VARI LITE INTERNATIONAL INC, S-1, 1997-08-13

VARI LITE INTERNATIONAL INC
S-1, 1997-08-13

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST , 1997

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

VARI-LITE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3648 75-2239444
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

201 REGAL ROW
DALLAS, TEXAS 75247
(214) 630-1963
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

H. R. BRUTSCHE III
PRESIDENT AND CHIEF EXECUTIVE OFFICER
201 REGAL ROW
DALLAS, TEXAS 75247
(214) 630-1963
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

COPIES TO:

<TABLE>
<S> <C>
ALAN J. PERKINS JEFFREY A. CHAPMAN
GARDERE & WYNNE, L.L.P. VINSON & ELKINS L.L.P.
1601 ELM STREET, SUITE 3000 2001 ROSS AVENUE, SUITE 3700
DALLAS, TEXAS 75201 DALLAS, TEXAS 75201
(214) 999-3000 (214) 220-7700
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE REGISTRATION FEE(1)
<S> <C> <C>
Common Stock, $0.10 par value............................... $ 31,050,000 $ 9,410
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>
SUBJECT TO COMPLETION DATED , 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SHARES

[INSERT VARI-LITE INTERNATIONAL LOGO]

COMMON STOCK

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All of the shares of common stock, par value $0.10 per share (the
"Common Stock"), offered hereby are being sold by Vari-Lite International, Inc.
(the "Company"). Prior to this offering (the "Offering"), there has been no
public market for the Common Stock. It is currently anticipated that the initial
public offering price will be between $ and $ per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The Company intends to apply for quotation of the Common
Stock on the Nasdaq National Market under the symbol "LITE."

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SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK.

-----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
------------- ------------- -------------
<S> <C> <C> <C>
Per Share..................................................... $ $ $
Total(3)...................................................... $ $ $
</TABLE>

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(1) The Company and the Selling Stockholders (as hereinafter defined) have
agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."

(2) Before deducting estimated expenses of $600,000, which are payable by the
Company.

(3) Certain stockholders of the Company (the "Selling Stockholders") have
granted the Underwriters a 45-day option to purchase up to additional shares
of Common Stock on the same terms and conditions as set forth above solely
to cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to Selling
Stockholders will be $ , $ and $ , respectively. See "Selling
Stockholders" and "Underwriting."

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The Common Stock is offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them and subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders, in whole or in part. It is expected that
delivery of the shares of Common Stock will be made on or about ,
1997.

[LOGO]

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THE DATE OF THIS PROSPECTUS IS , 1997.
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[Inside Front Cover]

[Insert Graphics or Pictures]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE AND TO COVER SOME OR
ALL OF A SHORT POSITION IN THE COMMON STOCK MAINTAINED BY THE UNDERWRITERS. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS (A) REFLECTS THE REINCORPORATION
("REINCORPORATION") OF THE COMPANY AS A DELAWARE CORPORATION PURSUANT TO A
MERGER OF VARI-LITE INTERNATIONAL, INC., A TEXAS CORPORATION ("VARI-LITE
TEXAS"), INTO THE COMPANY, WHICH WILL BE EFFECTED IMMEDIATELY PRIOR TO THE
CONSUMMATION OF THE OFFERING AND IN WHICH THE SHARES OF CLASS A AND CLASS B
COMMON STOCK OF VARI-LITE TEXAS WILL BE CONVERTED INTO SHARES OF THE COMPANY'S
COMMON STOCK ON A -FOR- BASIS AND (B) ASSUMES NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION UNLESS SPECIFICALLY PROVIDED OTHERWISE. ALL
REFERENCES TO THE COMPANY IN THIS PROSPECTUS REFER TO VARI-LITE INTERNATIONAL,
INC. AND ITS CONSOLIDATED SUBSIDIARIES, UNLESS THE CONTEXT INDICATES OTHERWISE.

THE COMPANY

The Company is a leading international provider of proprietary automated
lighting systems and related services to the entertainment industry, servicing
markets such as concert touring, theatre, television and film and corporate
events. In 1981, the Company revolutionized the professional entertainment
lighting industry by inventing the VARI*LITE-Registered Trademark- system, the
first automated lighting system that allowed real-time, computerized, remote
control of light beam features such as color, size, shape, position and
intensity. As a result, the VARI*LITE-Registered Trademark- brand name has
become recognized as the preeminent brand name for automated lighting. The
Company rents its VARI*LITE-Registered Trademark- automated lighting systems
exclusively through a domestic and international network of Company-owned
offices and independent distributors.

The Company believes that its position as an industry leader results from
its broad range of innovative and technologically superior products, its
longstanding collaborative relationship with participants in the entertainment
industry, its worldwide distribution system and its dedication to customer
service. The Company continuously addresses the technical and creative needs of
its customers by designing and manufacturing products that in many instances
have become the industry standard. Lighting designers using the Company's
automated lighting systems have won Tony-Registered Trademark- Awards for
Broadway lighting design every year since 1990, and the Company won an Emmy-TM-
Award for Outstanding Achievement in Engineering for television in 1991 and
1994. For its accomplishments in the concert touring market, the Company was
named by Performance Magazine as the "Lighting Company of the Year" six times
since 1989 and the "Equipment Manufacturer of the Year/Lighting" ten times since
1983.

The Company has capitalized on the growth of the entertainment industry and
has demonstrated its ability to broaden the application of its existing
technology and to develop new lighting systems and products to create and
penetrate new markets.

- CONCERT TOURING. The Company initially designed its systems to serve the
concert touring market and remains a leader in that market. The Company's
customers have included such notable performers as The Rolling Stones,
Phil Collins, Genesis, Pink Floyd, Paul McCartney, David Bowie, Elton
John, Tina Turner, Sting, Reba McEntire, Vince Gill, Barbara Streisand,
Diana Ross, Whitney Houston, Sheryl Crow, Pearl Jam and the Indigo Girls.

- THEATRE. By developing the first virtually silent automated lighting
fixture, the Company secured a significant competitive advantage in the
theatre market, including touring theatre shows. The Company's systems
have been used in such shows as CHICAGO, MISS SAIGON, SUNSET BOULEVARD,
KISS OF THE SPIDER WOMAN, THE WILL ROGERS FOLLIES, TOMMY, GREASE, HOW TO
SUCCEED IN BUSINESS WITHOUT REALLY TRYING, BRING IN 'DA NOISE BRING IN 'DA
FUNK, JESUS CHRIST SUPERSTAR, MARTIN GUERRE, JEKYLL & HYDE, OLIVER,
RAGTIME and SHOW BOAT.

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Awards, Country Music Awards, MTV Music Awards and other awards shows, as
well as television shows such as THE TONIGHT SHOW WITH JAY LENO, THE LATE
SHOW WITH DAVID LETTERMAN, WHEEL OF FORTUNE, SATURDAY NIGHT LIVE, HOME
IMPROVEMENT and AMERICAN GLADIATORS, and the movies FORREST GUMP, BATMAN
FOREVER, WAYNE'S WORLD and SISTER ACT, among others. VARI*LITE-Registered
Trademark- automated lighting fixtures or "luminaires" are also installed
in ABC's New York studios, where they are used for PRIME TIME LIVE, 20/20
and GOOD MORNING AMERICA.

- CORPORATE EVENTS. The Company is continuing to expand its presence in the
corporate events market by providing automated lighting systems for
conventions, business meetings, new product launches and special events.
The Company's systems have been used in events for Sony, Nike, IBM,
Sprint, Oldsmobile and Microsoft, among others.

- ARCHITECTURAL. Recently, the Company has targeted the lighting needs of
architectural markets such as restaurants, casinos, retail stores,
corporate showrooms, shopping malls, building exteriors and landmarks. The
Company's Irideon-Registered Trademark-automated lighting system product
line, which is in the development stage, is designed specifically for such
architectural lighting applications.

The Company's VARI*LITE-Registered Trademark- systems incorporate advanced
proprietary and patented technology in both lighting fixtures and control
consoles. The Company is the only industry participant which combines patented
dichroic filter color changing systems, advanced heat removal techniques and
computer control systems that utilize distributed processing and resident cue
memory in each luminaire. By using such technology to execute a lighting effect
(or cue), an operator can transmit a single command to up to 1,000 luminaries
simultaneously, each of which stores its own set of cues. As a result, customers
using the Company's systems can create lighting presentations with greater
flexibility, complexity, speed and precision than with competing products.

The Company is also a leader in providing complementary products and
services to the entertainment industry, including concert sound systems,
conventional lighting equipment, custom stage construction and stage set design
services, and design and production management services for conventions,
business meetings and special events.

The Company's principal objectives are to maintain its worldwide leadership
positions in its existing markets and to create demand for its products in new
markets. The key elements of this strategy include (i) maintaining its
commitment to innovation, (ii) expanding its worldwide distribution capabilities
and (iii) continuing to offer value-added complementary services.

The Company's predecessor, Vari-Lite Texas, was incorporated in 1988 in the
State of Texas as a holding company to own Showco, Inc. ("Showco"), which began
operations in 1970, and Vari-Lite, Inc. ("Vari-Lite"), which began operations in
1981. Immediately prior to the consummation of the Offering, the Company was
reincorporated in the State of Delaware. The Company's principal executive
offices are located at 201 Regal Row, Dallas, Texas 75247 and its telephone
number is (214) 630-1963.

4
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THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company......... shares

Common Stock to be outstanding after the
Offering................................... shares(1)

Use of Proceeds............................. The net proceeds will be used to repay
approximately $ million of indebtedness under
the Company's Credit Agreement (as hereinafter
defined). See "Use of Proceeds."

Proposed Nasdaq National Market symbol...... "LITE"
</TABLE>

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(1) Excludes shares of Common Stock issuable upon exercise of options to be
granted in connection with the Offering at an exercise price equal to the
Offering price and shares of Common Stock issuable upon exercise of
warrants with an exercise price of $ per share. See "Management-- Employee
Benefit Plans--Omnibus Plan" and "Shares Eligible for Future Sale."

5
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
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<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue:
Rental revenues............................. $ 28,539 $ 31,869 $ 47,625 $ 65,864 $ 65,741 $ 45,389 $ 56,400
Products sales and service revenues......... 2,593 3,384 6,187 9,046 11,397 8,042 10,688
--------- --------- --------- --------- --------- --------- ---------
Total revenues............................ 31,132 35,253 53,812 74,910 77,138 53,431 67,088
Gross profit.................................. 19,088 20,645 30,753 41,985 42,930 29,563 37,337
Selling, general and administrative expense... 13,343 13,170 19,181 28,163 30,077 22,230 25,124
Research and development expense.............. 1,948 2,347 3,033 3,283 4,404 2,947 4,684
Operating income.............................. 3,797 5,128 8,539 10,539 8,449 4,386 7,529
Interest expense.............................. 1,675 1,606 1,805 2,788 3,092 2,437 2,692
Income before extraordinary loss.............. $ 1,349 $ 2,269 $ 4,334 $ 4,714 $ 3,119 $ 1,136 $ 2,783
Net income per share(1)....................... $ $ $ $ $ $ $
Weighted average shares outstanding...........
PRO FORMA DATA(2):
Income before extraordinary loss..............
Net income per share..........................
Weighted average shares outstanding...........
OTHER DATA:
EBITDA(3)..................................... $ 8,084 $ 10,230 $ 14,874 $ 19,159 $ 18,518 $ 11,929 $ 16,169
Capital expenditures.......................... 5,503 11,050 13,566 20,748 12,587 9,125 19,880
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------
AS
ACTUAL ADJUSTED(4)
--------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets.......................................................................... $ 89,925 $
Total debt............................................................................ 45,399
Stockholders' equity.................................................................. 27,560
</TABLE>

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(1) Net income per share in fiscal 1994 includes an extraordinary loss from
early extinguishment of debt of $ per share.

(2) Pro forma data gives effect to the Offering and the application of the
proceeds therefrom to repay the Company's outstanding borrowings under the
Credit Agreement at the beginning of the periods presented, assuming the
repayment of $ million of debt at a weighted average interest rate of
9.25%. See "Use of Proceeds."

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

(4) Adjusted to reflect the sale of shares of Common Stock offered by the
Company hereby at an assumed Offering price of $ per share and the
anticipated application of the net proceeds therefrom. See "Use of
Proceeds."

6
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RISK FACTORS

THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION
RELATING TO THE COMPANY THAT ARE BASED ON THE BELIEFS OF MANAGEMENT AS WELL AS
ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY. WHEN
USED IN THIS PROSPECTUS, THE WORDS "ANTICIPATE," "BELIEVE," "ESTIMATE,"
"EXPECT," "WILL," "COULD," "MAY" AND SIMILAR EXPRESSIONS, AS THEY RELATE TO
MANAGEMENT OR THE COMPANY, ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
SUCH STATEMENTS REFLECT THE CURRENT VIEWS OF MANAGEMENT WITH RESPECT TO FUTURE
EVENTS AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS,
INCLUDING THOSE DESCRIBED IN THIS PROSPECTUS. 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. IN ADDITION TO
THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE
CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING THE COMMON STOCK OFFERED HEREBY.

FLUCTUATIONS IN OPERATING RESULTS AND SEASONALITY

The Company has experienced and is expected to continue to experience
significant fluctuations in its quarterly operating results, both between
different quarters within the same fiscal year and with respect to the same
quarter between different fiscal years. These fluctuations arise from several
factors, including the timing and dollar value of sales-type leases with
customers, the dependence of the Company on concert tours, which are
unpredictable in timing and duration, the introduction of new products and
general economic conditions both domestically and internationally. The Company's
expenses are based, in part, on its expectations as to future revenue and, as a
result, net income for a given period could be disproportionately affected by a
reduction in revenue. In addition, the Company's business is subject to seasonal
fluctuations with the highest percentage of its revenues being generated in the
summer months and the lowest percentage being generated in the winter months.
Because of the possibilities of significant fluctuations, results for any
quarter may not be indicative of the results that may be achieved in a full
year. While the Company expects to experience growth in revenue and profit,
there can be no assurance that the Company's historical levels of revenue or
profits will be sustained, particularly on a quarterly basis. Furthermore, there
can be no assurance that the concert touring market on which the Company is
dependent will continue to emphasize lighting as an important element of concert
shows or that the Company's current or future products will continue to be used
by concert touring customers. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-- Quarterly Fluctuations and
Seasonality."

ABILITY TO INTRODUCE NEW PRODUCTS; TECHNOLOGICAL CHANGES

The Company's past success has depended, and its future growth will depend,
in large part, on its ability to enhance and develop new features for its
existing products, to develop new technology, to introduce new products to meet
changing customer requirements and to adapt to evolving technology. There can be
no assurance that the Company will successfully develop such new technology,
enhancements, features or new products or that the Company's products will
continue to achieve market acceptance. Any delay in or failure to complete
development of such technology, enhancements, features or new products, or any
failure of the Company's products to continue to achieve market acceptance,
could have a material adverse effect on the Company. In addition, there can be
no assurance that products or technologies developed by others will not render
the Company's products or technologies uncompetitive or obsolete. In 1996, the
Company introduced its Irideon-Registered Trademark- interior lighting product
line, including the AR5-TM- luminaire and the Composer-Registered Trademark-
control system. In 1998, the Company anticipates introducing its high
brightness, multi-feature VL7-TM- spot luminaire. There can be no assurance that
these products will gain market acceptance or satisfactory revenue growth or
profitability.

RELIANCE ON INTELLECTUAL PROPERTY

The Company generally relies on a combination of patent, trade secret,
copyright and trademark laws, contracts and technical measures to establish and
protect its proprietary rights in its products and technologies. However, the
Company believes that such measures provide only limited protection, and there
is no assurance

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that such measures will be adequate to prevent misappropriation. As of June 30,
1997, the Company had 31 United States patents, 14 applications for United
States patents pending with respect to certain elements of its hardware and
software and 24 United States registered trademarks. As of June 30, 1997, the
Company had over 110 foreign patents and over 100 applications for foreign
patents pending. There can be no assurance that any patents will be issued from
the applications pending or, if patents are issued, that the claims allowed
under such patents or other patents of the Company will be sufficiently broad to
deter or prohibit others from marketing similar products. Revenues generated in
countries in which the Company has limited or no patent protection may be
adversely affected by sales of products by competitors utilizing the Company's
United States patented technology. Although the Company takes precautions to
protect its trade secrets, it may be possible for unauthorized third parties to
copy portions of the Company's technology or to obtain and use information that
the Company regards as proprietary. Furthermore, the laws of certain countries
in which the Company's products are or may be distributed do not protect the
Company's products and intellectual property rights to the same extent as the
laws of the United States. In addition, there can be no assurance that the
Company's competitors will not independently develop technologies that are
substantially equivalent or superior to the Company's technologies. Any failure
by the Company to protect its intellectual property, including any failure to
prevail in the High End Lawsuit (as hereinafter defined), could have a material
adverse effect on the Company.

Significant and protracted litigation may be necessary to protect the
Company's intellectual property rights, to determine the scope of the
proprietary rights of others or to defend against claims of infringement. The
Company believes that its products do not infringe any existing third-party
proprietary rights; however, there can be no assurance that third-party claims
alleging infringement will not be asserted against the Company in the future. If
infringement is alleged, the Company could be required to discontinue the use of
certain processes, to cease the manufacture, use and rental or sale of
infringing products, to incur significant litigation damages, costs and expenses
and to either develop non-infringing technology or obtain licenses to use the
alleged infringing technology. There can be no assurance that the Company would
be able to develop such alternative technologies or to obtain such licenses on
terms commercially acceptable to the Company, if at all. Any infringement claims
could have a material adverse effect on the Company. See "Business--Intellectual
Property."

CAPITALIZED LITIGATION COSTS

The Company has capitalized and expects to continue to capitalize its costs
relating to the High End Lawsuit ($2.5 million as of June 30, 1997, and an
estimated additional $1.6 million through consummation of the trial), a patent
infringement suit in which the Company is the plaintiff. Unless the Company
receives a judgment in this litigation that the defendant has infringed at least
one of its patents and the Company concludes, based on all of the facts and
circumstances, that such a judgment will allow it to maintain its competitive
advantage provided by the infringed patents, all costs incurred by the Company
relating to the High End Lawsuit (including those previously capitalized) will
be required to be recorded as an expense in the period that the judgment is
rendered. There can be no assurance that the Company will not be required to
expense its costs relating to the High End Lawsuit. Furthermore, the defendant
has asserted as a counterclaim that the Company has used the Company's patents
to violate the antitrust laws. Although the Company believes such counterclaim
to be without merit and intends to vigorously contest such counterclaim, if the
defendant were to receive a judgment in its favor with respect to such
counterclaim, the Company could be held liable for the defendant's damages which
could be substantial. See "Business--Legal Proceedings."

DEPENDENCE ON ENTERTAINMENT INDUSTRY

Revenues from the concert touring, theatre, television and film markets
accounted for 81.5%, 71.7%, 72.0%, 70.2% and 71.4%, of the Company's net
revenues for the fiscal years ended September 30, 1994, 1995 and 1996 and for
the nine months ended June 30, 1996 and 1997, respectively. The amounts spent on
entertainment by the general public historically have been dependent upon
discretionary spending, which may be adversely affected

8
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by general economic conditions. A significant reduction in the amounts spent on
entertainment by the general public could have a material adverse effect on the
Company.

COMPETITION

There is significant competition in many of the Company's markets, based
primarily on product capability, quality and reliability, price, worldwide
distribution capabilities, brand name recognition and reputation and customer
service and support. In the Company's rental businesses, there are a number of
competitors, particularly in the concert touring market. The Company competes in
some cases with companies that are larger or have greater development, marketing
and financial resources than the Company. There can be no assurance that the
Company will be able to compete successfully in its markets or that the
competitive pressures will not have a material adverse effect on the Company.
See "Business--Competition."

DEPENDENCE ON MANAGEMENT AND OTHER PERSONNEL

The success of the Company's business is highly dependent upon the Company's
President and Chief Executive Officer, H.R. Brutschffi III, and certain other
key employees. The loss of the services of one or more of such individuals could
have a material adverse effect on the Company, and there can be no assurance
that the Company will be able to retain the services of its key employees. The
Company believes that its future success also will depend significantly upon its
ability to attract, motivate and retain additional highly skilled managerial,
operational, technical, sales and marketing personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will be
successful in attracting, assimilating and retaining the personnel it requires
to develop, manufacture and market its products or expand its operations. See
"Business--Employees" and "Management."

RISKS OF ACQUISITIONS

The Company may from time to time pursue the acquisition of other companies,
assets or product lines that complement or expand its existing business.
Acquisitions involve a number of risks that could adversely affect the Company,
including the diversion of management's attention, the assimilation of the
operations and personnel of the acquired companies, the amortization of acquired
intangible assets and the potential loss of key employees of the acquired
companies. No assurance can be given that any acquisition by the Company will
not materially and adversely affect the Company or that any such acquisition
will enhance the Company's business. The Company currently has no agreements or
understandings with respect to any potential acquisitions.

FOREIGN EXCHANGE RISK; INTERNATIONAL TRADE RISK

International revenues accounted for 37.0%, 46.9%, 49.3%, 48.4% and 48.9%,
of the Company's net revenues for the fiscal years ended September 30, 1994,
1995 and 1996 and the nine months ended June 30, 1996 and 1997, respectively. In
addition, the Company purchases certain components used in its products from
manufacturers located in foreign countries. As a result, the Company's
operations may be adversely affected by fluctuations of the value of the U.S.
dollar against foreign currencies, political instability resulting in the
disruption of trade with foreign countries, the imposition of additional
regulations relating to imports or duties, taxes and other charges, longer
payment cycles, difficulties in receivables collection and restrictions on the
transfer of funds. The Company has historically hedged its currency fluctuation
risk by borrowing in local currencies under the Credit Agreement, a portion of
which will be repaid with the net proceeds of the Offering. The Company is party
to, and may in the future enter into additional, transactions to hedge such
risks; however there can be no assurance that the Company will enter into such
additional transactions or that any such transactions will effectively hedge the
Company's currency risk. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

9
<PAGE>
DEPENDENCE ON KEY SUPPLIERS

The Company has chosen to develop strategic relationships with certain key
suppliers and is dependent upon such suppliers for many important components
used in the Company's automated lighting systems. The Company generally
purchases these components pursuant to purchase orders and has no guaranteed
supply arrangements with such suppliers. Some of these suppliers are critical to
the Company's continued uninterrupted production because they provide
custom-designed components. Major delivery delays or termination of the
Company's relationship with any supplier of such components could materially
adversely affect the Company. There can be no assurance that the Company's
suppliers will continue to be able and willing to meet the Company's
requirements for its key components.

DEPENDENCE ON MANUFACTURING FACILITY

The Company's principal manufacturing facility is located in Dallas, Texas.
The Company is dependent on this facility and a disruption of the Company's
manufacturing operations could have a material adverse effect on the Company.
Such disruption could result from various factors, including human error or a
natural disaster such as a tornado, fire or flood.

CONTROL OF THE COMPANY BY EXISTING STOCKHOLDERS

Upon consummation of the Offering, the Company's directors, officers and
employees will beneficially own approximately % of the outstanding Common
Stock. The holders of a majority of the outstanding Common Stock can elect all
of the directors of the Company and can approve, delay or prevent certain
fundamental corporate transactions, including mergers, consolidations and the
sale of substantially all of the Company's assets. For so long as these
stockholders own a significant percentage of the Common Stock, they will retain
substantial influence over the affairs of the Company which may result in
decisions that are not in the best interest of all stockholders of the Company.
These factors, along with the factors described in "Description of Capital
Stock--Special Provisions of the Certificate of Incorporation and By-Laws," may
also have the effect of delaying or preventing a change in management or voting
control of the Company. See "Principal Stockholders."

LACK OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE; DETERMINATION
OF OFFERING PRICE

Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that after the Offering an active public market
for the Common Stock will develop or be sustained or that any market that may
develop for the Common Stock will be liquid. The market price of the Common
Stock could be subject to significant fluctuations in response to various
factors and events, including quarterly variations in operating results and the
liquidity of the market for the Common Stock. The Offering price for the Common
Stock offered hereby was determined by negotiation between the Company and the
Underwriters and may not be indicative of the prices at which the Common Stock
will trade after the Offering. There can be no assurance that the market price
of the Common Stock after the Offering will not fall below the Offering price.
See "Underwriting."

EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS

The Company's Certificate of Incorporation and By-Laws include provisions
that may have the effect of discouraging proposals by third parties to acquire a
controlling interest in the Company, which could deprive stockholders of the
opportunity to consider an offer they would otherwise accept. See "Description
of Capital Stock--Special Provisions of the Certificate of Incorporation and
By-Laws."

DILUTION

Based on an assumed Offering price of $ per share, new investors
purchasing the Common Stock offered hereby will experience immediate dilution in
net tangible book value of approximately $ per

10
<PAGE>
share. In addition, the future exercise of stock options and warrants would
result in further dilution. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the public market following
the Offering could adversely affect the market price of the Common Stock. Upon
completion of the Offering, the Company will have shares of Common Stock
outstanding. Of these shares, the shares sold in the Offering ( shares
if the Underwriters' over-allotment option is exercised in full) will be freely
tradeable in the public market without restriction by persons other than
affiliates of the Company. All of the remaining shares are "restricted
securities" within the meaning of Rule 144 under the Securities Act.
Approximately of such shares will have been held for more than one year as
of the date of this Prospectus and may be sold 90 days after the Company has
been subject to the reporting requirements of Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), subject to the volume,
manner of sale and other limitations of Rule 144. The Company and certain
stockholders who will collectively own shares of Common Stock immediately
following the Offering, and the holders of warrants who will collectively have
the right immediately following the Offering to purchase shares of Common
Stock, have agreed not to sell or otherwise transfer any shares of Common Stock
for a period of 180 days after the effective date of the Offering without the
prior written consent of A.G. Edwards & Sons, Inc. Following the expiration of
such 180-day lock-up agreements, approximately additional shares of Common
Stock will be eligible for sale in accordance with the requirements of Rule 144.
Upon completion of the Offering, the Company intends to file registration
statements on Form S-8 under the Securities Act to register all of the shares of
Common Stock issued or reserved for future issuance under the Omnibus Plan (as
hereinafter defined) and the ESOP (as hereinafter defined). See "Shares Eligible
for Future Sale" and "Underwriting."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered by the Company in the Offering, after deducting the estimated
underwriting discounts and estimated Offering expenses to be paid by the
Company, are estimated to be $ , assuming an Offering price of $ per
share. See "Underwriting."

The Company intends to use the net proceeds of the Offering to repay
indebtedness under the Company's multicurrency credit agreement, dated March 31,
1994, as amended (the "Credit Agreement"), which will allow the Company to
reborrow funds under the Credit Agreement to purchase and construct additional
rental equipment, to expand its domestic and international distribution
channels, to pursue potential acquisitions of complementary businesses and for
other general corporate purposes. The Company currently has no agreements or
understandings with respect to potential acquisitions. As of June 30, 1997,
approximately $40.8 million was outstanding under the Credit Agreement (based on
currency exchange rates as of such date).

The Credit Agreement provides for U.S. dollar denominated revolving credit
and term credit facilities in the amount of $23,000,000 and $20,500,000,
respectively, British pounds sterling denominated revolving credit and term
credit facilities in the amount of $5,000,000 and $6,500,000 (U.S. dollar
equivalents as of June 30, 1997), respectively, and Japanese yen denominated
revolving credit and term credit facilities in the amount of $6,000,000 and
$1,300,000 (U.S. dollar equivalents as of June 30, 1997), respectively. The U.S.
dollar denominated revolving credit facility bears interest at the prime rate of
Brown Brothers Harriman & Co., agent under the Credit Agreement ("BBH"), plus
1.0% (9.50% as of June 30, 1997). The British pounds sterling denominated
revolving credit facility bears interest at a rate determined by reference to
the London interbank offered rate ("LIBOR") for deposits in British pounds
sterling plus 2.0% (8.38% as of June 30, 1997). The Japanese yen denominated
revolving credit facility bears interest at a rate determined by reference to
the "Euroyen TIBOR" rate on the Bloomberg Financial Markets service at "TIBOEY"
plus 3.5% (4.07% as of June 30, 1997). The U.S. dollar denominated term loan
bears interest at either BBH's prime rate plus 1.0% (9.50% as of June 30, 1997)
or a rate determined by reference to LIBOR for deposits in U.S. dollars plus
3.5% (9.31% as of June 30, 1997). The

11
<PAGE>
British pounds sterling denominated term loan bears interest at a rate
determined by reference to LIBOR for deposits in British pounds sterling plus
2.0% (8.44% as of June 30, 1997). The Japanese yen denominated term loan bears
interest at a rate determined by reference to the Tokyo interbank offered rate
for deposits in Japanese yen plus 2.5% (4.14% as of June 30, 1997). Mandatory
payments of principal are due and payable quarterly on each term loan and
interest are payable monthly or on the last day of any eurocurrency interest
period. The entire outstanding principal balance of the term loans and the
revolving credit facilities are due and payable in full on June 30, 2001. Until
April 1, 1998, a prepayment penalty equal to 0.25% of the amount prepaid is due
and payable in connection with voluntary prepayments of the term loans. The
Company is a party to two interest rate swap agreements which fix the Company's
effective interest costs under a portion of the Credit Agreement. See "Risk
Factors--Foreign Exchange Risk; International Trade Risk" and Note E of "Notes
to Consolidated Financial Statements."

DIVIDEND POLICY

The Company paid dividends of approximately $0.6 million with respect to
each of the 1994, 1995 and 1996 fiscal years. Through June 30, 1997, the Company
has paid dividends with respect to the current fiscal year of approximately $0.2
million, and it intends to pay additional dividends of approximately $0.4
million prior to the consummation of the Offering. The Company does not
anticipate paying any other cash dividends on the Common Stock in the
foreseeable future and anticipates that future earnings will be retained to
finance operations and expansion. The payment of cash dividends in the future
will be at the discretion of the Board of Directors and will depend upon such
factors as earnings levels, capital requirements, the Company's financial
condition and other factors the Board of Directors deems relevant. In addition,
the Credit Agreement limits the amount of dividends that may be paid by the
Company in any fiscal year to 30% of net income (as defined in the Credit
Agreement) for such fiscal year.

DILUTION

The net tangible book value attributable to the Company's Common Stock at
June 30, 1997 was $
($ per share). "Net tangible book value per share" represents the Company's
total tangible assets less total liabilities divided by the total number of
shares of Common Stock outstanding. After giving effect to the sale by the
Company of the shares of Common Stock to be sold by the Company in the
Offering (at an assumed Offering price of $ per share), and after deducting
the estimated underwriting discount and expenses of the Offering to be paid by
the Company, and the application of the net proceeds as set forth under "Use of
Proceeds," the Company's net tangible book value as of June 30, 1997, would have
been $ ($ per share), representing an immediate increase of $ in net
tangible book value per share to existing stockholders and an immediate dilution
of $ in net tangible book value per share to new investors purchasing shares
in the Offering. The following table illustrates this dilution per share of
Common Stock:

<TABLE>
<S> <C> <C>
Assumed Offering price per share...................................... $
Net tangible book value per share at June 30, 1997.................. $
Increase per share attributable to new investors.................... .
---------
Pro forma net tangible book value per share after the Offering........ .
---------
Dilution of net tangible book value per share to new investors(1)..... $ .
---------
---------
</TABLE>

- -------

(1) Excludes shares issuable upon exercise of warrants with an exercise
price of $ per share. To the extent any of these warrants are exercised,
new investors would suffer further dilution. See "Shares Eligible for Future
Sale."

The following table sets forth, on a pro forma basis as of June 30, 1997,
the difference between existing stockholders and new investors with respect to
the number of shares of Common Stock purchased from the

12
<PAGE>
Company and the total cash consideration and average price per share paid to the
Company (based upon an assumed Offering price of $ per share for new
investors):

<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED AVERAGE
-------------------------- ------------------------ PRICE PER
NUMBER(1) PERCENT AMOUNT PERCENT SHARE
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing Stockholders(2)...................................... .% $ . .% $
New Investors................................................. .% . .%
--- ----- --- -----
100.0% $ . 100.0%
--- ----- --- -----
--- ----- --- -----
</TABLE>

- -------

(1) Excludes shares issuable upon exercise of options to be granted in
connection with the Offering at an exercise price equal to the Offering
price and shares of Common Stock issuable upon exercise of warrants at
an exercise price of $ per share. To the extent any of these options or
warrants are exercised, new investors would suffer further dilution. See
"Management--Employee Benefit Plans-- Omnibus Plan" and "Shares Eligible for
Future Sale."

(2) Approximately 91.5% of the shares of Common Stock owned by existing
stockholders have been held by them since 1982.

13
<PAGE>
CAPITALIZATION

The following table sets forth the Company's capitalization at June 30, 1997
(a) on a historical basis and (b) as adjusted to give effect to the sale by the
Company of shares of Common Stock offered hereby at an assumed Offering
price of $ per share and the application of the net proceeds therefrom as
described in "Use of Proceeds." The data set forth below should be read in
conjunction with the other financial information presented elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
Short-term debt, including current portion of long-term debt.............................. $ $
--------- -----------
--------- -----------
Long-term debt, net of current portion.................................................... $ $
Stockholders' equity(1):
Preferred Stock, $0.10 par value; 10,000,000 shares authorized, no shares issued and
outstanding; no shares issued and outstanding as adjusted............................. $ -- $ --
Common Stock, $0.10 par value; 40,000,000 shares authorized, shares issued and
outstanding; shares issued and outstanding as adjusted...........................
Treasury stock, at cost, shares....................................................
Additional paid-in capital..............................................................
Stockholder notes receivable............................................................
Stock purchase warrants.................................................................
Cumulative foreign currency translation adjustment......................................
Retained earnings.......................................................................
Total stockholders' equity............................................................
Total capitalization.................................................................. $ $
--------- -----------
--------- -----------
</TABLE>

- -------

(1) Excludes exercise price to be paid in connection with the issuance of
shares of Common Stock issuable upon exercise of options to be granted in
connection with the Offering at an exercise price equal to the Offering
price and shares of Common Stock issuable upon exercise of warrants
with an exercise price of $ per share.

14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected consolidated financial data for the Company as of and
for each of the five fiscal years ended in the period September 30, 1996 have
been derived from the consolidated financial statements of the Company. The
selected consolidated financial data for the Company as of and for each of the
three fiscal years ended in the period September 30, 1996 have been derived from
the Company's consolidated financial statements which are included elsewhere in
this Prospectus and have been audited by Deloitte & Touche, LLP, independent
certified public accountants, whose audit report is included herein. Such
selected consolidated financial data should be read in conjunction with such
financial statements and related notes thereto. The selected consolidated
financial data at June 30, 1997 and for the nine months ended June 30, 1996 and
1997 have been derived from the unaudited consolidated financial statements of
the Company which, in the opinion of the Company's management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation. The results of operations for the nine months ended June 30,
1997 are not necessarily indicative of results that may be expected for the full
year. This data should be read in conjunction with the information set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and related notes thereto included
elsewhere in this Prospectus.

INCOME STATEMENT DATA:
Revenue:
Rental revenues................................... $ 28,539 $ 31,869 $ 47,625 $ 65,864 $ 65,741 $ 45,389 $ 56,400
Products sales and service revenues............... 2,593 3,384 6,187 9,046 11,397 8,042 10,688
--------- --------- --------- --------- --------- --------- ---------
Total revenues.................................. 31,132 35,253 53,812 74,910 77,138 53,431 67,088
Rental costs........................................ 10,395 12,320 18,775 26,288 26,425 18,267 22,342
Product sales and service costs..................... 1,649 2,288 4,284 6,637 7,783 5,601 7,409
--------- --------- --------- --------- --------- --------- ---------
Gross profit........................................ 19,088 20,645 30,753 41,985 42,930 29,563 37,337
Selling, general and administrative expense......... 13,343 13,170 19,181 28,163 30,077 22,230 25,124
Research and development expense.................... 1,948 2,347 3,033 3,283 4,404 2,947 4,684
--------- --------- --------- --------- --------- --------- ---------
Operating income.................................... 3,797 5,128 8,539 10,539 8,449 4,386 7,529
Interest expense.................................... 1,675 1,606 1,805 2,788 3,092 2,437 2,692
--------- --------- --------- --------- --------- --------- ---------
Income before taxes and extraordinary loss.......... 2,122 3,522 6,734 7,751 5,357 1,949 4,837
Income taxes........................................ 773 1,253 2,400 3,037 2,238 813 2,054
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary loss.................... 1,349 2,269 4,334 4,714 3,119 1,136 2,783
Extraordinary loss from early extinguishment of debt
(net of tax of $389).............................. -- -- 756 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income.......................................... $ 1,349 $ 2,269 $ 3,578 $ 4,714 $ 3,119 $ 1,136 $ 2,783
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income per share................................ $ $ $ $ $ $ $
Cash dividends per share(1).........................
Weighted average shares outstanding.................
OTHER DATA:
EBITDA(2)........................................... $ 8,084 $ 10,230 $ 14,874 $ 19,159 $ 18,518 $ 11,929 $ 16,169
Capital expenditures................................ 5,503 11,050 13,566 20,748 12,587 9,125 19,880
</TABLE>

15
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- JUNE 30, 1997
--------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........................................ $ 30,607 $ 37,626 $ 57,223 $ 73,007 $ 77,573 $ 89,925
Total debt.......................................... 13,574 16,648 27,497 34,870 37,349 45,399
Stockholders' equity................................ 11,085 13,303 16,631 21,329 24,538 27,560
</TABLE>

- ---------

(1) After the Offering, the Company does not anticipate paying any cash
dividends on the Common Stock for the foreseeable future and anticipates
that future earnings will be retained to finance future operations and
expansion. See "Dividend Policy."

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

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the financial condition and results of
operations of the Company for the fiscal years ended September 30, 1994, 1995
and 1996 and the nine-month periods ended June 30, 1996 and 1997. This
discussion should be read in conjunction with the Consolidated Financial
Statements and related notes thereto included elsewhere in this Prospectus.

GENERAL

The Company is a leading designer and manufacturer of automated lighting
systems and products which are marketed exclusively through its domestic and
international facilities and an independent distributor network. The Company
rents its VARI*LITE-Registered Trademark- automated lighting systems and other
products and provides services to the entertainment industry, including markets
such as concert touring, theatre, television and film and corporate events. In
addition, the Company sells its Irideon-Registered Trademark- automated lighting
systems for use in a wide variety of architectural applications.

The Company's revenues are generated through the rental of lighting and
sound systems and equipment, and through sales of related products and services
and architectural lighting systems. Rental revenues include revenues generated
from leases of VARI*LITE-Registered Trademark- automated lighting systems,
concert sound systems and conventional lighting equipment. Revenues from product
sales and services include custom stage construction and stage set design,
design and production management services and the sale of Irideon-Registered
Trademark- automated lighting systems and related products.

Rental revenues were $47.6 million, $65.9 million and $65.7 million or
88.5%, 87.9% and 85.2% of total revenues during fiscal 1994, 1995 and 1996,
respectively. The vast majority of the Company's rental revenues are earned from
the rental of VARI*LITE-Registered Trademark- automated lighting systems, with
the remainder from the rental of concert sound systems and conventional lighting
equipment. The Company's rental revenues are recorded as earned over the term of
each contract except for revenues from sales-type leases which are recorded and
typically paid at the inception of the lease. Sales-type leases are long-term
leases for the Company's VARI*LITE-Registered Trademark- automated lighting
systems and are accounted for as sales for financial accounting purposes.
Revenues from sales-type leases were $4.4 million, $9.9 million and $4.5 million
during fiscal 1994, 1995 and 1996, respectively. Because sales-type lease
revenues are recorded in their entirety at the inception of the lease, wide
variations in revenues and earnings in any given quarter can occur. Rental costs
consist of direct costs of maintaining, supporting and delivering the rental
equipment and the depreciation costs of the capital expenditures incurred to
manufacture or purchase the rental equipment. The Company depreciates rental
equipment over periods of five to ten years. The direct costs associated with
sales-type leases include the net book value of the equipment rented which is
expensed in its entirety at the inception of the lease.

The Company generates sales revenue from its custom stage construction and
stage set design services, design and production management services to
corporations and business associations for conventions, business meetings and
special events and sales of Irideon-Registered Trademark- automated lighting
systems. The Company first introduced its Irideon-Registered Trademark- lighting
system in 1993 and revenues from the Irideon-Registered Trademark- product line
have increased from $0.8 million in fiscal 1994 to $2.6 million in fiscal 1996,
and $3.3 million for nine-month period ended June 30, 1997. During fiscal 1994,
1995 and 1996, the Company's Irideon-Registered Trademark- product line
experienced operating losses of $0.1 million, $0.9 million and $1.2 million,
respectively, due to start-up costs. To date, the gross margin percentage of
Irideon-Registered Trademark-products has been lower than those of the Company's
rental business. Although the gross margin percentage of Irideon-Registered
Trademark- products is expected to improve, it is expected to remain below that
of the Company's rental business.

17
<PAGE>
The following table reflects the percentages of total revenues by market:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30,
JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Concert Touring............................................... 48.5% 38.2% 33.0% 31.0% 30.9%
Theatre....................................................... 19.3 20.6 22.7 20.9 25.1
Television and Film........................................... 13.7 12.9 16.3 18.3 15.4
Corporate Events.............................................. 11.1 14.0 12.2 13.9 12.8
Other......................................................... 7.4 14.3 15.8 15.9 15.8
--------- --------- --------- --------- ---------
Total Revenue................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

Although the Company expects revenues earned from concert touring (primarily
rental revenues) to continue to represent a significant percentage of the
Company's total revenues, during the past three fiscal years, concert touring
revenues have decreased as a percentage of the Company's total revenues due to
an increase in rental revenues generated from the Company's other customer
markets. The Company has experienced fluctuations in its concert touring
revenues because of the unpredictable nature of the timing and duration of such
tours and expects such fluctuations to continue in the future.

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

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30,
JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
North America................................................. 63.0% 53.1% 50.7% 51.6% 51.1%
Europe........................................................ 23.7 33.8 34.5 34.3 34.9
Asia.......................................................... 13.3 13.1 14.8 14.1 14.0
--------- --------- --------- --------- ---------
Total Revenue............................................... 100.0% 100.0% 100.0% 100.0% 100.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

The majority of the increase in European revenues in fiscal 1995 resulted
from the Company's VLEH acquisition for approximately $6.0 million on March 31,
1994. These companies provided lighting services and custom stage construction
and stage set design services and included the Company's London, England
VARI*LITE-Registered Trademark- distributor. This acquisition was accounted for
by the Company using the purchase method of accounting. In addition to London,
the Company has offices in Tokyo, Hong Kong and Madrid. The Company anticipates
that foreign revenues will remain a significant part of the Company's total
revenues as the demand for entertainment in foreign markets continues to
increase.

18
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth the percentages of total revenues represented
by certain income statement data and other data for the indicated periods:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, NINE MONTHS ENDED
JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Rental revenues....................................................... 88.5% 87.9% 85.2% 84.9% 84.1%
Product sales and service revenues.................................... 11.5 12.1 14.8 15.1 15.9
--------- --------- --------- --------- ---------
Total revenues...................................................... 100.0 100.0 100.0 100.0 100.0
Rental costs.......................................................... 34.9 35.1 34.3 34.2 33.3
Product sales and service costs....................................... 8.0 8.9 10.1 10.5 11.0
--------- --------- --------- --------- ---------
Gross margin.......................................................... 57.1 56.0 55.6 55.3 55.7
Selling, general and administrative expense........................... 35.6 37.5 39.0 41.6 37.5
Research and development expense...................................... 5.6 4.4 5.7 5.5 7.0
--------- --------- --------- --------- ---------
Operating income...................................................... 15.9 14.1 10.9 8.2 11.2
Interest expense...................................................... 3.4 3.7 4.0 4.6 4.0
--------- --------- --------- --------- ---------
Income before taxes and extraordinary loss............................ 12.5 10.4 6.9 3.6 7.2
Incomes taxes......................................................... 4.5 4.1 2.9 1.5 3.1
--------- --------- --------- --------- ---------
Income before extraordinary loss...................................... 8.0 6.3 4.0 2.1 4.1
Extraordinary loss.................................................... 1.4 -- -- -- --
--------- --------- --------- --------- ---------
Net income............................................................ 6.6% 6.3% 4.0% 2.1% 4.1%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER DATA:
Rental revenues....................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Rental costs.......................................................... 39.4 39.9 40.2 40.2 39.6
--------- --------- --------- --------- ---------
Rental gross margin................................................... 60.6% 60.1% 59.8% 59.8% 60.4%
Product sales and service revenues.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Product sales and service costs....................................... 69.2 73.4 68.3 69.6 69.3
--------- --------- --------- --------- ---------
Product sales and service gross margin................................ 30.8% 26.6% 31.7% 30.4% 30.7%

EBITDA................................................................ 27.6% 25.6% 24.0% 22.3% 24.1%
</TABLE>

NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO NINE MONTHS ENDED JUNE 30, 1996

REVENUES. Total revenues increased 25.6%, or $13.7 million, to $67.1
million in the nine-month period ended June 30, 1997, compared to $53.4 million
in the nine-month period ended June 30, 1996. The revenue increase was
attributable primarily to the factors set forth below.

Rental revenues increased 24.3%, or $11.0 million, to $56.4 million in the
nine-month period ended June 30, 1997, compared to $45.4 million in the
nine-month period ended June 30, 1996. This increase was primarily the result of
an overall increase in concert touring revenues due to an improved concert
touring market during the nine-month period ended June 30, 1997 compared to the
nine-month period ended June 30, 1996. As a result, the Company experienced
increased rental revenues from both automated lighting systems and sound
systems, as well as from other related products and services. Rental revenues
from sales-type leases accounted for approximately 33.5%, or $3.7 million, of
the increase in rental revenues in the nine-month period ended June 30, 1997,
compared with the nine-month period ended June 30, 1996. The increase in
sales-type lease revenues was primarily due to significant leases with a new
theatrical production and an amusement park.

19
<PAGE>
Product sales and service revenues increased 32.9%, or $2.7 million, to
$10.7 million in the nine-month period ended June 30, 1997, compared to $8.0
million in the nine-month period ended June 30, 1996. This increase was
primarily due to sales of the Company's Irideon-Registered Trademark- automated
lighting products which increased 123.2%, or $1.8 million, to $3.3 million in
the nine-month period ended June 30, 1997, compared to $1.5 million in the
nine-month period ended June 30, 1996. The remainder of the increase was
primarily attributable to the increase in revenues from stage construction
services as a result of increased concert touring activity.

RENTAL COSTS. Rental costs increased 22.3%, or $4.0 million, to $22.3
million in the nine-month period ended June 30, 1997, compared to $18.3 million
in the nine-month period ended June 30, 1996. Rental costs as a percentage of
rental revenues decreased to 39.6% in the nine-month period ended June 30, 1997,
from 40.2% in the nine-month period ended June 30, 1996. The decrease in rental
costs as a percentage of total rental revenues was primarily due to higher
utilization of the Company's rental equipment and other fixed charges during the
nine-month period ended June 30, 1997, compared to the nine-month period ended
June 30, 1996. Also contributing to this decrease was a decrease in sales-type
lease costs as a percentage of sales-type lease rental revenues in the
nine-month period ended June 30, 1997, compared to the nine-month period ended
June 30, 1996. The decrease in sales-type lease costs was due to the leasing of
older equipment during the nine-month period ended June 30, 1997, compared to
the nine-month period ended June 30, 1996.

PRODUCT SALES AND SERVICE COSTS. Product sales and service costs increased
32.3%, or $1.8 million, to $7.4 million in the nine-month period ended June 30,
1997, compared to $5.6 million in the nine-month period ended June 30, 1996.
Product sales and service costs as a percentage of product sales and service
revenues decreased to 69.3% in the nine-month period ended June 30, 1997, from
69.6% in the nine-month period ended June 30, 1996. The decrease in product
sales and service costs as a percentage of the related revenues was primarily
due to the Irideon-Registered Trademark- product line, which experienced
improved production efficiencies and an increase in direct sales. Partially
offsetting this decrease was an increase in product sales and service costs for
the Company's custom stage construction business that were subcontracted by the
Company during the 1997 period, compared to the 1996 period. Product sales and
service costs associated with subcontracted services are generally higher than
costs associated with services provided directly by the Company.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased 13.0%, or $2.9 million, to $25.1 million in the
nine-month period ended June 30, 1997, compared to $22.2 million in the
nine-month period ended June 30, 1996. This increase resulted primarily from
payroll and related costs to support the Company's continued growth. This
expense as a percentage of total revenues decreased to 37.5% in the nine-month
period ended June 30, 1997, from 41.6% in the nine-month period ended June 30,
1996, due to costs incurred during fiscal year 1996, resulting from increases in
personnel and improvements in information systems.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
increased 58.9%, or $1.8 million, to $4.7 million in the nine-month period ended
June 30, 1997, compared to $2.9 million in the nine-month period ended June 30,
1996. This expense as a percentage of total revenues increased to 7.0% in the
nine-month period ended June 30, 1997, from 5.5% in the nine-month period ended
June 30, 1996. These increases were primarily the result of an increase in the
employee-related costs associated with adding research and development engineers
during fiscal 1996 and the nine-month period ended June 30, 1997.

INTEREST EXPENSE. Interest expense increased 10.5%, or $0.3 million, to
$2.7 million in the nine-month period ended June 30, 1997, compared to $2.4
million in the nine-month period ended June 30, 1996. This increase was
attributable to additional long-term borrowings incurred by the Company to fund
capital expenditures.

INCOME TAXES. Effective tax rates in the nine-month periods ended June 30,
1997 and 1996 were 42.5% and 41.7%, respectively.

20
<PAGE>
FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1995

REVENUES. Total revenues increased 3.0%, or $2.2 million, to $77.1 million
in the fiscal year ended September 30, 1996, compared to $74.9 million in the
fiscal year ended September 30, 1995. The revenue increase was attributable
primarily to the factors set forth below.

Rental revenues decreased $0.2 million to $65.7 million in fiscal 1996,
compared to $65.9 million in fiscal 1995. This decrease was primarily the result
of a 54.2%, or $5.4 million, decrease in rental revenues from sales-type leases,
which decreased to $4.5 million in fiscal 1996, compared to $9.9 million in
fiscal 1995, primarily due to one major casino installation and an increase in
the cloning of several major touring theatrical productions in fiscal 1995.
Additionally, the Company experienced an overall decrease in concert touring
revenues in fiscal 1996 as a result of a downturn in the concert touring market
compared with fiscal 1995 when the Company earned significant revenues from the
Rolling Stones Voodoo Lounge tour. These decreases were offset by increased
revenues earned from the Company's VARI*LITE-Registered Trademark- automated
lighting systems as more of these products were available for rental as a result
of fiscal 1995 capital expenditures, including an increase in automated lighting
rental revenues in Japan.

Product sales and service revenues increased 26.0%, or $2.4 million, to
$11.4 million in fiscal 1996, compared to $9.0 million in fiscal 1995. Product
sales and service revenues increased as a percentage of total revenues to 14.8%
in fiscal 1996, from 12.1% in fiscal 1995. This increase in revenue was
primarily due to sales of Irideon-Registered Trademark- automated lighting
products which increased 180.9%, or $1.7 million, to $2.6 million in fiscal
1996, compared to $0.9 million in fiscal 1995.

RENTAL COSTS. Rental costs increased 0.5%, or $0.1 million, to $26.4
million in fiscal 1996, compared to $26.3 million in fiscal 1995. Rental costs
as a percentage of rental revenues increased to 40.2% in fiscal 1996, from 39.9%
in fiscal 1995. This increase was primarily the result of increased sales-type
lease costs as a percentage of sales-type lease rental revenues in fiscal 1996
when compared to fiscal 1995, due to the leasing of newer equipment during
fiscal 1996 when compared to fiscal 1995.

PRODUCT SALES AND SERVICE COSTS. Product sales and service costs increased
17.3%, or $1.2 million, to $7.8 million in fiscal 1996 compared to $6.6 million
in fiscal 1995. Product sales and service costs as a percentage of product sales
and service revenues decreased from 73.4% in fiscal 1995 to 68.3% in fiscal
1996. The decrease in these costs as a percentage of their related revenues was
primarily the result of operating improvements in the Company's custom stage
construction business.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased 6.8%, or $1.9 million, to $30.1 million in
fiscal 1996, compared to $28.2 million in fiscal 1995. This expense as a
percentage of revenues increased to 39.0% in fiscal 1996 from 37.5% in fiscal
1995. These increases primarily resulted from increased payroll and related
costs and depreciation expense associated with continued growth through
increases in personnel and improvements in information systems.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
increased 34.1%, or $1.1 million, to $4.4 million in fiscal 1996, compared to
$3.3 million in fiscal 1995. This expense as a percentage of revenues increased
to 5.7% in fiscal 1996, from 4.4% in fiscal 1995. These increases were primarily
the result of an increase in the employee-related costs associated with adding
16 research and development engineers during fiscal 1996.

INTEREST EXPENSE. Interest expense increased 10.9%, or $0.3 million, to
$3.1 million in fiscal 1996, compared to $2.8 million in fiscal 1995. This
increase was attributable to additional long-term borrowings incurred by the
Company to fund capital expenditures in fiscal 1995 and 1996.

INCOME TAXES. Effective tax rates in fiscal 1996 and 1995 were 41.7% and
39.2%, respectively.

21
<PAGE>
FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1994

REVENUES. Total revenues increased 39.2%, or $21.1 million, to $74.9
million in fiscal 1995 compared to $53.8 million in fiscal 1994. Approximately
56.2% of the growth in total revenues, or $11.9 million, was attributable to
revenues generated from Vari-Lite Europe Holdings Limited ("VLEH"), the
Company's London, England based subsidiary which was formed to acquire three
companies on March 31, 1994. As a result, only six months of VLEH's operations
were included in fiscal 1994. Also during fiscal 1995, the Company earned $8.9
million, or approximately 11.9% of total revenues, from the rental of automated
lighting and sound systems and other lighting products and services used on the
Rolling Stones Voodoo Lounge tour.

Rental revenues increased 38.3%, or $18.3 million, to $65.9 million in
fiscal 1995, compared to $47.6 million in fiscal 1994. Approximately 48.1% of
the growth in rental revenues, or $8.8 million, was attributable to an increase
in revenues from the VLEH acquisition. Rental revenues from sales-type leases
accounted for approximately 30.0%, or $5.5 million, of the increase in rental
revenues from fiscal 1994 to fiscal 1995. The increase in sales-type lease
revenues was primarily due to one major casino installation and an increase in
the cloning of several major touring theatrical productions in fiscal 1995. The
remainder of the increase in rental revenues was primarily due to revenues
earned from the Rolling Stones Voodoo Lounge tour and an overall increase in
automated lighting rental revenues in Japan.

Product sales and service revenues increased 46.2%, or $2.8 million, to $9.0
million in fiscal 1995, compared to $6.2 million in fiscal 1994. Product sales
and service revenues increased as a percentage of total revenues to 12.1% in
fiscal 1995, from 11.5% in fiscal 1994. These increases were primarily
attributable to the VLEH acquisition.

RENTAL COSTS. Rental costs increased 40.0%, or $7.5 million, to $26.3
million in fiscal 1995, compared to $18.8 million in fiscal 1994. Rental costs
as a percentage of rental revenues increased to 39.9% in fiscal 1995, from 39.4%
in fiscal 1994.

PRODUCT SALES AND SERVICE COSTS. Product sales and service costs increased
54.9%, or $2.3 million, to $6.6 million in fiscal 1995, compared to $4.3 million
in fiscal 1994. Product sales and service costs as a percentage of product sales
and service revenues increased to 73.4% in fiscal 1995 from to 69.2% in fiscal
1994. These increases were primarily the result of higher than anticipated costs
to build custom stages and stage sets for customers.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses increased 46.8%, or $9.0 million, to $28.2 million in
fiscal 1995, compared to $19.2 million in fiscal 1994. This expense as a
percentage of revenues increased to 37.5% in fiscal 1995 from 35.6% in fiscal
1994. These increases were partially due to the non-recurring costs associated
with the VLEH acquisition in fiscal 1994 and an increase in consulting and
employee benefit expenses as a result of the Company's initiatives to improve
its human resource and process management. During fiscal 1995, the Company
established the ESOP and Equivalence Plan (as hereinafter defined) and accrued
contributions to them of an aggregate of $0.8 million. This increase was also
partially due to unusually high design modification costs to improve performance
of certain rental equipment and costs to make certain VARI*LITE-Registered
Trademark- products compliant with international safety regulations. The
remainder of the increase in selling, general and administrative expense
resulted primarily from payroll and related costs to support continued growth.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
increased 8.2%, or $0.3 million, to $3.3 million in fiscal 1995, compared to
$3.0 million in fiscal 1994. This increase in research and development expense
was primarily attributable to costs incurred in connection with the development
of the Company's Irideon-Registered Trademark- products. This expense as a
percentage of revenues decreased to 4.4% in fiscal 1995, from 5.6% in fiscal
1994.

INTEREST EXPENSE. Interest expense increased 54.5%, or $1.0 million, to
$2.8 million in fiscal 1995, compared to $1.8 million in fiscal 1994. This
increase was attributable to additional long-term borrowings

22
<PAGE>
incurred by the Company to fund the VLEH acquisition in fiscal 1994 and other
capital expenditures in fiscal 1994 and 1995 primarily associated with an
increase in rental assets.

INCOME TAXES. Effective tax rates in fiscal 1995 and 1994 were 39.2% and
35.6%, respectively. The increase in the effective tax rate in fiscal 1995 was
primarily due to increased earnings from the Company's subsidiary in Japan,
which are taxed at a higher rate than the Company's other earnings, and
increased earnings in certain states in which the Company is subject to state
income tax.

EXTRAORDINARY LOSS. During fiscal 1994, the Company entered into the Credit
Agreement, the proceeds of which were used to refinance outstanding indebtedness
under then existing credit facilities, to fund the VLEH acquisition and to build
rental equipment. The Company incurred prepayment penalties, net of taxes, of
$0.8 million relating to the early extinguishment of the existing debt. See
"--Liquidity and Capital Resources."

QUARTERLY FLUCTUATIONS AND SEASONALITY

The following table sets forth certain income statement data and EBITDA for
each of the Company's last 15 quarters, which were derived from unaudited
financial statements of the Company. In the opinion of the Company's management,
this income statement data contains all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation thereof.

<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
------------ ----------- --------- ------------ FISCAL YEAR
-----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Fiscal 1994
Total Revenues.................................... $ 9,778 $ 9,591 $ 15,160 $ 19,283 $ 53,812
EBITDA............................................ 2,659 2,025 3,720 6,470 14,874
Operating income.................................. 1,321 633 2,019 4,566 8,539
Fiscal 1995
Total Revenues.................................... $ 18,648 $ 17,234 $ 19,314 $ 19,714 $ 74,910
EBITDA............................................ 6,224 4,027 4,495 4,413 19,159
Operating income.................................. 4,267 1,951 2,284 2,037 10,539
Fiscal 1996
Total Revenues.................................... $ 16,791 $ 16,995 $ 19,645 $ 23,707 $ 77,138
EBITDA............................................ 3,648 3,436 4,845 6,589 18,518
Operating income.................................. 1,186 915 2,285 4,063 8,449
Fiscal 1997
Total Revenues.................................... $ 22,326 $ 22,384 $ 22,378
EBITDA............................................ 5,215 5,083 5,871
Operating income.................................. 2,424 2,265 2,840
</TABLE>

The Company has experienced and is expected to continue to experience
fluctuations in quarterly operating results, both between different quarters
within the same fiscal year and with respect to the same quarter between
different fiscal years. These fluctuations arise from several factors, including
the timing and dollar value of sales-type leases with customers, the dependence
of the Company on concert tours, which are unpredictable in timing and duration,
the introduction of new products and general economic conditions both
domestically and internationally. In addition, the Company's business is subject
to seasonal fluctuations with the highest percentage of its revenues being
generated in the summer months and the lowest percentage being generated in
winter months. Because of the possibilities of significant fluctuations, results
for any quarter may not be indicative of the results that may be achieved in a
full year. While the Company expects to experience growth in its revenues and
profits, there can be no assurance that the Company's historical levels of
revenues or profits will be sustained, particularly on a quarterly basis. See
"Risk Factors--Fluctuations in Operating Results and Seasonality."

23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has financed its operations and capital
expenditures with cash flow from operations, bank borrowings and advances from
distributors and customers. The Company's operating activities generated cash
flow of approximately $10.9 million, $12.2 million, $7.3 million and $4.7
million during fiscal 1994, 1995 and 1996 and for the nine months ended June 30,
1997, respectively.

The Company intends to use the net proceeds of the Offering to repay
indebtedness under the Credit Agreement. As of June 30, 1997, approximately
$40.8 million was outstanding under the Credit Agreement (based on currency
exchange rates as of June 30, 1997). The Credit Agreement contains compliance
covenants, including requirements that the Company achieve certain financial
ratios. In addition, the Credit Agreement places limitations on the ability to
pay stockholder distributions, make capital expenditures, incur additional
indebtedness, make certain loans or investments, sell assets or reacquire Common
Stock. The Company incurs a commitment fee equal to 0.5% per annum on the
average daily unused portion of the revolver which is payable quarterly.
Substantially all of the Company's assets, except those pledged to distributors,
are pledged as collateral under the Credit Agreement. The Company expects to
obtain a new credit facility after completion of the Offering.

The Company has hedged its currency fluctuation risk by borrowing in local
currencies under the Credit Agreement. The Company is a party to two interest
rate swap agreements which fix the Company's effective interest costs under a
portion of the Credit Agreement. See "Risk Factors--Foreign Exchange Risks;
International Trade Risk," "Use of Proceeds" and Note E of "Notes to
Consolidated Financial Statements."

The Company has funded the costs to manufacture automated lighting equipment
to be rented to certain distributors with advances made by the distributors
under the terms of the Company's distributorship agreements. The distributors
typically advance to the Company an amount equal to the cost to manufacture the
equipment, and enter into a four-year agreement whereby the distributors have
the exclusive right to sublease the lighting equipment within defined market
areas. Borrowings by the Company under these agreements, which are secured by
liens against the applicable equipment, are repaid by the Company through future
rentals due from the distributors under the terms of their distributorship
agreements and bear interest at various rates ranging from 0% to 10.25%
annually. Proceeds received under these distributorship agreements were
approximately $1.0 million, $2.2 million and $1.7 million for fiscal 1994, 1995
and 1996, respectively, and outstanding borrowings from distributors at
September 30, 1994, 1995 and 1996 and June 30, 1997 were approximately $2.1
million, $2.9 million, $2.8 million and $2.1 million, respectively. All amounts
advanced by distributors are accounted for by the Company as short-term debt.
See "Business--Marketing, Sales and Distribution."

The Company has funded the cost to purchase computer equipment and office
furniture and fixtures with advances from asset based lending institutions.
Borrowings by the Company under agreements with such institutions typically
amortize over three years and bear interest at various rates ranging from 8.25%
to 10.40%. Proceeds received under this type of financing were approximately
$0.2 million, $1.6 million, $1.8 million and $1.1 million for fiscal 1994, 1995
and 1996 and the nine-month period ended June 30, 1997, respectively, and
borrowings outstanding at September 30, 1994, 1995 and 1996 and June 30, 1997
were approximately $0.4 million, $1.7 million, $2.8 million and $3.0 million,
respectively.

The Company has also used customer advances or deposits on contracts to fund
short-term working capital and immediate capital expenditure needs for specific
contracts. As of September 30, 1994, 1995 and 1996 and June 30, 1997, the
Company had outstanding payables on customer deposits on contracts of
approximately $1.3 million, $1.2 million, $1.2 million and $1.8 million,
respectively.

Dividends paid to stockholders totaled approximately $0.6 million with
respect to each of fiscal 1994, 1995 and 1996, and $0.2 million with respect to
fiscal 1997 through June 30, 1997. The Company intends to pay additional
dividends of approximately $0.4 million to its stockholders prior to the
consummation of the Offering. The Company does not anticipate paying any
additional cash dividends after the consummation of the Offering. See "Dividend
Policy."

The Company's business requires significant capital expenditures. Capital
expenditures for the fiscal years ended September 30, 1994, 1995 and 1996 were
approximately $13.6 million, $20.7 million and $12.6 million,

24
<PAGE>
respectively, of which approximately $12.2 million, $18.0 million and $10.2
million were for rental equipment inventories. The majority of the Company's
revenues are generated through the rental of automated lighting and concert
sound systems and, as such, the Company must maintain a significant amount of
rental equipment to meet customer demands. Total rental equipment inventories
increased from approximately $49.2 million at the beginning of fiscal 1994 to
$102.9 million at June 30, 1997. This increase primarily consisted of automated
lighting equipment, the majority of which consisted of recently designed
lighting equipment and additional equipment to resolve shortages that the
Company has experienced and to replace equipment taken out of rental inventory
for sales-type leases. The Company's management anticipates capital expenditures
of approximately $23.0 million during fiscal 1997, primarily for expansion of
rental inventories.

The Company invests heavily in management information systems, believing
them to be a key factor in the Company's ability to remain ahead of its
competitors. In fiscal 1995 and 1996, the Company invested approximately $2.2
million constructing a wide-area network throughout the United States and
implementing Oracle financial and manufacturing applications. This computer
system is expected to meet the anticipated needs of the Company for the
foreseeable future.

The Company had a working capital deficit of approximately $2.0 million,
$4.8 million and $0.6 million at September 30, 1994, 1995 and 1996,
respectively, and a working capital surplus of approximately $0.5 million at
June 30, 1997. The Company has historically maintained working capital deficits
since the bulk of its revenue generating assets are classified as long-term
assets rather than current assets.

In December 1995, the Company entered into a financing transaction with an
unaffiliated special purpose entity which purchased a 32-acre site in the
Dallas, Texas area for approximately $3.6 million and intends to build a 233,000
square foot facility. The Company is leasing this land for five years, with six
five-year renewal options. The Company has the right to lease a building to be
built on the land for a term that is identical to the land lease. The rental
rate will be based on the total cost of the project, which is expected to be
approximately $18.0 million. The Company has an option to purchase the property
at any time during the term of the lease for its original cost. The Company
intends to consolidate all of its Dallas, Texas based operations in this new
facility when it is completed, which is expected to be in fiscal 2000. This
financing arrangement will be accounted for as an operating lease for financial
reporting purposes. See "Business--Properties".

The Company has capitalized and expects to continue to capitalize its costs
relating to the High End Lawsuit (approximately $2.5 million as of June 30,
1997, and an estimated additional $1.6 million through consummation of the
trial). Unless the Company receives a judgment in this litigation that at least
one of its patents has been infringed and the Company concludes, based on all of
the facts and circumstances, that such a judgment will allow it to maintain its
competitive advantage provided by the infringed patents, all costs incurred by
the Company relating to the High End Lawsuit (including those previously
capitalized) will be required to be recorded as an expense in the period that
the judgment is rendered. See "Risk Factors--Capitalized Litigation Costs" and
"Business--Litigation."

Management believes that cash flow generated from operations, combined with
the net proceeds from the Offering and borrowing capacity under the Credit
Agreement (after giving effect to the application of the proceeds of the
Offering) should be sufficient to fund its anticipated operating needs and
capital expenditures for at least twelve months after the date of the Offering.
However, because the Company's future operating results will depend on a number
of factors, including the demand for the Company's products and services, the
level of competition, the success of the Company's research and development
programs, the ability to achieve competitive and technological advances and
general and economic conditions and other factors beyond the Company's control,
there can be no assurance that sufficient capital resources will be available to
fund the expected expansion of its business beyond such period.

INFLATION

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

25
<PAGE>
BUSINESS

GENERAL

- TELEVISION AND FILM. The Company successfully leveraged its versatile
product line to become a leading provider of automated lighting to the
television market and to increase its penetration of the film market. The
Company has provided automated lighting for the Academy Awards, Emmy-TM-
Awards, Grammy Awards, Country Music Awards, MTV Music Awards and other
awards shows, as well as television shows such as THE TONIGHT SHOW WITH
JAY LENO, THE LATE SHOW WITH DAVID LETTERMAN, WHEEL OF FORTUNE, SATURDAY
NIGHT LIVE, HOME IMPROVEMENT and AMERICAN GLADIATORS, and the movies
FORREST GUMP, BATMAN FOREVER, WAYNE'S WORLD and SISTER ACT, among others.
VARI*LITE-Registered Trademark- automated lighting fixtures or
"luminaires" are also installed in ABC's New York studios, where they are
used for PRIME TIME LIVE, 20/20 and GOOD MORNING AMERICA.

26
<PAGE>
- ARCHITECTURAL. Recently, the Company has targeted the lighting needs of
architectural markets such as restaurants, casinos, retail stores,
corporate showrooms, shopping malls, building exteriors and landmarks. The
Company's Irideon-Registered Trademark- automated lighting system product
line, which is in the development stage, is designed specifically for such
architectural lighting applications.

INDUSTRY

In the early 1980's, the concert touring market was the first to recognize
that automated lighting could be used not only to augment a performance but also
as an additional source of entertainment. Today, lighting and lighting design
play an integral role in the entertainment industry, providing illumination of
concert, theatre, television and film performers for the audience, as well as
creating special effects to augment the performance. According to an industry
source, the concert touring market in North America has grown at an annual rate
of approximately 6% over the past nine years, as measured by major headliner
arena ticket sales. The Company believes that the international concert touring
market will grow at a faster rate because it is at an earlier stage in its
development.

The theatre market, as measured by the North American live theatre box
office receipts, has grown by an annual rate of approximately 11% over the last
ten years according to VARIETY. More importantly, touring shows, for which the
Company's automated lighting systems are ideally suited, accounted for 60% of
the total market in 1996 compared to 52% in 1986. The Company believes that the
North American and international theatre markets continue to represent a
significant opportunity for the Company.

In recent years, lighting designers have begun to utilize entertainment
lighting in new settings such as corporate meetings, restaurants, casinos,
cruise ships and retail settings. The Company has broadened the application of
its existing technologies to address this demand, including the development of
its Irideon-Registered Trademark-product line for architectural use. The Company
expects the demand for entertainment lighting in both existing and new settings
to increase in the future.

STRATEGY

- MAINTAINING ITS COMMITMENT TO INNOVATION. The Company will remain
committed to research and development, designing innovative technologies
for use in multiple products. By continuing to develop leading edge,
proprietary automated lighting products with novel and versatile features,
the Company expects to maintain its leadership positions in existing
markets and create demand for its products in new markets.

- EXPANDING ITS WORLDWIDE DISTRIBUTION CAPABILITIES. The Company is
committed to leveraging its position as an industry leader in automated
lighting by expanding its domestic and international distribution channels
by opening new offices, affiliating with additional independent
distributors and

27
<PAGE>
acquiring complementary businesses. The Company intends to increase its
focus as a full-service provider of quality products and services by
further expanding and diversifying its worldwide inventory and
distribution system, improving its extensive education and training
programs and continuing to emphasize customer service. The Company expects
to significantly expand its recent efforts to offer a full range of
lighting services and products, including conventional lighting products,
in order to compete effectively for all of its customers' lighting needs.

- CONTINUING TO OFFER VALUE-ADDED COMPLEMENTARY SERVICES. The Company
intends to continue providing complementary sound, conventional lighting,
custom stage and stage set, and design and production management products
and services, thereby offering comprehensive solutions to its customers'
needs and leveraging its customer relationships to maximize revenue.

PRODUCTS AND SERVICES

AUTOMATED LIGHTING--VARI*LITE-REGISTERED TRADEMARK- PRODUCTS.

The Company designs, manufactures and markets an extensive line of
integrated automated lighting systems, including light fixtures, or
"luminaires," control consoles and support equipment, and provides system
operators and maintenance services. To accommodate users who prefer to operate
the Company's lighting systems independently, the Company also conducts
extensive training programs. The Company rents rather than sells its
VARI*LITE-Registered Trademark- automated lighting systems.

VL1-TM- LUMINAIRE. The Company's initial product, the revolutionary VL1-TM-
luminaire, was the first automated luminaire using a dichroic filter color
changing system, thereby becoming the first compact, easily transportable light
capable of moving and changing beam intensity, position, movement, size, shape
and color. The VL1-TM- luminaire was introduced in 1981 and remained in service
until 1996.

SERIES 200-TM- SYSTEM. The Company's VL2C-Registered Trademark- spot
luminaire, VL4-Registered Trademark- wash luminaire and Artisan-Registered
Trademark- Plus and mini-Artisan-Registered Trademark- 2 control consoles
constitute the Company's Series 200-TM- system. Spot luminaires create a hard-
edged, crisp beam which can be used for precisely focused illumination and
visual effects, as well as for projecting custom light images such as faces and
designs through the use of "gobos", designs etched into a piece of glass or cut
into a piece of metal through which a light beam is directed to create an image.
Each VL2C-Registered Trademark- spot luminaire model can change light color in
one-tenth of a second and can produce more than 120 separate light colors
through the use of the Company's patented color changing system. In designing
the Series 200-TM- system, the Company patented a number of features which it
believes makes the Company's light systems superior to those of its competitors.
The Company is the only industry participant which combines patented dichroic
filter color changing systems, advanced heat removal techniques and a computer
control systems that utilize distributed processing and resident cue memory in
each luminaire. By using such technology to execute a lighting effect (or cue),
an operator can transmit a single command to up to 1,000 luminaires
simultaneously, each of which stores its own set of cues. As a result, customers
using the Company's systems can create lighting presentations with greater
flexibility, complexity, speed and precision than with competing products.

The VL4-Registered Trademark- wash luminaire projects a dispersed soft-edge
light beam for even illumination of objects and areas. The VL4-Registered
Trademark- luminaire's patented color changing system allows the user to select
30 preset and 160 programmable colors from thousands of available colors and to
change these colors in less than three-tenths of a second, or program the system
for timed color cross-fades. In addition, the VL4-Registered Trademark-luminaire
features precisely timed control of light intensity, including the ability to
instantaneously turn the light fixture on and off. Continuous adjustment of
diffusion and beam angle provides enhanced control of the beam shape.

SERIES 300-TM- SYSTEM. The Company developed its Series 300-TM- automated
lighting system principally to satisfy the demands of the theatre, television
and film markets for virtually silent, light weight automated lighting products
with sophisticated color changing features. The Company's Series 300-TM- system,
including the VL5-Registered Trademark- wash luminaire, the VL6-Registered
Trademark- spot luminaire and the VLM-TM- automated moving mirror, as well as
the Artisan-Registered Trademark-Plus and mini-Artisan-Registered Trademark- 2
control consoles, also appeals to major concert touring clients who want to rent
large

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<PAGE>
systems. The VL5-Registered Trademark- luminaire is lighter than the
VL4-Registered Trademark- luminaire, and its cold-mirror reflector both
eliminates the need for noisy cooling fans and reduces the amount of heat the
lights emit onto the stage. Color changes for the VL5-Registered Trademark- are
controlled by a system that allows color cross-fades in as little as
seven-tenths of a second and interchangeable lenses work with an internal
diffusing mechanism to provide a wide variety of beam sizes and shapes. The
VL6-Registered Trademark- spot luminaire is the companion to the VL5-Registered
Trademark- wash luminaire, and has two interchangeable 12-position wheels of
dichroic color filters and gobos for split second color and image changes and
multi-color beams. The VL5Arc-TM- luminaire, which won the "Product of the
Year/Lighting" for 1996, awarded by Lighting Dimensions magazine, has a brighter
bulb than the VL5-Registered Trademark- luminaire and an innovative fluid-filled
variable lens (patent pending) which allows beam size control. The VLM-TM-
automated moving mirror is a dual-sided highly reflective Lexan-Registered
Trademark- polycarbonate mirror panel. With its ability to both pan and tilt 360
degrees, the VLM-TM- automated moving mirror can be used to augment the effects
produced by VARI*LITE-Registered Trademark- wash and spot luminaires, or it can
be used with conventional lights to create limited beam motion at a very low
cost.

Although the Company's VL5-Registered Trademark- wash luminaires and
VL6-Registered Trademark- spot luminaires are compatible with the
industry-standard DMX 512 digital protocol and, as such, can be operated by DMX
512 control consoles, the Company's other products require the more
sophisticated, higher performance of the Company's proprietary control consoles
which use a high speed, bi-directional communications protocol. The Company's
primary control console, the Artisan-Registered Trademark- Plus, provides
control of up to 1,000 luminaires, dimmers and other equipment with up to 1,000
cues per channel, allowing the operator to control each luminaire or to store
and play back preset cues. The Company also rents the smaller, less expensive
mini-Artisan-Registered Trademark- 2 control console which has substantially the
same capabilities as the Artisan-Registered Trademark- Plus control console, but
requires longer programming time. Accordingly, the mini-Artisan-Registered
Trademark- 2 control console is often used either where space is limited or as a
back-up system to the Artisan-Registered Trademark- Plus control console.

OTHER PRODUCTS AND SERVICES. The Company provides trained personnel to
operate its automated lighting systems and offers training courses, maintenance
and other support services to customers. The Company considers these services to
be of critical importance to its business. The Company maintains extensive,
custom-designed training facilities in its Dallas, Texas and London, England
offices, where it trains both its own personnel and customers who find it more
efficient to have their own personnel operate and maintain the
VARI*LITE-Registered Trademark- equipment. The Company also provides smaller
training facilities in its New York, Los Angeles and Tokyo offices.

In addition to luminaires and control consoles, the Company rents related
equipment required to operate the Company's systems, such as power and control
signal distribution equipment, dimmers and cables. The Company has also
developed a unique stackable, plastic injection-molded storage case for
transporting its equipment. The Company's cases are custom-designed to protect
VARI*LITE-Registered Trademark- equipment and last longer than the industry
standard carpet covered wood or laminate cases. These cases are also
significantly lighter than other cases, thereby reducing transportation costs.

AUTOMATED LIGHTING--IRIDEON-REGISTERED TRADEMARK- PRODUCTS.

In 1994, the Company began to apply its existing automated lighting
technologies to create its Irideon-Registered Trademark-products for the
architectural lighting industry. Through its subsidiary Irideon, Inc.
("Irideon"), the Company sells Irideon-Registered Trademark- automated lighting
products, even though it continues to rent all of its non-architectural
products.

AR500 LUMINAIRE-TM-. The AR500-TM- weather-proof wash luminaire is the
Company's first product designed specifically for exterior illumination of
objects such as monuments, bridges and commercial buildings. Like the Company's
other products, the AR500-TM- luminaire uses the Company's patented color
changing system to produce smooth color cross-fades through virtually the entire
color spectrum. Various lenses permit the light beam size to be altered and a
douser provides the ability to dim beam intensity. Lighting Dimensions Magazine
named the AR500-TM- luminaire the "Product of the Year/Lighting", Architectural
Category in 1993. Since its introduction, the Company has sold over 1,300
AR500-TM- luminaires.

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<PAGE>
AR5-TM- LUMINAIRE. In 1996, the Company began selling interior
architectural automated lights for use in permanent architectural installations.
The AR5-TM- wash luminaire is the first product in a planned family of products
for interior applications. This product uses new dichroic filter coatings, many
plastic components and a newly-developed light source, which allow the Company
to market less expensive products to lighting and interior designers, and does
not require trained operators after the initial set-up. The AR5-TM- wash
luminaire was named "Product of the Year/Lighting", Architectural Category in
1995 by Lighting Dimensions magazine and in 1996 won "Product of the Year" at
Lightfair International.

COMPOSER-REGISTERED TRADEMARK- CONTROL SYSTEM. The AR500-TM- and AR5-TM-
luminaires both are operated with the Composer-Registered Trademark-control
system. The Composer-Registered Trademark- is a Windows-Registered Trademark-
95-based system that is programmable using a standard personal computer. After
programming has been completed, the personal computer can be removed and
lighting cues or sequences can be activated via an internal clock or from wall
switches. The Composer-Registered Trademark- control system is DMX compatible
which, among other things, allows it to operate products manufactured by others.

AUTOMATED LIGHTING--VARI*LITE-REGISTERED TRADEMARK- PRODUCTS

<TABLE>
<CAPTION>
FISCAL YEAR
PRODUCT INTRODUCED DESCRIPTION
- ------------------ ------------ --------------------------------------------------------------------------------
<S> <C> <C>
VL1-TM- 1981 The original VARI*LITE-Registered Trademark- spot luminaire. Rendered obsolete
in most markets by subsequent VARI*LITE-Registered Trademark- products.

VL2C-Registered 1986 A high intensity spot luminaire using an arc light bulb. Favored by concert,
Trademark- television and theatrical lighting designers due to its beam quality, motion
control, bright colors and wide range of color choices.

VL4-Registered 1988 A wash luminaire using an arc light bulb and featuring a high speed douser. The
Trademark- brightness and precisely timed control of light intensity and beam size appeal
to concert, theatre and television and film clients.

VL5-Registered 1992 A lighter, less expensive version of the VL4-Registered Trademark- wash
Trademark- luminaire using a tungsten light bulb. Silent operation, compactness and lighter
weight appeal to theatrical, concert, television and film and corporate events
users. Lower cost attracts both major concert touring clients wanting to lease
larger systems and entry level concert touring clients with budgetary
constraints.

VL5Arc-TM- 1997 A VL5-Registered Trademark- luminaire utilizing a 600 watt arc source for very
high brightness and a beam control device. Used in productions where high
brightness is required.

VL5B-TM- 1995 A VL5-Registered Trademark- luminaire with a color system designed for the
television and theatre markets with an enhanced pastel range.

VL6-Registered 1994 A compact, virtually silent spot luminaire which is the companion to the
Trademark- VL5-Registered Trademark- wash luminaire. The brightness, small size and low
cost of this luminaire appeal to all lighting disciplines, especially theatrical
and television and film users as well as corporate events.

VL7-TM- 1998 A high brightness, multi-feature spot luminaire. Expected to service all
(projected) markets.

VLM-TM- 1994 An automated dual-sided moving mirror able to pan and tilt 360 degrees. Appeals
to both large and entry level concert touring clients.
</TABLE>

30
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR
PRODUCT INTRODUCED DESCRIPTION
- ------------------ ------------ --------------------------------------------------------------------------------
<S> <C> <C>
Artisan-Registered 1986 A computerized console required to control most of the Company's luminaires.
Trademark- Plus Uses a proprietary communications protocol which allows the operator more
functionality, efficiency and control of lighting effects than the industry
standard DMX 512 protocol.

Mini-Artisan-Registered 1994 A smaller, less expensive console designed to operate the Company's luminaires.
Trademark- 2 Often used as a back-up console to the Artisan-Registered Trademark- Plus
console.
</TABLE>

AUTOMATED LIGHTING--IRIDEON-REGISTERED TRADEMARK- PRODUCTS

<TABLE>
<CAPTION>
FISCAL YEAR
PRODUCT INTRODUCED DESCRIPTION
- --------------------- ------------ -----------------------------------------------------------------------------
<S> <C> <C>
AR500-TM- 1993 A weather-proof wash luminaire with the capability to change color and beam
size or intensity. The first automated luminaire designed specifically for
outdoor uses such as building exteriors and landmarks and has the
"UL-Registered Trademark-" rating for "wet" location.

AR5-TM- 1996 An automated wash luminaire designed for architectural applications such as
restaurants, casinos, retail stores, corporate showrooms and shopping malls.

Composer-Registered 1996 The control system used to operate Irideon-Registered Trademark- architectural
Trademark- luminaires. A Windows-Registered Trademark- 95-based system that is
programmable using a standard personal computer with playback via an internal
clock or wall switches, thereby eliminating the need for trained operators
after initial set-up.
</TABLE>

COMPLEMENTARY BUSINESSES

The Company is a leader in providing complementary products and services to
the entertainment industry, including concert sound systems, conventional
lighting equipment, custom stage construction and stage set design services, and
design and production management services for conventions, business meetings and
special events.

CONCERT SOUND SYSTEMS. The Company's Showco subsidiary rents concert sound
systems and provides related services almost exclusively to the worldwide
concert touring market. Its clients have included The Rolling Stones, Janet
Jackson, Eric Clapton, Paul McCartney, Genesis, Phil Collins, the Beach Boys,
James Taylor, Willie Nelson, Alanis Morissette, Reba McEntire, Vince Gill, Alan
Jackson, Moody Blues, Bob Seger, the Cranberries, INXS, Stone Temple Pilots and
Smashing Pumpkins. The Company's PRISM-Registered Trademark- sound system was
introduced in 1986 as the first large scale concert sound system engineered as a
totally integrated system specifically for use in concert touring. The
proprietary, scalable PRISM-Registered Trademark- system can be used in any
venue from smaller theatres to stadiums and is easier to assemble, disassemble
and transport than competitive sound systems. The quality of the
PRISM-Registered Trademark- sound system is evidenced by the numerous awards
Showco has received, including awards from Mix Magazine for "Outstanding
Institutional Achievement--Sound Reinforcement Company of the Year" in 1988 and
1991 through 1993 (for which it was also nominated in 1994 through 1997) and for
"Outstanding Technical Achievement--Sound Reinforcement Product of the Year"
(for the PRISM-Registered Trademark-Digital Control System) in 1990, the
Performance Readers Poll for "Sound Company of the Year" in 1988, 1989 and 1991
and Live Sound! "Instrumental Tin Ear Award--International Touring Company of
the Year" in 1995. Since 1987, three different Showco sound engineers have won
Mix Magazine's "Sound Engineer of the Year" award.

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<PAGE>
CONVENTIONAL LIGHTING PRODUCTS. Through its subsidiaries, Theatre Projects
Lighting Services Limited ("Theatre Projects"), which was acquired in 1994, and
Concert Production Lighting, Inc. ("Concert Production"), the Company offers
conventional lighting equipment, including numerous types of luminaires and
control consoles, large search lights, automatic gel scrollers, trusses, dimmers
and smoke machines, to London's West End theatre market and the United Kingdom
and European theatre touring markets, as well as to concert touring artists
worldwide and to businesses for corporate events. The Company has rented
equipment to such West End theatre productions as CATS, PHANTOM OF THE OPERA,
SUNSET BOULEVARD and JOSEPH AND HIS AMAZING TECHNICOLOR DREAMCOAT and to
performers such as The Rolling Stones, Paul McCartney, Phil Collins, Vince Gill,
Mary Chapin Carpenter and Torvill and Dean, among others. The Company is also
very active in the special events market, providing services to numerous events
for the British royalty. In the corporate event market, the Company has provided
its conventional lighting products to numerous annual shareholder meetings
(including in stadiums with up to 80,000 attendees) and new product launches.

STAGE AND STAGE SETS. Through its Brilliant Stages Limited ("Brilliant
Stages") subsidiary, which was acquired in 1994, the Company sells custom stage
and stage set design and construction services to the international concert
touring, theatre and industrial trade show and corporate events markets. The
Company's welded aluminum stages are designed using CAD software and are
constructed to facilitate rapid assembly, disassembly and loading in a
semi-trailer for efficient transportation. The Company is noted for high-tech
stages and stage sets that include distinctive hydraulic components and
sophisticated electronic effects, such as the stages and stage sets designed and
built for the Rolling Stones Voodoo Lounge tour in 1995 and The Rolling Stones
upcoming 1997-98 tour, and has provided stages and stage sets to other concert
tour customers such as Pink Floyd, Elton John, Tina Turner, U2, Metallica, Peter
Gabriel and Phil Collins, and to trade shows for Whirlpool, Smirnoff, Fuji
Television and Philips, among others. The Company has also provided services to
such theatre productions as JOSEPH AND HIS AMAZING TECHNICOLOR DREAMCOAT and LES
MISERABLES.

CORPORATE MEETINGS AND SPECIAL EVENTS. The Company, through its IGNITION!
Creative Group, Inc. ("Ignition") subsidiary, provides design and production
management services to businesses for conventions, business meetings, new
product launches and special events. The Company provides concept development,
scenery, lighting, sound, special effects, scripting, media production, sound
and entertainment production for such events. Clients of the Company for these
services include Mary Kay Cosmetics, Inc., Kawasaki Motor Corp., U.S.A.,
Warner/Elektra/Atlantic Records, The Hong Kong Trade Development Council and
EXCEL Communications, Inc.

MARKETING, SALES AND DISTRIBUTION

The Company markets its products and services to the entertainment industry,
including concert touring, theatre, television and film and corporate events
markets, as well as to the architectural market. Depending on the circumstances,
the Company solicits business from lighting and set designers and consultants,
sound engineers, artist managers, producers, production managers and production
companies, promoters, architects, corporations and business associations. The
Company believes that its customer relationships, reputation for innovative,
quality products, worldwide distribution and excellent service are the keys to
its success. The Rolling Stones represented 11.9% of the Company's revenues in
fiscal 1995. No other customer has accounted for more than 10% of the Company's
revenues for at least the last three fiscal years.

AUTOMATED LIGHTING--VARI*LITE-REGISTERED TRADEMARK- PRODUCTS. The Company
rents rather than sells its VARI*LITE-Registered Trademark-automated lighting
products. In addition to providing the Company with a higher level of quality
control over its rental products, which require trained operators and
maintenance personnel, the Company believes renting has enabled it to better
protect its intellectual property and generate a continuing revenue stream for
each product over an extended time period. In order to compete effectively, the
Company relies heavily on its reputation as an innovative industry leader and
strives to develop strong relationships with lighting designers and other
individuals who specify lighting requirements.

32
<PAGE>
The Company markets its automated lighting systems and services in the
United States through Company owned offices in Dallas, New York, Los Angeles,
Nashville, Orlando, Las Vegas and Chicago and an independent distributor system.
Each Company-owned office targets a specific market segment. For example, the
New York office targets the theatre market, the Nashville office targets the
country music, television and concert performances markets, the Los Angeles
office targets the television and film market and the Orlando, Las Vegas and
Chicago offices target the corporate events market. The independent distributors
focus on specific geographic markets and tend to rent to all market segments.
The Company's international distribution system comprises Company-owned
locations in London, Tokyo, Hong Kong and Madrid, as well as, at June 30, 1997,
independent distributors in Australia, Austria, Belgium, France, Germany, Korea,
Singapore and Sweden and 27 independent dealers in 36 cities in the United
States, Puerto Rico, Mexico, Canada, the United Kingdom and five countries in
Europe.

The Company has two basic types of distribution arrangements: independent
distributors and independent dealers. Under the first arrangement, which
typically has a term of four years, the distributor advances the Company the
funds needed to build the lighting systems to be rented by that distributor.
These advances are accounted for as loans and although the distributor is solely
responsible for renting the Company's equipment and providing support services
to the end-users, rental revenues are split on a predetermined basis between the
Company and the distributor, with the distributor retaining the Company's share
until the distributor's advances to the Company have been repaid. Distributors
are required to undergo four weeks of intensive training in operation and
maintenance of the Company's lighting systems. Under the second arrangement,
independent dealers rent the less expensive Series 300-TM- systems from the
Company generally for fixed lease payments over a five-year term and bear the
entire risk of renting the lighting systems to end users in regional markets.

In an effort to respond to requests from customers who wanted to purchase
the Company's lighting systems, in 1989 the Company began entering into
sales-type leases. Under the typical sales-type lease, the customer rents the
Company's equipment for either a five- or a ten-year term, with unlimited
one-year renewal options, for a lump sum payment at the commencement of the
term, plus a nominal renewal option exercise price. The customer is normally
solely responsible for maintaining the equipment under these arrangements, but
often enters into a maintenance agreement with the Company. As of June 30, 1997,
the Company had entered into over 50 sales-type leases with customers such as
the Ringling Brothers and Barnum & Bailey Circus, the Las Vegas Hilton, Mirage
and MGM Grand hotels in Las Vegas, the Lyric Opera in Chicago, The San Francisco
Opera, Busch Gardens in Florida, the Mel Tillis Theater in Branson, Missouri and
the Aladdin touring ice show.

Recently, the Company has begun to further emphasize its full-service
strategy by expanding its capability to offer conventional lighting products.
This effort is designed to increase the Company's revenues from the rental of
all VARI*LITE-Registered Trademark- products.

AUTOMATED LIGHTING--IRIDEON-REGISTERED TRADEMARK- PRODUCTS. The Company
sells its architectural lighting products primarily through a worldwide network
of independent sales representatives and distributors, but also directly, to
lighting designers who recommend lighting equipment for architectural
applications such as restaurants, casinos, retail stores, corporate showrooms,
shopping malls, building exteriors and landmarks.

CONVENTIONAL LIGHTING PRODUCTS. The Company's conventional lighting
operations, which have historically operated independently from the
VARI*LITE-Registered Trademark- product operations, maintain internal marketing
and distribution departments and rely heavily on the Company's established
reputation for quality and service, which is enhanced by its high visibility
projects and customers. The Company reinforces this reputation by advertising in
trade and specialty magazines. Most of the Company's conventional lighting
contracts are procured through a bidding process and the Company believes that
competition in this industry is based on expertise, quality and price. The
Company has recently begun to integrate these operations with those of its
VARI*LITE-Registered Trademark- products in order to improve its position as a
full-service provider.

33
<PAGE>
CONCERT SOUND SYSTEMS. The Company markets its concert sound equipment
directly to end-users worldwide. Showco has developed personal relationships
with artist managers, sound engineers, production managers and event producers
and relies on its reputation for superior quality and service to attract
customers.

STAGES AND STAGE SETS. The Company markets its stages and stage sets
principally to production companies and set and lighting designers. The Company
relies on a bidding process to award almost all contracts, but the Company
believes its reputation for quickly producing quality products with
sophisticated high technology motion and other features is the key element to
its marketing success. Although the Company relies to some degree on the trade
press for publicity, it engages in very little advertising.

CORPORATE MEETINGS AND SPECIAL EVENTS. The Company sells its design and
production management services to corporate meeting planners and sales or
marketing executives. In-house salespeople seek requests for proposals through
cold calls, sales letters and professional mailings and, to a lesser extent,
through advertising in trade publications. Upon receiving an invitation to
submit a proposal, the Company assembles a project team which develops concepts
and designs for a multi-media presentation to the potential client.

RESEARCH AND DEVELOPMENT; INTELLECTUAL PROPERTY

Since 1970, the Company and its predecessors have continually developed
proprietary products that serve the entertainment industry. The Company's
proprietary technology and development of innovative products that meet the
needs of its customers have enabled it to expand the applications for its
technology to new products and markets. From time to time, the Company has
forged important collaborations with unaffiliated entities to supplement and
complement its internal research and development activities.

As of June 30, 1997, the Company's research and development group consisted
of over 70 engineers, and the Company expects to continue to expand this group.
These internal capabilities enable the Company to continually improve existing
products, design new products and develop new technology to meet the needs of
its customers. In the fiscal years ended September 30, 1994, 1995 and 1996, the
Company's research and development expenditures totaled $3.0 million, $3.3
million and $4.4 million, respectively.

The Company's extensive research and development efforts have produced a
number of leading-edge technological developments in the automated lighting
industry. When appropriate, the Company seeks patent protection for its
products, particularly in its automated lighting business. As of June 30, 1997,
the Company had registered and received 31 domestic patents and over 110 foreign
patents in several different countries and territories. In addition, the Company
had 14 patent applications pending in the United States on automated lighting
technology and over 100 patent applications pending worldwide. The Company's
patents cover the basic concepts, control software, control hardware and
features unique to each of the Company's VARI*LITE-Registered Trademark-
luminaire models. None of the Company's patents expire before 2000. The Company
believes that its patents provide a substantial competitive advantage over its
competitors in the automated lighting industry, and the Company's ability to
compete in the future will depend in part on maintaining its technological
advantage over its competitors. See "Risk Factors--Reliance on Intellectual
Property."

The Company has obtained trademark protection in the United States and
numerous foreign countries on various names, including, among others,
VARI*LITE-Registered Trademark-, Artisan-Registered Trademark- Plus,
Mini-Artisan-Registered Trademark- 2, Series 100-TM-, Series 200-TM-, VL1-TM-,
VL2C-Registered Trademark-, VL4-Registered Trademark-, VL5-Registered
Trademark-, VL5Arc-TM-, VL5B-TM-, VL6-Registered Trademark-, Dichro*Tune-TM-,
Dichro*Wheel-TM-, Showco-TM-, PRISM-Registered Trademark-, Irideon-Registered
Trademark-, AR500-TM-, AR5-TM- and Composer-Registered Trademark-.

MANUFACTURING

With the exception of the Company's stage construction business, which is
based in London, England, the Company's manufacturing facilities are located in
Dallas, Texas. The Company's manufacturing process principally consists of
procuring, inspecting and assembling components custom-made by others to the
Company's specifications. The Company generally provides its suppliers with
specifications for its components and pays for all tooling used in their
production. The Company emphasizes the quality and reliability of its products
and,

34
<PAGE>
accordingly, submits all finished products to rigorous testing both at the time
they are manufactured and when they are returned to the Company at the
termination of each rental agreement. In North America, compliance is certified
by Underwriters Laboratories, Inc.-Registered Trademark- and the Canadian
Standards Association. In the European Union, the CE mark signifies compliance
with standards for Electromagnetic Compatibility and Low Voltage Directives and
the TUV Rheinland GS Safety Mark signifies safety compliance. The Company builds
all new equipment and is retrofitting certain existing equipment to be in
compliance with these standards and marks.

The Company has chosen to develop strategic relationships with certain of
its key suppliers to develop products specifically to meet the Company's
requirements. As a result, although most components and raw materials used by
the Company are available from more than one supplier, many important components
for the Company's lighting systems are provided by one vendor and are
custom-designed (often jointly by the Company and its vendor). The Company
attempts to maintain adequate inventories of these components and, based on its
experience, does not anticipate problems obtaining sufficient supplies in the
foreseeable future. The loss of any supplier that is the sole vendor of a
component would delay the Company's manufacturing schedules and possibly force
the Company to purchase new tooling, but the Company believes substitute
suppliers can be found for all components of all of its products. See "Risk
Factors--Dependence on Key Suppliers."

EQUIPMENT INVENTORY MANAGEMENT

The Company uses an inventory control and management system to locate its
rental equipment at all times anywhere in the world. Each piece of equipment is
serialized for identification purposes. Equipment utilization is centrally
monitored at the Company's headquarters to determine (i) which products are in
highest demand in various geographic markets and whether certain equipment
should be relocated to increase utilization and revenue, (ii) whether product
shortages that require the production of additional units exist and (iii)
whether current pricing is at the appropriate level.

The maximum utilization rates of the Company equipment are affected by
production scheduling requirements of the concert touring, theatre, television
and film industries and corporate events. Utilization rates are also limited by
the need for maintenance, service and shipping time. The Company's inventory
control system helps the Company maximize its utilization rates in light of
these factors in order to satisfy customer requirements while maximizing
revenue.

MANAGEMENT INFORMATION SYSTEMS

COMPETITION

Each of the Company's businesses is highly competitive. In its automated
lighting business, the Company primarily competes with Coemar SPA, Clay Paky
SPA, High End Systems, Inc. ("High End"), Light & Sound Design, Ltd. and Martin
Gruppen A/S. Of these competitors, only Light & Sound Design, Ltd. manufactures
and rents equipment, while the others sell equipment to other rental companies.
The Company competes with a number of conventional lighting rental companies,
who also purchase automated lighting equipment from others, in the theatre,
television and film, concert touring and corporate event markets. The Company
competes primarily on the basis of product capabilities, quality and
reliability, price, worldwide distribution capabilities, brand name recognition
and reputation and customer service and support. The VARI*LITE-Registered
Trademark- brand name has been recognized for years as the preeminent brand name
for automated lighting.

The Company has several national concert sound competitors, the most
significant of which is Clair Brothers Audio. However, other companies such as
Maryland Sound Industries, Inc., Audio Analysts USA, Inc.,

35
<PAGE>
dB Sound, Inc. and Southern California Sound Image, Inc. compete effectively by
offering less sophisticated equipment at lower prices. The Company competes in
this business principally on product capabilities, quality and reliability,
price, brand name recognition, reputation and customer service.

The Company's stage and stage set business competes principally in the
United Kingdom and to a lesser extent in the United States. The primary factors
affecting competition in this market include reputation for quality and the
ability to quickly build sophisticated and technically difficult
state-of-the-art stages and stage sets. The market for design and production
management services is highly competitive and fragmented, including hundreds of
free lance producers and designers. Competition in this industry is based
primarily on personal relationships and creativity.

PROPERTIES

The Company leases all of its facilities, including five facilities
comprising approximately 153,000 square feet in Dallas, Texas under leases that
expire in April 1999, but can be extended until at least April 2000. The Dallas
facilities contain the Company's executive offices, manufacturing, warehouse,
maintenance, advanced technologies and research and development facilities and
training center. The executive offices, warehouse and manufacturing space of
Vari-Lite Europe Limited ("Vari-Lite Europe"), Theatre Projects and Brilliant
Stages are located in London, England in two facilities with approximately
71,500 square feet that are leased through January 1998 and March 2010. The
executive offices of Vari-Lite Asia, Inc. ("Vari-Lite Asia"), as well as its
Technical Center, are located in Tokyo in two leased facilities aggregating
approximately 10,300 square feet, the terms of which expire in February 1999 and
October 2000. In addition, the Company leases sales offices in Chicago, Hong
Kong, Madrid, Las Vegas, Los Angeles, Nashville, New York and Orlando.

In December 1995, the Company entered into a financing transaction with an
unaffiliated special purpose entity which purchased a 32-acre site in the
Dallas, Texas area for approximately $3.6 million, upon which the Company
intends to build a 233,000 square foot facility. The Company is leasing this
land for five years, with six five-year renewal options. The Company has the
right to lease a building to be built on the land for a term that is identical
to the land lease. The Company's rental rate will be based on the total cost of
the project, which is expected to be approximately $18.0 million. The Company
has an option to purchase the property at any time during the term of the lease
for its original cost. The Company intends to consolidate all of its Dallas,
Texas-based operations in this new facility in fiscal 2000. This financing
arrangement is accounted for as an operating lease for financial reporting
purposes.

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.

In August 1995, the Company brought suit asserting a number of claims of
infringement of several of its patents by High End in the Northern District of
Texas seeking monetary damages and injunctive relief to prevent future patent
infringement (the "High End Lawsuit"). The Company also sought a temporary
restraining order for alleged trade secrets violations, which the court denied.
High End has denied the Company's claims and has counterclaimed seeking to have
certain of the Company's patents declared invalid and alleging that the
Company's claims are frivolous and that the Company has violated federal
antitrust laws. The Company believes High End's counterclaims are without merit.
Discovery in this matter is proceeding and trial is currently scheduled for
February 1998. The Company has capitalized and expects to continue to capitalize
its costs relating to this lawsuit ($2.5 million as of June 30, 1997 and an
estimated additional $1.6 million through consummation of the trial). Unless the
Company receives a judgment in this litigation that High End has infringed at
least one of its patents and the Company concludes, based on all of the facts
and circumstances, that such a judgment will allow it to maintain its
competitive advantage provided by the

36
<PAGE>
infringed patents, all costs incurred by the Company relating to the High End
Lawsuit (including those previously capitalized) will be required to be recorded
as an expense in the period that the judgment is rendered.

EMPLOYEES

As of June 30, 1997, the Company had 481 full-time employees. In addition,
the Company had 167 part-time and temporary employees. None of the Company's
employees is a party to any collective bargaining agreement and the Company has
never experienced a work stoppage. The Company considers its relations with its
employees to be good.

37
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning the executive
officers and directors of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- ------------------------------------------------------------------------
<S> <C> <C>
H. R. Brutsche III(1) 52 Chairman of the Board, President and Chief Executive Officer of the
Company

Michael P. Herman 54 Vice President-Finance, Chief Financial Officer and Secretary of the
Company

James H. Clark, Jr.(1)(2) 60 Director of the Company

John D. Maxson(1) 57 Director of the Company; Chairman of the Board of Showco and Ignition

J. Anthony Smith(3) 52 Director of the Company

C. Vincent Prothro(2)(3)(4) 54 Director of the Company

John R. Rettberg(2)(3)(4) 59 Director of the Company

Keizo Akimoto 63 President and Representative Director of Vari-Lite Asia

David W. Alley 52 Executive Vice President--International Operations and Director of
Vari-Lite

James P. Bates 50 Vice President--Information Technology and Chief Information Officer of
the Company

James M. Bornhorst 51 Vice President and Chief Science Officer of the Company and Vice
President--Advanced Technology and Director of Vari-Lite

Richard W. Bratcher, Jr. 37 President, Chief Executive Officer and Director of Showco

Brian L. Croft 58 Managing Director of VLEH

Robert V. Dungan 44 Vice President, General Manager and Director of Irideon

Loren J. Haas 39 Executive Vice President--North American Operations of Vari-Lite

Janis C. Pestinger 45 Vice President--Administration and Assistant Secretary of the Company

T. Clay Powers 38 Vice President--Product Development and Manufacturing of Vari-Lite and
Director of Showco

J. Scott Thompson 45 President, Chief Executive Officer and Director of Ignition
</TABLE>

- -------

(1) Member of the Executive Committee

(2) Member of the Audit Committee

(3) Member of the Compensation Committee

(4) Member of the Omnibus Plan Committee

H.R. BRUTSCHE III is one of the founders of the Company and its subsidiaries
and has served as a director of the Company and its subsidiaries since their
inception. Mr. Brutsche has served as Chairman of the Board, President and Chief
Executive Officer of the Company and its predecessors since 1980. Mr. Brutsche
also serves as Chairman of the Board of VLEH, Vari-Lite Europe, Brilliant Stages
and Theatre Projects and as President and Chief Executive Officer of Vari-Lite
and Irideon.

38
<PAGE>
MICHAEL P. HERMAN joined the Company in June 1993 as Vice
President--Finance, Chief Financial Officer, Secretary and Treasurer. In January
1997, Mr. Herman ceased acting as Treasurer of the Company. Mr. Herman also
serves as Vice President--Finance, Chief Financial Officer, Secretary and
Treasurer of Vari-Lite, Irideon, Showco, Concert Production and Ignition. From
May 1991 to May 1993, Mr. Herman was the Vice President-- Finance and Chief
Financial Officer of Barry's Cameras, Inc., a chain of retail camera and video
stores.

JAMES H. CLARK, JR. has been a director of the Company and its predecessors
since 1978. Mr. Clark serves as Chairman of the Company's Executive Committee
and Audit Committee and is a director of all of the Company's subsidiaries. Mr.
Clark has been the Managing General Partner of Clark Partnership, Ltd., an
investment and venture capital partnership, since 1988, and serves as Chairman
of the Board of Texas Freezer Co. Mr. Clark's son is married to Mr. Prothro's
daughter.

JOHN D. MAXSON is one of the founders of the Company and its subsidiaries
and has served as a director of the Company and its subsidiaries since their
inception. Mr. Maxson has served as Chairman of the Board of Showco for
approximately 25 years and as Chairman of Ignition since its inception in
September 1994.

J. ANTHONY SMITH has been a director of the Company and its predecessors
since 1981. Mr. Smith also serves as a director of all of the Company's
subsidiaries. Mr. Smith has been the Managing Director of Hit & Run Music
(Publishing) Limited, an international independent music publisher, for over 20
years; the Managing Director of Hit & Run Music Limited, a professional manager
of musicians, for over 20 years; and the Managing Director of Ives Street
Developments Limited, a property management company, for six years.

C. VINCENT PROTHRO has been a director of the Company since April 1996. Mr.
Prothro has been Chairman of the Board of Dallas Semiconductor Corporation, a
manufacturer of electronic chips and chip-based subsystems, since 1984 and Chief
Executive Officer and President of Dallas Semiconductor Corporation since 1989.
Mr. Prothro is also a general partner of Southwest Enterprise Associates, L.P.,
a venture capital fund. Mr. Prothro's daughter is married to Mr. Clark's son.

JOHN R. RETTBERG has been a director of the Company since April 1996 and
serves as Chairman of the Company's Compensation Committee and Omnibus
Committee. Mr. Rettberg currently serves as a consultant to the Northrop Grumman
Corporation ("Northrop Grumman"), an advanced technology company operating
primarily in the fields of aircraft and military electronics design, development
and manufacturing. Mr. Rettberg has served in this capacity since his retirement
from Northrup Grumman on January 1, 1995. Mr. Rettberg joined Northrop Grumman
in 1962 and, prior to his retirement, was Corporate Vice President and
Treasurer. Mr. Rettberg is also a director of J.P. Morgan Investment Mgmt., a
manager of mutual funds.

KEIZO AKIMOTO has been the Representative Director (equivalent of chief
executive officer) of Vari-Lite Asia since 1985 and President of Vari-Lite Asia
since 1992 and has been with Vari-Lite Asia since its formation in 1984.

DAVID W. ALLEY has been Executive Vice President--International Operations
of Vari-Lite since 1995 and has been a director of Vari-Lite since March 1987
and of each of VLEH and Vari-Lite Asia since 1995. From 1994 to 1995, he served
as Vice President-East and West Coast Operations of Vari-Lite and he served as
Vice President-West Coast Operations from 1990 until 1994. Mr. Alley has held
various other positions with Vari-Lite and Showco since 1981.

JAMES P. BATES has been the Vice President--Information Technology and Chief
Information Officer of the Company since October 1996. Prior to that time since
1989, Mr. Bates was Director of Applications Systems Implementation for DSC
Communications Corp.

JAMES M. BORNHORST has been the Vice President and Chief Science Officer of
the Company and the Vice President--Advanced Technology of Vari-Lite since 1995
and a director of Vari-Lite since its inception. Prior to that, Mr. Bornhorst
served as Vice President--Engineering of Vari-Lite since 1983 and has been
employed since 1972 in various other capacities with Showco and Vari-Lite.

39
<PAGE>
RICHARD W. BRATCHER, JR. has been the President and Chief Executive Officer
and a director of Showco since July 1996. He served as Vice President and
General Manager of Showco from August 1993 until July 1996 and shop manager of
Showco from August 1987 until August 1993. Mr. Bratcher has also served in
various other capacities with Showco since 1983.

BRIAN L. CROFT has been the Managing Director of VLEH and Vari-Lite Europe
since the formation of VLEH and its acquisition of Vari-Lite Europe in 1994.
From 1989 until its acquisition by the Company in 1994, Mr. Croft was the
General Manager and a director of Vari-Lite Europe, Ltd., which was then an
independent VARI*LITE-Registered Trademark- distributor and a subsidiary of the
Samuelson Group plc.

ROBERT V. DUNGAN has served as Vice President and General Manager of Irideon
since its inception in September 1994 and as a director of Irideon since January
1996. From January 1993 to September 1994, Mr. Dungan served as Vice
President-Products Group of Vari-Lite and served as Operations Manager of Vari-
Lite from 1988 until January 1993. He has also served in various other
capacities with Vari-Lite since 1983.

LOREN J. HAAS has been the Executive Vice President--North American
Operations of Vari-Lite since 1995. From 1993 until 1995, Mr. Haas was General
Manager--Dallas of Vari-Lite and was Marketing Manager of Vari-Lite from 1991
until 1993. Mr. Haas has served in various other capacities with Vari-Lite since
1987.

JANIS C. PESTINGER has been Vice President--Administration and Assistant
Secretary of the Company since November 1996 and May 1993, respectively. Ms.
Pestinger also has served as Vice President--Administration of Vari-Lite since
December 1993 and for more than three years prior to that as the Risk and
Benefits Manager for Vari-Lite. Ms. Pestinger has served in various other
positions with Vari-Lite and Showco since 1979.

T. CLAY POWERS has been the Vice President--Product Development and
Manufacturing of Vari-Lite since July 1996. Prior to that he served as the
President and Chief Executive Officer of Showco since 1992. Mr. Powers also has
served as a director of Showco since 1990. From 1991 to 1992, Mr. Powers served
as Vice President and General Manager of Showco and from 1990 to 1991 Mr. Powers
served as Vice President--Internal Operations of Showco. Mr. Powers has served
in various other capacities with Showco since 1982.

J. SCOTT THOMPSON has served as President and Chief Executive Officer of
Ignition since October 1994 and as a director of Ignition and its predecessor
since January 1992. Prior to October 1994, Mr. Thompson was a Vice President of
Showco since 1987 and served in various capacities with Showco since 1978.

BOARD OF DIRECTORS

DIRECTOR COMPENSATION. The Board of Directors is divided into three
classes, with one class of directors elected on a rotating basis at each annual
meeting of stockholders for a three-year term. Each director who is not an
employee of the Company or a subsidiary of the Company is paid an annual fee of
$20,000, plus $1,000 for each meeting of the Board of Directors or a Committee
of the Board of Directors attended. The Company also pays all transportation and
lodging costs for directors to attend meetings of the Board of Directors and its
Committees. Each of Messrs. Clark, Maxson and Smith also receives $10,000
annually plus $250 per meeting for serving as a director of Vari-Lite, $5,000
annually plus $62.50 per meeting for serving as a director of VLEH, $4,000
annually plus $125 per meeting for serving as a director of Showco, $4,000
annually plus $62.50 per meeting for serving as a director of each of Vari-Lite
Europe and Theatre Projects, $3,000 annually plus $125 per meeting for serving
as a director of each of Vari-Lite Asia, Ignition and Irideon and $3,000
annually plus $62.50 per meeting for serving as a director of Brilliant Stages.

As of July 1, 1995, the Company entered into a Deferred Compensation
Agreement ("Deferred Compensation Agreement") with each of Messrs. Brutsche,
Clark, Maxson and Smith pursuant to which each of them receives $167,000
annually for six years, payable monthly. Also, as of March 31, 1994, the
Company, Vari-Lite and Showco entered into Compensation Continuation Agreements
with each of Messrs. Brutsche, Clark and Maxson pursuant to which the Company,
Vari-Lite and Showco each agreed to continue paying for 60 days after the death
of any such individual the cash compensation that the deceased was receiving
from the companies at the time of his death.

40
<PAGE>
Each of Messrs. Clark, Maxson and Smith (each a "Consultant") also has
entered into a Consulting Agreement with the Company, dated as of July 1, 1995,
providing that the Consultant will be available to provide consulting services
to the Company in consideration for the Company's payment to the Consultant of
an annual consulting fee. Pursuant to their Consulting Agreements, Messrs. Clark
and Maxson each receive an annual consulting fee of $100,000, payable monthly,
and Mr. Smith receives an annual consulting fee of $20,000, payable monthly.
Each Consulting Agreement has an initial term of three years with an automatic
extension of one year for each completed year of service by the Consultant
thereunder and may be terminated in the event of death, upon permanent
disability, for cause (as defined in the Consulting Agreement) or upon the
occurrence of a change of control (as defined in the Consulting Agreement). If a
Consulting Agreement is terminated without cause, because of permanent
disability or through an action by the Company that constitutes constructive
termination, or as a result of a change of control, the Consultant will receive
the full consulting fee he would have received through the remainder of the
three-year term.

In addition, each of Messrs. Brutsche, Clark and Maxson is eligible to
receive benefits under one or more life insurance policies (collectively
"Policies" and individually "Policy") pursuant to split-dollar agreements (the
"Split-Dollar Agreements") with the Company. The Split-Dollar Agreements each
provide for sharing the costs and benefits of the Policies between the Company
and Mr. Brutsche, Mr. Clark or Mr. Maxson, as the case may be. The Company pays
the entire premium on each Policy to the insurer. An irrevocable trust created
or an individual designated by Mr. Brutsche, Mr. Clark or Mr. Maxson, as the
case may be, who is the owner of the Policy (the "Owner") reimburses the Company
for the portion of the premium attributable to the death benefit protection of
each Policy (the "P.S. 58 Cost"). The Company pays the amount of the P.S. 58
Cost to Mr. Brutsche, Mr. Clark or Mr. Maxson, as the case may be, as additional
compensation and such person then gifts such amount to the Owner to use to
reimburse the Company. Except under certain circumstances, upon the termination
of each Split-Dollar Agreement, the Company will be reimbursed for the premiums
it has paid under the Policies that are subject to the Split-Dollar Agreements.
All of the Split-Dollar Agreements utilize the collateral assignment method to
secure the Company's right to repayment of the premiums it has paid under the
Policies. Under this method, the Owner owns the Policy, and a collateral
assignment (establishing the Company's right to such premium reimbursement from
the cash surrender value or death benefits payable under the Policies) is filed
with the insurer. The Owner has the right to designate the beneficiaries of the
Policies and may borrow and make withdrawals from the cash surrender value, to
the extent such cash surrender value exceeds the amount of premiums owed to the
Company. The Owner may cancel or surrender the Policies at any time, subject to
any applicable obligation to repay the premiums paid by the Company.

COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors has
established an Executive Committee, an Audit Committee, a Compensation Committee
and an Omnibus Committee. The Executive Committee is composed of Messrs. Clark,
Maxson and Brutsche, with Mr. Clark serving as Chairman. The Executive Committee
has the authority, between meetings of the Board of Directors, to take all
actions with respect to the management of the Company's business that require
action by the Board of Directors, except with respect to certain specified
matters that by law must be approved by the entire Board.

The Audit Committee is composed of Messrs. Clark, Prothro and Rettberg, with
Mr. Clark serving as Chairman. The Audit Committee is responsible for (a)
reviewing the scope of, and the fees for, the annual audit, (b) reviewing with
the independent auditors the corporate accounting practices and policies, (c)
reviewing with the independent auditors their final report, (d) reviewing with
internal and independent auditors overall accounting and financial controls and
(e) being available to the independent auditors during the year for consultation
purposes.

The Compensation Committee is composed of Messrs. Smith, Prothro and
Rettberg, with Mr. Rettberg serving as Chairman. With the exception of awards
under the Omnibus Plan and Annual Incentive Plan (as hereinafter defined), the
Compensation Committee determines the compensation of the officers of the
Company and performs other similar functions.

41
<PAGE>
The Omnibus Committee is composed of Messrs. Prothro and Rettberg, with Mr.
Rettberg serving as Chairman. The Omnibus Committee administers the Omnibus Plan
and the Annual Incentive Plan, including the determination of eligibility and
the granting of awards under such plans.

EXECUTIVE COMPENSATION

The following table summarizes the compensation paid to the Company's chief
executive officer and its four other most highly compensated executive officers
and a former executive officer of the Company for services rendered for the
fiscal year ended September 30, 1996 (collectively, the "Named Executive
Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
FISCAL 1996 ANNUAL COMPENSATION
---------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)
- ---------------------------------------------------------- --------- ----------- --------------- ----------------
<S> <C> <C> <C> <C>
H. R. Brutsche III........................................ 433,008 48,713 167,000(2) 41,454(3)
Chairman of the Board, President and Chief Executive
Officer of the Company

Keizo Akimoto(1).......................................... 199,737 19,495 -- --
Representative Director of Vari-Lite Asia

David W. Alley............................................ 154,500 11,513 -- 3,855(4)
Executive Vice President--International Operations of
Vari-Lite

James M. Bornhorst........................................ 136,299 9,449 -- 3,756(4)
Vice President and Chief Science Officer of the Company
and Vice President--Advanced Technology of Vari-Lite

T. Clay Powers............................................ 126,267 10,500 -- 4,231(4)
Vice President--Product Development and Manufacturing of
Vari-Lite

James E. Kinnu(5) ........................................ 350,016 35,002 -- --
</TABLE>

- -------

(1) Applies conversion rate of Japanese yen to U.S. dollars based on the
exchange rate in effect at the end of each month during fiscal 1996.

(2) This amount was paid to Mr. Brutsche pursuant to the Deferred Compensation
Agreement. See "Management--Board of Directors."

(3) This amount includes $3,292 and $20,725, respectively, which were paid on
behalf of Mr. Brutsche for the Policies pursuant to the Split-Dollar
Agreements and for a term life insurance policy maintained on the life of
Mr. Brutsche; $13,817 which was paid to reimburse Mr. Brutsche for taxable
income incurred with respect to the premiums paid on his behalf on the term
life insurance policy; and $4,620 which were contributions made by the
Company on behalf of Mr. Brutsche to the Company's 401(k) plan. See
"Management--Employment Agreements."

(4) These amounts were contributions made by the Company on behalf of such Named
Executive Officer to the Company's 401(k) plan.

(5) Prior to his departure from the Company, effective September 30, 1996, Mr.
Kinnu served as the Company's Senior Executive Vice President and Chief
Operating Officer.

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<PAGE>
EMPLOYMENT AGREEMENTS

As of July 1, 1995, the Company entered into an Employment Agreement (the
"Brutsche Employment Agreement") with H. R. Brutsche III, Chairman of the Board,
President and Chief Executive Officer. The initial term of the Brutsche
Employment Agreement is for five years, with an automatic extension of one year
for each completed year of service by Mr. Brutsche thereunder. Pursuant to the
Brutsche Employment Agreement, Mr. Brutsche receives an annual salary of
$433,000, subject to annual review by the Compensation Committee, which may
increase but not reduce his annual salary, and is eligible to receive an annual
bonus, long-term incentive compensation and deferred compensation in accordance
with plans established for officers and directors of the Company. Mr. Brutsche
is also entitled to receive various life, medical and disability insurance
benefits. The Brutsche Employment Agreement may be terminated in the event of
death, upon permanent disability, for cause (as defined in the Brutsche
Employment Agreement) or upon the occurrence of a change of control (as defined
in the Brutsche Employment Agreement). If the Brutsche Employment Agreement is
terminated because of permanent disability, Mr. Brutsche will continue to
receive his base salary through the remainder of the five-year term of the
Brutsche Employment Agreement, less any disability benefits. If Mr. Brutsche's
employment is terminated without cause, through an action by the Company that
constitutes constructive termination (as defined in the Brutsche Employment
Agreement) or as the result of a change of control, the Company is obligated to
continue to pay Mr. Brutsche his base salary in effect at the time of
termination through the remainder of the five-year term. In addition to those
provided for under the Brutsche Employment Agreement, Mr. Brutsche is eligible
to receive certain other benefits. See "Management--Board of Director--Director
Compensation."

The Company entered into an Employment Agreement (the "Kinnu Employment
Agreement") with James E. Kinnu, the former Senior Executive Vice President and
Chief Operating Officer of the Company, as of August 28, 1995. The Kinnu
Employment Agreement had an initial term of three years and provided for Mr.
Kinnu to receive an annual base salary of $350,000 and to participate in the
Company's employee benefit plans. Pursuant to the Kinnu Employment Agreement, on
September 10, 1995, Mr. Kinnu received an interest-free loan of $200,000 (the
"Kinnu Loan") for a term of three years with the principal to be forgiven in
equal amounts each month over the term of the Kinnu Employment Agreement, and
reimbursement of relocation expenses of up to $25,000. Effective September 30,
1996, Mr. Kinnu was terminated by the Company without cause. In connection with
his termination, the Company will continue to pay Mr. Kinnu as a consultant
$350,000 per year until September 30, 1998, agreed to cancel and forgive the
Kinnu Loan and acquired shares of Common Stock in consideration for the
forgiveness and cancellation of Mr. Kinnu's $132,900 principal amount
indebtedness to the Company, which accrued interest at 8% per annum, matured on
August 31, 1998 and was incurred by Mr. Kinnu to acquire such shares of Common
Stock.

EMPLOYEE BENEFIT PLANS

OMNIBUS PLAN. In August 1996, the Company adopted the Vari-Lite
International, Inc. 1997 Omnibus Plan (the "Omnibus Plan") to attract and retain
qualified employees and non-employee directors. An aggregate of shares of
Common Stock, subject to adjustment for stock splits, stock dividends and
certain other types of reclassifications, has been authorized for issuance upon
exercise of options, stock appreciation rights ("SARs"), bonus stock, phantom
stock, dividend equivalents and other awards, or as restricted or performance
awards under the Omnibus Plan ("Awards"). The Omnibus Committee administers the
Omnibus Plan and determines to whom Awards are to be granted and the terms and
conditions, including the number of shares and the period of exercisability
thereof. Awards may be granted to officers, management, other key employees and
to non-employee directors of the Company or any of its present or future
subsidiaries as determined by the Omnibus Committee, provided that any options
to be granted to non-employee directors who are members of the Omnibus Committee
must be granted by the entire Board of Directors of the Company.

The Omnibus Plan authorizes the grant or issuance of both nonqualified stock
options and incentive stock options, with the terms of each such option set
forth in separate agreements. The Omnibus Plan requires that the exercise price
for each stock option must be not less than 100% of the fair market value of the
Common Stock at

43
<PAGE>
the time the option is granted. No incentive stock option, however, may be
granted to a non-employee director or to an employee who owns more than 10% of
the total combined voting power of all classes of outstanding stock of the
Company unless the option price is at least 110% of the fair market value of the
Common Stock at the date of grant. The fair market value of stock options that
may be granted to an employee in any calendar year is not limited, but no
employee may be granted incentive stock options that first become exercisable
during a calendar year to purchase Common Stock with an aggregate fair market
value in excess of $100,000. In addition, no grantee may be granted more than an
aggregate of shares of Common Stock, subject to adjustment for stock
splits, stock dividends and certain other types of reclassifications. SARs may
be granted separately or in tandem with the grant of an option. Any performance
awards may be denominated or payable in cash, Common Stock, other securities or
other Awards and shall confer on the holder thereof the right to receive
payments based upon the achievement of such performance goals and for such
periods as the Omnibus Committee may establish. Restricted stock may be sold to
the grantees at various prices (but not below par value) and made subject to
such restrictions as may be determined by the Omnibus Committee. The Omnibus
Committee may grant other Awards that provide the grantee with the right to
purchase Common Stock or that are valued by reference to the fair market value
of the Common Stock including, but not limited to, phantom securities or
dividend equivalents.

The exercise or purchase price for all options, restricted stock and other
rights to acquire Common Stock, together with any applicable tax required to be
withheld, may be paid in cash or, at the discretion of the Omnibus Committee,
with shares of Common Stock owned by the grantee (or issuable upon exercise of
the option), execution of a promissory note by the grantee or with other lawful
consideration.

The dates on which options or other Awards first become exercisable and on
which they expire are set forth in individual stock options or other agreements
setting forth the terms of the Awards. Such agreements may provide that options
and other awards expire upon termination of the grantee's status as an employee
or director or for any other reason and may provide that such options continue
to be exercisable following the grantee's death or disability by the grantee's
estate or by the person who acquired the right to exercise the option by bequest
or inheritance, or by the grantee or his representative in the event of the
grantee's disability, provided the option is exercised prior to the earlier of
the date of its expiration or six months after the date of the grantee's death
or disability. In the event of a change of control (as defined in the Omnibus
Plan) of the Company, all Awards that have not expired will become fully and
immediately vested and exercisable and may be exercised for the remaining term
of such Awards.

No Award may be assigned or transferred by the grantee, except by will or
the laws of intestate succession, although shares of Common Stock issued under
the Omnibus Plan may be transferred if all applicable restrictions have lapsed.

Amendments of the Omnibus Plan to change the class of persons eligible to be
granted awards or increase the number of shares as to which options, SARs,
restricted stock and other Awards may be granted (except for adjustments
resulting from stock splits and the like) require the approval of the Company's
stockholders. In all other respects the Omnibus Plan can be amended, modified,
suspended or terminated by the Omnibus Committee, unless such action would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. Amendments of the Omnibus Plan may not, without the consent of the
grantee, affect such grantee's rights under an Award previously granted, unless
the Award itself otherwise expressly so provides. The Omnibus Plan terminates 10
years from the date of its adoption by the Company's Board of Directors.

ESOP. The Company adopted the Vari-Lite International, Inc. Employees'
Stock Ownership Plan (the "ESOP"), effective as of January 1, 1995, for the
benefit of its employees and the employees of its participating subsidiaries
(the Company and its participating subsidiaries are referred to herein as the
"Employers") who are at least 21 years of age, have completed at least one "year
of service" (as defined in the ESOP) and are actively contributing to the
Company's 401(k) plan. The ESOP is intended to be an eligible individual account
stock bonus plan that qualifies under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and, subject to certain maximum
provisions, allocates the Employers' discretionary contributions to each

44
<PAGE>
participating employee according to the ratio of such employee's total
compensation to the aggregate amount of compensation received by all
participants in the ESOP. The term "compensation" includes base salary paid
during a plan year and cafeteria deferrals under Section 125 of the Code, but
does not include reimbursements or other expenses, allowances, fringe benefits
(cash or non-cash), moving expenses, deferred compensation, welfare benefits,
bonuses, overtime pay or amounts deferred under a salary deferral arrangement
under Section 401(k) of the Code.

The Company intends, but is not required, to make annual contributions to
the ESOP in the form of nonelective contributions and qualified matching
contributions (as each is defined in the ESOP) consisting of shares of Common
Stock, cash or a combination thereof. The ESOP provides for full distributions
of employee account balances for normal and late retirements, disability and
death and distributions of vested portions of employee accounts upon a
separation of service (as defined in the ESOP). Generally, a participant's
benefits under the ESOP will become vested 20% per year commencing upon
completion of three years of service and be fully vested upon completion of
seven years of service.

The assets of the ESOP are held by Overton Bank and Trust, N.A., as trustee
of The Vari-Lite International, Inc. Employees' Stock Ownership Trust (the "ESOP
Trust"). The ESOP Trust is intended to be exempt from taxation under Section
501(a) of the Code. Atwell & Associates acts as Plan Administrator of the ESOP.

EQUIVALENCE PLAN. The Company adopted The Vari-Lite International, Inc.
Employees' Stock Equivalence Plan (the "Equivalence Plan"), effective as of
January 1, 1995, for the benefit of certain employees of subsidiaries of the
Company domiciled outside of the United States who are at least 21 years of age
and have completed at least one "year of service" (as defined in the Equivalence
Plan). The Equivalence Plan is intended to be a nonqualified employee retirement
plan known as a phantom stock plan under United States tax laws. Employees
participating in the Equivalence Plan are eligible to receive stock equivalence
units ("Units") credited to their accounts along with the contractual right to
receive the cash value of such Units in the future. No shares of stock will be
distributed under the Equivalence Plan. The value of each Unit is equal to the
fair market value of one share of Common Stock on the date such Unit is credited
to a participant's account. Upon conversion of the Units in accordance with the
terms of the Equivalence Plan, participants shall be entitled to receive, for
each Unit converted, an amount equal to the fair market value of one share of
Common Stock on the date of conversion. A holder of Units shall not have any
dividend or voting rights or any other rights as a stockholder of the Company,
unless otherwise provided by the Board of Directors of the Company.

The number of Units awarded under the Equivalence Plan, if any, will be
determined each year by the Compensation Committee. The Company's awards of
Units under the Equivalence Plan shall be made, subject to certain maximum
provisions, according to the ratio of each eligible employee's total
compensation to the amount of total compensation received by all participants in
the Equivalence Plan. The Equivalence Plan provides for full distributions of
employee account balances upon the retirement, disability or death of an
employee and distributions of vested percentages of employee accounts upon
termination of employment for any other reason. Generally, a participant's
benefits under the Equivalence Plan will fully vest upon his or her completion
of seven years of service.

The Company established an irrevocable grantor trust within the meaning of
the Code (commonly referred to as a rabbi trust) to provide funding for benefit
payments from the Equivalence Plan. Although the employers' contributions to the
rabbi trust are generally irrevocable, the assets placed in the trust must
remain subject to the claims of the employers' creditors. The rabbi trust
provides the participants in the Equivalence Plan with additional security that
they will receive benefits in the event of a change in the management of the
Company.

The assets of the Equivalence Plan are held by Bank of Butterfield
International (Cayman) Ltd., as trustee of The Vari-Lite International, Inc.
Equivalence Plan Trust, and Atwell & Associates acts as Plan Administrator.

ANNUAL INCENTIVE PLAN. On June 13, 1995, the Company adopted the Vari-Lite
International, Inc. Annual Incentive Plan (the "Annual Incentive Plan"),
effective October 1, 1995, to provide annual bonuses to eligible employees. Any
employee who is employed by the Company or one of its subsidiaries on March 31
of a year shall

45
<PAGE>
be considered an eligible employee for that year. Bonus amounts for a year may
be granted based on predetermined targets ("formula derived awards") or in the
discretion of the Omnibus Committee ("discretionary awards"), or a combination
of both. The targets for each year are established by the Omnibus Committee and
may be based solely on the Company's attaining its operating income goal for
that year (as established by the Omnibus Committee) or may be based in part on
the level of attainment by the Company of that operating income goal and in part
on the level of attainment of performance measures established by the Omnibus
Committee for that year based on subsidiary, department or individual
performance, or a combination thereof as determined by the Omnibus Committee.
The relative weight placed on each performance measure by the Omnibus Committee
may vary for each eligible employee based on his position with the Company, or
its subsidiaries or departments. Each year each eligible employee shall have the
opportunity to earn a specified percentage of his base salary (excluding any
bonus, commission or overtime) for that year as a formula derived award. The
range of percentage of base salary that a participant may earn as a formula
derived award is specified in the Annual Incentive Plan and is determined by
each eligible employee's level of responsibility and potential impact on Company
performance. No eligible employee shall be deemed to have earned a formula
derived award for a year unless the Company attains the threshold level
(specified in the Annual Incentive Plan) of operating income established for
that year, although the Company expects to modify this restriction in the
future. Discretionary awards are not limited.

The Company shall make payment of all bonus amounts for a year, if any, to
each eligible employee in cash no later than 90 days after the end of that year
(the "Payout Date"). Unless an eligible employee's employment terminates due to
death, total disability or retirement at or after age 65 during the year after
he has been employed for at least six months during that year, the employee must
be employed by the Company or one of its subsidiaries on the Payout Date for a
year to be entitled to receive payment of his bonus, if any, for that year. If
an eligible employee becomes eligible after the first day of the year or dies,
retires at or after age 65 or becomes totally disabled during the year, after
being employed by the Company for at least six months during that year, the
bonus amount, if any, payable to him for that year shall be prorated to reflect
the actual length of his service with the Company and its subsidiaries during
that year.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

At the beginning the fiscal year ended September 30, 1996, the Compensation
Committee of the Company consisted of Messrs. Maxson, Clark and Brutsche. Mr.
Brutsche is the Chairman of the Board, President and Chief Executive Officer of
the Company. In May 1996, Messrs. Smith, Prothro and Rettberg replaced Messrs.
Maxson, Clark and Brutsche on the Compensation Committee.

As of July 1, 1995, the Company entered into the Brutsche Employment
Agreement with H. R. Brutsche III, Chairman of the Board, President and Chief
Executive Officer. The initial term of the Brutsche Employment Agreement is for
five years, with an automatic extension of one year for each completed year of
service by Mr. Brutsche thereunder. Pursuant to the Brutsche Employment
Agreement, Mr. Brutsche receives an annual salary of $433,000, subject to annual
review by the Compensation Committee, which may increase but not reduce his
annual salary, and is eligible to receive an annual bonus, long-term incentive
compensation and deferred compensation in accordance with plans established for
officers and directors of the Company. Mr. Brutsche is also entitled to receive
various life, medical and disability insurance benefits. The Brutsche Employment
Agreement may be terminated in the event of death, upon permanent disability,
for cause (as defined in the Brutsche Employment Agreement) or upon the
occurrence of a change of control (as defined in the Brutsche Employment
Agreement). If the Brutsche Employment Agreement is terminated because of
permanent disability, Mr. Brutsche will continue to receive his base salary
through the remainder of the five-year term of the Brutsche Employment
Agreement, less any disability benefits. If Mr. Brutsche's employment is
terminated without cause, through an action by the Company that constitutes
constructive termination (as defined in the Brutsche Employment Agreement) or as
the result of a change of control, the Company is obligated to continue to pay
Mr. Brutsche his base salary in effect at the time of termination through the
remainder of the five-year term.

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<PAGE>
As of July 1, 1995, the Company entered into the Deferred Compensation
Agreements with each of Messrs. Brutsche, Clark, Maxson and Smith pursuant to
which each of them receives $167,000 annually for six years, payable monthly.
Also, as of March 31, 1994, the Company, Vari-Lite and Showco entered into
Compensation Continuation Agreements with Messrs. Brutsche, Clark and Maxson
pursuant to which the Company, Vari-Lite and Showco each agreed to continue
paying for 60 days after the death of any such individual the cash compensation
that the deceased was receiving from the companies at the time of his death.

Messrs. Clark, Maxson and Smith also have entered into the Consulting
Agreements with the Company, dated as of July 1, 1995, providing that the
Consultant will be available to provide consulting services to the Company in
consideration for the Company's payment to the Consultant of an annual
consulting fee. Pursuant to their Consulting Agreements, Messrs. Clark and
Maxson receives an annual consulting fee of $100,000, payable monthly, and Mr.
Smith receives an annual consulting fee of $20,000, payable monthly. Each
Consulting Agreement has an initial term of three years with an automatic
extension of one year for each completed year of service by the Consultant
thereunder and may be terminated in the event of death, upon permanent
disability, for cause (as defined in the Consulting Agreement) or upon the
occurrence of a change of control (as defined in the Consulting Agreement). If a
Consulting Agreement is terminated without cause, because of permanent
disability or through an action by the Company that constitutes constructive
termination, or as a result of a change of control, the Consultant will receive
the full consulting fee he would have received through the remainder of the
three-year term.

In addition, each of Messrs. Brutsche, Clark and Maxson is eligible to
receive benefits under one or more Policies pursuant to Split-Dollar Agreements
with the Company. The Split-Dollar Agreements each provide for sharing the costs
and benefits of the Policies between the Company and Mr. Brutsche, Mr. Clark or
Mr. Maxson, as the case may be. The Company pays the entire premium on each
Policy to the insurer. The Owner reimburses the Company for the P.S. 58 Cost.
The Company pays the amount of the P.S. 58 Cost to Mr. Brutsche, Mr. Clark or
Mr. Maxson, as the case may be, as additional compensation and such person then
gifts such amount to the Owner to use to reimburse the Company. Except under
certain circumstances, upon the termination of each Split-Dollar Agreement, the
Company will be reimbursed for the premiums it has paid under the Policies that
are subject to the Split-Dollar Agreements. All of the Split-Dollar Agreements
utilize the collateral assignment method to secure the Company's right to
repayment of the premiums it has paid under the Policies. Under this method, the
Owner owns the Policy, and a collateral assignment (establishing the Company's
right to such premium reimbursement from the cash surrender value or death
benefits payable under the Policies) is filed with the insurer. The Owner has
the right to designate the beneficiaries of the Policies and may borrow and make
withdrawals from the cash surrender value, to the extent such cash surrender
value exceeds the amount of premiums owed to the Company. The Owner may cancel
or surrender the Policies at any time, subject to any applicable obligation to
repay the premiums paid by the Company.

CERTAIN TRANSACTIONS

In fiscal years 1994, 1995 and 1996 and the nine-month period ended June 30,
1997, Philip D.C. Collins, who beneficially owns more than five percent of the
Common Stock of the Company, paid the Company, $1.5 million, $0.9 million, $0
and $1.9 million, respectively, for the rental of automated lighting products
and other services for use in his concert tours. Hit & Run Music Limited, a
corporation owned by J. Anthony Smith ("Hit & Run"), manages Mr. Collins. The
Company believes that the terms of the above transactions were at least as
favorable to the Company as those which could have been obtained in an arm's
length transaction with an unaffiliated third party.

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<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information concerning the beneficial
ownership of Common Stock, as of August 31, 1997, by (a) each person known by
the Company to own beneficially more than 5% of the outstanding Common Stock,
(b) each director of the Company, (c) each Named Executive Officer and (d) all
executive officers and directors as a group. The Company believes that each of
such stockholders has the sole voting and dispositive power over the shares held
by such stockholder except as otherwise indicated. See "Risk Factors--Control of
the Company by Existing Stockholders."

<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
SHARES COMMON STOCK
BENEFICIALLY OWNED -----------------------------
BEFORE BEFORE AFTER
NAME THE OFFERING OFFERING OFFERING
- -------------------------------------------------------- ------------------------ -------------- -------------
<S> <C> <C> <C>
H. R. Brutsche III(1)...................................
James H. Clark, Jr.(2)(3)...............................
John D. Maxson(2)(4)....................................
J. Anthony Smith(5).....................................
C. Vincent Prothro......................................
John R. Rettberg........................................
Anthony G. Banks(5).....................................
Philip D.C. Collins(5)..................................
Michael J.C.C. Rutherford(5)............................
Alice Spradley(6).......................................
Keizo Akimoto...........................................
T. Clay Powers..........................................
James M. Bornhorst......................................
David W. Alley..........................................
James E. Kinnu(7).......................................
All officer and directors as a group (18 persons).......
</TABLE>

- -------

* less than one percent

(1) Includes shares owned by Brutsche Family Trust, a trust of which BBH
serves as trustee. Mr. Brutsche disclaims beneficial ownership of such
shares. Mr. Brutsche's address is 201 Regal Row, Dallas, Texas 75247.

(2) The address of Messrs. Clark and Maxson is 8117 Preston Road, Suite 220,
Dallas, Texas 75225.

(3) Includes shares owned by Clark Partnership, Ltd., a limited partnership
of which Mr. Clark is the managing general partner, and shares owned by
Mr. Clark's wife. Mr. Clark disclaims beneficial ownership of the shares
owned by his wife.

(4) Includes shares owned by Peggy Maxson 1996 Irrevocable Trust, a trust
of which BBH serves as trustee. Mr. Maxson disclaims beneficial ownership of
such shares.

(5) Includes held by Ashtray Music Ltd., a United Kingdom limited company,
the stockholders of which are Walbrook Trustees (Jersey) Ltd. re: G45,
Walbrook Trustees (Jersey) Ltd. re: G47, Walbrook Trustees (Jersey) Ltd. re:
G48 and Walbrook Trustees (Jersey) Ltd. (collectively, the "Walbrook
Trusts"). All remaining shares are shares held of record by the Walbrook
Trusts, which were settled by Messrs. Smith, Banks, Collins and Rutherford,
respectively. None of the Walbrook Trusts have named beneficiaries, but the
Company believes the settlors retain the power to direct the trustees of the
Walbrook Trusts with respect to such shares.

(6) Includes shares owned by The Walter & Alice Spradley Family Trust,
shares owned by The Walter & Alice Spradley Living Trust #1,
shares owned by The Walter & Alice Spradley Living Trust #2A and shares
owned by The Walter & Alice Spradley Living Trust #2B. Alice Spradley is the
trustee of all of such trusts.

(7) Effective September 30, 1996, Mr. Kinnu was terminated as the Company's
Senior Executive Vice President and Chief Operating Officer.

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<PAGE>
SELLING STOCKHOLDERS

The Selling Stockholders listed in the following table have granted to the
several Underwriters options, exercisable within 45 days from the date of this
Prospectus, to purchase up to shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." The respective number of shares of
Common Stock subject to such options by each Selling Stockholder is set forth
opposite his name. The amount beneficially owned by the Selling Stockholders
prior to the Offering are as of August 31, 1997:

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE SHARES OFFERED OWNED AFTER THE
OFFERING SUBJECT TO OFFERING(1)
---------------------- OVER-ALLOTMENT ----------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENTAGE OPTIONS NUMBER PERCENTAGE
- --------------------------------------------------- --------- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>

</TABLE>

- -------

* less than one percent.

(1) Assumes that the over-allotment options are exercised in full.

DESCRIPTION OF CAPITAL STOCK

The Company has authorized capital stock consisting of 40,000,000 shares of
Common Stock, $0.10 par value, and 10,000,000 shares of Preferred Stock, $0.10
par value. At August 31, 1997, there were shares of Common Stock
outstanding, owned by holders of record, and there were no shares of
Preferred Stock outstanding. A total of shares of Common Stock are reserved for
future issuance under, and for issuance upon the exercise of options to be
granted under the Omnibus Plan, and a total of shares of Common Stock are
reserved for issuance upon the exercise of outstanding warrants. See
"Management--Omnibus Plan" and "Shares Eligible for Future Sale." Upon
consummation of the Offering, shares of Common Stock and no shares of
Preferred Stock will be outstanding.

COMMON STOCK

All outstanding shares of Common Stock are, and the shares of Common Stock
offered hereby when issued and paid for will be, fully paid and nonassessable.
All holders of Common Stock have full voting rights and are entitled to one vote
for each share held of record on all matters submitted to a vote of the
stockholders. Votes may not be cumulated in the election of directors.
Stockholders have no preemptive or subscription rights. Holders of Common Stock
are entitled to dividends when, as and if declared by the Board of Directors
from funds legally available therefor and are entitled, upon liquidation, to
share ratably in all assets remaining after

49
<PAGE>
payment of liabilities. The rights of holders of Common Stock will be subject to
any preferential rights of any Preferred Stock which may be issued in the
future.

The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.

PREFERRED STOCK

The Board of Directors of the Company is authorized (without any further
action by the stockholders) to issue Preferred Stock in one or more series and
to fix voting rights, liquidation preferences, dividend rates, conversion
rights, redemption rights and terms, including sinking fund provisions, and
certain other rights and preferences. The Board of Directors may issue Preferred
Stock for such consideration and on such terms as it deems desirable.
Satisfaction of any dividend preferences of outstanding Preferred Stock would
reduce the amount of funds available for the payment of dividends on Common
Stock. Also, holders of Preferred Stock would normally be entitled to receive a
preference payment in the event of any liquidation, dissolution or winding-up of
the Company before any payment is made to the holders of Common Stock. In
addition, under certain circumstances, the issuance of Preferred Stock may
render more difficult or tend to discourage a merger, tender offer or proxy
contest, the assumption of control by a holder of a large block of the Company's
securities or the removal of incumbent management. The Board of Directors of the
Company, without stockholder approval, may issue Preferred Stock with voting and
conversion rights which could adversely affect the holders of Common Stock. The
Company has no present intention to issue any shares of Preferred Stock.

SPECIAL PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS

ANTI-TAKEOVER PROVISIONS. The Certificate of Incorporation and By-Laws
contain certain provisions, in addition to the authorization of the Preferred
Stock, that may reduce the likelihood of a change in management or voting
control of the Company without the consent of the Company's Board of Directors.
These provisions could have the effect of delaying, deterring or preventing
tender offers or takeover attempts that some or a majority of the Company's
stockholders might consider to be in the stockholders' best interest, including
offers or attempts that might result in a premium over the market price for the
Common Stock. The By-Laws of the Company can be amended by the stockholders of
the Company only upon the affirmative vote of the holders of not less than 80%
of the outstanding voting stock of the Company. Additionally, in the event of a
change of control (as defined in the Omnibus Plan) of the Company, all awards
under the Omnibus Plan that have not expired become fully and immediately vested
and exercisable and may be exercised for the remaining terms of such awards.

STAGGERED BOARD OF DIRECTORS. The Certificate of Incorporation and
By-Laws divide the Board of Directors into three classes that are elected to
staggered three-year terms. The Company believes that a staggered Board of
Directors will help assure the continuity and stability of the Company's
Board of Directors and the Company's business strategies and policies. In
addition, the staggered board provisions help ensure that the Company's
Board of Directors, if confronted with an unsolicited proposal from a third
party that has acquired a block of the voting stock of the Company, will
have sufficient time to review the proposal and appropriate alternatives and
to seek the best available result for all stockholders. The staggered board
provisions could increase the likelihood that, in the event of a takeover of
the Company, incumbent directors would retain their positions. The
affirmative vote of holders of at least 80% of the Company's outstanding
voting stock is required to amend these provisions.

REMOVAL OF DIRECTORS DURING THEIR TERMS. Under the Certificate of
Incorporation and By-Laws, a director may be removed during his or her term
of service only "for cause" and only by the affirmative vote of not less
than 80% of the outstanding voting stock of the Company. As defined, "for
cause" means: (i) commission of an act of fraud or embezzlement against the
Company; (ii) conviction of a felony or a crime involving moral turpitude;
(iii) gross negligence or willful misconduct in performing the director's
duties to the Company or its stockholders; or (iv) breach of fiduciary duty
owed to the Company. The By-Laws also provide that vacant directorships may
be filled by the Board of Directors.

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<PAGE>
STOCKHOLDER ACTION. Unless limited by the Certificate of Incorporation
of a corporation, the Delaware General Corporation Law permits stockholder
action without a meeting, without prior notice and without a vote upon the
written consent of the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were
present and voted. The Certificate of Incorporation and By-Laws prohibit
stockholder action without a meeting. The affirmative vote of holders of at
least 80% of the Company's outstanding voting stock is required to amend
these provisions. Additionally, the By-Laws provide that meetings of the
stockholders can only be called by the Chief Executive Officer, a majority
of the Board of Directors or holders of not less than 50% of the outstanding
voting stock of the Company.

FAIR PRICE PROVISION. The Certificate of Incorporation includes a "fair
price" provision that requires the affirmative vote of the holders of at
least 80% of the outstanding voting stock of the Company to approve a merger
with, or disposition of assets or the issuance of securities having a fair
market value of $5.0 million or more to, an interested stockholder (as
hereinafter defined), a liquidation proposed by an interested stockholder or
the reclassification of the Company's securities or a similar transaction
that increases the interested stockholder's proportionate ownership in the
Company. An "interested stockholder" is anyone who owns or controls,
directly, indirectly or together with others, 10% or more of the Company's
voting stock. A transaction with an interested stockholder will not require
stockholder approval if a majority of disinterested directors (as defined in
the Certificate of Incorporation) approves the transaction or if the
transaction involves the distribution to the stockholders of cash or other
consideration that satisfies the "fair price" criteria set forth in the
Certificate of Incorporation, which generally require that all stockholders
receive equal treatment, an adequate price and adequate disclosure. The fair
price provision of the Certificate of Incorporation may not be amended
without the affirmative vote of at least 80% of the Company's outstanding
voting stock. In addition, Section 203 of the Delaware General Corporation
Law, much like the fair price provision described above, limits the ability
of a corporation to enter into certain business combinations with an
"interested stockholder" (generally defined as a person owning 15% or more
of a corporation's outstanding voting stock) unless certain conditions are
met. The Certificate of Incorporation, however, includes a provision
electing not to be governed by Section 203.

EVALUATION FACTORS. The Certificate of Incorporation contains a
provision that allows the Board of Directors to evaluate factors other than
the price offered when considering a proposed acquisition of the Company.
The Certificate of Incorporation permits the Board of Directors to consider
the social, legal and economic effects of the proposed acquisition upon the
Company's employees, suppliers, customers and the communities in which the
Company operates. The Board of Directors can also consider any other factors
it deems relevant, including not only the consideration offered in the
proposed transaction relative to the market price of the Common Stock but
also the value of the Company in a freely negotiated transaction and in
relation to the estimate by the Board of Directors of the future value of
the Company as an independent entity. The affirmative vote of the holders of
not less than 80% of the outstanding voting stock of the Company is required
to amend this provision.

STOCKHOLDER PROPOSALS AND NOMINATIONS. The Company's By-Laws provide
that notice of proposed stockholder nominations for the election of
directors must be given in writing to the Secretary of the Company at the
principal executive offices of the Company not less than 75 days nor more
than 85 days prior to the meeting at which directors are to be elected (or
if fewer than 75 days' notice or prior public disclosure of the
stockholders' meeting date is given or made by the Company, not later than
the 10th day following the day on which the notice was mailed or such public
disclosure was made). The By-Laws also provide that at an annual
stockholders' meeting, and subject to any other applicable requirements,
only such business may be conducted as has been brought before the meeting
by, or at the direction of, the Board of Directors or by a stockholder who
has given timely prior written notice to the Secretary of the Company of
such stockholder's intention to bring such business before the meeting. For
such stockholder's notice to be timely, it must be delivered to or mailed
and received at the principal executive offices of the Company not later
than the date that corresponds to 120 days prior to the date the Company's
proxy

51
<PAGE>
statement was released to stockholders in connection with the previous
year's annual meeting of stockholders. Such notice must contain certain
information specified in the By-Laws.

LIMITATIONS ON LIABILITY OF DIRECTORS. The Certificate of Incorporation
limits the liability of directors to the extent allowed by the Delaware General
Corporation Law. Specifically, directors will not be held liable to the Company
or its stockholders for an act or omission in such capacity as a director,
except for liability as a result of: (i) a breach of the duty of loyalty to the
Company or its stockholders; (ii) actions or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
payment of an improper dividend or improper repurchase of the Company's stock
under Section 174 of the Delaware General Corporation Law; or (iv) actions or
omissions pursuant to which the director will receive an improper personal
benefit.

The principal effect of the limitation of liability provision is that a
stockholder is unable to prosecute an action for monetary damages against a
director of the Company unless the stockholder can demonstrate one of the
specified bases for liability. This provision, however, does not eliminate or
limit director liability arising in connection with causes of action brought
under the federal securities laws.

The Certificate of Incorporation does not eliminate the directors' duty of
care. The inclusion of this provision in the Certificate of Incorporation may,
however, discourage or deter stockholders or management from bringing a lawsuit
against directors for a breach of their fiduciary duties, even though such an
action, if successful, might otherwise benefit the Company and its stockholders.
This provision should not affect the availability of equitable remedies such as
injunction or rescission based upon a director's breach of the duty of care. The
affirmative vote of the holders of not less than 80% of the outstanding voting
stock of the Company is required to amend this provision.

INDEMNIFICATION. The Certificate of Incorporation and By-Laws provide that
the Company is generally required to indemnify its directors and officers for
all judgments, fines, settlements, legal fees and other expenses incurred in
connection with pending or threatened legal proceedings because of the
director's or officer's position with the Company or another entity that the
director or officer serves at the Company's request, subject to certain
conditions, and to advance funds to its directors and officers to enable them to
defend against such proceedings. To receive indemnification, the director or
officer must have been successful in the legal proceeding or acted in good faith
and in what was reasonably believed to be a lawful manner and in the Company's
best interest. The affirmative vote of the holders of not less than 80% of the
outstanding voting stock of the Company is required to amend this provision.

52
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the current stockholders of the Company
will own approximately % of the outstanding Common Stock ( % if the
Underwriters' over-allotment option is exercised in full). The Company and
certain stockholders who will collectively own shares of Common Stock
immediately following the Offering, and holders of warrants who will
collectively have the right immediately following the Offering to purchase
shares of Common Stock, have agreed with A.G. Edwards & Sons, Inc. not to sell,
grant any option to sell, transfer or otherwise dispose of, directly or
indirectly, any shares of Common Stock for a period of 180 days following the
date of this Prospectus without the prior written consent of A.G. Edwards &
Sons, Inc. See "Underwriting."

Upon completion of the Offering, the Company will have shares of Common
Stock outstanding. Of these shares, the shares sold in the Offering (
shares if the Underwriters' over-allotment option is exercised in full) will be
freely tradeable in the public market without restriction by persons other than
affiliates of the Company. All of the remaining shares are "restricted
securities" within the meaning of Rule 144 under the Securities Act.
Approximately of such shares will have been held for more than one year as
of the date of this Prospectus and may be sold 90 days after the Company has
been subject to the reporting requirements of Section 13 of the Exchange Act,
subject to the volume, manner of sale and other limitations of Rule 144.
Following the expiration or release from the 180-day lock-up agreements with
A.G. Edwards & Sons, Inc. approximately additional shares of Common Stock
will be eligible for sale in accordance with the requirements of Rule 144. See
"Underwriting."

In general, under Rule 144 as currently in effect, if a period of at least
one year has elapsed between the later of the date on which "restricted shares"
(as that phrase is defined in Rule 144) were acquired from the Company and the
date on which they were acquired from an "affiliate" of the Company (as that
term is defined in Rule 144), then the holder of such restricted shares
(including an affiliate) is entitled to sell within any three-month period a
number of shares of Common Stock that does not exceed the greater of (a) 1% of
the then-outstanding shares of Common Stock ( shares upon completion of the
Offering), and (b) the average weekly reported trading volume in the Common
Stock during the four calendar weeks preceding such sale. Sales under Rule 144
also are subject to certain notice and manner-of-sale requirements and the
availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not an affiliate of the Company (in
general, a person who is not a director, officer or principal stockholder of the
Company) during the three months prior to resale and who has beneficially owned
such shares for at least two years is entitled to sell such restricted stock
under Rule 144 without regard to the requirements discussed above, other than
the manner-of-sale provisions.

The Company is unable to estimate the number of shares that may be sold in
the future by its stockholders since this will depend on the market price for
the Common Stock, the personal circumstances of the stockholders and other
factors. Any sale of substantial amounts of shares in the open market may
significantly reduce the market price of the Common Stock offered hereby.

Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 under the Securities Act may be
relied upon with respect to the resale of shares of Common Stock originally
purchased from the Company by its employees, directors and officers prior to the
date the Company becomes subject to the reporting requirements of the Exchange
Act pursuant to written compensatory benefit plans or written contracts relating
to the compensation of such persons. Shares of Common Stock issued in reliance
on Rule 701 are "restricted shares" and, beginning 90 days after the Company
becomes subject to the reporting requirements of the Exchange Act, may be sold
by persons other than affiliates, subject to the provisions regarding
manner-of-sale under Rule 144, and by affiliates under Rule 144 without
compliance with its one-year minimum holding period requirements.

The Company intends to file registration statements on Form S-8 under the
Securities Act to register all of the shares of Common Stock issued or reserved
for future issuance under the Omnibus Plan and the ESOP. After the effective
date of such registration statements, shares purchased upon exercise of options
granted pursuant to

53
<PAGE>
the Omnibus Plan or pursuant to the ESOP will be available for resale in the
public market without restriction by persons who are not affiliates of the
Company, and to the extent they are held by affiliates, pursuant to Rule 144,
without observance of the holding period requirements. Effective with the
consummation of the Offering, options to purchase a total of shares of
Common Stock will be granted, none of which will be exercisable in less than one
year from the date of grant and shares will be owned by the ESOP and
Equivalence Plan. See "Risk Factors--Control of the Company by Existing
Stockholders," "Management-- Employee Benefit Plans--Omnibus Plan,"
"Management--Employee Benefits Plans--ESOP" and "Management--Employee Benefits
Plans--Equivalence Plan."

In connection with an amendment to the Credit Agreement on July 31, 1996,
the Company issued to certain members of its bank syndicate warrants to purchase
an aggregate of shares of Common Stock at an exercise price of $ per
share, all of which will remain outstanding after consummation of the Offering.
The outstanding warrants can be exercised at any time and the underlying shares
can be sold either pursuant to demand registration rights which are exercisable
on the first anniversary of the consummation of the Offering and thereafter on
an annual basis through December 31, 2004, or pursuant to piggyback registration
rights which are exercisable at any time.

UNDERWRITING

The Underwriters named below have severally agreed with the Company subject
to the terms and conditions of the Underwriting Agreement, to purchase the
respective numbers of shares of Common Stock set forth opposite their names
below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- -------------------------------------------------------------------------------- ------------
<S> <C>
A.G. Edwards & Sons, Inc........................................................

Total.........................................................................
------------
------------
</TABLE>

The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the shares of Common Stock, if any are purchased.

The Company has been advised by A.G. Edwards & Sons, Inc., the
Representative of the several Underwriters (the "Representative"), that the
Underwriters propose to offer the Common Stock to the public at the Offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not in excess of $. per share and that the
Underwriters and such dealers may reallow a discount of not in excess of $.
per share to other dealers. The Offering price and the concession and discount
to dealers may be changed by the Underwriters after the Offering.

54
<PAGE>
In the Underwriting Agreement, the Selling Stockholders have granted the
Underwriters options, expiring at the close of business on the 45th day
subsequent to the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock at the Offering price, less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriters may exercise such options solely to cover over-allotments, if any,
in the sale of the shares. To the extent the Underwriters exercise such options,
each of the Underwriters will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage of the option shares
as the number of shares to be purchased by it shown in the table above bears to
, and the Selling Stockholders will be obligated, pursuant to the
options, to sell such shares to the Underwriters.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. The liability of each Selling Stockholder under this indemnity
is limited to the amount of his proceeds.

The Company and certain stockholders who collectively will own shares
of Common Stock immediately following the Offering, and holders of warrants who
will collectively have the right immediately following the Offering to purchase
shares of Common Stock, have agreed that they will not, directly or
indirectly, offer, sell or otherwise dispose of any shares of Common Stock,
other than the shares offered pursuant to this Prospectus, for a period of 180
days from the date of this Prospectus without the prior written consent of A.G.
Edwards & Sons, Inc. See "Shares Eligible for Future Sale."

In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company and the Selling Stockholders,
and in such case may purchase Common Stock in the open market following
completion of the Offering to cover all or a portion of such short position. The
Underwriters may also cover all or a portion of such short position, up to
shares of Common Stock, by exercising the Underwriters' over-allotment option
referred to above. In addition, A.G. Edwards & Sons, Inc., on behalf of the
Underwriters, may impose "penalty bids" under contractual arrangements with the
Underwriters whereby it may reclaim from an Underwriter (or dealer participating
in the Offering) for the account of the other Underwriters, the selling
concession with respect to Common Stock that is distributed in the Offering but
subsequently purchased for the account of the Underwriters in the open market.
Any of the transactions described in this paragraph may result in the
maintenance of the price of the Common Stock at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if it is undertaken, it may be discontinued at any
time.

The Representative has informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

Prior to the Offering, there has been no public market for the Common Stock.
The Offering price for the Common Stock was determined by negotiation between
the Company and the Representative. Among the factors considered in determining
the Offering price was the history of and the prospects for the Company and the
industry in which it operates, the past and present operating results of the
Company and the trends of such results, the future prospects of the Company, an
assessment of the Company's management, the general condition for the securities
markets at the time of the Offering and the prices for similar securities of
comparable companies.

At the request of the Company, up to shares of Common Stock in the
Offering have been reserved for sale to certain officers, directors and
employees, business affiliates and related persons of the Company who have
expressed an interest in purchasing shares of Common Stock at the Price to
Public set forth on the cover page of this Prospectus. The number of shares of
Common Stock available for sale in the Offering will be reduced to the extent
such persons purchase such shares. Purchases will be prohibited to the extent
that they are

55
<PAGE>
requested in lots of less than 100 shares. Any reserved shares not so purchased
will be offered by the Underwriters on the same basis as the other shares
available through the Offering.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock covered by this
Prospectus will be passed upon for the Company by Gardere & Wynne, L.L.P.,
Dallas, Texas. Certain legal matters pertaining to the Common Stock will be
passed upon for the Underwriters by Vinson & Elkins L.L.P., Dallas, Texas.

EXPERTS

The consolidated financial statements and related schedules of the Company
as of September 30, 1995 and 1996 and for each of the three years in the period
ended September 30, 1996, included in this Prospectus and the Registration
Statement have been audited by Deloitte & Touche LLP, independent certified
public accountants, as stated in their reports thereon appearing herein and
elsewhere in the Registration Statement, and have been so included in reliance
upon the reports of such firm given upon the authority of that firm as experts
in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 under the Securities Act with
respect to the Common Stock offered hereby. This Prospectus, which is part of
the Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits thereto. For further information
concerning the Company and the Common Stock, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith, copies
of which may be inspected at the Commission's principal office, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, or copies of which may be
obtained from the Commission at such office upon payment of the fees prescribed
by the Commission or on the Internet at HTTP://WWW.SEC.GOV. The summaries in
this Prospectus of additional information included in the Registration Statement
or any exhibit thereto are qualified in their entirety by reference to such
information or exhibit filed with the Commission.

The Company intends to furnish its stockholders with annual reports
containing audited financial statements certified by an independent public
accounting firm and quarterly reports for the first three quarters of each
fiscal year containing unaudited financial information.

56
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS OF
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

<TABLE>
<S> <C>
Independent Auditors' Report.......................................................... F-2

Consolidated Balance Sheets as of September 30, 1995 and 1996, and June 30, 1997
(unaudited)......................................................................... F-3

Consolidated Statements of Income for the Years Ended September 30, 1994, 1995 and
1996, and for the Nine Months Ended June 30, 1996 and 1997 (unaudited).............. F-4

Consolidated Statements of Stockholders' Equity for the Years Ended September 30,
1994, 1995 and 1996, and for the Nine Months Ended June 30, 1997 (unaudited)........ F-5

Consolidated Statements of Cash Flows for the Years Ended September 30, 1994, 1995 and
1996, and for the Nine Months Ended June 30, 1996 and 1997 (unaudited).............. F-6

Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of Vari-Lite
International, Inc. and subsidiaries (herein referred to as "the Company") as of
September 30, 1995 and 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of September 30,
1995 and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles.

Dallas, Texas
November 22, 1996 (October , 1997,
as to the first paragraph of Note F)

The accompanying consolidated financial statements are presented to give effect
to the Company's reincorporation in Delaware and the Company's recapitalization,
in which the shares of Class A and Class B Common Stock will be converted into
shares of the Company's new common stock and a class of preferred stock will be
authorized, as described in Note F to the consolidated financial statements. The
above opinion is in the form which will be signed by Deloitte & Touche LLP upon
effectiveness of the above events, assuming that from November 22, 1996 to the
effective date of such events, no other material events have occurred which
would affect the accompanying consolidated financial statements and notes
thereto.

Deloitte & Touche LLP
Dallas, Texas
August 13, 1997

F-2
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash........................................................................... $ 3,973 $ 2,633 $ --
Receivables, less allowance for doubtful accounts of $495, $348 and $448....... 8,158 11,070 13,178
Inventory...................................................................... 2,013 2,395 2,996
Prepaid expense and other current assets....................................... 1,876 816 2,627
--------- --------- -----------
TOTAL CURRENT ASSETS......................................................... 16,020 16,914 18,801
EQUIPMENT AND OTHER PROPERTY:
Lighting and sound equipment................................................... 79,486 87,932 101,713
Machinery and tools............................................................ 1,591 2,179 2,149
Furniture and fixtures......................................................... 3,563 3,728 3,791
Office and computer equipment.................................................. 5,244 7,593 8,043
Work in progress and raw materials inventory................................... 3,759 3,259 6,805
--------- --------- -----------
93,643 104,691 122,501
Less accumulated depreciation and amortization............................... 38,620 47,982 55,947
--------- --------- -----------
55,023 56,709 66,554
OTHER ASSETS..................................................................... 1,964 3,950 4,570
--------- --------- -----------
TOTAL ASSETS................................................................. $ 73,007 $ 77,573 $ 89,925
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses.......................................... $ 10,361 $ 8,596 $ 8,508
Deposits on contracts.......................................................... 1,164 1,187 1,854
Income taxes payable........................................................... 857 350 155
Current portion of long-term obligations....................................... 8,477 7,427 7,806
--------- --------- -----------
TOTAL CURRENT LIABILITIES.................................................... 20,859 17,560 18,323
LONG-TERM OBLIGATIONS............................................................ 26,393 29,922 37,593
DEFERRED INCOME TAXES............................................................ 4,426 5,553 6,449
--------- --------- -----------
TOTAL LIABILITIES............................................................ 51,678 53,035 62,365

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferred Stock, $0.10 par value (10,000,000 shares authorized), none issued or
outstanding..................................................................
Common Stock, $0.10 par value (40,000,000 shares authorized)...................
Treasury Stock, at cost, shares at September 30, 1996, and shares at
June 30, 1997................................................................
Additional paid-in capital.....................................................
Stockholder notes receivable................................................... (398) (352) (186)
Stock purchase warrants........................................................ 663 600 600
Cumulative foreign currency translation adjustment............................. 780 905 1,451
Retained earnings.............................................................. 16,861 19,735 21,953
--------- --------- -----------
TOTAL STOCKHOLDERS' EQUITY................................................... 21,329 24,538 27,560
--------- --------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................... $ 73,007 $ 77,573 $ 89,925
--------- --------- -----------
--------- --------- -----------
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER FOR THE NINE MONTHS
30, ENDED JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Rental revenues............................................ $ 47,625 $ 65,864 $ 65,741 $ 45,389 $ 56,400
Product sales and services revenues........................ 6,187 9,046 11,397 8,042 10,688
--------- --------- --------- --------- ---------
TOTAL REVENUES........................................... 53,812 74,910 77,138 53,431 67,088
Rental cost of sales....................................... 18,775 26,288 26,425 18,267 22,342
Product sales and services cost of sales................... 4,284 6,637 7,783 5,601 7,409
--------- --------- --------- --------- ---------
TOTAL COST OF SALES...................................... 23,059 32,925 34,208 23,868 29,751
--------- --------- --------- --------- ---------
GROSS PROFIT............................................. 30,753 41,985 42,930 29,563 37,337
Selling, general and administrative expense................ 19,181 28,163 30,077 22,230 25,124
Research and development expense........................... 3,033 3,283 4,404 2,947 4,684
--------- --------- --------- --------- ---------
TOTAL OPERATING EXPENSES................................. 22,214 31,446 34,481 25,177 29,808
--------- --------- --------- --------- ---------
OPERATING INCOME........................................... 8,539 10,539 8,449 4,386 7,529
Interest expense........................................... 1,805 2,788 3,092 2,437 2,692
--------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS.......... 6,734 7,751 5,357 1,949 4,837
Income taxes............................................... 2,400 3,037 2,238 813 2,054
--------- --------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY LOSS........................... 4,334 4,714 3,119 1,136 2,783
Extraordinary loss from early extinguishment of debt (net
of tax of $389).......................................... 756
--------- --------- --------- --------- ---------
NET INCOME................................................. $ 3,578 $ 4,714 $ 3,119 $ 1,136 $ 2,783
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
WEIGHTED AVERAGE SHARES OUTSTANDING........................
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
EARNINGS PER SHARE......................................... $ $ $ $ $
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------------- --------------------- TREASURY PAID-IN
SHARES AMOUNT SHARES AMOUNT STOCK CAPITAL
---------- --------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 1, 1993......................... -- $ -- $ $ -- $
Dividends declared...............................
Shares purchased and retired.....................
Shares issued....................................
Net effect of translation adjustment.............
Adjust warrant valuation allowance...............
Net income.......................................
---------- --------- ---------- --------- ----- -----------
BALANCE, SEPTEMBER 30, 1994...................... -- -- --
Dividends declared...............................
Shares issued....................................
Payments on stockholder notes receivable.........
Net effect of translation adjustment.............
Issuance of stock to the ESOP and ESEP Plans.....
Adjust warrant valuation allowance...............
Net income.......................................
---------- --------- ---------- --------- ----- -----------
BALANCE, SEPTEMBER 30, 1995......................
Dividends declared...............................
Purchase of treasury stock....................... (28)
Purchases of stock warrants......................
Issuance of stock warrants.......................
Payments on stockholder notes receivable.........
Issuance of stock to the ESOP and ESEP Plans.....
Net effect of translation adjustment.............
Net income.......................................
---------- --------- ---------- --------- ----- -----------
BALANCE, SEPTEMBER 30, 1996
UNAUDITED:..................................... (28)
Dividends declared...............................
Purchase of treasury stock....................... (158)
Payments on stockholder notes receivable.........
Issuance of stock to the ESOP and ESEP Plans.....
Net effect of translation adjustment.............
Net income.......................................
---------- --------- ---------- --------- ----- -----------
BALANCE, JUNE 30, 1997 (UNAUDITED)............... -- $ -- $ $ (186) $
---------- --------- ---------- --------- ----- -----------
---------- --------- ---------- --------- ----- -----------

<CAPTION>
CUMULATIVE
FOREIGN
STOCKHOLDER STOCK CURRENCY
NOTES PURCHASE TRANSLATION RETAINED
RECEIVABLE WARRANTS ADJUSTMENT EARNINGS TOTAL
------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 1, 1993......................... $ -- $ 480 $ 651 $ 9,671 $
Dividends declared............................... (315)
Shares purchased and retired.....................
Shares issued.................................... (98)
Net effect of translation adjustment............. 67
Adjust warrant valuation allowance............... 67 (67)
Net income....................................... 3,578
----- ----- ----------- ----------- ---------
BALANCE, SEPTEMBER 30, 1994...................... (98) 547 718 12,867
Dividends declared............................... (604)
Shares issued.................................... (323)
Payments on stockholder notes receivable......... 23
Net effect of translation adjustment............. 62
Issuance of stock to the ESOP and ESEP Plans.....
Adjust warrant valuation allowance............... 116 (116)
Net income....................................... 4,714
----- ----- ----------- ----------- ---------
BALANCE, SEPTEMBER 30, 1995...................... (398) 663 780 16,861
Dividends declared............................... (648)
Purchase of treasury stock.......................
Purchases of stock warrants...................... (663) 403
Issuance of stock warrants....................... 600
Payments on stockholder notes receivable......... 46
Issuance of stock to the ESOP and ESEP Plans.....
Net effect of translation adjustment............. 125
Net income....................................... 3,119
----- ----- ----------- ----------- ---------
BALANCE, SEPTEMBER 30, 1996
UNAUDITED:..................................... (352) 600 905 19,735
Dividends declared............................... (565)
Purchase of treasury stock.......................
Payments on stockholder notes receivable......... 166
Issuance of stock to the ESOP and ESEP Plans.....
Net effect of translation adjustment............. 546
Net income....................................... 2,783
----- ----- ----------- ----------- ---------
BALANCE, JUNE 30, 1997 (UNAUDITED)............... $ (186) $ 600 $ 1,451 $ 21,953 $
----- ----- ----------- ----------- ---------
----- ----- ----------- ----------- ---------
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEARS ENDED SEPTEMBER
30, ENDED JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net income........................................................... $ 3,578 $ 4,714 $ 3,119 $ 1,136 $ 2,783
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization...................................... 5,876 8,436 9,869 7,393 8,489
Amortization of note discount and deferred loan fees............... 205 186 199 149 265
Extraordinary loss from the early extinguishment of debt........... 756 -- -- -- --
Provision for doubtful accounts.................................... 67 334 348 103 94
Deferred income taxes.............................................. 958 702 1,127 (51) 896
Gain on sale of equipment and other property....................... (53) (1,967) (574) -- (2,991)
Provisions for ESOP and ESEP contributions......................... -- 750 250 -- 250
Net change in assets and liabilities:
Decrease (increase) in accounts receivable....................... (2,823) (2,436) (2,846) (1,989) (2,202)
Decrease (increase) in prepaid expenses.......................... (959) (15) 1,060 (4,716) (1,811)
Decrease (increase) in inventory................................. -- (1,031) (382) 2,412 (601)
Decrease (increase) in other assets.............................. (1,130) (370) (2,616) (232) (824)
Increase (decrease) in accounts payable, accrued liabilities and
income taxes payable........................................... 3,543 3,077 (2,268) (1,180) (284)
Increase (decrease) in deposits on contracts..................... 919 (172) 23 474 667
--------- --------- --------- --------- ---------
Net cash provided by operating activities........................ 10,937 12,208 7,309 3,499 4,731
Cash flows from investing activities:
Capital expenditures................................................. (13,566) (20,748) (12,587) (9,125) (19,880)
VLEH Acquisition..................................................... (5,940) -- -- -- --
Proceeds from sale of equipment...................................... 582 2,412 1,377 -- 5,030
--------- --------- --------- --------- ---------
Net cash used in investing activities............................ (18,924) (18,336) (11,210) (9,125) (14,850)
Cash flows from financing activities:
Proceeds from issuance of debt....................................... 25,800 10,998 28,204 12,476 16,967
Principal payments on debt........................................... (12,525) (3,926) (24,601) (8,869) (8,127)
Proceeds from issuance of distributor advances....................... 997 2,168 1,745 1,306 604
Principal payments on distributor advances........................... (4,200) (1,362) (1,894) (1,322) (1,216)
Proceeds from payments on stockholder notes receivable............... -- 33 46 38 166
Proceeds from issuance of common stock............................... 102 -- -- -- --
Prepayment penalty from early extinguishment of debt................. (500) -- -- -- --
Purchase of common stock............................................. (4) -- -- -- --
Purchase of treasury stock........................................... -- -- (28) -- (158)
Purchase of stock warrant............................................ -- -- (260) -- --
Dividends paid....................................................... (315) (604) (648) (568) (565)
--------- --------- --------- --------- ---------
Net cash provided by financing activities........................ 9,355 7,307 2,564 3,061 7,671
Effect on cash from foreign currency translation adjustment............ 99 (624) (3) (166) (185)
--------- --------- --------- --------- ---------
Net increase (decrease) during the period.............................. 1,467 555 (1,340) (2,731) (2,633)
Cash, beginning of period.............................................. 1,951 3,418 3,973 3,973 2,633
--------- --------- --------- --------- ---------
Cash, end of period.................................................... $ 3,418 $ 3,973 $ 2,633 $ 1,242 $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental Cash Flow Information
- -----------------------------------------------------------------------
Cash paid for interest expense....................................... $ 1,812 $ 2,905 $ 3,234 $ 2,564 $ 2,956
Cash paid for income taxes........................................... $ 1,111 $ 1,752 $ 1,528 $ 1,470 $ 1,765
Acquisition of property under capital leases......................... $ 302 $ -- $ -- $ -- $ --
Warrants issued...................................................... $ -- $ -- $ 600 $ -- $ --
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE A--ORGANIZATION:

Vari-Lite International, Inc. and subsidiaries (herein referred to as "the
Company") is a leading international provider of proprietary automated lighting
systems and related services to the entertainment industry, servicing markets
such as concert touring, theater, television and film and corporate events.

On March 31, 1994, the Company formed Vari-Lite Europe Holdings Limited
("VLEH") to acquire the net assets, consisting primarily of equipment and
property, and the operations of three London-based companies, which are in the
business of providing lighting services and stage and stage set construction.
The total purchase price, including related acquisition and financing costs was
approximately $6,000, which was funded with a portion of the proceeds from the
Company's Credit Facility (see Note E). The acquisition was accounted for using
the purchase method of accounting, and accordingly, the purchase price was
allocated to the tangible assets acquired, and liabilities assumed based upon a
determination of their fair values at the acquisition date. The results of
operations of VLEH have been included in the consolidated financial statements
since its acquisition.

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION AND USE OF ESTIMATES

The consolidated financial statements of Vari-Lite International, Inc.
includes the accounts of its wholly-owned subsidiaries Vari-Lite, Inc., Showco,
Inc., Irideon, Inc., IGNITION! Creative Group, Inc., Concert Production
Lighting, Inc., Vari-Lite Asia, Inc. (a Japanese corporation), Vari-Lite Hong
Kong Limited and VLEH and its subsidiaries. All material intercompany
transactions and balances have been eliminated.

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

INTERIM FINANCIAL STATEMENTS

The balance sheet as of June 30, 1997, and the statements of income,
stockholders' equity and cash flows for the nine months ended June 30, 1996 and
1997, have been prepared by the Company without audit. In the opinion of
management, all adjustments (which included only normal, recurring adjustments)
necessary to present fairly the financial position, at June 30, 1997 and the
results of operations and cash flows for the nine months ended June 30, 1996 and
1997, have been made. The results of operations for the nine months ended June
30, 1997, are not necessarily indicative of the results to be expected for the
full year.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company has certain financial instruments consisting primarily of cash,
accounts and lease receivables, debt and long-term obligations and interest rate
swap agreements. The carrying values of substantially all of the financial
instruments approximate their respective fair values.

F-7
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INVENTORY

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

EQUIPMENT AND OTHER PROPERTY

Equipment and other property are stated at cost or, in the case of
capitalized leases, at the lower of the present value of future lease payments
or the fair value of the equipment. Depreciation and amortization are provided
on the straight-line method over the estimated useful lives of the various
classes of equipment and other property. In 1996, management reevaluated the
estimated useful lives of the Company's lighting equipment and accordingly
lengthened the lives of certain lighting equipment to correspond with the
anticipated revenue of the equipment.

OTHER ASSETS

The Company capitalizes and includes in other assets deferred financing
costs and the costs of acquiring patents and trademarks on its products.
Deferred financing costs are amortized over the term of the debt. Amortization
on patents and trademarks is computed on the straight-line basis over the lives
of the patents or trademarks or the period of expected benefit. In addition, the
Company capitalizes legal costs associated with the pursuit of third parties for
infringement of certain of the Company's patents, copyrights and trademarks.
Such costs are capitalized when the Company is successful or management believes
it will be successful. These costs are amortized over the lives of the
applicable patents, copyrights and trademarks.

REVENUE RECOGNITION

Revenues related to equipment rental and services are recognized as earned
over the terms of the contracts. Revenues from long-term leases classified as
sales-type leases are recognized upon delivery and installation of the
equipment. Revenues related to the sale of architectural products are recognized
upon shipment of the equipment. In 1995, one customer accounted for 11.9% of the
Company's revenues. No other customer accounted for more than 10% of the
Company's revenues during any of the three years in the period ended September
30, 1996 or the nine months ended June 30, 1997.

RESEARCH AND DEVELOPMENT

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

INCOME TAXES

The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes," and files a consolidated federal income tax
return. Deferred tax assets and liabilities are recorded based on the difference
between the tax basis of assets and liabilities and their carrying amounts for
financial reporting

F-8
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
purposes, referred to as temporary differences. Provision is made for deferred
taxes relating to temporary differences in the recognition of income and expense
for financial reporting and for income tax purposes.

FOREIGN CURRENCY TRANSLATION

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

EARNINGS PER SHARE

Earnings per share is calculated by dividing net income by the weighted
average shares outstanding for the applicable period. Common stock equivalents,
including warrants and options, are included, to the extent considered dilutive,
using the treasury stock method and are assumed to be outstanding for the full
period in the period of issuance.

NEW ACCOUNTING PRONOUNCEMENTS

In October 1996, the Financial Accounting Standards Board ("the FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," which is effective for periods ending after
December 15, 1995. Management intends to implement only the disclosure
requirements of such statement for employee stock-based compensation. However,
the accounting provisions of this statement will be required to be implemented
upon the future issuance of non-employee stock-based compensation. The Company
does not believe that there will be a material impact to the historically
reported amount of earnings per share upon the implementation of this statement.

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
is effective for periods ending after December 15, 1997. Implementation of SFAS
No. 128 will have no effect on the Company's results of operations, financial
position or cash flows but will require a change in the calculation of earnings
per share. The Company does not believe that there will be a material impact to
the reported amount of earnings per share upon the implementation of this
statement.

In February 1997, the FASB issued SFAS No. 129, "Capital Structure," which
is effective for periods ending after December 15, 1997. Implementation of SFAS
No. 129 will have no effect on the Company's results of operations, financial
position or cash flows.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which is effective for fiscal years beginning after December 15, 1997.
Comprehensive income is the change in equity of a business enterprise during a
period from transactions and other events from nonowner sources. SFAS No. 130
will require that changes in the balances of items that are reported directly in
a separate component of stockholders' equity (such as unrealized gains and
losses and minimum pension liability adjustments) be added to net income to
arrive at comprehensive income. Implementation of SFAS No. 130 will have no
effect on the Company's results of operations, financial position or cash flows,
but will require additional footnote disclosures presenting the Company's
comprehensive income.

F-9
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. Accordingly, the Company plans to adopt SFAS
No. 131 for its fiscal year beginning October 1, 1998. Implementation of SFAS
No. 131 will have no effect on the Company's results of operations, financial
position or cash flows, but may require a change in the disclosures regarding
the Company's operating segments.

OTHER

Certain reclassifications have been made to the September 30, 1994 and 1995,
consolidated financial statements to conform to the presentation in the
September 30, 1996, consolidated financial statements.

NOTE C--INVENTORY:

Inventory consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1995 1996
--------- --------- JUNE 30,
-----------
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials................................................ $ 766 $ 1,998 $ 2,654
Work in progress............................................. 216 294 197
Finished goods............................................... 1,031 103 145
--------- --------- -----------
$ 2,013 $ 2,395 $ 2,996
--------- --------- -----------
--------- --------- -----------
</TABLE>

NOTE D--OTHER ASSETS:

Other assets consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1995 1996
--------- --------- JUNE 30,
-----------
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
Patents and trademarks....................................... $ 263 $ 2,355 $ 2,809
Deferred financing costs..................................... 947 1,432 1,436
Other, including sales-type lease receivables 1,239 865 1,230
--------- --------- -----------
2,449 4,652 5,475
Less accumulated amortization................................ (485) (702) (905)
--------- --------- -----------
$ 1,964 $ 3,950 $ 4,570
--------- --------- -----------
--------- --------- -----------
</TABLE>

Included in the amount of patents and trademarks are amounts capitalized by
the Company relating to the High End Lawsuit, a patent infringement suit in
which the Company is the plaintiff. Unless the Company receives a judgment in
this litigation that the defendant has infringed at least one of its patents and
the Company concludes, based on all of the facts and circumstances that such a
judgment will allow it to maintain its competitive advantage provided by the
infringed patents, all costs incurred by the Company related to the High

F-10
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE D--OTHER ASSETS: (CONTINUED)
End Lawsuit (including those previously capitalized) will be required to be
recorded as an expense in the period that the judgment is rendered.

NOTE E--LONG-TERM OBLIGATIONS:

Long-term obligations consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1995 1996
--------- --------- JUNE 30,
-----------
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
Credit Facility:
Term loans at current exchange rates (net of value
assigned to warrants of $600 at September 30, 1996, and
$488 at June 30, 1997)................................. $ 21,813 $ 26,514 $ 24,402
Revolving lines of credit................................ 8,346 5,236 15,938
Advances from distributors................................. 2,943 2,810 2,101
Obligations under capital leases with interest at 8.6% to
10.4%, maturities through 1999........................... 530 348 201
Other...................................................... 1,238 2,441 2,757
--------- --------- -----------
34,870 37,349 45,399
Less current portion....................................... (8,477) (7,427) (7,806)
--------- --------- -----------
$ 26,393 $ 29,922 $ 37,593
--------- --------- -----------
--------- --------- -----------
</TABLE>

The Company's Credit Facility allows borrowings up to $28,000 under a
revolving line of credit. The Company incurred prepayment penalties in 1994 of
$756 (net of tax benefit of $389) relating to the early extinguishment of its
prior debt facility, which was expensed in the consolidated statement of income
as an extraordinary loss. Loans under the revolver may be drawn in U.S. dollars,
U.K. pounds sterling or Japanese yen, subject to their availability under the
Credit Facility. Interest on the term loans and the revolvers is calculated as
follows:

<TABLE>
<CAPTION>
LOAN DENOMINATION INTEREST RATE
- -------------------------------------------- --------------------------------------------
<S> <C>
U.S. dollar term Prime rate plus 1% or LIBOR plus 3.5%
Multicurrency revolver Prime rate plus 1% for U.S. dollar
borrowings and Euroyen TIBOR plus 3.5% for
Japanese yen borrowings
U.K. pound sterling term LIBOR rate plus 2%
U.K. pound sterling revolver LIBOR rate plus 2%
Japanese yen term TIBOR rate plus 2.5%
</TABLE>

Based on the outstanding amounts under the Credit Facility as of September
30, 1995 and 1996 and June 30, 1997, the weighted average interest rates were
10.35%, 8.69% and 8.83%, respectively.

F-11
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE E--LONG-TERM OBLIGATIONS: (CONTINUED)
At September 30, 1996 and June 30, 1997, the Company had interest rate swap
agreements with two of its primary lenders relating to a notional principal
amount of $19,800, and $17,700, respectively, which effectively changes the
Company's variable interest rate exposure on such borrowing to a fixed weighted
average interest rate of 9.60%. The interest rate swap agreements mature on or
before the maturity date of the related notes as follows:

<TABLE>
<CAPTION>
SEPTEMBER
30,1996
------------ JUNE 30,
1997
-----------
(UNAUDITED)
<S> <C> <C>
Year one.......................................................... $ 3,050 $ 3,800
Year two.......................................................... 3,800 5,900
Year three........................................................ 5,450 1,000
Year four......................................................... 1,000 7,000
Year five......................................................... 6,500 --
------------ -----------
$ 19,800 $ 17,700
------------ -----------
------------ -----------
</TABLE>

The Company is exposed to credit loss in the event of nonperformance by the
other parties to the interest rate swap agreements. However, the Company does
not anticipate nonperformance by the other parties.

Principal payments of approximately $826 under the multicurrency term loan
are due quarterly and increase to $1,076 per quarter on September 30, 1997
through the remaining term of the loan. A lump sum payment of approximately
$8,471 is due June 30, 2001. Interest on outstanding term loans is due
quarterly. Principal amounts outstanding under the revolving line of credit are
due June 30, 2001 and interest on outstanding amounts is due monthly. Until
April 1, 1998, a prepayment penalty equal to .25% of the amount prepaid is due
and payable in connection with voluntary prepayments of the term loans.

The Credit Facility contains compliance covenants, including requirements
that the Company achieve certain financial ratios. In addition, the Credit
Facility places limitations on the ability to pay stockholder distributions,
make capital expenditures, incur additional indebtedness, make certain loans or
investments, sell assets or reacquire the Company's stock. The Company incurs a
commitment fee equal to .5% per annum on the average daily unused portion of the
revolver which is payable quarterly. Substantially all Company assets, except
those pledged to distributors (described below), are pledged as collateral under
the Credit Facility.

In connection with certain distributor agreements, the Company has received
advances for a five-year period to provide the necessary funds for construction
of the leased lighting systems (see Note G). The remaining balances outstanding
under such borrowings at September 30, 1995 and 1996, and June 30, 1997, were
$2,943, $2,810 and $2,101, respectively. Equipment with a net book value of
approximately $8,700 at June 30, 1997 ($7,500 at September 30, 1996) has been
pledged to the distributors as collateral for such loans. The interest rate on
substantially all the notes is variable and ranged from 3% to 7% for the years
ended September 30, 1995 and 1996 and the unaudited nine months ended June 30,
1997. Substantially all the advances are nonrecourse and are repaid from the
Company's portion of the rental revenue earned on the associated leases.

F-12
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

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

<TABLE>
<CAPTION>
SEPTEMBER
30, 1996
------------ JUNE 30,
1997
-----------
(UNAUDITED)
<S> <C> <C>
Year one.......................................................... $ 7,427 $ 7,806
Year two.......................................................... 5,204 5,353
Year three........................................................ 4,872 4,762
Year four......................................................... 4,225 27,478
Year five......................................................... 15,621 --
------------ -----------
$ 37,349 $ 45,399
------------ -----------
------------ -----------
</TABLE>

NOTE F--STOCKHOLDERS' EQUITY:

On October , 1997, in conjunction with the Company's reincorporation in
Delaware, the Board of Directors of the Company created a new class of common
stock and authorized 40,000,000 shares. As a result of the reincorporation,
stockholders will receive shares of common stock for each share of the
Company's Class A common stock and Class B common stock held by the
stockholders. Share amounts and the weighted average shares outstanding for all
periods presented give retroactive effect to the recapitalization of the common
stock. In addition, the Company authorized 10,000,000 shares of preferred stock
which the Company's Board of Directors may issue for such consideration and on
such terms as it deems desirable, including with voting and conversion rights
that could adversely affect the holders of common stock.

In connection with prior debt agreements, the Company and a lender entered
into a warrant purchase agreement, which granted the lender a warrant to
purchase shares of Common Stock. The Company initially allocated $400 of the
proceeds of these loan agreements to the warrant and in subsequent years
increased such warrant value to an amount equal to the warrant valuation as
defined in the agreement. During 1996, the Company repurchased the warrant from
the holder for $260.

In July 1996, in connection with an amendment to the Company's Credit
Facility, the Company issued warrants to purchase up to shares of Common
Stock at a price based on the Company's earnings as defined in the warrant
agreement. After December 31, 2001, and through the warrant expiration date of
December 31, 2004, the warrant holders may put the warrant shares back to the
Company at the price specified in the warrant agreement. This put right will
terminate upon the occurrence of certain events, including an initial public
offering. The terms of the warrants also provide for registration rights and
adjustments to the price and number of shares in certain circumstances. As of
September 30, 1996 and June 30, 1997, no warrants had been exercised.

F-13
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE G--LEASES:

Company has agreements with various distributors whereby it has leased
certain lighting equipment to the distributors for a five-year period. These
agreements are accounted for as operating leases. Under the terms of these
agreements, these distributors have the exclusive right to market the lighting
equipment by subrental within defined market areas or customers. The
distributors' lease payments to the Company are calculated at 50% of the gross
rental revenue received by the distributors from their subrental of the lighting
equipment and amounted to approximately $2,864, $3,797, $4,893, $3,778 and
$3,576 for the years ended September 30, 1994, 1995 and 1996, and for the
unaudited nine months ended June 30, 1996 and 1997, respectively. The lighting
equipment under these leasing arrangements had a net book value of approximately
$7,552, $7,473 and $8,736 at September 30, 1995 and 1996, and June 30, 1997,
respectively.

The Company is also the lessor under sales-type leases. Leases classified as
sales-type leases generally stipulate that all lease payments be made within 30
days of the start of the lease term; however, the Company has also entered into
certain sales-type leases that allow for periodic payment throughout the term of
the lease. The Company recorded revenues of $4,427, $9,914, $4,544, $2,318 and
$6,009 and cost of products and services of $1,465, $3,422, $2,223, $1,023 and
$2,054 in the years ended September 30, 1994 1995 and 1996, and in the unaudited
nine months ended June 30, 1996 and 1997, respectively, related to sales-type
leases.

Equipment under leases which do not qualify as sales-type leases are
accounted for as operating leases. Leases of this type include distributor
leases, as detailed above, and dealer leases. Under dealer leases, dealers
receive exclusive rights to subrent the Company's lighting equipment in a
certain geographic area. The Company provides the lighting equipment to the
dealers, who pay a monthly rental fee to the Company.

Future minimum lease payments receivable, including those which relate to
sales-type leases and are included in other assets, are as follows:

<TABLE>
<CAPTION>
SALES-TYPE OPERATING
------------------------------ --------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1996
--------------- JUNE 30, 1997 ------------- JUNE 30,
------------- 1997
(UNAUDITED) -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Year one............................. $ 344 $ 181 $ 929 $ 1,798
Year two............................. 303 102 920 1,830
Year three........................... 151 -- 785 1,577
Year four............................ -- -- 519 1,329
Year five............................ -- -- 209 1,089
Thereafter........................... -- -- 20 19
----- ----- ------ -----------
Total minimum lease payments......... 798 283 $ 3,382 $ 7,642
------ -----------
------ -----------
Less amount representing interest.... (105) (28)
----- -----
Present value of net minimum lease
payments........................... 693 255
Less current portion................. (279) (177)
----- -----
Long-term lease receivables.......... $ 414 $ 78
----- -----
----- -----
</TABLE>

F-14
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE G--LEASES: (CONTINUED)
AS LESSEE

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

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1995 1996
--------- --------- JUNE 30,
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
Computers and equipment under capital leases............ $ 2,563 $ 2,563 $ 2,563
Less accumulated depreciation........................... (2,014) (2,144) (2,241)
--------- --------- -----------
Property under capital leases, net...................... $ 549 $ 419 $ 322
--------- --------- -----------
--------- --------- -----------
</TABLE>

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

<TABLE>
<CAPTION>
CAPITAL OPERATING
------------------------------ --------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1996
--------------- JUNE 30, 1997 ------------- JUNE 30,
------------- 1997
(UNAUDITED) -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
1997................................. $ 223 $ 136 $ 1,109 $ 1,132
1998................................. 99 63 897 802
1999................................. 44 -- 527 454
2000................................. -- -- 400 243
2001................................. -- -- -- --
----- ----- ------ -----------
Total minimum lease payments......... 366 199 $ 2,933 $ 2,631
------ -----------
------ -----------
Less amount representing interest.... (18) (14)
----- -----
Present value of net minimum lease
payments........................... 348 185
Less current portion................. (200) (134)
----- -----
Long-term lease obligations.......... $ 148 $ 51
----- -----
----- -----
</TABLE>

Rental expense for the years ended September 30, 1994, 1995 and 1996, and
the unaudited nine months ended June 30, 1996 and 1997 was approximately $1,347,
$1,957, $2,397, $1,760 and $1,956, respectively.

In December 1995, the Company entered into a lease agreement with an
unaffiliated entity ("Lessor") for land to be used as the site for a new
corporate facility. After the initial non-cancelable lease term, ending in
December 2000, the lease may be renewed for up to six additional five-year terms
by agreement of the parties. If the lease is not renewed or is otherwise
terminated, the Company may be required to make a residual termination payment
equal to 85% of the $3,600 paid by the lessor to acquire the land. In addition,
the Company has an option to purchase the land during the term of the lease for
a price equal to the Lessor's cost. Rent payable under the lease is based upon
the $3,600 spent by the Lessor to acquire the land and the Lessor's cost of
funds from time to time. At September 30, 1996 and June 30, 1997, the Company
had a swap agreement with one

F-15
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE G--LEASES: (CONTINUED)
of its primary lenders relating to a notional amount of $3,600, which
effectively changes the Company's variable rent exposure on this lease to a
fixed annual amount of $388. This swap agreement matures in October 2000. The
Company is exposed to credit loss in the event of nonperformance by the other
party to the interest rate swap agreement. However, the Company does not
anticipate nonperformance by the other party. Future minimum rental commitments
and rent expense for the year ended September 30, 1996, and the unaudited nine
months ended June 30, 1996 and 1997, have been included in the amounts above.

NOTE H--INCOME TAXES:

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
U.S. Federal..................................................... $ 1,273 $ 1,289 $ 100 $ 87 $ 104
State............................................................ -- 217 54 46 56
International.................................................... 169 829 957 731 998
Deferred:
U.S. Federal..................................................... 860 906 992 (50) 787
State............................................................ 20 217 135 (1) 109
International.................................................... 78 (421) -- -- --
--------- --------- --------- --- ---------
$ 2,400 $ 3,037 $ 2,238 $ 813 $ 2,054
--------- --------- --------- --- ---------
--------- --------- --------- --- ---------
</TABLE>

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

<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income tax expense at U.S. statutory rate.......................... $ 2,289 $ 2,635 $ 1,821 $ 663 $ 1,644
Cumulative effect of change in accounting principle................ 90 -- -- -- --
International taxes................................................ 119 153 255 93 230
State taxes........................................................ -- 434 189 69 170
Foreign and general business tax credits........................... (128) (300) (100) -- --
Other--primarily permanent differences............................. 30 115 73 (12) 10
--------- --------- --------- --- ---------
$ 2,400 $ 3,037 $ 2,238 $ 813 $ 2,054
--------- --------- --------- --- ---------
--------- --------- --------- --- ---------
</TABLE>

Deferred income taxes have been provided for the temporary differences
between the financial reporting bases and the tax bases of the Company's assets
and liabilities. Deferred income taxes resulted principally from the use of
accelerated depreciation for tax purposes and straight-line depreciation for
financial reporting purposes.

F-16
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE H--INCOME TAXES: (CONTINUED)
In 1995 and 1996 and for the unaudited nine months ended June 30, 1996 and
1997, there was no valuation allowance at the beginning or end of the respective
fiscal period.

For tax purposes, the Company has approximately $1,500 of foreign tax
credits that expire in 1997 through 2001. In addition, approximately $542 of
alternative minimum tax credits (which do not expire) and approximately $165 of
tax benefits related to net operating loss carryforwards (which expire in 2011)
are available to offset future regular tax liability. The benefit of these tax
credit carryforwards has been recognized for financial statement purposes as
part of deferred taxes.

International income taxes relate to the results of operations of the
wholly-owned subsidiaries, Vari-Lite Asia, Inc., Vari-Lite Hong Kong Limited and
VLEH, as well as to withholding taxes on revenue generated by the Company's
foreign distributors.

NOTE I--EMPLOYEE BENEFIT PLANS:

The Company has a defined contribution 401(k) plan in which substantially
all its U.S. employees can elect to be participants. Under the terms of the
401(k) plan, employees can defer up to 20% of their earnings up to the permitted
maximum as defined by IRS regulations. The Company matches 50% of the employee's
contribution up to 5% of the employee's earnings during the plan year. During
the years ended September 30, 1994, 1995 and 1996, and for the unaudited nine
months ended June 30, 1996 and 1997, the Company's cost to match employee
contributions was approximately $150, $300, $242, $195 and $193, respectively.

Substantially all employees of VLEH may elect to be participants in the
Vari-Lite Europe Pension Plan. The plan is a defined contribution plan under
which employees may contribute up to 3% of their base salaries. The Company
makes contributions at a rate of 200% of the employee contributions, with
additional contributions made for certain key employees. The Company incurred
costs of $46, $140, $156, $114 and $150, representing matching contributions for
the years ended September 30, 1994, 1995 and 1996, and for the unaudited nine
months ended June 30, 1996 and 1997, respectively.

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

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

F-17
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE I--EMPLOYEE BENEFIT PLANS: (CONTINUED)
For the years ended September 30, 1995 and 1996 and the unaudited nine
months ended June 30, 1996 and 1997, the Company recorded contributions of $750,
$250, $186 and $189 for contributions to the ESOP and ESEP, representing
approximately , , and shares of common stock, respectively.

F-18
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE J--OPERATIONS BY GEOGRAPHIC AREA:

The income statement and balance sheet information by geographic area is
summarized in the following table:

<TABLE>
<CAPTION>
UNITED
STATES ASIA EUROPE INTERCOMPANY TOTAL
------------ --------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
September 30, 1994
- -----------------------------------------------------
Net Revenues......................................... $ 37,903 $ 7,141 $ 12,744 $ (3,976) $ 53,812
Net Income........................................... 3,280 51 247 -- 3,578
September 30, 1995
- -----------------------------------------------------
Net Revenues......................................... $ 43,443 $ 9,779 $ 25,337 $ (3,649) $ 74,910
Net Income........................................... 3,381 773 560 -- 4,714
September 30, 1996
- -----------------------------------------------------
Net Revenues......................................... $ 45,253 $ 11,401 $ 26,584 $ (6,100) $ 77,138
Net Income........................................... 1,590 1,153 376 -- 3,119
June 30, 1996 (unaudited)
- -----------------------------------------------------
Net Revenues......................................... $ 31,824 $ 7,524 $ 18,313 $ (4,230) $ 53,431
Net Income........................................... 584 560 (8) -- 1,136
June 30, 1997 (unaudited)
- -----------------------------------------------------
Net Revenues......................................... $ 40,307 $ 9,410 $ 23,408 $ (6,037) $ 67,088
Net Income........................................... 1,626 768 389 -- 2,783
</TABLE>

<TABLE>
<CAPTION>
UNITED
STATES ASIA EUROPE INTERCOMPANY TOTAL
------------ --------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
September 30, 1994
- -----------------------------------------------------
Assets............................................... $ 53,317 $ 5,349 $ 13,068 $ (14,511) $ 57,223
Liabilities.......................................... 33,589 2,545 11,691 (7,233) 40,592
September 30, 1995
- -----------------------------------------------------
Assets............................................... $ 68,722 $ 5,698 $ 15,591 ($ 17,004) $ 73,007
Liabilities.......................................... 46,004 3,191 13,522 (11,039) 51,678
September 30, 1996
- -----------------------------------------------------
Assets............................................... $ 69,052 $ 4,760 $ 13,529 ($ 9,768) $ 77,573
Liabilities.......................................... 44,615 2,486 10,838 (4,904) 53,035
June 30, 1996 (unaudited)
- -----------------------------------------------------
Assets............................................... $ 67,283 $ 6,205 $ 15,440 $ (12,639) $ 76,289
Liabilities.......................................... 44,619 3,330 12,947 (6,673) 54,223
June 30, 1997 (unaudited)
- -----------------------------------------------------
Assets............................................... $ 78,738 $ 5,519 16,760 $ (11,092) $ 89,925
Liabilities.......................................... 53,275 2,143 13,175 (6,228) 62,365
</TABLE>

F-19
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)

FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996, (UNAUDITED)

AS TO THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

(IN THOUSANDS EXCEPT SHARE DATA)

NOTE K--RELATED PARTY TRANSACTIONS:

Certain directors provided consulting services to the Company and received
fees totaling approximately $526, $424, $512, $374 and $467 for the years ended
September 30, 1994 and 1995 and 1996 and for the unaudited nine months ended
June 30, 1996 and 1997, respectively.

At September 30, 1996 and June 30, 1997, the Company had notes receivable
from stockholders totaling $353 and $186, respectively, related to common stock
purchases. The notes bear interest at various rates, mature at various times,
and are collateralized by and shares of common stock
at September 30, 1996 and June 30, 1997, respectively.

The Company received from a stockholder of the Company $1,500, $900, $0 and
$1,942 in the years ended September 30, 1994, 1995 and 1996 and the nine months
ended June 30, 1997, respectively, for the rental of automated lighting products
and other services.

NOTE L--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):

The following summarizes the unaudited quarterly results of operations for
the years ended September 30, 1995 and 1996, and the nine months ended June 30,
1997:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1995
--------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
------------ ----------- --------- ------------
<S> <C> <C> <C> <C>
Revenues...................................................... $ 18,648 $ 17,234 $ 19,314 $ 19,714
Income before income taxes.................................... 3,670 1,277 1,533 1,271
Net income.................................................... 2,232 777 932 773
Net income per share..........................................

YEAR ENDED SEPTEMBER 30, 1996
--------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
------------ ----------- --------- ------------
<S> <C> <C> <C> <C>
Revenues...................................................... $ 16,791 $ 16,995 $ 19,645 $ 23,707
Income before income taxes.................................... 359 113 1,476 3,409
Net income.................................................... 209 66 861 1,983
Net income per share..........................................
<CAPTION>

YEAR ENDED SEPTEMBER 30, 1997
------------------------------------
DECEMBER 31 MARCH 31 JUNE 30
------------ ----------- ---------
<S> <C> <C> <C> <C>
Revenues...................................................... $ 22,326 $ 22,384 $ 22,378
Income before income taxes.................................... 1,551 1,372 1,914
Net income.................................................... 892 789 1,102
Net income per share..........................................
</TABLE>

F-20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
STOCKHOLDERS OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.

-------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................
Risk Factors..............................................................
Use of Proceeds...........................................................
Dividend Policy...........................................................
Dilution..................................................................
Capitalization............................................................
Selected Consolidated Financial Data......................................
Management's Discussion and Analysis of Financial Condition and Results of
Operations..............................................................
Business..................................................................
Management................................................................
Principal Stockholders....................................................
Selling Stockholders......................................................
Description of Capital Stock Shares Eligible for Future Sale..............
Underwriting..............................................................
Legal Matters.............................................................
Experts...................................................................
Additional Information....................................................
Index to Consolidated Financial Statements................................
</TABLE>

-------------------

UNTIL , 1997 (25 DAYS AFTER
COMMENCEMENT OF THE OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

[VARI-LITE LOGO]

COMMON STOCK
-----------------

PROSPECTUS

-----------------

[LOGO]

, 1997

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The Registrant estimates that expenses to be paid by the Company in
connection with the offering described in this Registration Statement will be as
follows. All of the amounts except the SEC registration fee, the NASD fee and
the Nasdaq National Market listing fee are estimates.

<TABLE>
<CAPTION>
ITEM AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
SEC registration fee.............................................................. $ 9,410
NASD fee.......................................................................... 3,605
Nasdaq National Market listing fee................................................
Legal fees and expenses........................................................... 200,000
Accounting fees and expenses...................................................... 200,000
Printing expenses................................................................. 100,000
Fees and expenses for qualification under state securities laws (including legal
fees)........................................................................... 5,000
Transfer agent's and registrar's fees and expenses................................ 20,000
Miscellaneous.....................................................................
----------
Total........................................................................... $ 600,000*
----------
----------
</TABLE>

- -------

* None of this amount is to be borne by the Selling Stockholders.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant is incorporated under the laws of Delaware. Section 145 of
the Delaware General Corporation Law provides that a Delaware corporation may
indemnify any person against expenses, fines and settlements actually and
reasonably incurred by any such person in connection with a threatened, pending
or completed action, suit or proceeding in which he is involved by reason of the
fact that he is or was a director, officer, employee or agent of such
corporation, provided that (i) he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and (ii) with respect to any criminal action or proceeding, he had
no reasonable cause to believe his conduct was unlawful. If the action or suit
is by or in the name of the corporation, the corporation may indemnify any such
person against expenses actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interest of the corporation, except that no indemnification may be made in
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation, unless and only to the extent that the Delaware Court
of Chancery or the court in which the action or suit is brought determines upon
application that, despite the adjudication of liability but in light of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.

As permitted by the Delaware General Corporation Law, the Certificate of
Incorporation provides that the directors and officers of the Registrant shall
be indemnified by the Registrant against certain liabilities that those persons
may incur in their capacities as directors or officers. The Certificate of
Incorporation eliminates the liability of directors of the Registrant, under
certain circumstances, to the maximum extent permitted by the Delaware General
Corporation Law. See "Description of Capital Stock--Special Provisions of the
Certificate of Incorporation and By-Laws" included in the Prospectus.

II-1
<PAGE>
The Company has entered into Indemnification Agreements with the directors
and officers of the Company and certain of its subsidiaries pursuant to which
the Company has agreed to indemnify such individuals to the fullest extent
authorized by the Delaware General Corporation Law.

The Underwriting Agreement filed as Exhibit 1.1 hereto contains reciprocal
agreements of indemnity between the Registrant and the Underwriters as to
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"), and in certain circumstances provides for
indemnification of the Registrant's directors and officers.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since June 30, 1994 the Registrant has issued and sold the following
securities (all such amounts having been adjusted to reflect the reincorporation
of the Registrant as a Delaware corporation pursuant to a merger with Vari-Lite
International, Inc., a Texas corporation ("Vari-Lite Texas"), which will be
effected immediately prior to the consummation of the Offering and pursuant to
which the two classes of Common Stock of Vari-Lite Texas will be converted into
the Registrant's Common Stock on a -for- basis) without registration
under the Securities Act (none of which sales were underwritten):

On September 28, 1994, the Registrant issued shares of Common Stock at
a purchase price of $ per share to Michael P. Herman, an officer and employee
of the Registrant. Exemption from registration was claimed under Section 4(2) of
the Securities Act regarding transactions by an issuer not involving any public
offering.

On March 31, 1995, the Registrant issued shares of Common Stock at a
purchase price of $ per share to Brian L. Croft, an officer and employee of a
subsidiary of the Registrant. Exemption from registration was claimed under
Section 4(2) of the Securities Act regarding transactions by an issuer not
involving any public offering.

On September 15, 1995, the Registrant issued , , , ,
, and shares of Common Stock at a purchase price of $ per share to
Richard W. Bratcher, Jr., Howard Page, T. Clay Powers, Loren J. Haas, Janis C.
Pestinger, J. Scott Thompson and James E. Kinnu, respectively. Mr. Kinnu was an
officer and employee of the Registrant. Messrs. Powers, Thompson, Bratcher and
Haas and Ms. Pestinger are officers and employees of subsidiaries of the
Registrant and Mr. Page is an employee of a subsidiary of the Registrant.
Exemption from registration was claimed under Section 4(2) of the Securities Act
regarding transactions by an issuer not involving any public offering.

On September 29, 1995, the Registrant issued shares to Overton Bank and
Trust, N.A., as trustee of the Vari-Lite International, Inc. Employees' Stock
Ownership Plan ("ESOP"), as the Registrant's discretionary contribution in the
amount of $494,995.26 or $ per share to the ESOP for the 1995 calendar plan
year. Exemption from registration was claimed under Section 4(2) of the
Securities Act regarding transactions by an issuer not involving any public
offering.

On July 31, 1996, the Registrant issued warrants to purchase shares of
Common Stock at an exercise price of $ per share to certain members of the
Company's bank syndicate. Exemption from registration was claimed under Section
4(2) of the Securities Act regarding transactions by an issuer not involving any
public offering.

On February 6, 1997, the Registrant issued shares to Bank of
Butterfield International (Cayman) Ltd., as trustee of the Vari-Lite
International, Inc. Employees' Stock Equivalence Plan ("ESEP"), as the
Registrant's discretionary contribution in the amount of $248,340.35, the ESEP
for the 1995 calendar plan year. Exemption from registration was claimed under
Section 4(2) of the Securities Act regarding transactions by an issuer not
involving any public offering.

On February 6, 1997, the Registrant issued shares to Overton Bank and
Trust, N.A., as trustee of the ESOP, as the Registrant's additional
discretionary contribution in the amount of $6,683.63 or $ per share to

II-2
<PAGE>
the ESOP for the 1995 calendar plan year. Exemption from registration was
claimed under Section 4(2) of the Securities Act regarding transactions by an
issuer not involving any public offering.

On June 30, 1997, the Registrant issued shares to Overton Bank and
Trust, N.A., as trustee of the ESOP, as the Registrant's discretionary
contribution in the amount of $174,652.86 or $ per share to the ESOP for the
1996 calendar plan year. Exemption from registration was claimed under Section
4(2) of the Securities Act regarding transactions by an issuer not involving any
public offering.

On June 30, 1997, the Registrant issued shares to Bank of Butterfield
International (Cayman) Ltd., as trustee of the ESEP, as the Registrant's
discretionary contribution in the amount of $75,318.26 or $ per share to the
ESEP for the 1996 calendar plan year. Exemption from registration was claimed
under Section 4(2) of the Securities Act regarding transactions by an issuer not
involving any public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <C> <S>
*1.1 -- Form of Underwriting Agreement

3.1 -- Certificate of Incorporation of the Registrant

*3.2 -- By-Laws of the Registrant

*4.1 -- Form of certificate representing shares of the Registrant's Common Stock

4.2 -- Warrant Agreement, dated as of July 31, 1996, among the Registrant, Brown Brothers Harriman &
Co., NBD Bank, SunTrust Bank, Atlanta (formerly known as Trust Company Bank) and Comerica
Bank--Texas

*5.1 -- Legal Opinion of Gardere & Wynne, L.L.P. regarding legality of securities being registered

10.1 -- Employment Agreement, dated as of July 1, 1995, between the Registrant and H. R. Brutsche III

*10.2 -- Amendment No. 1, dated as of August 11, 1997, to the Employment Agreement, dated as of July 1,
1995, between the Registrant and H.R. Brutsche III

10.3 -- Consulting Agreement, dated as of July 1, 1995, between the Registrant and J. Anthony Smith

10.4 -- Consulting Agreement, dated as of July 1, 1995, between the Registrant and John D. Maxson

*10.5 -- Amendment No. 1, dated as of August 11, 1997, to the Consulting Agreement, dated as of July 1,
1995, between the Registrant and John D. Maxson

10.6 -- Consulting Agreement, dated as of July 1, 1995, between the Registrant and James H. Clark, Jr.

10.7 -- Deferred Compensation Agreement, dated as of July 1, 1995, between the Registrant and H. R.
Brutsche III

10.8 -- Deferred Compensation Agreement, dated as of July 1, 1995, between the Registrant and John D.
Maxson

10.9 -- Deferred Compensation Agreement, dated as of July 1, 1995, between the Registrant and James H.
Clark, Jr.

10.10 -- Deferred Compensation Agreement, dated as of July 1, 1995, between the Registrant and J. Anthony
Smith
</TABLE>

II-3
<PAGE>
<TABLE>
<C> <C> <S>
10.11 -- Compensation Continuation Agreement, dated as of March 31, 1994, among the Registrant,
Vari-Lite, Inc., Showco, Inc. and H. R. Brutsche III

10.12 -- Compensation Continuation Agreement, dated as of March 31, 1994, among the Registrant,
Vari-Lite, Inc., Showco, Inc. and John D. Maxson

10.13 -- Compensation Continuation Agreement, dated as of March 31, 1994, among the Registrant,
Vari-Lite, Inc., Showco, Inc. and James H. Clark, Jr.

10.14 -- Statement and Terms of Employment, dated as of April 1, 1994, between Vari-Lite Europe Ltd. and
Brian L. Croft

*10.15 -- Split-Dollar Agreement, dated as of October 12, 1995, among the Registrant, Brown Brothers
Harriman Trust Company of Texas, trustee of the H.R. Brutsche III Insurance Trust, and H. R.
Brutsche III

*10.17 -- Amended and Restated Split-Dollar Agreement, dated as of October 12, 1997, among the Registrant,
Brown Brothers Harriman Trust Company of Texas, trustee of the John D. Maxson 1995 Irrevocable
Trust, and John D. Maxson

*10.18 -- Amended and Restated Split-Dollar Life Insurance Agreement, dated as of October 12, 1995, among
the Registrant, James Howard Cullum Clark and James H. Clark, Jr.

*10.19 -- Amended and Restated Split-Dollar Agreement, dated as of October 12, 1995, between the
Registrant, James Howard Cullum Clark and James H. Clark, Jr.

*10.20 -- Vari-Lite International, Inc. 1997 Omnibus Plan

*10.21 -- First Amendment to Vari-Lite International, Inc. 1997 Omnibus Plan

10.22 -- Vari-Lite International, Inc. Employees' Stock Ownership Plan

*10.23 -- Vari-Lite International, Inc. Employees' Stock Equivalence Plan

*10.24 -- Vari-Lite International, Inc. Annual Incentive Plan

*10.25 -- First Amendment to Vari-Lite International, Inc. Annual Incentive Plan

10.26 -- Credit Agreement, dated as of March 31, 1994, among the Registrant and all of its subsidiaries
and Brown Brothers Harriman & Co., Coutts & Co., NBD Bank, N.A., Trust Company Bank and
Comerica Bank--Texas

10.27 -- Amendment No. 1 to Credit Agreement, dated as of July 1, 1994, among the Registrant and all of
its subsidiaries and Brown Brothers Harriman & Co., Coutts & Co., NBD Bank, N.A., Trust
Company Bank and Comerica Bank--Texas

10.28 -- Amendment No. 2 to Credit Agreement, dated as of September 30, 1994, among the Registrant and
all of its subsidiaries and Brown Brothers Harriman & Co., Coutts & Co., NBD Bank, N.A., Trust
Company Bank and Comerica Bank--Texas

10.29 -- Amendment No. 3 to Credit Agreement, dated as of February 22, 1995, among the Registrant and all
of its subsidiaries and Brown Brothers Harriman & Co., Coutts & Co., NBD Bank, N.A., Trust
Company Bank and Comerica Bank--Texas

10.30 -- Amendment No. 4 to Credit Agreement, dated as of November 22, 1995, among the Registrant and all
of its subsidiaries and Brown Brothers Harriman & Co., Coutts & Co., NBD Bank, N.A., Trust
Company Bank and Comerica Bank--Texas

10.31 -- Amendment No. 5 to Credit Agreement, dated as of December 18, 1995, among the Registrant and all
of its subsidiaries and Brown Brothers Harriman & Co., Coutts & Co., NBD Bank, SunTrust Bank,
Atlanta and Comerica Bank--Texas
</TABLE>

II-4
<PAGE>
<TABLE>
<C> <C> <S>
10.32 -- Amendment No. 6 to Credit Agreement, dated as of May 20, 1996, among the Registrant and all of
its subsidiaries and Brown Brothers Harriman & Co., Coutts & Co., NBD Bank, SunTrust Bank,
Atlanta and Comerica Bank--Texas

10.33 -- Amendment No. 7 to Credit Agreement, dated as of July 31, 1996, among the Registrant and all of
its subsidiaries and Brown Brothers Harriman & Co., Coutts & Co., NBD Bank, SunTrust Bank,
Atlanta and Comerica Bank--Texas

10.34 -- Amendment No. 8 to Credit Agreement, dated as of January 16, 1997, among the Company and all of
its subsidiaries and Brown Brothers Harriman & Co., Coutts & Co., NBD Bank, SunTrust Bank,
Atlanta and Comerica Bank--Texas

10.35 -- Employment Agreement, dated as of August 28, 1995, by and between the Registrant and James E.
Kinnu

10.36 -- Severance Agreement, dated as of September 30, 1996, by and between the Registrant and James E.
Kinnu

10.37 -- Ground Lease, dated as of December 21, 1995, among Brazos Beltline Development, Inc. and
Vari-Lite, Inc., Showco, Inc., Ignition! Creative Services, Inc., Concert Production Lighting,
Inc. and Irideon, Inc.

10.38 -- Guaranty, dated as of December 21, 1995, by the Registrant

*10.39 -- Form of Indemnification Agreement with Directors and Officers

21.1 -- List of Registrant's Subsidiaries

23.1 -- Consent of Deloitte & Touche LLP

*23.2 -- Consent of Gardere & Wynne, L.L.P. (included in Exhibit 5.1)

24.1 -- Power of attorney (set forth on page II - )

27.1 -- Financial Data Schedule
</TABLE>

- -------

* To be filed by amendment

(b) Financial Statement Schedules

Not applicable

ITEM 17. UNDERTAKINGS.

(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(b) The undersigned Registrant hereby undertakes to provide to the
representatives of the underwriters at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in such names as
required by the representatives of the underwriters to permit prompt delivery to
each purchaser.

II-5
<PAGE>
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas and State of Texas
on the 13th day of August, 1997.

<TABLE>
<S> <C> <C>
VARI-LITE INTERNATIONAL, INC.

By: /s/ H.R. BRUTCHE, III
-----------------------------------------
H.R. Brutche, III
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY

Each of the undersigned hereby appoints H. R. Brutsche III and Michael P.
Herman and each of them (with full power to act alone) as attorneys and agents
for the undersigned, with full power of substitution, for and in the name, place
and stead of the undersigned, to sign and file with the Securities and Exchange
Commission under the Securities Act of 1933 any and all amendments and exhibits
to this Registration Statement and any and all applications, instruments and
other documents to be filed with the Securities and Exchange Commission
pertaining to the registration of the securities covered hereby, with full power
and authority to do and perform any and all acts and things whatsoever requisite
or desirable.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 13th day of August, 1997.

NAME TITLE
- ------------------------------ -----------------------------------------------

/s/ H.R. BRUTCHE, III Chairman of the Board, President and Chief
- ------------------------------ Executive Officer (Principal Executive
H.R. Brutche, III Officer)

/s/ MICHAEL P. HERMAN Vice President--Finance, Chief Financial
- ------------------------------ Officer and Secretary (Principal Financial
Michael P. Herman and Accounting Officer)

/s/ JAMES H. CLARK, JR.
- ------------------------------ Director
James H. Clark, Jr.

/s/ JOHN D. MAXSON
- ------------------------------ Director
John D. Maxson

/s/ C. VINCENT PROTHRO
- ------------------------------ Director
C. Vincent Prothro

/s/ JOHN R. RETTBERG
- ------------------------------ Director
John R. Rettberg

/s/ J. ANTHONY SMITH
- ------------------------------ Director
J. Anthony Smith

II-7
<PAGE>
INDEX TO EXHIBITS