Salary”).”

3.             Sections 5(d) and 5(h) of the Employment Agreement are hereby deleted in their entirety.

4.             Except as amended hereby, the Employment Agreement shall remain in full force and effect in accordance with its terms.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
H. R. Brutsché III

2

EX-10.80

Exhibit 10.80

ASSIGNMENT AND ASSUMPTION AGREEMENT

OF AMENDED AND RESTATED SPLIT-DOLLAR LIFE INSURANCE

This Assignment and Assumption Agreement of Amended and Restated Split-Dollar Life Insurance, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”), Brown Brothers Harriman Trust Company of Texas, trustee of the Harry R. Brutsché III Insurance Trust, dated October 6, 1995 (the “Owner”), and Harry R. Brutsché III (the “Director”).

W I T N E S S E T H:

WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.), the Owner, and the Director entered into that certain Amended and Restated Split-Dollar Life Insurance Agreement, dated as of October 12, 1995 (the “Split-Dollar Agreement”); and

WHEREAS, the Owner is the owner of that certain Whole Life Policy with Supplemental Insurance Option, Policy Number 8592771 (the “Policy”), issued by Massachusetts Mutual Life Insurance Company (the “Insurer”) to Director, acquired pursuant to the terms of the Split-Dollar Agreement; and

WHEREAS, the Policy is assigned to the Company pursuant to that certain Assignment of Life Insurance Policy as Collateral, dated October 12, 1995 by and between the Company and the Owner (the “Collateral Assignment”) as security for the repayment of the amounts which the Company made on the premiums due on the Policy on behalf of the Owner; and

WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have reviewed and made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to assign all of the Company’s rights, obligations, duties and liabilities under the Split-Dollar Agreement accruing after the date hereof to the Director; and

WHEREAS, the Director is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to assume all of the Company’s rights, obligations, duties and liabilities accruing after the date hereof under the Split-Dollar Agreement;

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows:

1.Assignment.  The Company hereby assigns, transfers and conveys to Director the Split-Dollar Agreement and all of the Company’s rights, title and interest in, under and to the Split-Dollar Agreement.

2.Assumption.  The Director hereby accepts the assignment of the Split-Dollar Agreement and assumes and agrees to perform, discharge and satisfy all of the Company’s obligations, duties and liabilities accruing under the Split-Dollar Agreement, including, but not limited to, the obligation to pay to the Insurer the annual premium for the Policy (it being understood that Director shall not have any obligation to perform, discharge or satisfy any obligations, duties or liabilities of the Company arising or accruing on or before the date of this Assignment).

3.Termination of Collateral Assignment.  The Collateral Assignment is hereby released and shall be of no further force or effect.

4.Further Assurance.  The Company and Director hereby agree to execute any and all further documents and to take any and all further actions as either of them may reasonably request in order to effectuate fully the provisions of this Agreement.

5.Entire Agreement.  This Agreement represents the entire agreement between the Company and Director concerning the subject matter hereof and supersedes all prior agreements or understandings, written or oral, with respect thereto.

6.Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.  The parties acknowledge and agree that this Agreement and the obligations and undertakings of the parties hereunder will be performable in Dallas, Dallas County, Texas.

7.Counterparts.  This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall constitute one agreement.

2

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
BROWN BROTHERS HARRIMAN TRUST COMPANY OF TEXAS, as trustee of the Harry R. Brutsché III Insurance Trust, dated October 6, 1995
By:
Name:
Title:
Harry R. Brutsché III

3

Amended and Restated Split-Dollar Life Insurance Agreement

Insurer:	Massachusetts Mutual Life Insurance Company
Policy:	Whole Life Policy with Supplemental Insurance Option, Policy Number 8592771
Insured:	Harry R. Brutsché III
Owner:	Brown Brothers Harriman Trust Company of Texas, as Trustee of the Harry R. Brutsché III Insurance Trust, dated October 6, 1995
Employer:	Vari-Lite International, Inc. (formerly Vari-Lite Holdings, Inc.)
Effective Date:	December 12, 1990

This Assignment and Assumption Agreement of Split-Dollar Life Insurance was recorded by Insurer on                            , 2002.

MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY

By:

Name:

Title:

4

EX-10.81

Exhibit 10.81

ASSIGNMENT AND ASSUMPTION AGREEMENT

OF SPLIT-DOLLAR LIFE INSURANCE

This Assignment and Assumption Agreement of Split-Dollar Life Insurance, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”), Brown Brothers Harriman Trust Company of Texas, trustee of the Harry R. Brutsché III Insurance Trust, dated October 6, 1995 (the “Owner”), and Harry R. Brutsché III (the “Director”).

W I T N E S S E T H:

WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.), the Owner, and the Director entered into that certain Split-Dollar Life Insurance Agreement, dated as of October 12, 1995 (the “Split-Dollar Agreement”); and

WHEREAS, the Owner is the owner of that certain Modified Premium Whole Life Policy, Policy Number 67151530 (the “Policy”), issued by John Hancock Mutual Life Insurance Company (the “Insurer”) to Director, acquired pursuant to the terms of the Split-Dollar Agreement; and

WHEREAS, the Policy is assigned to the Company pursuant to that certain Assignment of Life Insurance Policy as Collateral, dated October 12, 1995 by and between the Company and the Owner (the “Collateral Assignment”) as security for the repayment of the amounts which the Company made on the premiums due on the Policy on behalf of the Owner; and

WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have reviewed and made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to assign all of the Company’s rights, obligations, duties and liabilities under the Split-Dollar Agreement accruing after the date hereof to the Director; and

WHEREAS, the Director is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to assume all of the Company’s rights, obligations, duties and liabilities accruing after the date hereof under the Split-Dollar Agreement;

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows:

1.Assignment.  The Company hereby assigns, transfers and conveys to Director the Split-Dollar Agreement and all of the Company’s rights, title and interest in, under and to the Split-Dollar Agreement.

2.Assumption.  The Director hereby accepts the assignment of the Split-Dollar Agreement and assumes and agrees to perform, discharge and satisfy all of the Company’s obligations, duties and liabilities accruing under the Split-Dollar Agreement, including, but not limited to, the obligation to pay to the Insurer the annual premium for the Policy (it being understood that Director shall not have any obligation to perform, discharge or satisfy any obligations, duties or liabilities of the Company arising or accruing on or before the date of this Assignment).

3.Termination of Collateral Assignment.  The Collateral Assignment is hereby released and shall be of no further force or effect.

4.Further Assurance.  The Company and Director hereby agree to execute any and all further documents and to take any and all further actions as either of them may reasonably request in order to effectuate fully the provisions of this Agreement.

5.Entire Agreement.  This Agreement represents the entire agreement between the Company and Director concerning the subject matter hereof and supersedes all prior agreements or understandings, written or oral, with respect thereto.

6.Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.  The parties acknowledge and agree that this Agreement and the obligations and undertakings of the parties hereunder will be performable in Dallas, Dallas County, Texas.

7.Counterparts.  This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall constitute one agreement.

2

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
BROWN BROTHERS HARRIMAN
TRUST COMPANY OF TEXAS, as trustee
of the Harry R. Brutsché III Insurance Trust,
dated October 6, 1995
By:
Name:
Title:
Harry R. Brutsché III

3

Split-Dollar Life Insurance Agreement

Insurer:	John Hancock Mutual Life Insurance Company
Policy:	Modified Premium Whole Life Policy, Policy Number 67151530
Insured:	Harry R Brutsché III
Owner:	Brown Brothers Harriman Trust Company of Texas, as Trustee of the Harry R. Brutsché III Insurance Trust, dated October 6, 1995
Employer:	Vari-Lite International, Inc. (formerly Vari-Lite Holdings, Inc.)
Effective Date:	October 12, 1995

This Assignment and Assumption Agreement of Split-Dollar Life Insurance was recorded by Insurer on                     , 2002.

JOHN HANCOCK MUTUAL LIFE

INSURANCE COMPANY

By:

Name:

Title:

4

EX-10.82

Exhibit 10.82

ASSIGNMENT AND ASSUMPTION AGREEMENT

OF SPLIT-DOLLAR LIFE INSURANCE

This Assignment and Assumption Agreement of Split-Dollar Life Insurance, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”), James Howard Cullum Clark (the “Owner”), and James H. Clark, Jr. (the “Director”).

W I T N E S S E T H:

WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.), the Owner, and the Director entered into that certain Split-Dollar Life Insurance Agreement, dated as of October 12, 1995 (the “Split-Dollar Agreement”); and

WHEREAS, the Owner is the owner of that certain Modified Premium Whole Life Insurance Policy, Policy Number 67127330 (the “Policy”), issued by John Hancock Mutual Life Insurance Company (the “Insurer”) to Director, acquired pursuant to the terms of the Split-Dollar Agreement; and

WHEREAS, the Policy is assigned to the Company pursuant to that certain Assignment of Life Insurance Policy as Collateral, dated October 12, 1995 by and between the Company and the Owner (the “Collateral Assignment”) as security for the repayment of the amounts which the Company made on the premiums due on the Policy on behalf of the Owner; and

WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have reviewed and made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to assign all of the Company’s rights, obligations, duties and liabilities under the Split-Dollar Agreement accruing after the date hereof to the Director; and

WHEREAS, the Director is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to assume all of the Company’s rights, obligations, duties and liabilities accruing after the date hereof under the Split-Dollar Agreement;

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows:

1.Assignment.  The Company hereby assigns, transfers and conveys to Director the Split-Dollar Agreement and all of the Company’s rights, title and interest in, under and to the Split-Dollar Agreement.

2.Assumption.  The Director hereby accepts the assignment of the Split-Dollar Agreement and assumes and agrees to perform, discharge and satisfy all of the Company’s

obligations, duties and liabilities accruing under the Split-Dollar Agreement, including, but not limited to, the obligation to pay to the Insurer the annual premium for the Policy (it being understood that Director shall not have any obligation to perform, discharge or satisfy any obligations, duties or liabilities of the Company arising or accruing on or before the date of this Assignment).

3.Termination of Collateral Assignment.  The Collateral Assignment is hereby released and shall be of no further force or effect.

4.Further Assurance.  The Company and Director hereby agree to execute any and all further documents and to take any and all further actions as either of them may reasonably request in order to effectuate fully the provisions of this Agreement.

5.Entire Agreement.  This Agreement represents the entire agreement between the Company and Director concerning the subject matter hereof and supersedes all prior agreements or understandings, written or oral, with respect thereto.

6.Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.  The parties acknowledge and agree that this Agreement and the obligations and undertakings of the parties hereunder will be performable in Dallas, Dallas County, Texas.

7.Counterparts.  This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall constitute one agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
James Howard Cullum Clark
James H. Clark, Jr.

2

Split-Dollar Life Insurance Agreement

Insurer:	John Hancock Mutual Life Insurance Company
Policy:	Modified Premium Whole Life Insurance Policy, Policy Number 67127330
Insured:	James H. Clark, Jr.
Owner:	James Howard Cullum Clark
Employer:	Vari-Lite International, Inc. (formerly Vari-Lite Holdings, Inc.)
Effective Date:	October 12, 1995

This Assignment and Assumption Agreement of Split-Dollar Life Insurance was recorded by Insurer on                        , 2002.

JOHN HANCOCK MUTUAL LIFE

INSURANCE COMPANY

By:

Name:

Title:

3

EX-10.83

Exhibit 10.83

ASSIGNMENT AND ASSUMPTION AGREEMENT

OF AMENDED AND RESTATED SPLIT-DOLLAR LIFE INSURANCE

This Assignment and Assumption Agreement of Amended and Restated Split-Dollar Life Insurance, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”), James Howard Cullum Clark (the “Owner”), and James H. Clark, Jr. (the “Director”).

W I T N E S S E T H:

WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.), the Owner, and the Director entered into that certain Amended and Restated Split-Dollar Life Insurance Agreement, dated as of October 12, 1995 (the “Split-Dollar Agreement”); and

WHEREAS, the Owner is the owner of that certain Whole Life Policy with Supplemental Insurance Option, Policy Number 8592938 (the “Policy”) issued by Massachusetts Mutual Life Insurance Company (the “Insurer”) to Director, acquired pursuant to the terms of the Split-Dollar Agreement; and

WHEREAS, the Policy is assigned to the Company pursuant to that certain Assignment of Life Insurance Policy as Collateral, dated October 12, 1995 by and between the Company and the Owner (the “Collateral Assignment”) as security for the repayment of the amounts which the Company made on the premiums due on the Policy on behalf of the Owner; and

WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have reviewed and made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to assign all of the Company’s rights, obligations, duties and liabilities under the Split-Dollar Agreement accruing after the date hereof to the Director; and

WHEREAS, the Director is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to assume all of the Company’s rights, obligations, duties and liabilities accruing after the date hereof under the Split-Dollar Agreement;

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows:

1.Assignment.  The Company hereby assigns, transfers and conveys to Director the Split-Dollar Agreement and all of the Company’s rights, title and interest in, under and to the Split-Dollar Agreement.

2.Assumption.  The Director hereby accepts the assignment of the Split-Dollar Agreement and assumes and agrees to perform, discharge and satisfy all of the Company’s obligations, duties and liabilities accruing under the Split-Dollar Agreement, including, but not limited to, the obligation to pay to the Insurer the annual premium for the Policy (it being understood that Director shall not have any obligation to perform, discharge or satisfy any obligations, duties or liabilities of the Company arising or accruing on or before the date of this Assignment).

3.Termination of Collateral Assignment.  The Collateral Assignment is hereby released and shall be of no further force or effect.

4.Further Assurance.  The Company and Director hereby agree to execute any and all further documents and to take any and all further actions as either of them may reasonably request in order to effectuate fully the provisions of this Agreement.

5.Entire Agreement.  This Agreement represents the entire agreement between the Company and Director concerning the subject matter hereof and supersedes all prior agreements or understandings, written or oral, with respect thereto.

6.Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.  The parties acknowledge and agree that this Agreement and the obligations and undertakings of the parties hereunder will be performable in Dallas, Dallas County, Texas.

7.Counterparts.  This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall constitute one agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

.	VARI-LITE INTERNATIONAL, INC
	By:
		T. Clay Powers, President
	James Howard Cullum Clark
	James H. Clark, Jr.

2

Amended and Restated Split-Dollar Life Insurance Agreement

Insurer:	Massachusetts Mutual Life Insurance Company
Policy:	Whole Life Policy with Supplemental Insurance Option, Policy Number 8592938
Insured:	James H. Clark, Jr.
Owner:	James Howard Cullum Clark
Employer:	Vari-Lite International, Inc. (formerly Vari-Lite Holdings, Inc.)
Effective Date:	December 12, 1990

This Assignment and Assumption Agreement of Split-Dollar Life Insurance was recorded by Insurer on                             , 2002.

MASSACHUSETTS MUTUAL LIFE

INSURANCE COMPANY

By:

Name:

Title:

3

EX-10.84

Exhibit 10.84

ASSIGNMENT AND ASSUMPTION AGREEMENT

OF AMENDED AND RESTATED SPLIT-DOLLAR LIFE INSURANCE

This Assignment and Assumption Agreement of Amended and Restated Split-Dollar Life Insurance, dated as of June 30, 2002, is by and between Vari-Lite International, Inc. (the “Company”), Brown Brothers Harriman Trust Company of Texas, trustee of the John D. Maxson 1995 Irrevocable Trust, dated October 11, 1995 (the “Owner”), and John D. Maxson (the “Director”).

W I T N E S S E T H:

WHEREAS, the Company (formerly known as Vari-Lite Holdings, Inc.), the Owner, and the Director entered into that certain Amended and Restated Split-Dollar Life Insurance Agreement, dated as of October 12, 1995 (the “Split-Dollar Agreement”); and

WHEREAS, the Owner is the owner of that certain Flexible Premium Adjustable Life Policy, Policy Number A10137201L (the “Policy”), issued by American General Life Insurance Company (the “Insurer”) to Director, acquired pursuant to the terms of the Split-Dollar Agreement; and

WHEREAS, the Policy is assigned to the Company pursuant to that certain Assignment of Life Insurance Policy as Collateral, dated October 12, 1995 by and between the Company and the Owner (the “Collateral Assignment”) as security for the repayment of the amounts which the Company made on the premiums due on the Policy on behalf of the Owner; and

WHEREAS, the Company has suffered a decline in its financial performance and management and the Board of Directors of the Company have reviewed and made recommendations for reducing expenses of the Company in order to improve the Company’s financial performance; and

WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has determined that it is in the best financial interest of the Company to assign all of the Company’s rights, obligations, duties and liabilities under the Split-Dollar Agreement accruing after the date hereof to the Director; and

WHEREAS, the Director is a significant stockholder of the Company and agrees that it is in the best financial interest of the Company to assume all of the Company’s rights, obligations, duties and liabilities accruing after the date hereof under the Split-Dollar Agreement;

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows:

1.Assignment.  The Company hereby assigns, transfers and conveys to Director the Split-Dollar Agreement and all of the Company’s rights, title and interest in, under and to the Split-Dollar Agreement.

2.Assumption.  The Director hereby accepts the assignment of the Split-Dollar Agreement and assumes and agrees to perform, discharge and satisfy all of the Company’s obligations, duties and liabilities accruing under the Split-Dollar Agreement, including, but not limited to, the obligation to pay to the Insurer the annual premium for the Policy (it being understood that Director shall not have any obligation to perform, discharge or satisfy any obligations, duties or liabilities of the Company arising or accruing on or before the date of this Assignment).

3.Termination of Collateral Assignment.  The Collateral Assignment is hereby released and shall be of no further force or effect.

4.Further Assurance.  The Company and Director hereby agree to execute any and all further documents and to take any and all further actions as either of them may reasonably request in order to effectuate fully the provisions of this Agreement.

5.Entire Agreement.  This Agreement represents the entire agreement between the Company and Director concerning the subject matter hereof and supersedes all prior agreements or understandings, written or oral, with respect thereto.

6.Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.  The parties acknowledge and agree that this Agreement and the obligations and undertakings of the parties hereunder will be performable in Dallas, Dallas County, Texas.

7.Counterparts.  This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall constitute one agreement.

2

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

VARI-LITE INTERNATIONAL, INC.
By:
	T. Clay Powers, President
BROWN BROTHERS HARRIMAN TRUST COMPANY OF TEXAS, as trustee of the John D. Maxson 1995 Irrevocable Trust, dated October 11, 1995
By:
Name:
Title:
John D. Maxson

3

Amended and Restated Split-Dollar Life Insurance Agreement

Insurer:	American General Life Insurance Company
Policy:	Flexible Premium Adjustable Life Policy, Policy Number A10137201L
Insured:	John D. Maxson
Owner:	Brown Brothers Harriman Trust Company of Texas, as Trustee of the John D. Maxson 1995 Irrevocable Trust, dated October 11, 1995
Employer:	Vari-Lite International, Inc. (formerly Vari-Lite Holdings, Inc.)

This Assignment and Assumption Agreement of Split-Dollar Life Insurance was recorded by Insurer on                          , 2002.

AMERICAN GENERAL
LIFE INSURANCE COMPANY

By:

Name:

Title:

4

EX-10.85

EXHIBIT 10.85

AMENDMENT NO. 5

TO

FINANCING AGREEMENT

This AMENDMENT NO. 5 TO FINANCING AGREEMENT (this “Amendment”), made as of June 30, 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, and Amendment No. 4 to Financing Agreement, dated as of March 31, 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 deleting the definitions of “Applicable LIBOR Rate Margin” and “Applicable Prime Rate Margin” in their entirety and by substituting the following new definitions in lieu thereof:

“Applicable LIBOR Rate Margin” means (i) from August 1 through and excluding November 15, 2002, a rate equal to (A) 3.50% per annum with respect to Revolving Loans, and (B) 3.50% per annum with respect to the Term Loan A and the CapEx Term Loans (collectively, the “Term Loans”), and (ii) thereafter, so long as no Event of Default shall have occurred and be continuing, a per annum rate which shall adjust as of each Applicable Margin Adjustment Date based on the Leverage Ratio for the most recent four (4) fiscal quarters preceding such Applicable Margin Adjustment Date, as determined by the Bank from the

quarterly reports and annual reports required by Section 8.7 and Section 8.8, respectively, in accordance with the following table:

Leverage Ratio	Applicable LIBOR Rate Margin for Revolving Loans	Applicable LIBOR Rate Margin for Term Loans
Greater than or equal to 2.5 to 1	3.50%	3.50%
Greater than or equal to 2.0 to 1 but less than 2.5 to 1	3.25%	3.25%
Less than or equal to 2.0 to 1	3.00%	3.00%

“Applicable Prime Rate Margin” means (i)  from August 1 through and excluding November 15, 2002, a rate equal to (A) 1.75% per annum with respect to Revolving Loans, and (B) 1.75% per annum with respect to the Term Loans and (ii) thereafter, so long as no Event of Default shall have occurred and be continuing, a per annum rate which shall adjust as of each Applicable Margin Adjustment Date based on the Leverage Ratio for the most recent four (4) fiscal quarters preceding such Applicable Margin Adjustment Date, as determined by the Bank from the quarterly reports and annual reports required by Section 8.7 and Section 8.8, respectively, in accordance with the following table:

Leverage Ratio	Applicable Prime Rate Margin for Revolving Loans	Applicable Prime Rate Margin for Term Loans
Greater than or equal to 2.5 to 1	1.75%	1.75%
Greater than or equal to 2.0 to 1 but less than to 2.5 to 1	1.50%	1.50%
Less than or equal to 2.0 to 1	1.25%	1.25%

2.2           Amendment to Section 8.3(b).  Section 8.3(b) of the Financing Agreement shall be amended by deleting Section 8.3(b) in its entirety and by substituting the following new Section 8.3(b) in lieu thereof:

(b)         Borrower shall deliver to Bank a borrowing base certificate in the form of Exhibit H attached hereto and incorporated herein by reference (a “Borrowing Base Certificate”), (i) for the period beginning on the first day of each month and ending on the fifteenth day of such month, no later than thirty (30) days after the beginning of each such month, and (ii) for the period beginning on the first day of each month and ending on the last day of such month, no later than

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fifteen (15) days after the end of each such month.  The Borrowing Base Certificate delivered with respect to the monthly period shall be reconciled to the financial statements required to be delivered pursuant to Section 8.5 hereof, and, together with such Borrowing Base Certificate, Borrower shall deliver to Bank monthly reports of Borrower’s sales, leases, credits to sales, credits to leases, or credit memoranda applicable to sales, leases, collections and non-cash charges (from whatever source, including, without limitation, sales and noncash journals or other credits to Receivables).

2.3           Amendment to Section 12(b).  Section 12(b) of the Financing Agreement shall be amended by deleting Section 12(b) in its entirety and by substituting the following new Section 12(b) in lieu thereof:

(b)Borrower or International shall commit any breach of this Agreement under Section 8, Section 10.1, Section 10.11 through Section 10.33, or Section 10.35 through Section 10.37 hereof;

2.4           Amendment to Section 10.  Section 10 of the Financing Agreement shall be amended by adding the following new Section 10.38 thereto:

10.38       Asset Appraisal.

Borrower will, no later than October 30, 2002, deliver an appraisal of Borrower’s Rental Inventory, which appraisal shall be in form and substance satisfactory to Bank, in its sole discretion.

2.5           Amendment to Exhibit J. 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.

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

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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. 5.

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. 5 to Financing Agreement.  Bank shall have received an original counterpart of this Amendment No. 5 to Financing Agreement, executed and delivered by a duly authorized officer of Borrower.

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.  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           Amendment Fee.  Borrower shall have paid Bank an amendment fee in an amount of Twenty-Five Thousand Dollars ($25,000.00).

5.  MISCELLANEOUS.

5.1           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.

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5.2           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.

5.3           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]

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IN WITNESS WHEREOF, Borrower has caused this Amendment No. 5 to Financing Agreement to be duly executed and delivered by its duly authorized officer as of the date first above written.

Signed and acknowledged	VARI-LITE, INC.
in the presence of:
	By:
Name:
	Its:
Name:

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STATE OF	)
	) ss:
COUNTY OF	)

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

Notary Public

Accepted at Cleveland, Ohio,

Effective as of June 30, 2002.

U.S. BANK NATIONAL ASSOCIATION

By:

Its:

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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 June 30, 2002, to the terms of the foregoing Amendment No. 5 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:

Its:

STATE OF	)
	) ss:
COUNTY OF	)

The foregoing instrument was acknowledged before me this        day of August, 2002, by                                     , the                      of VARI-LITE INTERNATIONAL, INC., a Delaware corporation, on behalf of the company.

Notary Public

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Exhibit J

Financial Covenants

Financial Covenants.  Borrower agrees that it shall:

(A)Net Capital Expenditures.  Not make nor permit International to make Net Capital Expenditures in an aggregate amount exceeding $6,000,000 for any fiscal year.

(B)Earnings Before Interest, Taxes, Depreciation and Amortization.  Not permit International’s Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) to be less than the following amounts for the following periods:

EBIDTA	Period
$2,931,000	10/01/00 - 12/31/00
$6,234,000	10/01/00 - 03/31/01
$7,461,000	10/01/00 - 06/30/01
$9,491,000	10/01/00 - 09/30/01
$7,650,000	01/01/01 - 12/31/01
$6,940,000	04/01/01 - 03/31/02
$7,247,000	07/01/01 - 06/30/02
$8,500,000	10/01/01 - 09/30/02
$16,314,000	01/01/02 - 12/31/02
$16,882,000	04/01/02 - 03/31/03
$17,385,000	07/01/02 - 06/30/03
$18,123,000	10/01/02 - 09/30/03
$1,110,000	07/01/02 - 07/31/02
$2,295,000	07/01/02 - 08/31/02
$3,555,000	07/01/02 - 09/30/02

(C)Net Worth.  Not permit International’s Net Worth to be less than the following amounts as of the following dates:

Net Worth	Date
$45,000,000	12/31/00
$45,000,000	03/31/01
$45,000,000	06/30/01
$44,600,000	09/30/01
$44,000,000	12/31/01
$43,041,000	03/31/02
$37,200,000	06/30/02
$37,200,000	09/30/02
$47,750,000	12/31/02
$47,750,000	03/31/03
$47,750,000	06/30/03
$47,750,000	09/30/03

(D)Maximum Debt.  Not permit International’s Total Funded Indebtedness to exceed the following amounts at any time during the following periods:

Total Funded Indebtedness	Period
$29,000,000	01/01/01 - 06/30/01
$27,000,000	07/01/01 - 09/30/01
$25,000,000	10/01/01 - 12/31/01
$25,000,000	01/01/02 - 03/31/02
$25,000,000	04/01/02 - 06/30/02
$25,000,000	07/01/02 - 09/30/02
$25,000,000	10/01/02 - 12/31/02
$27,000,000	01/01/03 - 03/31/03
$27,000,000	04/01/03 - 06/30/03
$27,000,000	07/01/03 - 09/30/03
$27,000,000	at any time thereafter

(E)Leverage Ratio.  Not permit International’s Leverage Ratio to exceed the following ratios as of the following dates:

Leverage Ratio	Date
4.65 to 1	03/31/01
3.23 to 1	06/30/01
2.56 to 1	09/30/01
2.90 to 1	12/31/01
3.05 to 1	03/31/02
3.21 to 1	06/30/02
2.76 to 1	09/30/02
1.80 to 1	12/31/02
1.75 to 1	03/31/03
1.65 to 1	06/30/03
1.65 to 1	09/30/03

(F)Total Debt Service Ratio.  Not permit International’s Total Debt Service Ratio to be less than the following ratios as of the following dates:

Total Debt Service Ratio	Date
0.61 to 1	09/30/01
0.60 to 1	12/31/01
0.53 to 1	03/31/02
0.77 to 1	06/30/02
0.81 to 1	09/30/02
1.20 to 1	12/31/02
1.20 to 1	03/31/03
1.20 to 1	06/30/03
1.20 to 1	09/30/03

II.Definitions

(A)The term “Net Capital Expenditures” for purposes of this Exhibit J shall mean 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.

(B)The term “Earnings Before Interest, Taxes, Depreciation, and Amortization” or “EBITDA”for purposes of this Exhibit J shall mean International’s consolidated earnings from operations before income taxes and interest income or expense plus depreciation, plus amortization of all non-cash charges, all as determined in accordance with generally accepted accounting principles, and shall not include any gains or losses from the sale of assets outside the normal course of business or any other extraordinary accounting adjustments or non-recurring items of income or loss.

(C)The term “Net Worth” for purposes of this Exhibit J shall mean the total of International’s consolidated shareholders equity, as determined in accordance with generally accepted accounting principles, consistently applied.

(D)The term “Total Funded Indebtedness” for purposes of this Exhibit J shall have the meaning and be determined in accordance with generally accepted accounting principles consistently applied by International on a consolidated basis in accordance with past practices.

(E)The term “Leverage Ratio” for purposes of this Exhibit J shall mean:

1.             As of 03/31/01,  the ratio of Total Funded Indebtedness as of such date to EBITDA as measured from 10/01/00 to 03/31/01;

2.             As of 06/30/01, the ratio of Total Funded Indebtedness as of such date to EBITDA as measured from 10/01/00 to 06/30/01;

3.             As of 09/30/01, the ratio of Total Funded Indebtedness as of such date to EBITDA as measured from 10/01/00 to 09/30/01; and

4.             As of 12/31/01 and as of the last day of any fiscal quarter thereafter, the ratio of Total Funded Indebtedness as of such date to EBITDA as measured on a four quarter trailing basis.

(F)The term “Unfunded Capital Expenditure Payments” for purposes of this Exhibit J shall mean the amount of consolidated capital expenditures of International which are not financed under the CapEx Facility nor any other financing arrangement with any other person.

(G)The term “Total Debt Service Ratio” for purposes of this Exhibit J shall mean:

1.             For the period commencing on the 07/01/01 and ending on 09/30/01, the ratio of (a) EBITDA as measured from 01/01/01 to 09/30/01 to (b) the sum of  (i) the total consolidated and regularly scheduled principal and interest payments of Total Funded Indebtedness for the period 01/01/01 to 09/30/01,  plus  (ii) Unfunded Capital Expenditure Payments for the period 01/01/01 to 09/30/01, minus (iii) the US $1,000,000 Japanese principal payment paid by Vari-Lite Asia, Inc. in March, 2001;

2.             For the period commencing on the 10/01/01 and ending on 12/31/01, the ratio of (a) EBITDA as measured on a four quarter trailing basis to (b) the sum of  (i) the total consolidated and regularly scheduled principal and interest payments of Total Funded Indebtedness for such four quarter trailing period,  plus (ii) Unfunded Capital Expenditure Payments for such four quarter trailing period,  minus  (iii) the US $1,000,000 Japanese principal payment paid by Vari-Lite Asia, Inc. in March, 2001, plus (iv) the amount of taxes paid by International on a consolidated basis during such four quarter trailing period, minus (v) the amount of Japanese taxes paid by Vari-Lite Asia, Inc. in February, 2001; and

3.             For all periods after 12/31/01, the ratio of (a) EBITDA as measured on a four quarter trailing basis to (b) the sum of  (i) the total consolidated and regularly scheduled principal and interest payments of Total Funded Indebtedness for such four quarter trailing period,  plus (ii) Unfunded Capital Expenditure Payments for such four quarter trailing period, plus (iii) the amount of taxes paid by International on a consolidated basis during such four quarter trailing period.