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REGISTRATION RIGHTS AGREEMENT    
  

    AGREEMENT dated as of January 12, 2001among (i) among Merrill Communications LLC, a Delaware limited liability company (the
"Company"), (ii) Merrill Real Estate Company, a Minnesota corporation, Merrill/Magnus Publishing Corporation, a Minnesota corporation, Merrill/New York
Company, a Minnesota corporation, Merrill/May Inc., a Minnesota corporation, Merrill Alternatives, Inc., a Minnesota corporation, Merrill International, Inc., a Minnesota corporation,
FMC Resource Management Corporation, a Washington corporation, Merrill Training & Technology, Inc., a Minnesota corporation, Merrill/Global, Inc., a Minnesota corporation and
Merrill/Executech, Inc., a Minnesota corporation (collectively, the "Subsidiary Guarantors") and Merrill Corporation, a Minnesota corporation
("Holdings" and, together with the Subsidiary Guarantors, the "Guarantors"), and (iii) DLJMB
Funding II, Inc., DLJ First ESC, L.P. and DLJ ESC II, L.P. (collectively, together with their Affiliates (as defined below), the "DLJ Entities")
and John W. Castro, in his individual capacity ("Mr. Castro"). Mr. Castro and the DLJ Entities are herein referred to as the
"Initial Holders". 

 
 

W I T N E S S E T H    
  

    WHEREAS, the Company has proposed to issue and sell $23,464,660.77 aggregate principal amount at maturity of its 14% Senior Discount Notes due 2008 (the
"Initial Notes"), issued pursuant to the Note Purchase Agreement dated as of January 12, 2001 (the "Note Purchase
Agreement") among the Company, the Guarantors and the Initial Holders and the form of Indenture attached as Exhibit A to the Initial Notes (the
"Indenture"), for an aggregate purchase price of $9,100,000, and the Guarantors have agreed to guarantee (collectively, the
"Guarantees") the Company's obligations under the Notes (as defined herein) and the Indenture; and 

    WHEREAS,
to induce the Initial Holders to purchase the Initial Notes, the Company and the Guarantors have agreed to provide the rights set forth in this Agreement; 

    NOW,
THEREFORE, the parties hereby agree as follows: 

 
 

SECTION 1.  DEFINITIONS    
  

    As used in this Agreement, the following capitalized terms shall have the following meanings: 

    Act: The Securities Act of 1933, as amended. 

    Affiliate: As defined in Rule 144 of the Act. 

    Affiliated Market Maker: A Broker-Dealer who is (or that, in the reasonable judgment of such Broker-Dealer or
its counsel, may be) (i) deemed to be an Affiliate of the Company or (ii) otherwise required to deliver a prospectus in connection with sales or market-making activities involving
securities of the Company. 

    Broker-Dealer: Any broker or dealer registered under the Exchange Act. 

    Business Day: Any day other than a Saturday, a Sunday or a day on which banking institutions in the City of New
York are authorized by law, regulation or executive order to remain closed. 

    Commission: The Securities and Exchange Commission. 

    Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence
of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement effective continuously and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section
3(b) hereof and (c) the delivery by the Company to the Registrar under the Indenture of Series B Notes in the same aggregate principal amount as the aggregate principal amount of
Initial Notes tendered by Holders thereof pursuant to the Exchange Offer. 

 

    Consummation Date: The date on which the Exchange Offer is consummated. 

    Consummation Deadline: As defined in Section 3(b) hereof. 

    Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof. 

    Exchange Act: The Securities Exchange Act of 1934, as amended. 

    Exchange Offer: The exchange and issuance by the Company of a principal amount of Series B Notes (which
shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding principal amount of Initial Notes that are tendered by such Holders in connection with such exchange
and issuance. 

    Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the
related Prospectus. 

    Filing Trigger Date: As defined in Section 4(a) hereof. 

    Filing Deadline: As defined in Sections 3(a) and 4(a) hereof. 

    Holders: As defined in Section 2 hereof. 

    Prospectus: The prospectus included in a Registration Statement at the time such Registration Statement is
declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into
such prospectus. 

    Recommencement Date: As defined in Section 6(d) hereof. 

    Registration Request: As defined in Section 3(a) hereof. 

    Registration Statement: Any registration statement of the Company and the Guarantors relating to (a) an
offering of Series B Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case,
(i) that is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included therein, all amendments and supplements to such registration statement
(including post-effective amendments) and all exhibits and material incorporated by reference therein. 

    Rule 144: Rule 144 promulgated under the Act. 

    Series B Notes: The Company's 14% Series B Senior Discount Notes due 2008 to be issued:
(i) in the Exchange Offer or (ii) as contemplated by Section 6(b) hereof. 

    Shelf Registration Statement: As defined in Section 4 hereof. Suspension Notice: As defined in Section 6(d)
hereof. 

    TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the
Indenture. 

    Transfer Restricted Securities: Each (i) Initial Note, until the earliest to occur of (a) the
date on which such Initial Note is exchanged in the Exchange Offer for a Series B Note which is entitled to be resold to the public by the Holder thereof without complying with the prospectus
delivery requirements of the Act, (b) the date on which such Initial Note has been disposed of in accordance with a Shelf Registration Statement (and the purchasers thereof have been issued
Series B Notes), and (c) the date on which such Initial Note is distributed to the public pursuant to Rule 144 under the Act (and purchasers thereof have been issued
Series B Notes) and (ii) Series B Note issued to a Broker-Dealer until the date on which such Series B Note is disposed of by such Broker-Dealer pursuant to the "Plan 

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of Distribution" contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein). 

 
 

SECTION 2.  HOLDERS    
  

    A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person is
the holder of record of Transfer Restricted Securities. 

 
 

SECTION 3.  REGISTERED EXCHANGE OFFER    
  

    (a) If
the Company shall receive at any time a written request by Holders owning at least a majority of the aggregate principal amount of the Initial Notes then
outstanding (the "Registration Request") that the Company and the Guarantors effect the Exchange Offer, then unless the Exchange Offer shall not be
permitted by applicable federal law (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Guarantors shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable after the Registration Request, but in no event later than 90 days after the Registration Request (such 90th day being the
"Filing Deadline"), (ii) use their reasonable best efforts to cause such Exchange Offer Registration Statement to become effective at the
earliest possible time, but in no event later than 180 days after the Registration Request (such 180th day being the "Effectiveness Deadline"),
(iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective,
(B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) subject to the proviso in Section
6(c)(xii), cause all necessary filings, if any, in connection with the registration and qualification of the Series B Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and, within the time period contemplated by
Section 3(b) hereof, Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting (i) registration of the Series B Notes to be offered in exchange
for the Initial Notes that are Transfer Restricted Securities and (ii) resales of Series B Notes by Broker-Dealers that tendered into the Exchange Offer Initial Notes that such
Broker-Dealer acquired for its own account as a result of market-making activities or other trading activities (other than Initial Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below. 

    (b) The
Company and the Guarantors shall use their respective reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously,
and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however,
that in no event shall such period be less than 20 Business Days. The Company and the Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No
securities other than the Series B Notes shall be included in the Exchange Offer Registration Statement. The Company and the Guarantors shall use their reasonable best efforts to cause the
Exchange Offer to be Consummated within 30 Business Days after the Exchange Offer Registration Statement has become effective, but in no event later than 40 Business Days thereafter (such 40th day
being the "Consummation Deadline"). 

    (c) The
Company shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any
Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Initial
Notes acquired directly from the Company or any Affiliate of the Company), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section shall
also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such 

3

 

sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the
extent required by the Commission. 

    Because
such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in
connection with its initial sale of any Series B Notes received by such Broker-Dealer in the Exchange Offer, the Company and the Guarantors shall permit the use of the Prospectus contained in
the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement for a period of 90 days following the Consummation Date. To the extent necessary to
ensure that the Prospectus contained in the Exchange Offer Registration Statement is available for sales of Series B Notes by Broker-Dealers, the Company and the Guarantors agree to use their
respective reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the provisions of Section
6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time,
for a period of 90 days from the Consummation Deadline or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant
thereto. The Company and the Guarantors shall provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers, promptly upon request, at any time during such period. 

 
 

SECTION 4.  SHELF REGISTRATION    
  

    (a)  Shelf Registration.  If (i) the Exchange Offer is not permitted by applicable law (after the
Company and the Guarantors have complied with the procedures set forth in Section 6(a)(i) below) or (ii) if any Holder shall notify the Company within 20 Business Days following the
Consummation Deadline that (A) based on an opinion of counsel, such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder is a
Broker-Dealer and holds Initial Notes
acquired directly from the Company or any of its Affiliates, then the Company and the Guarantors shall: 

    (x) cause
to be filed, on or prior to the date (the "Filing Deadline") that is 90 days after the date (the "Filing Trigger Date") that is the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration Statement cannot be filed as a result of Section 4(a)(i) above and (ii) the date on which the Company receives
the notice specified in Section 4(a)(ii) above, a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement)
(the "Shelf Registration Statement"), relating to all Transfer Restricted Securities, in the case of clause (a)(i) above or to the Transfer
Restricted Securities specified in any notice delivered pursuant to clause (a)(ii) above, as the case may be, and 

    (y) shall
use their respective reasonable best efforts to cause such Shelf Registration Statement to become effective on or prior to 180 days after the Filing Trigger
Date for the Shelf Registration Statement (such 180th day the "Effectiveness Deadline"). 

    If,
after the Company has filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Company is required to file and make
effective a Shelf Registration Statement solely because the Exchange Offer is not permitted under applicable federal law (i.e., Section 4(a)(i) above), then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause (x) above; provided that, in such event, the Company shall remain obligated to meet the Effectiveness Deadline set forth in
clause (y). 

    To
the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this
Section 4(a) and the 

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other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and the Guarantors shall use their respective reasonable best efforts to keep any Shelf
Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and
(c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, until the later of
(a) the date on which each of the Initial Holders is no longer deemed to be an Affiliate of the Company, and (b) the earlier of the second anniversary of the Registration Request (as
such date may be extended pursuant to Section 6(d) hereof) and such earlier date when no Transfer Restricted Securities covered by such Shelf Registration Statement remain outstanding 

    (b)  Provision by Holders of Certain Information in Connection with the Shelf Registration Statement.  No
Holder may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20
days after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading. 

    (c)  Expiration of Rights.  Holders that do not give the written notice within the 20 Business Day period
set forth in Section 4(a) hereof, if required to be given, will no longer have any registration rights pursuant to this Section 4. Notwithstanding the foregoing, no Affiliate of the Company
shall be required to give such written notice or deliver an opinion in order to maintain its registration rights pursuant to this Section 4. 

 
 

SECTION 5.  MARKET MAKING PROSPECTUS    
  

    For so long as any of the Initial Notes are outstanding and if, in the reasonable judgment of any Initial Holder or its counsel, such Initial Holder or any of
its Affiliates is required to deliver a prospectus (any such prospectus, a "Market Making Prospectus") in connection with sales of the Initial Notes,
the Company and the Guarantors hereby agree to (i) provide such Initial Holder, without charge, as many copies of the Market Making Prospectus as such Initial Holder may reasonably request,
(ii) periodically amend the Registration Statement so that the information contained in the Registration Statement complies with the requirements of Section 10(a) of the Act,
(iii) amend the Registration Statement or amend or supplement the Market Making Prospectus when necessary to reflect any material changes in the information provided therein and promptly file
such amendment or supplement with the Commission, (iv) provide such Initial Holder with copies of each amendment or supplement so filed and such other documents, including opinions of counsel
and "comfort" letters, as such Initial Holder may reasonably request and (v) indemnify such Initial Holder with respect to the Market Making Prospectus and, if applicable, contribute to any
amount paid or payable by such Initial Holder in a manner substantially identical to that specified in Section 8 hereof (with appropriate modifications). The Company and the Guarantors consent to the
use, subject to the provisions of the Act and the state securities or Blue Sky laws of the jurisdictions in which the Initial Notes are offered by such Initial Holder, of each Market Making
Prospectus. 

 
 

SECTION 6.  REGISTRATION PROCEDURES    
  

    (a)  Exchange Offer Registration Statement.  In connection with the Exchange Offer, the Company and the
Guarantors shall (x) comply with all applicable provisions of Section 6(c) below, (y) use their respective reasonable best efforts to effect such exchange and to permit the resale of
Series B Notes by Broker-Dealers that tendered in the Exchange Offer Initial Notes that such Broker-Dealer acquired for its own account as a result of its market-making activities or other
trading activities (other than Initial 

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Notes acquired directly from the Company or any of its Affiliates) being sold in accordance with the intended method or methods of distribution thereof, and (z) comply with all of the following
provisions: 

     (i) If,
following the date hereof there has been announced a change in Commission policy with respect to exchange offers, such as the Exchange Offer, that in the
reasonable opinion of counsel to the Company raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company and the Guarantors hereby agree to seek
a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Transfer Restricted Securities. The Company and the
Guarantors hereby agree to use their reasonable best efforts in pursuing the issuance of such a decision to the Commission staff level. 

    (ii) As
a condition to its participation in the Exchange Offer, each Holder (including, without limitation, any Holder who is a Broker Dealer) shall furnish, upon the
request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company and the Guarantors (which may be contained in the letter of transmittal contemplated by
the Exchange Offer Registration Statement) to the effect that, at the time of Consummation of the Exchange Offer, (A) any Series B Notes received by such Holder will be acquired in the
ordinary course of its business, (B) such Holder will have no arrangement or understanding with any person to participate in the distribution of the Initial Notes or the Series B Notes
within the meaning of the Act, (C) if the Holder is not a Broker-Dealer or is a Broker-Dealer but will not receive Series B Notes for its own account in exchange for Initial Notes,
neither the Holder nor any such other Person is engaged in or intends to participate in a distribution of the Series B Notes, and (D) that such Holder is not an Affiliate of the Company.
If the Holder is a Broker-Dealer that will receive Series B Notes for its own account in exchange for Initial Notes, it will represent that the Initial Notes to be exchanged for the
Series B Notes were acquired by it as a result of market-making activities or other trading activities, and will acknowledge that it will deliver a prospectus meeting the requirements of the
Act in connection with any resale of such Series B Notes. It is understood that, by acknowledging that it will deliver, and by delivering, a prospectus meeting the requirements of the Act in
connection with any resale of such Series B Notes, the Holder is not admitting that it is an "underwriter" within the meaning of the Act. 

    (iii) Prior
to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission
(A) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted
in the Commission's letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause
(i) above, (B) including a representation that neither the Company nor the Guarantors has entered into any arrangement or understanding with any Person to distribute the Series B
Notes to be received in the Exchange Offer and that, to the best of the Company's and the Guarantors' information and belief, each Holder participating in the Exchange Offer is acquiring the
Series B Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Series B Notes received in the
Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable. 

    (b)  Shelf Registration Statement.  In connection with the Shelf Registration Statement, the Company and
the Guarantors shall: 

     (i) comply
with all the provisions of Section 6(c) below and use their respective reasonable best efforts to effect such registration to permit the sale of the
Transfer Restricted Securities being 

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sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto
the Company and the Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for
the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof,
and 

    (ii) issue,
upon the request of any Holder or purchaser of Initial Notes covered by any Shelf Registration Statement contemplated by this Agreement, Series B
Notes having an aggregate principal amount equal to the aggregate principal amount of Initial Notes sold pursuant to the Shelf Registration Statement and surrendered to the Company for cancellation;
the Company shall register Series B Notes on the Shelf Registration Statement for this purpose and issue the Series B Notes to the purchaser(s) of securities subject to the Shelf
Registration Statement in the names as such purchaser(s) shall designate. 

    (c)  General Provisions.  In connection with any Registration Statement and any related Prospectus
required by this Agreement, the Company and the Guarantors shall: 

     (i) use
their respective reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the
period specified in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to
contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading
or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Guarantors shall file promptly an
appropriate amendment to such Registration Statement or a supplement to the Prospectus, as applicable, curing such defect, and, if Commission review is required, use their respective reasonable best
efforts to cause such amendment to be declared effective as soon as practicable. 

    (ii) prepare
and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; 

    (iii) advise
each Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement (in the case of the Shelf Registration Statement) and
each Affiliated Market Maker promptly and, if requested by such Person, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering
or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any 

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statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus
in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their respective reasonable best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time; 

    (iv) subject
to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to
the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; 

    (v) furnish
to each Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement (in the case of the Shelf Registration Statement)
and each Affiliated Market Maker in connection with such sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Persons, if any, for a period of at least five Business Days, and the Company will not file any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such Persons shall reasonably object within five Business Days after the
receipt thereof. Such Persons shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed,
contains an untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not
misleading, or fails to comply with the applicable requirements of the Act; 

    (vi) promptly
prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document
to each Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement (in the case of the Shelf Registration Statement) and each Affiliated Market Maker in
connection with such exchange or sale, if any, make the Company's and the Guarantor's representatives available for discussion of such document and other customary due diligence matters, and include
such information in such document prior to the filing thereof as such Persons may reasonably request; 

   (vii) make
available, at reasonable times, for inspection by each Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement (in
the case of the Shelf Registration Statement) and each Affiliated Market Maker and any attorney or accountant retained by such Persons, all financial and other records, pertinent corporate documents
of the Company and the Guarantors and cause the Company's and the Guarantor's officers, directors and employees to supply all information reasonably requested by any such Persons, attorney or
accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness, other than inspection of any records,
documents or information which would have an adverse effect on the Company's 

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competitive position; provided, however, that any records, documents or information which are necessary to avoid or correct a material misstatement or omission in such Registration Statement or which
are necessary to enable a Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement (in the case of the Shelf Registration Statement) or Affiliated Market Maker
(in the case of an Exchange Offer Registration Statement containing a prospectus required to be delivered by an Affiliated Market Maker) and any attorney or accountant retained by any such Persons to
exercise any applicable due diligence responsibilities will be released to such Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement (in the case of the
Shelf Registration Statement) or Affiliated Market Maker (in the case of an Exchange Offer Registration Statement containing a prospectus required to be delivered by an Affiliated Market Maker); 

   (viii) if
requested by any Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement (in the case of the Shelf Registration
Statement) or any Affiliated Market Maker, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such
Persons may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities and the use of the
Registration Statement or Prospectus for market-making activities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or post-effective amendment; 

    (ix) upon
request, furnish to each Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement (in the case of the Shelf
Registration Statement) in connection with such exchange or sale and each Affiliated Market Maker, without charge, at least one copy of the Registration Statement, as first filed with the Commission,
and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); 

    (x) deliver
to each Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement (in the case of the Shelf Registration Statement)
and each Affiliated Market Maker, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may
request; the Company and the Guarantors hereby consent to the use (in accordance with law and subject to Section 6(d) hereof) of the Prospectus and any amendment or supplement thereto by each
selling Person in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto and all market-making activities of
such Affiliated Market Maker, as the case may be; 

    (xi) upon
the request of any Holder, in the light of the circumstances under which they were made, or either Initial Holder, enter into such agreements (including
underwriting agreements) as are customary in comparable securities offerings and make such representations and warranties and take all such other appropriate actions in connection therewith in order
to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any applicable Registration Statement contemplated by this Agreement as may be reasonably requested by any
Holder in connection with any sale or resale pursuant to any applicable Registration Statement. In such connection, and also in connection with market-making activities by any Affiliated Market Maker,
the Company and the Guarantors shall: 

    (A) upon
request of any Person, furnish (or in the case of paragraphs (2) and (3), use its reasonable best efforts to cause to be furnished) to each Person, upon
Consummation of the 

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Exchange Offer or upon the effectiveness of the Shelf Registration Statement, as the case may be: 

    (1) a
customary certificate, dated such date, signed on behalf of the Company and the Guarantors by (x) the president or any vice president and (y) a principal
financial or accounting officer of the Company and the Guarantors, confirming, as of the date thereof, such matters as are customary in connection with public offerings of securities similar to the
Notes as such Person may reasonably request; 

    (2) a
customary opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of
counsel for the Company and the Guarantors covering such matters as are customary in connection with public offerings of securities similar to the Notes and such other matter as such Person may
reasonably request; and 

    (3) a
customary comfort letter, dated the date of Consummation of the Exchange Offer, or as of the date of effectiveness of the Shelf Registration Statement, as the
case may be, from the Company's
independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten offerings, and affirming the
matters set forth in the comfort letters delivered pursuant to Section 9(j) of the Note Purchase Agreement; and 

    (B) deliver
such other documents and certificates as may be reasonably requested by such Persons to evidence compliance with the matters covered in clause
(A) above and with any customary conditions contained in the any agreement entered into by the Company and the Guarantors pursuant to this clause (xi); 

   (xii) prior
to any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders may request and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that neither the Company nor the
Guarantors shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to
taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; 

   (xiii) in
connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with
the Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as the selling Holders may request at least two Business Days prior to such sale of Transfer Restricted Securities; 

   (xiv) use
their respective reasonable best efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xii) above; 

   (xv) provide
a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted
Securities and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with The Depository Trust Company; 

10

  

   (xvi) otherwise
use their respective reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally available
to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 under the Act (which
need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); 

  (xvii) cause
the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in
connection therewith, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute and use their reasonable best efforts to cause the Trustee thereunder to execute, all documents that may be required to effect such changes and all other forms and documents required
to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and 

  (xviii) provide
promptly to each Holder and Affiliated Market Maker, upon request, each document filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act. 

    (d)  Restrictions on Holders.  Each Holder agrees by acquisition of a Transfer Restricted Security and
each Affiliated Market Maker agrees that, upon receipt of the notice referred to in Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact of the kind described in
Section 6(c)(iii)(D) hereof (in each case, a "Suspension Notice"), such Person will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until (i) such Person has received copies of the supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or
(ii) such Person is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus (in each case, the "Recommencement Date"). Each Person receiving a Suspension Notice hereby agrees that it will either
(i) destroy any Prospectuses, other than permanent file copies, then in such Person's possession which have been replaced by the Company with more recently dated Prospectuses or
(ii) deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Person's possession of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of the Suspension Notice. The time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as
applicable, shall be extended by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the Recommencement Date. 

 
 

SECTION 7.  REGISTRATION EXPENSES    
  

    (a) All
expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal
securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Series B Notes to be issued in the Exchange Offer and printing
of Prospectuses whether for exchanges, sales, market-making or otherwise), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company and the
Guarantors; (v) all application and filing fees in connection with listing the Series B Notes on a national securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters
required by or incident to such performance). 

11

 

    The Company will, in any event, bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal
or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors. 

    (b) In
connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf
Registration Statement), the Company and the Guarantors will reimburse the Initial Holders and the Holders who are tendering Initial Notes into in the Exchange Offer and/or selling or reselling
Initial Notes or Series B Notes pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be Davis Polk & Wardwell, unless another firm shall be chosen by the Holders of a majority in principal amount at
maturity of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. 

 
 

SECTION 8.  INDEMNIFICATION    
  

    (a) The
Company and the Guarantors, jointly and severally, agree to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who
controls such Holder (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities, judgments, (including without
limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of Series B Notes or registered Initial Notes, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission that
is based upon information relating to any of the Holders furnished in writing to the Company by any of the Holders. 

    (b) Each
Holder agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors and their directors and officers, and each person, if
any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company or the Guarantors , to the same extent as the foregoing indemnity from the Company and the
Guarantors set forth in Section 8(a) above, but only with reference to information relating to such Holder furnished in writing to the Company by such Holder expressly for use in any
Registration Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total
amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer
Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. 

    (c) In
case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the
"indemnifying person") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably
satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the 

12

 

defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any indemnified party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel
shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably
satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the
indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying
party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees
and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified pursuant to Section 8(a), and by the Company and the Guarantors, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written
consent or (ii) effected without its written consent if the settlement is entered into more than 20 Business Days after the indemnifying party shall have received a request from the indemnified
party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the
indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party
from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act,
by or on behalf of the indemnified party. 

    (d) To
the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities
or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of
such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and
the Holders, on the other hand, from their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company and the Guarantors, on the one hand, and of
the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors, on the one hand, or by
the Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and judgments referred to above shall be deemed to 

13

 

include, subject to the limitations set forth in the second paragraph of Section 8(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or
defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. 

    The
Company, the Guarantors and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation
(even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds
(i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint. 

    (e) The
Company and the Guarantors agree that the indemnity and contribution provisions of this Section 8 shall apply to Affiliated Market Makers to the same extent, on
the same conditions, as it applies to Holders. 

 
 

SECTION 9.  RULE 144A and RULE 144    
  

    The Company and the Guarantors agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the
Company or the Guarantors (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer
Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required
by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. 

 
 

SECTION 10.  MISCELLANEOUS    
  

    (a)  Remedies.  The Company and the Guarantors acknowledge and agree that any failure by the Company or
the Guarantors to comply with its obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Initial Holders or the Holders or Affiliated Market Makers for which there
is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Holders or any Holder or Affiliated
Market Makers may obtain such relief as may be required to specifically enforce the Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The Company and the Guarantors further
agree to waive the defense in any action for specific performance that a remedy at law would be adequate. 

    (b)  No Inconsistent Agreements.  Neither the Company nor the Guarantors, will, on or after the date of
this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent 

14

 

with the rights granted to the holders of the Company's and the Guarantors' securities under any agreement entered into on or prior to the date hereof. 

    (c)  Amendments and Waivers.  The provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 10(c)(i), the Company has obtained
the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of
a majority of the outstanding principal amount at maturity of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Company or the Guarantors). Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the
Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by
the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. 

    (d)  Third Party Beneficiary.  The Holders and Affiliated Market Makers shall be third party
beneficiaries to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Initial Holders, on the other hand, and shall have the right to enforce such agreements
directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of Holders and Affiliated Market Makers hereunder. 

    (i)  Notices.  All notices and other communications provided for or permitted hereunder shall be made in
writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: 

    (ii) if
to the Company or the Guarantors: 

Merrill
Communications LLC.

One Merrill Circle

St. Paul, Minnesota 55108

Telecopier No.: (651) 632-4141

Attention: General Counsel 

    (iii) if
to any DLJ Entity: 

c/o
DLJMB Funding II, Inc.

277 Park Ave.

New York, NY 10172

Telecopier No.: (212) 892-7272

Attention: Ivy Dodes 

    (iv) if
to Mr. Castro: 

c/o
Merrill Corporation

One Merrill Circle

St. Paul, Minnesota 55108

Telecopier No.: (208) 246-7520 

    (v) in
any case, with a copy to: 

Davis
Polk & Wardwell

450 Lexington Avenue

New York, New York 10012

Telecopier No. (212) 450-4000

Attention: Lawrence E. Wieman., Esq. 

15

 

    All
such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. 

    Copies
of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. 

    Upon
the date of filing of the Exchange Offer or a Shelf Registration Statement, as the case may be, notice shall be delivered to DLJMB Funding II, Inc., on behalf of the Initial
Holders (in the form attached hereto as Exhibit A) and shall be addressed to: Attention: Ivy Dodes, 277 Park Avenue, New York, New York 10172. 

    (e)  Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided, that nothing herein shall be deemed to permit
any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Note Purchase Agreement or the Indenture. If any transferee of any Holder
shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement,
and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if applicable, the Note Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. 

    (f)  Counterparts.  This Agreement may be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 

    (g)  Headings.  The headings in this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof. 

    (h)  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. 

    (i)  Severability.  In the event that any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby. 

    (j)  Entire Agreement.  This Agreement is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This
Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 

16

 

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

	 	 	MERRILL COMMUNICATIONS LLC
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Chief Financial Officer
	 	 	 	 	 	 	

	

 	
 	

MERRILL CORPORATION
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Chief Financial Officer
	 	 	 	 	 	 	

	

 	
 	

MERRILL REAL ESTATE COMPANY
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Treasurer
	

 	
 	

MERRILL/MAGNUS PUBLISHING CORPORATION
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Treasurer
	 	 	 	 	 	 	

	

 	
 	

MERRILL/NEW YORK COMPANY
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Treasurer
	 	 	 	 	 	 	

17

 

	

 	
 	

MERRILL/MAY INC.
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Treasurer
	 	 	 	 	 	 	

	

 	
 	

MERRILL ALTERNATIVES, INC.
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Treasurer
	 	 	 	 	 	 	

	

 	
 	

MERRILL INTERNATIONAL, INC.
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Treasurer
	 	 	 	 	 	 	

	

 	
 	

FMC RESOURCE MANAGEMENT CORPORATION
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Treasurer
	 	 	 	 	 	 	

	

 	
 	

MERRILL TRAINING & TECHNOLOGY, INC.
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Treasurer
	 	 	 	 	 	 	

18

 

	

 	
 	

MERRILL/GLOBAL, INC.
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Treasurer
	 	 	 	 	 	 	

	

 	
 	

MERRILL/EXECUTECH, INC.
	

 	
 	

By:	
 	

/s/ ROBERT H. NAZARIAN   

	 	 	 	 	Name:	 	Robert H. Nazarian
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Treasurer
	 	 	 	 	 	 	

	

 	
 	

DLJMB FUNDING II, INC.
	

 	
 	

By:	
 	

/s/ MATTHEW SIROVICH   

	 	 	 	 	Name:	 	Matthew Sirovich
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Principal
	 	 	 	 	 	 	

	

 	
 	

DLJ FIRST ESC, L.P.
	

 	
 	

By:	
 	

/s/ MATTHEW SIROVICH   

	 	 	 	 	Name:	 	Matthew Sirovich
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Principal
	 	 	 	 	 	 	

	

 	
 	

DLJ ESC II, L.P.
	

 	
 	

By:	
 	

/s/ MATTHEW SIROVICH   

	 	 	 	 	Name:	 	Matthew Sirovich
	 	 	 	 	 	 	

	 	 	 	 	Title:	 	Principal
	 	 	 	 	 	 	

	

 	
 	

/s/ JOHN W. CASTRO   
 JOHN W. CASTRO

19

EXHIBIT A  

 NOTICE OF FILING OF

A/B EXCHANGE OFFER REGISTRATION STATEMENT  

	To:	 	DLJMB Funding II, Inc.

277 Park Avenue

New York, New York 10172

Attention: Ivy Dodes

Fax: (212) 892-7272
	

From:	
 	

Merrill Communications LLC.

14% Senior Discount Notes due 2008

Date:          ,    

    For
your information only (NO ACTION REQUIRED): 

    Today,          ,    ,
we filed an A/B Exchange Registration Statement/ Shelf Registration Statement with the Securities and Exchange Commission. 

QuickLinks

REGISTRATION RIGHTS AGREEMENT

W I T N E S S E T H

SECTION 1. DEFINITIONS

SECTION 2. HOLDERS

SECTION 3. REGISTERED EXCHANGE OFFER

SECTION 4. SHELF REGISTRATION

SECTION 5. MARKET MAKING PROSPECTUS

SECTION 6. REGISTRATION PROCEDURES

SECTION 7. REGISTRATION EXPENSES

SECTION 8. INDEMNIFICATION

SECTION 9. RULE 144A and RULE 144

SECTION 10. MISCELLANEOUS<PAGE>

                                U.S. $24,500,000

                               FINANCING AGREEMENT

                          dated as of December 29, 2000

                                     between

                       FIRSTAR BANK, NATIONAL ASSOCIATION

                                     as Bank

                                       and

                                 VARI-LITE, INC.

                                   as Borrower

<PAGE>

                                Table OF CONTENTS

<TABLE>
<CAPTION>
Section                                                                                                     Page
-------                                                                                                     ----
<S>                                                                                                         <C>
1. CAPITALIZED TERMS...........................................................................................1
      1.1 Defined Terms........................................................................................1
      1.2 Accounting Terms....................................................................................15

2. LOANS AND OTHER FINANCIAL ACCOMMODATIONS...................................................................15
      2.1 Total Facility......................................................................................15
      2.2 Revolving Loan Facility.............................................................................15
      2.3 Term Loan A Facility................................................................................16
      2.4 CapEx Term Loan Facility............................................................................16
      2.5 Voluntary Prepayments...............................................................................17
      2.6 Disbursement of Loans...............................................................................18
      2.7 Procedure for Advancing Revolving Loans.............................................................18
      2.8 Procedure for Advancing CapEx Term Loans............................................................18
      2.9 No Limitation on Liens..............................................................................18
      2.10 Deficiency.........................................................................................19
      2.11 Voluntary Reduction of Total Facility..............................................................19
      2.12 Advance Rates and Sublimits........................................................................19

3. INTEREST CHARGES; MINIMUM LOAN CHARGE; FEES; MANDATORY PREPAYMENT..........................................20
      3.1 Interest on Loans...................................................................................20
      3.2 Inability to Determine LIBOR Base Rate..............................................................22
      3.3 LIBOR Unlawful, etc.................................................................................22
      3.4 LIBOR Indemnity.....................................................................................23
      3.5 Increased Costs - Capital Adequacy..................................................................23
      3.6 Closing Fee.........................................................................................23
      3.7 Unused Facility Fee.................................................................................23
      3.8 Mandatory Prepayment................................................................................24
      3.9 Interest Rate Protection............................................................................24
      3.10 Calculation of Certain Charges.....................................................................24
      3.11 Charging Loan Account..............................................................................24
      3.12 Maximum Rate.......................................................................................24

4. MONTHLY ACCOUNTINGS........................................................................................25

5. SECURITY...................................................................................................25
      5.1 Security Agreement..................................................................................25
      5.2 Patent Assignment...................................................................................25
      5.3 Pledges.............................................................................................25
      5.4 Landlord Waiver.....................................................................................26
      5.5 Guaranty............................................................................................26
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                         <C>
      5.6 Subordination Agreements............................................................................26

6. DELIVERIES PRIOR TO DISBURSEMENT; FURTHER ASSURANCES.......................................................26

7. RECEIVABLES; COLLECTION OF RECEIVABLES; DISPUTED RECEIVABLES...............................................26
      7.1 Representations and Warranties Regarding Receivables................................................26
      7.2 Disputes and Claims Regarding Receivables...........................................................27
      7.3 Locked Box..........................................................................................27
      7.4 Special Account.....................................................................................28
      7.5 Crediting of Remittances............................................................................28
      7.6 Costs of Collection.................................................................................29

8. EXAMINATION OF COLLATERAL AND THE PREMISES; REPORTING......................................................29
      8.1 Maintenance of Books and Records....................................................................29
      8.2 Access and Inspection...............................................................................29
      8.3 Reporting Regarding Receivables.....................................................................29
      8.4 Reporting Regarding Inventory.......................................................................30
      8.5 Monthly Financial Statements........................................................................31
      8.6 Annual Projections..................................................................................31
      8.7 Certified Quarterly Financial Statements............................................................31
      8.8 Audited Annual Financial Statements.................................................................31
      8.9 Management Reports..................................................................................32
      8.10 Financial Certificate..............................................................................32
      8.11 Public Filings.....................................................................................32
      8.12 Monthly Reporting Regarding Inventory and Equipment................................................32
      8.13 Additional Monthly Reporting.......................................................................32

9. WARRANTIES, REPRESENTATIONS AND COVENANTS..................................................................33
      9.1 Organization, Etc...................................................................................33
      9.2 Due Authorization, Validity, Etc....................................................................33
      9.3 No Violation........................................................................................33
      9.4 Use of Loan Proceeds................................................................................34
      9.5 Management; Ownership of Assets, Licenses, Patents, Etc.............................................34
      9.6 Indebtedness........................................................................................34
      9.7 Title to Property; No Liens.........................................................................34
      9.8 Restrictions; Labor Disputes; Collective Bargaining Agreements, Etc.................................34
      9.9 No Violation of Law; Hazardous Materials............................................................35
      9.10 Absence of Default.................................................................................35
      9.11 Accuracy of Financials; No Material Changes........................................................35
      9.12 Pension Plans......................................................................................36
      9.13 Taxes and Other Charges............................................................................36
      9.14 No Litigation......................................................................................36
      9.15 No Brokerage Fee...................................................................................37
      9.16 Affiliates.........................................................................................37
      9.17 Capitalization; Warrants, Etc......................................................................37
      9.18 Noncompetition Agreements..........................................................................37
      9.19 Deposit and Other Accounts.........................................................................37
</TABLE>

                                       ii

<PAGE>
<TABLE>
<S>                                                                                                         <C>
      9.20 Solvency...........................................................................................37
      9.21 Full Disclosure....................................................................................38
      9.22 Casualties.........................................................................................38
      9.23 Real Property and Leases...........................................................................38
      9.24 Insurance Policies.................................................................................38
      9.25 Consents...........................................................................................38
      9.26 Updating Representations and Warranties............................................................38

10. COVENANTS.................................................................................................39
      10.1 Payment of Certain Expenses........................................................................39
      10.2 Notice of Litigation...............................................................................39
      10.3 Notice of ERISA Events.............................................................................39
      10.4 Notice of Labor Disputes and Collective Bargaining Agreements......................................39
      10.5 Compliance with Laws, Etc..........................................................................40
      10.6 Notice of Violations of Law, Tax Assessments.......................................................40
      10.7 Compliance with Other Agreements...................................................................40
      10.8 Notice of Violations of Certain Agreements.........................................................40
      10.9 Notice of Customer Defaults........................................................................40
      10.10 Taxes and Charges.................................................................................40
      10.11 Indebtedness; Guaranties..........................................................................41
      10.12 Title to Property; No Liens.......................................................................41
      10.13 Restrictions; Labor Disputes, Etc.................................................................41
      10.14 Pension Plans.....................................................................................42
      10.15 Solvency..........................................................................................42
      10.16 Property Insurance................................................................................42
      10.17 Liability Insurance...............................................................................42
      10.18 Deposit Accounts..................................................................................43
      10.19 Merger, Etc.......................................................................................43
      10.20 Investments.......................................................................................43
      10.21 Dividends.........................................................................................43
      10.22 Redemption of Stock...............................................................................43
      10.23 Stock Rights......................................................................................43
      10.24 Change in Business................................................................................43
      10.25 Affiliate Transactions............................................................................44
      10.26 Withdrawals From Accounts.........................................................................44
      10.27 Sale of Assets....................................................................................44
      10.28 Consignments, Etc.................................................................................44
      10.29 Change in Management or Business..................................................................44
      10.30 Claims Against Collateral.........................................................................44
      10.31 Judgments.........................................................................................45
      10.32 Filed Jurisdictions...............................................................................45
      10.33 Financial Covenants...............................................................................45
      10.34 Good Standing Certificate.........................................................................45
      10.35 Director's Fees...................................................................................45
      10.36 Chattel Paper.....................................................................................45
      10.37 Intercompany Loans................................................................................45
</TABLE>

                                      iii
<PAGE>

<TABLE>
<S>                                                                                                         <C>
11. EFFECTIVE DATE; TERMINATION...............................................................................46
      11.1 Effective Date and Termination Date................................................................46
      11.2 Termination by Bank................................................................................46
      11.3 Voluntary Termination..............................................................................46
      11.4 Acceleration Upon Termination......................................................................47
      11.5 Borrowers Remain Liable............................................................................47

12. EVENTS OF DEFAULT.........................................................................................47

13. BANK'S RIGHTS AND REMEDIES................................................................................49
      13.1 Acceleration, Etc..................................................................................49
      13.2 Fees and Expenses..................................................................................49

14. WAIVER; AMENDMENTS; SUCCESSORS AND ASSIGNS................................................................50
      14.1 Release of Collateral..............................................................................50
      14.2 Waivers and Amendments in Writing..................................................................50
      14.3 Assignment.........................................................................................50

15. MISCELLANEOUS.............................................................................................50
      15.1 Severability.......................................................................................50
      15.2 Governing Law......................................................................................50
      15.3 WAIVER OF JURISDICTION.............................................................................51
      15.4 Survival of Representations and Warranties.........................................................51
      15.5 Evidence of Loans..................................................................................51
      15.6 Bank's Ability Regarding Collateral and Premises...................................................51
      15.7 Application of Payments, Etc.......................................................................52
      15.8 Fees and Expenses..................................................................................52
      15.9 Notices............................................................................................53
      15.10 Indemnification...................................................................................53
      15.11 Use of Bank's Discretion..........................................................................54
      15.12 Equitable Relief..................................................................................54
      15.13 Entire Agreement..................................................................................54
      15.14 Headings..........................................................................................55
      15.15 WAIVER OF JURY TRIAL..............................................................................55
      15.16 Confession of Judgment............................................................................55
</TABLE>

                                       iv

<PAGE>

                                    EXHIBITS

EXHIBIT A    -   Form of Security Agreement
EXHIBIT B    -   Form of Vari-Lite Patent, Trademark and License Security
                 Agreement
EXHIBIT C    -   Form of Guaranty
EXHIBIT D    -   Form of Pledge Agreement
EXHIBIT E    -   Form of Landlord Waiver
EXHIBIT F    -   [RESERVED]
EXHIBIT G-1  -   Deliveries Prior to Disbursement
EXHIBIT G-2      CapEx Deliveries Prior to Disbursement
EXHIBIT H    -   Form of Borrowing Base Certificate
EXHIBIT I    -   Form of Chief Financial Officer's Certificate
EXHIBIT J    -   Financial Covenants
EXHIBIT K    -   Form of Certificate of Secretary
EXHIBIT L    -   Form of Signature Authorization Letter
EXHIBIT M    -   Form of Accountant's Access Letter
EXHIBIT N    -   Form of Accountant's Representation Letter
EXHIBIT O    -   Form of Certificate of Chief Financial Officer
EXHIBIT P    -   Form of Disbursement Direction Letter
EXHIBIT Q    -   Evidence of Insurance
EXHIBIT R    -   Form of Advertising Permission Letter
EXHIBIT S    -   [RESERVED]
EXHIBIT T    -   Form of Capital Expenditure Term Loan Installment Payment
                 Schedule
EXHIBIT U    -   Form of Subordination Agreement

                                       v

<PAGE>

                                    SCHEDULES

Schedule 1     -   Licenses, Patents, Trademarks, Etc.
Schedule 2     -   Indebtedness
Schedule 3     -   Permitted Liens
Schedule 4     -   Restrictions, Orders, Collective Bargaining Agreements, Etc.
Schedule 5     -   Violations of Law
Schedule 6     -   Pension Plan Liability
Schedule 7     -   Taxes and Other Charges
Schedule 8     -   Litigation
Schedule 9     -   Affiliates
Schedule 10    -   Capitalization
Schedule 11    -   Deposit and Other Accounts
Schedule 12    -   Leases
Schedule 13    -   Insurance Policies
Schedule 14    -   Investments
Schedule 15    -   Intercompany Loans
Schedule 16    -   Leased Premises
Schedule 17    -   Filed Locations
Schedule 18    -   Noncompetition Agreements

                                       vi

<PAGE>

                               FINANCING AGREEMENT

         THIS FINANCING AGREEMENT (this "Agreement") among FIRSTAR BANK,
NATIONAL ASSOCIATION, a national banking association ("Bank"), and VARI-LITE,
INC., a Delaware corporation (together with its successors and assigns, the
"Borrower") covering the terms upon which Bank will make loans and/or advances
to Borrower, is as follows:

1.       CAPITALIZED TERMS.

         Certain capitalized terms used herein are defined in this SECTION 1.

         1.1 Defined Terms.

         Whenever the following terms (whether or not underscored) are used
herein, they shall be defined as follows (such meanings to be equally applicable
to the singular and plural forms thereof):

         "ADDITIONAL FEE" shall have the meaning ascribed thereto in SECTION 3.5
hereof.

         "AFFILIATE" of any Person shall mean (a) any Person who or which is a
director, managing general partner or officer of such Person, or (b) any other
Person who or which, directly or indirectly, beneficially owns ten percent (10%)
or more of the voting stock of, or partnership interests, membership interests
or other similar equity interests in, such Person, or (c) any other Person in
which any Person described in CLAUSE (a), (b) or (c) above owns, directly or
indirectly, a ten percent (10%) or greater equity interest. Without limiting the
foregoing, for purposes of this Agreement, (w) all of Borrower's officers,
shareholders, directors, parent corporations, subsidiary corporations, joint
venturers and partners, (x) each member of the immediate family (as defined in
Item 404) of the Persons described in CLAUSE (w), (y) each Person as to which
any of the Persons described in CLAUSE (w) or any member of the immediate family
(as defined in Item 404 of Regulation SK promulgated pursuant to the Securities
Act of 1933, as amended) of any such Persons is a director, managing general
partner, or officer, and (z) each Person in which any of the Persons described
in CLAUSE (w) or any member of the immediate family (as defined in Item 404) of
any such Persons owns, directly or indirectly, a ten percent (10%) or greater
equity interest, shall at all times be deemed to be an Affiliate of each
Borrower.

         "APPLICABLE INTEREST RATE" means, with respect to any Loans, the
Applicable LIBOR Rate or the Applicable Prime Rate, as the case may be.

         "APPLICABLE LIBOR RATE" means, with respect to any Loans, the LIBOR
Rate PLUS the Applicable LIBOR Rate Margin then in effect with respect to such
Loans.

         "APPLICABLE LIBOR RATE MARGIN" means (i) from the Effective Date
through and excluding January 15, 2002 (the "Initial Interest Rate Period"), a
rate equal to (A) 2.50% per annum with respect to Revolving Loans, and (B) 2.50%
per annum with respect to the Term Loan A and the CapEx Term Loans
(collectively, the "Term Loans"), and (ii) thereafter, so long as no Event of
Default shall have occurred and be continuing, a per annum rate which shall

<PAGE>

adjust as of each Applicable Margin Adjustment Date based on the Leverage
Ratio for the most recent four (4) fiscal quarters preceding such Applicable
Margin Adjustment Date, as determined by the Bank from the quarterly reports
and annual reports required by SECTION 8.7 and SECTION 8.8, respectively, in
accordance with the following table:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                               Applicable LIBOR               Applicable LIBOR
                           Leverage Ratio                       Rate Margin for                Rate Margin for
                                                                Revolving Loans                   Term Loans
----------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                            <C>
          Greater than or equal to 2.5 to 1                            2.50%                        2.50%
----------------------------------------------------------------------------------------------------------------
          Greater than or equal to 2.0 to 1 but less than              2.25%                        2.25%
               2.5 to 1
----------------------------------------------------------------------------------------------------------------
          Less than or equal to 2.0 to 1                               2.00%                        2.00%
----------------------------------------------------------------------------------------------------------------
</TABLE>

         "APPLICABLE MARGIN ADJUSTMENT DATE" means, (a) January 15, 2002 (the
"Initial Applicable Margin Adjustment Date") and (b) thereafter, the first day
of the first month following receipt by Bank of the financial statements
required to be delivered under SECTION 8.7 hereof for each fiscal quarter of
International.

         "APPLICABLE PRIME RATE" means, with respect to any Loans, the Prime
Rate PLUS the Applicable Prime Rate Margin then in effect with respect to such
Loans.

         "APPLICABLE PRIME RATE MARGIN" means (i) during the Initial Interest
Rate Period, a rate equal to (A) 0.75% per annum with respect to Revolving
Loans, and (B) 0.75% per annum with respect to the Term Loans and (ii)
thereafter, so long as no Event of Default shall have occurred and be
continuing, a per annum rate which shall adjust as of each Applicable Margin
Adjustment Date based on the Leverage Ratio for the most recent four (4) fiscal
quarters preceding such Applicable Margin Adjustment Date, as determined by the
Bank from the quarterly reports and annual reports required by SECTION 8.7 and
SECTION 8.8, respectively, in accordance with the following table:

<TABLE>
<CAPTION>
                                                                 Applicable Prime           Applicable Prime
                                                                  Rate Margin for            Rate Margin for
                           Leverage Ratio                         Revolving Loans               Term Loans
------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                       <C>
          Greater than or equal to 2.5 to 1                            0.75%                        0.75%
------------------------------------------------------------------------------------------------------------------
          Greater than or equal to 2.0 to 1 but less than              0.50%                        0.50%
               to 2.5 to 1
------------------------------------------------------------------------------------------------------------------
          Less than or equal to 2.0 to 1                               0.25%                        0.25%
------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       2

<PAGE>

         "ATTORNEYS' FEES" shall mean the reasonable fees for services (and
costs and expenses related thereto) of all attorneys (and all paralegals and
other staff employed by such attorneys) employed by Bank from time to time in
connection with any matter whatsoever related to or arising out of the
transactions contemplated hereunder.

         "BORROWING BASE CERTIFICATE" shall have the meaning ascribed thereto in
SECTION 8.3(b) hereof.

         "BORROWING BASE DEFICIENCY" shall mean any failure of the Revolving
Loan Availability to be greater than or equal to zero (0) dollars.

         "BUSINESS DAY" shall mean any day which is neither a Saturday or Sunday
nor a legal holiday on which banks are authorized or required to be closed in
Cincinnati, Ohio or Dallas, Texas.

         "CALCULATED TERMINATION AMOUNT" shall mean the dollar amount equal to
the sum of (x) the unpaid principal and accrued and unpaid interest due on all
Term Loans on the Voluntary Termination Date, PLUS (y) the daily average
outstanding principal balance of the Revolving Loans for the period of 365 days
immediately preceding the Voluntary Termination Date (or such lesser period of
time if the Voluntary Termination Date occurs before December 29, 2001) PLUS (z)
the sum of all voluntary prepayments of the Term Loans to the extent such
prepayments are made from proceeds of loans provided to Borrower from an
institutional third party lender.

         "CAPEX ADJUSTMENT DATE" shall mean January 15, 2002; PROVIDED, HOWEVER,
the maximum amount of the CapEx Term Loan Facility shall not increase on such
date from Three Million Dollars ($3,000,000) to Five Million Dollars
($5,000,000) unless International shall have achieved consolidated EBITDA of at
least Fourteen Million Five Hundred Thousand Dollars ($14,500,000) for
International's fiscal year ended September 30, 2001, (the "EBITDA Threshold").

         "CAPEX TERM LOAN" shall have the meaning ascribed thereto in SECTION
2.1 hereof.

         "CAPEX TERM LOAN AVAILABILITY" shall mean, as at any time, an amount
not to exceed (i)(a) from and including the Effective Date through and excluding
the CapEx Adjustment Date, Three Million Dollars ($3,000,000), and (b) SUBJECT
TO the condition precedent of International meeting the EBITDA Threshold for its
fiscal year ended September 30, 2001, from and including the CapEx Adjustment
Date through and including September 30, 2002, Five Million Dollars ($5,000,000)
LESS (ii) the aggregate original principal amount of all CapEx Term Loans made
by the Bank hereunder.

         "CAPEX TERM LOAN FACILITY" shall have the meaning ascribed thereto in
SECTION 2.1 hereof.

         "CASUALTY LOSS" shall mean any of the following events with respect to
any item of Collateral: (i) the actual total loss of the item or such loss as
shall render repair of the item uneconomical, (ii) the item shall become lost,
stolen, destroyed, damaged beyond repair or

                                       3

<PAGE>

permanently rendered unfit for use for any reason whatsoever, or (iii) the
condemnation or taking, by exercise of the power of eminent domain or
otherwise, of such item or confiscation of such item, or of so much of any
such item as to render impractical or unreasonable the use of such item for
substantially the same purposes for which such item was used immediately
prior to such condemnation, taking or confiscation.

         "CHARGES" shall have the meaning ascribed thereto in SECTION 3.12
hereof.

         "COLLATERAL", "ACCOUNTS", "RECEIVABLES", "CHATTEL PAPER," "DEPOSIT
ACCOUNTS", "GENERAL INTANGIBLES", "EQUIPMENT", "DOCUMENTS", "INVENTORY",
"INVESTMENT PROPERTY", and "PROCEEDS" shall mean the "Collateral," "Accounts",
"Chattel Paper," "Deposit Accounts", "Documents", "General Intangibles,"
"Equipment," "Inventory," "Investment Property," "Receivables", and "Proceeds"
of Borrower, as defined in the Security Agreement.

         "CONTRACT" means a written agreement between a Borrower and any Person
or an invoice pursuant to an open account or a written agreement of such Person,
pursuant to or under which such Person shall be obligated to make payment to
Borrower for the purchase, lease or use (including, but not limited to,
licensing and related agreements) of Inventory and Equipment owned or leased by
Borrower.

         "CONTROLLED GROUP" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, are treated as a single employer
under Section 414(b) or 414(c) of the Internal Revenue Code, as amended, or
Section 4001 of ERISA, as amended.

         "DEFICIENCY" shall mean a Borrowing Base Deficiency.

         "EFFECTIVE DATE" shall mean December 29, 2000, or such later date as is
mutually agreeable to the parties hereto.

         "ELIGIBLE INVENTORY" shall mean "Inventory" of a Borrower consisting of
raw materials, finished goods or spare parts for sale, identified as "current
assets" under GAAP on the balance sheet of Borrower, and located at 201 Regal
Row, Dallas, Texas 75247 (the "Dallas Location") or at such other locations as
are approved in writing by Bank in its discretion, provided that the owner
and/or operator of the premises shall have executed and delivered to Bank a
mortgagee, landlord, warehouseman or other similar waiver in form and substance
satisfactory to Bank, in its discretion, and meeting all applicable
specifications that Bank, in its discretion, deems to be Eligible Inventory,
based on such credit and collateral considerations as Bank may deem appropriate.
Without limitation on the foregoing, the following shall not be deemed Eligible
Inventory: Inventory of Borrower (i) that is not readily saleable in Borrower's
business (including without limitation Inventory for which reserves for
obsolescence have been provided for in the financial statements or for which
obsolescence reserves are anticipated), (ii) that is located outside the United
States, (iii) that is not subject to the first priority security interest of
Bank, (iv) that is subject to any trademark, trade name or licensing
arrangement, or any law, rule or regulation, that could limit or impair the
ability of Bank to promptly exercise any of its rights with respect thereto, (v)
with respect to which insurance proceeds, if any, are not payable to Bank as
mortgagee or loss payee, (vi) that has been in existence for more than one (1)

                                       4

<PAGE>

year or is otherwise considered slow-moving or obsolete by Bank, in its
discretion, (vii) that is in the possession of any processor other than Borrower
unless such processor shall have executed and delivered to Bank a processor
consignment agreement or other similar agreement in form and substance
satisfactory to Bank, in its discretion, (viii) that is in transit, (ix) with
respect to which a Casualty Loss has been incurred, (x) that consists of general
supplies or maintenance supplies, cartons, packaging, fuel, or, unless otherwise
approved by Bank in writing, work in process, (xi) that is Rental Inventory, or
(xii) as to which Bank, in its good faith discretion, deems to be ineligible
based on any other credit and/or collateral considerations as Bank deems
appropriate.

         "ELIGIBLE RECEIVABLES" shall mean those "Receivables" of Borrower which
(i) arise out of sales or leases in the ordinary course of Borrower's business
to a Person who is not an Affiliate of Borrower or otherwise controlled by
Borrower or by an Affiliate of Borrower (unless such sale is guaranteed by a
letter of credit, which is in form and substance satisfactory to Bank, in its
discretion, which has been issued by a financial institution satisfactory to
Bank, in its discretion, and which has been transferred or assigned to Bank as
security for the Obligations), (ii) the terms of sale or lease of which are
ordinary terms of Borrower and require payment in full within not more than
ninety (90) days from the date of invoice or from the due date in any Contract
providing for the lease of Rental Inventory, (iii) are not in dispute, (iv) do
not violate any warranty with respect to Eligible Receivables set forth in
SECTION 7.1 of this Agreement, (v) if Chattel Paper, conform strictly to
representations, warranties and covenants set forth in this Agreement and in the
other Loan Documents, or is otherwise acceptable to Bank in its discretion, and
(vi) are not more than (A) with respect to Receivables owing from Investment
Grade Account Debtors, one hundred twenty (120) days past the date of invoice
thereof or from the due date in any Contract providing for the lease of Rental
Inventory, or (B) with respect to Receivables owing from account debtors that
are not Investment Grade Account Debtors, ninety (90) days past the date of
invoice thereof or from the due date in any Contract providing for the lease of
Rental Inventory; PROVIDED, HOWEVER, that no Receivable shall be an Eligible
Receivable if (a) the account debtor or any parent company, subsidiary company,
joint venturer or partner of the account debtor has filed or had filed against
it a petition in bankruptcy or for reorganization, made an assignment for the
benefit of creditors, or failed, suspended business operations, become insolvent
or had or suffered a receiver or a trustee to be appointed for a significant
portion of its assets or affairs, PROVIDED that Bank, in its discretion, may
consider any Receivable created with respect to such account debtor to be an
Eligible Receivable after such petition, assignment, failure, suspension,
insolvency, sufferance, or appointment has been dismissed, ceases to exist or
has otherwise been cured, (b) the account debtor is also a supplier to or
creditor of Borrower, unless (i) such account debtor executes and delivers a
Waiver of Rights to Counterclaim, Setoff and Defenses, in a form acceptable to
Bank in its discretion, in favor of Bank, or (ii) with respect to an account
debtor which has not executed and delivered such a Waiver of Rights to
Counterclaim, Setoff and Defenses, the aggregate amount owed to Borrower by such
account debtor exceeds the aggregate amount owed to such account debtor by
Borrower, in which case the Receivable shall be an Eligible Receivable only to
the extent of such excess, (c) the sale or lease is to an account debtor outside
the United States and Canada (except for Quebec), unless the sale is (i)
guaranteed by a letter of credit, which is in form and substance satisfactory to
Bank, in its discretion, which has been issued by a financial institution
satisfactory to Bank, in its discretion, and which has been transferred or
assigned to Bank as security for the Obligations, (ii) guaranteed by a banker's
acceptance satisfactory to Bank, in its discretion, or

                                       5

<PAGE>

(iii) on other terms acceptable to Bank, in its discretion, (d) twenty-five
percent (25%) or more of the Receivables from the account debtor and its
Affiliates are ineligible for any reason, without taking into consideration
such Receivables that are ineligible (i) under clause (b)(ii) above, or (ii)
by reason of the last sentence of this definition of "ELIGIBLE RECEIVABLES",
(e) the account debtor is the federal or any state government or any agency
or department thereof, unless with respect to such Receivable the Assignment
of Claims Act or comparable state statute or regulation has been complied
with or such compliance with respect to such Receivable has been specifically
waived by Bank in writing, (f) the Receivable consists of finance charges (or
if any portion of a Receivable consists of finance charges, only such portion
shall be considered ineligible), interest on delinquent accounts, proceeds of
consigned Inventory, employee or officer Receivables, service charges, or
debit memoranda, (g) the Receivable arises from a contract which contains a
prohibition of assignment of such Receivable and/or the proceeds thereof, (h)
the Receivable is evidenced by a promissory note, (i) the Receivable is
generated by a sale on approval, a bill and hold sale, a sale on consignment,
or other type of conditional sale, (j) the Receivable is not subject to the
first priority security interest of Bank, (k) the account debtor is located
in West Virginia, unless Borrower shall have properly qualified to do
business in West Virginia or shall have filed a Notice of Business Activities
Report with the West Virginia Division of Taxation for the then current year,
(l) the account debtor is located in New Jersey, unless Borrower shall have
properly qualified to do business in New Jersey or shall have filed a Notice
of Business Activities Report with the New Jersey Division of Taxation for
the then current year, (m) the account debtor is located in Minnesota, unless
Borrower shall have properly qualified to do business in Minnesota or shall
have filed a Notice of Business Activities Report with the Minnesota Division
of Taxation for the then current year, (n) the account debtor is located in
any other jurisdiction which requires that Borrower, in order to sue any
Person in such jurisdiction's courts, either (i) qualify to do business in
such jurisdiction, or (ii) file a report with the taxation division of such
jurisdiction for the then current year, unless Borrower shall have fulfilled
either of such requirements for the then current year with respect to such
jurisdiction, (o) the Receivable is a progress billing, (p) the account
debtor has sold or is selling substantially all of its assets, (q) the
account debtor is incompetent or has died, (r) Bank has received a check for
payment of such Receivable which has been returned uncollected, (s) the
Receivable arises from an invoice issued by Borrower prior to the shipment by
Borrower of the goods covered by such invoice to the applicable account
debtor, (t) Bank, in its good faith discretion, believes that the collection
of such Receivable is insecure, or that such Receivable may not be paid by
reason of the account debtor's financial inability to pay, or deems such
Receivable to be ineligible based on such other credit and/or collateral
considerations as Bank deems appropriate, (u) the account debtor has made
advance payments, in which case the Receivable shall be an Eligible
Receivable only to the extent of the excess of the amount of the Receivable
over such advance payments, or (v) Borrower has recorded on its books and
records an accrual for unreimbursable direct costs (including without
limitation contract overruns, damaged property and unallowable expenses) or
for general and administrative overabsorbtion, in either of which cases the
Receivable shall be an Eligible Receivable only to the extent of the excess
of the amount of the Receivable over such accrued amounts. In addition, and
without limitation of the foregoing, (i) if any Receivables owed by a
particular account debtor (other than Investment Grade Account Debtors) cause
the aggregate amount of Receivables owed by that account debtor to exceed
thirty percent (30%) of the aggregate amount of Borrower's Eligible
Receivables or twenty percent (20%) of the aggregate amount of Borrower's
aggregate Eligible Receivables, then such Receivables shall not

                                       6

<PAGE>

be Eligible Receivables to the extent of such excess, and (ii) if any
Receivables owed by an Investment Grade Account Debtor cause the aggregate
amount of Receivables owed by that account debtor to exceed fifty percent
(50%) of the aggregate amount of Borrower's Eligible Receivables, then such
Receivables shall not be Eligible Receivables to the extent of any such
excess.

         "ENVIRONMENTAL COMPLIANCE RESERVE" shall mean all reserves which in
the discretion of Bank, shall be established from time to time for amounts
that are required to be expended in order for the Borrower or the Borrower's
operations and property to comply with Environmental Laws or in order to
correct any violation by Borrower or by Borrower's operations or property of
Environmental Laws, or to remediate the presence of Hazardous Materials on,
in or under such property or operations or emanating therefrom.

         "ENVIRONMENTAL LAWS" shall mean any and all statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions relating to the environmental or the release of any materials
into the environment (including, without limitation, Hazardous Materials).

         "ERISA" shall have the meaning ascribed thereto in SECTION 9.12
hereof.

         "EURODOLLAR BUSINESS DAY" means any Business Day on which dealings
in United States dollar deposits are carried out on the London interbank
market and on which commercial banks are open for domestic and international
business (including dealings in United States dollar deposits) in London,
England.

         "EVENT OF DEFAULT" shall have the meaning ascribed thereto in
SECTION 12 hereof.

         "FACILITY REDUCTION AMOUNT" shall have the meaning ascribed thereto
in SECTION 2.11 hereof.

         "FACILITY REDUCTION NOTICE" shall have the meaning ascribed thereto
in SECTION 2.11 hereof.

         "FILED LOCATIONS" shall mean the jurisdictions listed on SCHEDULE 18
attached hereto and incorporated herein and such other jurisdictions
specified in writing by Bank, in which the Bank has filed financing
statements under the applicable State's version of the Uniform Commercial
Code and has a perfected, first priority lien on the Collateral, as the same
may from time to time be updated by the Borrower with the written agreement
of Bank.

         "FINANCIAL COVENANTS" shall have the meaning ascribed thereto in
SECTION 10.33 hereof.

         "FINANCIALS" shall mean those financial statements delivered from
time to time pursuant to SECTION 8.5, SECTION 8.6, SECTION 8.7 and SECTION
8.8 hereof and those financial statements attached to the Certificate of the
Chief Financial Officer delivered to Bank on the Effective Date.

                                       7

<PAGE>

         "HAZARDOUS MATERIAL" shall have the meaning ascribed thereto in
SECTION 9.9 hereof.

         "IGNITION! CREATIVE GROUP, INC." shall mean Ignition! Creative
Group, Inc., a Delaware corporation and a wholly-owned Subsidiary of
International.

         "INDEBTEDNESS" shall mean all of Borrower's obligations and
liabilities for the payment of money to any "Person" (as defined below),
including, without limitation, all debts, claims for the payment of money and
indebtedness, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable, however evidenced, created,
incurred, acquired or owing and however arising, whether under written or
oral agreement, operation of law or otherwise. Indebtedness includes, without
limiting the foregoing, (i) the "Obligations" (as defined below), (ii)
obligations and liabilities for the payment of money of any Person secured by
a lien, claim, encumbrance or security interest upon property owned by
Borrower, even though Borrower has not assumed or become liable for the
payment therefor, and (iii) obligations or liabilities for the payment of
money created or arising under any lease of real or personal property,
conditional sales contract or other title retention agreement with respect to
property used and/or acquired by Borrower, even though the rights and
remedies of the lessor, seller and/or lender thereunder are limited to
repossession of such property.

         "INDEMNIFIED LIABILITIES" shall have the meaning ascribed thereto in
SECTION 15.10 hereof.

         "INDEMNIFIED PARTY" shall have the meaning ascribed thereto in
SECTION 15.10 hereof.

         "INITIAL INTEREST RATE PERIOD" means the period of time from and
including the Effective Date through and excluding January 15, 2002.

         "INITIAL PERIOD" shall mean the period from and including the
Effective Date until and excluding January 15, 2002.

         "INTERCOMPANY LOAN OBLIGATIONS" means, with respect to Borrower, the
obligations of Borrower under Intercompany Loans advanced to Borrower.

         "INTERCOMPANY LOANS" means loans or advances to or from (i)
Borrower, (ii) International, or (iii) a Subsidiary of Borrower or
International, as the case may be, to or from any of the foregoing Persons.

         "INTEREST PERIOD" means, as to any LIBOR Rate Loan, the period
commencing on and including the date such LIBOR Rate Loan is made (or on the
effective date of Borrower's election to convert any Prime Rate Loan to a LIBOR
Rate Loan in accordance with the provisions of this Agreement) and ending on and
including the day which numerically corresponds to such date thirty (30), sixty
(60), ninety (90) or one hundred eighty (180) days thereafter as selected by
Borrower in accordance with the provisions of this Agreement, and thereafter,
each period commencing on the last day of the then preceding Interest Period for
such LIBOR Loan and ending on and including the day which numerically
corresponds to such date thirty (30), sixty (60), ninety (90) or one hundred
eighty (180) days thereafter (or, if such month

                                       8

<PAGE>

has no numerically corresponding day, on the last Business Day of such month)
as selected by Borrower in accordance with the provisions of this Agreement,
provided, however, that:

               (a) the first day of any Interest Period shall be a Eurodollar
          Business Day;

               (b) if any Interest Period would end on a day that shall not be a
          Eurodollar Business Day, such Interest Period shall be extended to the
          next succeeding Eurodollar Business Day unless such next succeeding
          Eurodollar Business Day would fall in the next calendar month, in
          which case, such Interest Period shall end on the next preceding
          Eurodollar Business Day;

               (c) no Interest Period shall extend beyond the Revolving Loan
          Termination Date; and

               (d) for each Term Loan, no Interest Period shall extend beyond
          the earliest scheduled maturity date of such Term Loan.

         "INTEREST RATE ELECTION NOTICE" has the meaning described in SECTION
3.1(c).

         "INTEREST RATE PROTECTION AGREEMENT" shall have the meaning ascribed
thereto in SECTION 3.10 hereof.

         "INTERNATIONAL" shall mean Vari-Lite International, Inc., a Delaware
corporation.

         "INTERNATIONAL GUARANTY" shall have the meaning ascribed thereto in
SECTION 5.5 hereof.

         "INTERNATIONAL PLEDGE AGREEMENTS" shall have the meaning ascribed
thereto in SECTION 5.3 hereof.

         "INVESTMENT GRADE ACCOUNT DEBTORS" shall mean any account debtor of
Borrower that has a credit rating of at least BBB by Standard & Poor's Rating
Service or the equivalent thereof by Moody's Investor Services, Inc.

         "LANDLORD WAIVER RESERVES" shall mean those amounts required to be paid
by Bank to a landlord of a Leased Premises under the applicable Landlord Waiver.

         "LANDLORD WAIVERS" shall have the meaning ascribed thereto in SECTION
5.4 hereof.

         "LEASED PREMISES" shall mean the Leased Premises described in SCHEDULE
17 attached hereto.

         "LEVERAGE RATIO" shall mean the Leverage Ratio as described on EXHIBIT
J hereto.

         "LIBOR BASE RATE" means, for any Interest Period with respect to any
LIBOR Rate Loan, the per annum interest rate (rounded upward, if necessary, to
the nearest next 1/100 of 1%) quoted to Bank or an Affiliate of Bank on an
immediately available funds basis, at or about 11:00 a.m. (London time) on the
date that is three (3) Eurodollar Business Days prior to

                                       9

<PAGE>

the first day of such Interest Period, for the offering by leading banks in
the London interbank Eurodollar market of United States dollar deposits with
Bank or such Affiliate for a period comparable in time to the duration of
such Interest Period and in amounts comparable to the amount of such LIBOR
Rate Loan as to which the LIBOR Base Rate is to be determined. If Bank shall
be unable or shall otherwise fail to so obtain the LIBOR Base Rate, the LIBOR
Base Rate shall be the average of those rates quoted on the REUTERS SCREEN
"LIBOR" page for a period comparable to the applicable Interest Period
(rounded upward, if necessary, to the nearest next 1/100 of 1%).

         "LIBOR RATE" means, for any Interest Period with respect to any LIBOR
Loan, the per annum rate of interest calculated pursuant to the following
formula (rounded up to the nearest 1/100th of 1%):

                                 LIBOR Base Rate
                          ------------------------------
                            1.00 - Reserve Percentage

         "LIBOR RATE LOAN" means any Loan for which interest is to be computed
with reference to the LIBOR Rate.

         "LOAN DOCUMENTS" shall mean this Agreement and all other documents,
instruments and agreements executed in connection herewith, as the same may be
amended, supplemented or otherwise modified from time to time.

         "LOANS" shall have the meaning ascribed thereto in SECTION 2.1 hereof.

         "LOCKED BOX" shall have the meaning ascribed thereto in SECTION 7.3
hereof.

         "MATERIAL ADVERSE EFFECT" shall mean the occurrence or existence of a
material adverse effect on: (a) the business, property, assets, operations or
condition, financial or otherwise, of Borrower or International; (b) the ability
of Borrower to perform any of its payment or other Obligations under this
Agreement or any of the other Loan Documents to which it is a party; (c) the
legality, validity or enforceability of Borrower's Obligations under this
Agreement or any of the other Loan Documents to which it is a party; or (d) the
ability of Bank to exercise its rights and remedies with respect to, or
otherwise to realize upon any of the Collateral, or any other security for the
Obligations.

         "MAXIMUM RATE" shall have the meaning ascribed thereto in SECTION 3.12
hereof.

         "MULTIEMPLOYER PLAN" shall have the meaning set forth in Section
4001(a)(3) of ERISA.

         "OBLIGATIONS" shall mean the Loans and all other loans, advances,
debts, liabilities, obligations, covenants and duties owing to Bank or any
Affiliate of Bank from Borrower of any kind, present or future, whether or
not evidenced by or arising out of this Agreement, any of the Loan Documents,
or any other agreement, transaction, extension of credit, letter of credit,
guaranty or indemnification or in any other manner, whether or not for the
payment of money, whether direct or indirect (including acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired, and

                                       10

<PAGE>

including, without limitation, all interest, charges, expenses, fees and any
other sums chargeable to Borrower in connection with any of the foregoing,
and all Attorneys' Fees.

         "PATENT ASSIGNMENT" shall have the meaning ascribed thereto in SECTION
5.2 hereof.

         "PENSION PLAN" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to title IV of ERISA (other than a
Multiemployer Plan) and to which any Borrower or any corporation, trade or
business that is, along with Borrower, a member of a Controlled Group may have
any liability, including any liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding six (6) years, or by reason of being deemed to be a contributing
sponsor under section 4069 of ERISA.

         "PERMITTED INVESTMENTS" shall mean (i) short-term obligations of , or
fully guaranteed by, the United States of America, (ii) commercial paper rated
A-2 or better by Standard and Poor's Rating Services, a division of The McGraw
Hill Companies, Inc., or P-2 or better by Moody's Investors Service, Inc., (iii)
certificates of deposit issued by and time and demand deposits with commercial
banks having capital and surplus in excess of $100,000,000; PROVIDED, HOWEVER,
in each case that the same provides for payment of both principal and interest
(and not principal alone or interest alone) and is not subject to any
contingency regarding the payment of principal or interest, and (iv) advances to
employees in the ordinary course of business to pay travel expenses and related
costs.

         "PERMITTED LIENS" shall mean the liens and interests in favor of
Bank granted in connection herewith and, to the extent reflected on the
Borrower's books and records and not impairing the operations of Borrower or
any performance hereunder or contemplated hereby: (i) liens arising by
operation of law for taxes not yet due and payable; (ii) statutory liens of
mechanics, materialmen, shippers, landlord liens and warehousemen for
services or materials for which payment is not yet due; (iii) deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) liens, if
any, specifically permitted by Bank from time to time in writing; (v) liens
securing obligations under capitalized leases or purchase money Indebtedness
permitted by SECTION 10.11(iv) on the property subject thereto, PROVIDED that
(a) such capitalized leases and purchase money Indebtedness shall not be
secured by any of the Collateral granted or mortgaged on the Effective Date,
(b) any liens relating to such capitalized leases and purchase money
Indebtedness shall not extend to cover any other property of Borrower other
than the property so acquired, and (c) the principal amount (i.e., exclusive
of interest, fees, expenses and other charges) of such capitalized leases and
purchase money Indebtedness shall not exceed the value of the property so
acquired at the time of such acquisition; (vi) liens for taxes, assessments
and other similar charges to the extent payment thereof shall not at the time
be required to be made in accordance with the provisions of SECTION 10.10;
(vii) the following if the validity or amount thereof is being contested in
good faith and by appropriate and lawful proceedings promptly initiated and
diligently conducted of which the applicable Borrower has given prior notice
to Bank and for which appropriate reserves (in Bank's good faith discretion)
have been established and so long as levy and execution have been and
continue to be stayed: claims of mechanics, materialmen, shippers,
warehouseman, carriers and landlords; (viii) deposits made in the

                                       11

<PAGE>

ordinary course of business to secure bids, tenders and contracts in the
ordinary course of Borrower's business; and (ix) as described on SCHEDULE 3
attached hereto.

         "PERMITTED PAYMENTS" means the following payments, regardless of
whether classified as dividends, distributions or payments of Intercompany
Loans: (i) payments to International in an amount not to exceed Inernational's
consolidated tax liability attributable to the net income of Borrower in any
fiscal year of Borrower, and (ii) so long as no Event of Default has occurred
which is continuing: (a) payments of interest at a market rate to Vari-Lite
Asia, Inc. on Intercompany Loans from Vari-Lite Asia, Inc. to Borrower, and (b)
payments to International to cover certain employment, compensation, audits,
director fees, legal and other overhead and administrative expenses not to
exceed One Million Dollars ($1,000,000) in the aggregate in any fiscal year of
Borrower.

         "PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, party or government or
governmental entity.

         "PLAN" shall have the meaning ascribed thereto in SECTION 10.3 hereof.

         "PRIME RATE" shall mean the rate per annum announced by Bank from time
to time as its "Prime Rate," such rate to be adjusted on the effective date of
any change in the Prime Rate by Bank.

         "PRIME RATE LOAN" means any Loan for which interest is to be computed
with reference to the Prime Rate.

         "RELATED PROPERTY" means with respect to any Receivable: (a) all of the
Borrower's right, title and interest in and to all Contracts, purchase orders,
agreements for lease or other agreements or documents that evidence, secure or
otherwise relate to such Receivable; (b) all of the Borrower's interest in the
merchandise (including returned merchandise), if any, relating to the sale or
lease which gave rise to such Receivable; (c) all liens from time to time
purporting to secure payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise, and all property subject to
such liens; (d) all UCC financing statements covering any collateral securing
payment of such Receivable (to the extent of the interest of the purchaser or
lessee in the related Receivable); (e) all guarantees and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related to such
Receivable or otherwise; (f) all books and records evidencing or otherwise
relating to any Receivables or any of the foregoing; (g) all collections with
respect to, and other proceeds of, such Receivables and any of the property
described above and f) all of Borrower's rights, title and interest (but not
obligations) arising under the agreement for sale or lease.

         "REMITTANCES" shall have the meaning ascribed thereto in SECTION 7.3
hereof.

         "RENTAL INVENTORY " means "Inventory" of Borrower which is leased by or
available for lease by Borrower to other Persons in the ordinary course of
Borrower's business and is identified as "fixed assets" under GAAP on the
balance sheet of Borrower.

                                       12

<PAGE>

         "RESERVE AMOUNT" shall mean an amount determined by Bank, in its
good faith discretion, as a reserve against Collateral values and potential
or anticipated obligations of Borrower, including, without limitation, (i)
tax liabilities and other obligations owing to governmental entities
including all amounts referred to in SECTION 10.10 hereof, (ii) litigation
liabilities, (iii) the Environmental Compliance Reserve, (iv) the anticipated
costs and expenses relating to the liquidation of Collateral, (v) unpaid
sales taxes, (vi) those reserve amounts as required to be held as reserves
under generally accepted accounting principles, (vii) liabilities and other
obligations owing by Borrower to any lessor of real property leased by
Borrower or to any warehouseman and (viii) an amount equal to the Landlord
Waiver Reserves.

         "REVOLVER ADJUSTMENT DATE" shall mean January 15, 2002; PROVIDED,
HOWEVER, the maximum amount of the Revolving Loan Facility (subject, in each
instance, to the Revolving Loan Borrowing Base) shall not increase on such date
from Five Million Dollars ($5,000,000) to Seven Million Five Hundred Thousand
Dollars ($7,500,000) unless International shall have achieved the EBITDA
Threshold for International's fiscal year ended September 30, 2001.

         "REVOLVING LOAN AVAILABILITY" shall mean, as at any applicable date, an
amount equal to the difference of:

               (i) (a) during the Initial Period, the lesser of (x) Five Million
          Dollars ($5,000,000), or (y) an amount equal to the Revolving Loan
          Borrowing Base then if effect, and (b) SUBJECT TO the condition
          precedent of International meeting the EBITDA Threshold for its fiscal
          year ended September 30, 2001, after the Initial Period, the lesser of
          (x) Seven Million Five Hundred Thousand Dollars ($7,500,000), or (y)
          an amount equal to the Revolving Loan Borrowing Base then in effect;

         LESS

               (ii) the then aggregate outstanding principal amount of all
          Revolving Loans.

         "REVOLVING LOAN BORROWING BASE" shall mean an amount equal as at any
time to the sum of (i) up to eighty percent (80%) of the net amount of
Borrower's Eligible Receivables (the "Eligible Receivables Advance Rate"), PLUS
(ii) up to the lesser of (x) fifty percent (50%) of the value of Borrower's
Eligible Inventory (the "Eligible Inventory Advance Rate"), or (y) Four Millions
Dollars ($4,000,000), valued at the lower of cost or market value, determined on
an "average cost" basis, consistently applied, minus (iii) the Reserve Amount
then in effect.

         "REVOLVING LOAN FACILITY" shall have the meaning ascribed thereto in
SECTION 2.1 hereof.

         "REVOLVING LOANS" shall have the meaning ascribed thereto in SECTION
2.2 hereof.

         "SECURITY AGREEMENT" shall have the meaning ascribed thereto in SECTION
5.1 hereof.

                                       13

<PAGE>

         "SOLVENT" shall mean, with respect to any Person, that (i) fair value
of the property of the Person is, on the date of determination, greater than the
total amount of liabilities (including contingent liabilities) of the Person as
of that date, (ii) as of that date, the Person is able to pay all liabilities of
the Person as those liabilities mature, and (iii) the Person does not have
unreasonably small capital for the business in which it is engaged or for any
business or transaction in which it is about to engage. In computing the amount
of contingent liabilities at any time, it is intended that they be computed at
the amount that, in light of all the facts and circumstances existing at the
time, represents the amount that can reasonably be expected to become an actual
or matured liability.

         "SPECIAL ACCOUNT" shall have the meaning ascribed thereto in SECTION
7.4 hereof.

         "SUBSIDIARY" shall mean any Person as to which another Person owns,
directly or indirectly, at least fifty percent (50%) of the outstanding shares
of capital stock or other interests (including, without limitation, membership
interests) having ordinary voting power for the election of directors, officers,
managers, trustees or other controlling Persons, or an equivalent controlling
interest.

         "TERM LOAN A" shall have the meaning ascribed thereto in SECTION 2.1
hereof.

         "TERM LOAN A FACILITY" shall have the meaning ascribed thereto in
SECTION 2.1 hereof.

         "TERM LOAN PAYMENTS" shall mean each of the monthly payments required
to be made on the Term Loan A, as more fully set forth in SECTIONS 2.3 hereof.

         "TERM LOAN PRINCIPAL PAYMENT DATE" shall have the meaning ascribed
thereto in SECTION 2.3 hereof.

         "TOTAL FACILITY" shall have the meaning ascribed thereto in SECTION 2.1
hereof.

         "UNUSED REVOLVING LOAN FACILITY AMOUNT" shall mean, for any period, the
amount for such period by which:

               (i) (a) during the Initial Period Five Million Dollars
          ($5,000,000) and (b) thereafter, subject to International meeting the
          EBITDA Threshold for International's fiscal year ended September 30,
          2001, Seven Million Five Hundred Thousand Dollars ($7,500,000), in
          each case as such amount may be reduced by the Facility Reduction
          Amount as provided for in SECTION 2.11 hereof,

         EXCEEDS

               (ii) the average of the aggregate outstanding principal amount of
          all Revolving Loans during such period.

         "VARI-LITE ASIA, INC." shall mean Vari-Lite Asia, Inc., a corporation
formed under the laws of Japan and a wholly-owned Subsidiary of International.

                                       14

<PAGE>

         "VARI-LITE EUROPE HOLDINGS, LIMITED" shall mean Vari-Lite Europe
Holdings, Limited, a corporation formed under the laws of Great Britain and a
wholly-owned Subsidiary of International.

         "VARI-LITE PRODUCTION SERVICES LIMITED" shall mean Vari-Lite Production
Services Limited, a corporation formed under the laws of Great Britain and a
wholly-owned Subsidiary of Vari-Lite Europe Holdings, Limited.

         "VOLUNTARY TERMINATION DATE" shall have the meaning ascribed thereto in
SECTION 11.3 hereof.

         "WELFARE PLAN" shall mean a "welfare plan", as such term is defined in
Section 3(1) of ERISA.

         1.2      ACCOUNTING TERMS.

         Any accounting terms used in this Agreement which are not specifically
defined shall have the meanings customarily given them in accordance with
generally accepted accounting principles ("GAAP").

2.       LOANS AND OTHER FINANCIAL ACCOMMODATIONS.

         2.1      TOTAL FACILITY.

         Bank will make up to a Twenty-Four Million Five Hundred Thousand Dollar
($24,500,000) total credit facility, as such amount may be reduced by the
Facility Reduction Amount under SECTION 2.11 hereof (the "Total Facility")
available to Borrower, subject to the terms and conditions of this Agreement and
comprised of the following loans advanced or made under the following facilities
(the "Loans"): (i) Revolving Loans (as hereinafter defined) to be advanced under
the Revolving Loan facility (the "Revolving Loan Facility") in an amount not to
exceed the Revolving Loan Borrowing Base, (ii) a term loan ("Term Loan A") to be
advanced to Borrower under the Term Loan A facility (the "Term Loan A
Facility"), and (iii) CapEx Term Loans (as hereinafter defined) to be advanced
under the capital expenditure term loan facility to Borrower (the "CapEx Term
Loan Facility"), all as more particularly described below. Notwithstanding any
provision to the contrary set forth herein, in no event shall the Bank be
required or have any obligation to advance Loans hereunder if any of the
Borrower, International, or any guarantor of the Obligations shall have filed
against it an involuntary petition in bankruptcy or for reorganization.

         2.2      REVOLVING LOAN FACILITY.

         Until the termination of this Agreement pursuant to SECTION 11 and/or
SECTION 13 hereof (the "Revolving Loan Termination Date"), revolving loans under
the Revolving Loan Facility will be lent and relent from time to time (such
loans being referred to collectively as the "Revolving Loans" and each of such
loans being referred to individually as a "Revolving Loan"), in an amount not to
exceed the Revolving Loan Borrowing Base. Notwithstanding the foregoing
sentence, in no event shall Bank be obligated to make Revolving Loans if, either
immediately

                                       15

<PAGE>

before or after giving effect to any such Revolving Loan, (y) a Deficiency
has occurred or shall occur, or (z) an Event of Default has occurred or shall
occur.

         2.3      TERM LOAN A FACILITY.

         The Term Loan A under the Term Loan A Facility will be made to Borrower
in the amount of Twelve Million Dollars ($12,000,000) on the Effective Date. The
principal of Term Loan A shall be payable in eighty-four (84) consecutive
monthly installments (each, a "Term Loan Payment"), commencing on the first day
of February, 2001, and thereafter on the first day of each succeeding calendar
month (each such date being referred to herein as a "Term Loan Principal Payment
Date"). The principal amount of the Term Loan Payments shall be as follows: (a)
One Hundred Forty-Two Thousand Eight Hundred Fifty-Seven Dollars ($142,857) on
each of the first eighty-three (83) Term Loan Principal Payment Dates, and (b)
One Hundred Forty-Two Thousand Eight Hundred Sixty-Nine Dollars ($142,869) on
the eighty-fourth (84th) Term Loan Principal Payment Date; PROVIDED, HOWEVER,
that notwithstanding the foregoing amortization schedule for the Term Loan, upon
the effective date of any termination of this Agreement pursuant to SECTION 11
and/or SECTION 13 hereof, all amounts then outstanding under the Term Loan A
shall become immediately due and payable without notice or demand. No repayment
or prepayment of the Term Loan A by Borrower shall be reason for any relending
or additional lending of the Term Loan A proceeds to Borrower. The principal of
and interest on the Term Loan A shall, at Bank's option, be payable in
accordance with the payment terms set forth in this Agreement by charging or
increasing the Revolving Loan balance of Borrower.

         2.4      CAPEX TERM LOAN FACILITY.

         Until the termination of this Agreement pursuant to SECTION 11 and/or
SECTION 13 hereof, CapEx Term Loans under the CapEx Term Loan Facility will be
lent to Borrower from time to time, in aggregate amounts UP TO THE LESSER OF (i)
the CapEx Term Loan Availability on each such date, or (ii)(a) up to
seventy-five percent (75%) of the cost of the equipment proposed to be purchased
from third parties with the proceeds of the proposed CapEx Term Loan or to
reimburse Borrower for up to seventy-five percent (75%) of the costs of
purchases of equipment from third parties made during the immediately preceding
fiscal quarter (in each instance excluding taxes, freight, installation costs
and other similar add-on costs and charges) and (b) up to one hundred percent
(100%) of Borrower's costs incurred in the manufacture of Rental Inventory
manufactured directly by Borrower; PROVIDED, HOWEVER, that no more than one (1)
CapEx Term Loan per calendar quarter may be advanced by Bank to Borrower. Each
CapEx Term Loan hereunder shall be in the principal amount of Two Hundred Fifty
Thousand Dollars ($250,000) or more. Borrower agrees that if it borrows CapEx
Term Loans in an amount greater than the amounts provided under this SECTION
2.4, Borrower will repay the excess ON DEMAND.

         Each advance under the CapEx Term Loan Facility shall be repayable in
installment payments of principal monthly (commencing on the first day of the
first (1st) month after the month in which such advance was made and on the
first day of each month thereafter) in an amount equal to 1/84th of the amount
of the advance. At the time of each advance under the CapEx Term Loan Facility,
Borrower shall furnish a "Capital Expenditure Term Loan Installment Payment
Schedule" to Bank substantially in the form of EXHIBIT T attached hereto

                                       16

<PAGE>

and made a part hereof, with appropriate insertions, which shall set forth
aggregate installment payments due thereafter on all Capital Expenditure Term
Loan Facility advances. Notwithstanding any amortization schedule for
advances made under the CapEx Term Loan Facility, upon the effective date of
any termination of this Agreement under SECTION 11 or SECTION 13 hereof, all
amounts then outstanding under the CapEx Term Loan Facility shall become
immediately due and payable without notice or demand. Each Capital
Expenditure Term Loan Payment Schedule shall not operate as a novation of any
of the Obligations or nullify, discharge, or release any such Obligations or
the continuing contractual relationship of the parties hereto in accordance
with the provisions of this Agreement. Notwithstanding the terms of this
Agreement, in no event shall Bank be obligated to make CapEx Term Loans if,
either immediately before or after giving effect to any such CapEx Term Loan,
(i) a Deficiency has occurred or shall occur, or (ii) an Event of Default has
occurred or shall occur. No payment or prepayment of any CapEx Term Loan
shall be reason for any relending or additional lending of CapEx Term Loan
proceeds. Borrower hereby authorizes Bank, at Bank's option, to pay the
principal of such Borrower CapEx Term Loans in accordance with the foregoing
amortization schedule by charging or increasing the Revolving Loan balance of
Borrower.

         2.5      VOLUNTARY PREPAYMENTS.

         Borrower shall have the right to prepay at any time the Loans in whole
or part without premium or penalty (except as provided in SECTION 3.4):

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

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

          (y)  a statement indicating the application of the prepayment between
               Term Loan A and CapEx Term Loans which application must comply
               with the paragraph below; and

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

         All prepayment notices shall be irrevocable. The principal amount of
the Loans for which a prepayment notice is given, together with interest on such
principal amount shall be due and payable on the date specified in such
prepayment notice as the date on which the proposed prepayment is to be made.
All Term Loan prepayments permitted pursuant to this SECTION 2.5 shall be
applied ratably to the Term Loan A and the CapEx Term Loans based on the amounts
of such Loans outstanding and, after giving effect to the preceding clause, then
in inverse order of the unpaid principal installments of such Loans. If the
Borrower prepays a Loan but fails to specify the applicable Loan which the
Borrower is prepaying, the prepayment shall be applied first to Revolving Loans
which are Prime Rate Loans, then to Revolving Loans which

                                       17

<PAGE>

are LIBOR Rate Loans; PROVIDED that if no Revolving Loans are outstanding,
first to the Term Loans which are Prime Rate Loans, then to Term Loans which
are LIBOR Rate Loans. Any prepayment hereunder shall be subject to the
Borrower's Obligation to indemnify the Banks under SECTION 3.4.

         2.6      DISBURSEMENT OF LOANS.

         All disbursements of proceeds of the Loans requested by Borrower
pursuant to SECTION 2.7 or SECTION 2.8 shall be effectuated by Bank's crediting
Account No. 821652971. Such account is or will be structured and utilized as a
controlled disbursement account; PROVIDED, HOWEVER, that Bank may at any time
hereafter elect not to credit proceeds of the Loans to the aforedescribed
controlled disbursement accounts but instead may establish a similar
non-controlled disbursement account for Borrower at Bank and disburse proceeds
of the Loans by crediting such non-controlled disbursement account of Borrower
at Bank.

         2.7      PROCEDURE FOR ADVANCING REVOLVING LOANS.

         Subject to the terms and conditions of this Agreement, Bank will, from
time to time on any Business Day prior to the termination of this Agreement
pursuant to SECTION 11 or SECTION 13 hereof, upon the oral or written request of
Borrower therefor, advance Revolving Loans to Borrower's account described in
SECTION 2.9 hereof; PROVIDED, HOWEVER, that so long as the controlled
disbursement account for Borrower at Bank referred to in SECTION 2.6 is in
place, Borrower shall be deemed to have requested a Revolving Loan each time a
check drawn on such account by Borrower is presented to Bank for payment
thereof. If Bank receives such a request from Borrower for a Revolving Loan
prior to 12:00 noon, Cincinnati, Ohio time on a Business Day, Bank will advance
such Revolving Loan on that same Business Day. If Bank receives such a request
from Borrower for a Revolving Loan after 12:00 noon, Cincinnati, Ohio time on a
Business Day, Bank will advance such requested Revolving Loan on the next
Business Day. Notwithstanding anything in this Agreement to the contrary, Bank
shall not be obligated to advance Loans if, either immediately before or after
giving effect to any such Loan, (i) a Deficiency has occurred or shall occur, or
(ii) an Event of Default has occurred or shall occur.

         2.8      PROCEDURE FOR ADVANCING CAPEX TERM LOANS.

         Subject to the terms and conditions of this Agreement, Bank will from
time to time prior to the termination of this Agreement pursuant to SECTION 11
or SECTION 13 hereof, advance CapEx Term Loans to Borrower's account described
in SECTION 2.6 hereof. Borrower shall notify Bank in writing at least ten (10)
Business Days prior to the Business Day on which the proposed CapEx Term Loan is
to be made of its request for a CapEx Term Loan. On the date of each CapEx Term
Loan, Bank will, so long as Borrower shall have satisfied each of the conditions
set forth in EXHIBIT G-2 attached hereto and incorporated herein by reference in
a manner satisfactory to Bank, advance the proceeds of such CapEx Term Loan to
the account of Borrower described in SECTION 2.6.

         2.9      NO LIMITATION ON LIENS.

         The limits on outstanding advances against the Revolving Loan Borrowing
Base set forth in this Agreement are not intended and shall not be deemed to
limit in any way Bank's

                                       18

<PAGE>

security interest in or lien on the Accounts, Chattel Paper, Related
Property, Documents, Receivables, Inventory, Equipment, or any other
collateral for the Obligations.

         2.10     DEFICIENCY.

         If a Deficiency occurs, the Borrower shall immediately, without demand
or notice, reduce the outstanding balance of the Loans made to Borrower so that
such Deficiency shall no longer exist.

         2.11     VOLUNTARY REDUCTION OF TOTAL FACILITY.

         Upon at least three (3) Business Days' prior written notice given to
Bank (the "Facility Reduction Notice"), Borrower shall have the right, without
premium or penalty, to permanently reduce the Total Facility by the amount (the
"Facility Reduction Amount"), specifically stated in the Facility Reduction
Notice, in increments of no less than One Hundred Thousand Dollars ($100,000).
Upon receipt by Bank of a Facility Reduction Notice sent in accordance with the
provisions of this Financing Agreement, (a) the Total Facility as defined in
SECTION 2.1 will be reduced by the Facility Reduction Amount, (b) the amount
appearing in subparagraph (i) of the definition of Unused Revolving Loan
Facility Amount shall be reduced by the Facility Reduction Amount and (iii) the
amount set forth in subparagraph (i)(a) or (b), as applicable, of the definition
of Revolving Loan Availability shall be reduced by the Facility Reduction
Amount. The Facility Reduction Notice may not be given if (a) an Event of
Default has occurred or would be caused thereby or (b) a Deficiency exists or
would be caused thereby.

         2.12     ADVANCE RATES AND SUBLIMITS.

         (a) CHANGES. Borrower acknowledges that the Bank, from time to time,
may do any one or more of the following in its discretion exercised in good
faith: (i) decrease the dollar limits on outstanding advances against the
Revolving Loan Borrowing Base or applicable to any one or more Inventory or
Receivable advance sublimits or (ii) decrease the Eligible Receivables Advance
Rate or the Eligible Inventory Advance Rate (collectively, the "Advance Rates")
if one or more of the following events occur or conditions exists: (a) an Event
of Default has occurred; (b) with regard to the Eligible Receivables Advance
Rate, (1) the dilution percentage with respect to Borrower's Eligible
Receivables (i.e., reductions in the amount of accounts receivable because of
returns, discounts, price adjustments, credit memoranda, credits, contracts and
other similar offsets) increases by an amount which the Bank, in good faith, has
determined is material above that which existed as of the Effective Date, (2)
the percentage of accounts receivable which are 90 days or more past the date of
the original invoices applicable thereto increases, in comparison to the
percentage of accounts receivable which are within 90 days from the date of the
original invoices applicable thereto, by an amount which the Bank in good faith,
determines is material, or (3) any material change occurs, determined by the
Bank in good faith, from the Effective Date in respect of the credit rating or
credit quality of Borrower's account debtors; or (c) with respect to the
Eligible Inventory Advance Rate, there occurs a material change, as determined
by the Bank in its discretion exercised in good faith, in the type, quantity, or
quality of Borrower's Eligible Inventory as the same is constituted on the
Effective Date.

                                       19

<PAGE>

         (b) NOTICE. If, at any time, the Bank decreases any of the dollar
limits on outstanding advances against the Revolving Loan Borrowing Base or the
Advance Rates ("STATED ADVANCE RATE CHANGE"), the Bank will give Borrower five
(5) days advance written notice of such Stated Advance Rate Change, unless an
Event of Default then exists, in which case no such notice shall be required.
Failure by Bank to so notify Borrower shall in no way affect Borrower's
obligations under this Agreement and the other Loan Documents or Bank's rights
and remedies hereunder or thereunder; PROVIDED, HOWEVER, prior to the occurrence
of an Event of Default no payment by Borrower of any Deficiency resulting from
an Advance Rate Change shall be due until Borrower receives such notice from
Bank.

3.       INTEREST CHARGES; MINIMUM LOAN CHARGE; FEES; MANDATORY PREPAYMENT.

         3.1      INTEREST ON LOANS.

         The Borrower shall pay Bank interest on the average daily outstanding
principal amount, if any, of Borrower's Loans and all other Obligations as
selected and specified by the Borrower in an Interest Rate Election Notice
furnished to the Bank in accordance with the provisions of SECTION 3.1(c), or as
otherwise determined in accordance with the provisions of this SECTION 3.1.
Notwithstanding the foregoing, the per annum rate of interest applicable at all
times after the occurrence of an Event of Default shall be (i) for Revolving
Loans, the greater of (x) the Prime Rate PLUS three percent (3%) or (y) the
LIBOR Rate PLUS three percent (3.0%) and (ii) for Term Loans, the greater of (x)
the Prime Rate PLUS three percent (3.0%) or (y) the LIBOR Rate PLUS three
percent (3%) (the "Default Rate").

         (a) PAYMENT OF INTEREST. Unpaid and accrued interest on all Prime Rate
Loans shall be paid monthly in arrears, on the first (1st) day of each calendar
month, commencing on February 1, 2000, and on the first (1st) day of each
calendar month thereafter, and at maturity (whether by acceleration,
declaration, extension or otherwise). Notwithstanding the foregoing, any and all
unpaid and accrued interest on any Prime Rate Loan converted to a LIBOR Rate
Loan or prepaid shall be paid immediately upon such conversion and/or
prepayment, as appropriate. Unpaid and accrued interest on any LIBOR Rate Loan
shall be paid on (i) the last Business Day of each Interest Period for each
LIBOR Rate Loan which has an Interest Period of thirty (30), sixty (60) or
ninety (90) days and (ii) on the ninetieth (90th) day and on the last Business
Day of the Interest Period for each LIBOR Loan which has an Interest Period of
One Hundred Eighty (180) days, and at maturity (whether by acceleration,
declaration, extension or otherwise); PROVIDED, HOWEVER, that any and all unpaid
and accrued interest on any LIBOR Rate Loan prepaid prior to expiration of the
then current Interest Period for such LIBOR Rate Loan shall be paid immediately
upon prepayment.

         (b) SELECTION OF RATE. From time to time as provided in this SECTION
3.1, by a proper and timely Interest Rate Election Notice furnished to Bank in
accordance with the provisions of SECTION 3.1(c), the Borrower may select an
Applicable Interest Rate or Applicable Interest Rates for any Loans to Borrower
or may convert the Applicable Interest Rate and, when applicable, the Interest
Period, for any existing Loan to Borrower to any other Applicable Interest Rate
or, when applicable, any other Interest Period. Borrower's selection of an
Applicable Interest Rate and/or an Interest Period, its election to convert an
Applicable Interest

                                       20

<PAGE>

Rate and/or an Interest Period to another Applicable Interest Rate or
Interest Period, and any other adjustments in an interest rate are subject to
the following additional limitations:

          (1)  Borrower shall not at any time select or change to an Interest
               Period that extends beyond the Revolving Loan Termination Date.

          (2)  (A) no change from any Applicable LIBOR Rate to the corresponding
               Applicable Prime Rate shall become effective on a day other than
               a Business Day and on a day which is the last day of the then
               current Interest Period, (B) no change of an Interest Period
               shall become effective on a day other than the last day of the
               then current Interest Period, and (C) no change from any
               Applicable Prime Rate to the corresponding Applicable LIBOR Rate
               shall become effective on a day other than a day which is a
               Eurodollar Business Day;

          (3)  any Applicable Interest Rate change for any Loan to be effective
               on a date on which any principal payment on account of such Loan
               is scheduled to be paid shall be made only after such payment
               shall have been made;

          (4)  no more than six (6) LIBOR Rate Loans may be outstanding at any
               one time and no more than an aggregate principal amount of Six
               Million Dollars ($6,000,000) of LIBOR Loans with Interest Periods
               of One Hundred Eighty (180) days may be outstanding at any one
               time;

          (5)  the first day of each Interest Period shall be a Eurodollar
               Business Day; and

          (6)  if, as of the effective date of a selection, an Event of Default
               exists, Bank, in the exercise of its sole and absolute
               discretion, may elect that no such selection, election or
               adjustment shall be allowed.

The minimum principal amount of a LIBOR Rate Loan shall be One Million Dollars
($1,000,000). If a request for a borrowing is not accompanied by an Interest
Rate Election Notice or does not otherwise include a selection of an Applicable
Interest Rate and, if applicable, an Interest Period, or if, after having made a
selection of an Applicable Interest Rate and, if applicable, an Interest Period,
the Borrower fails or is not otherwise entitled under the provisions of this
Agreement to continue such Applicable Interest Rate or Interest Period, the
Borrower shall be deemed to have selected the Applicable Prime Rate as the
Applicable Interest Rate until such time as the Borrower has selected a
different Applicable Interest Rate and specified an Interest Period in
accordance with, and subject to, the provisions of this SECTION 3.1(c).

         (c) INTEREST RATE ELECTION NOTICE. Bank will not be obligated to make
Loans, to convert the Applicable Interest Rate on Loans to another Interest
Rate, or to change Interest Periods, unless Bank shall have received an
irrevocable written or telephonic notice (an "Interest Rate Election Notice")
from the Borrower specifying the following information:

          (1)  the amount to be borrowed or converted;

                                       21

<PAGE>

          (2)  a selection of an Applicable Prime Rate or an Applicable LIBOR
               Rate;

          (3)  the length of the Interest Period if the Applicable Interest Rate
               selected is an Applicable LIBOR Rate; and

          (4)  the requested date on which such election is to be effective.

Any telephonic notice must be confirmed in writing within three (3) Business
Days. Each Interest Rate Election Notice must be received by the Bank not later
than 2:00 p.m. (Eastern Time) on the Business Day of any requested borrowing or
conversion in the case of a selection of the Prime Rate and not later than 2:00
p.m. (Eastern Time) on the third (3rd) Business Day before the effective date of
any requested borrowing or conversion in the case of a selection of the LIBOR
Rate.

         3.2      INABILITY TO DETERMINE LIBOR BASE RATE.

         In the event that (i) the Bank shall have determined that, by reason of
circumstances affecting the London interbank eurodollar market, adequate and
reasonable means do not exist for ascertaining the LIBOR Base Rate for any
requested Interest Period with respect to a Loan that the Borrower has requested
to be made or to be converted to a LIBOR Rate Loan or (ii) the Bank shall
determine that the LIBOR Base Rate for any requested Interest Period with
respect to a Loan the Borrower has requested to be made or to be converted to a
LIBOR Rate Loan does not adequately and fairly reflect the cost to the Bank of
funding or converting such Loan, the Bank shall give telephonic or written
notice of such determination to Borrower at least one (1) day prior to the
proposed date for funding or converting such Loan. If such notice is given, any
request for a LIBOR Rate Loan shall be made or converted to a Prime Rate Loan.
Until such notice has been withdrawn by the Bank, Borrower shall not request
that any Loan be made or converted to a LIBOR Rate Loan.

         3.3      LIBOR UNLAWFUL, ETC.

         If applicable laws shall (i) make it unlawful for the Bank to fund
through the purchase of dollar deposits with respect to any portion of the Loans
based, or requested by Borrower to be based, on LIBOR or otherwise give effect
to the Bank's obligations as contemplated under this Section with respect to the
use of the LIBOR Rate, or (ii) shall impose on the Bank any costs based on or
measured by the excess above a specified level of the amount of a category of
deposits or other liabilities of the Bank which includes deposits by reference
to which the LIBOR Rate is determined as provided herein or a category of
extensions of credit or other assets of the Bank which includes a LIBOR Rate, or
(iii) shall impose on the Bank any restrictions on the amount of such a category
of liabilities or assets which the Bank may hold, then, in each such case, the
Bank may, by notice thereof to Borrower, terminate the LIBOR option. Any portion
of the Loans subject thereto shall immediately bear interest thereafter at the
Applicable Prime Rate.

                                       22

<PAGE>

         3.4      LIBOR INDEMNITY.

         Borrower agrees to indemnify and reimburse Bank and to hold Bank
harmless from any loss, cost (including administrative costs) or expense
(including, without limitation, any such loss or expense arising from the
reemployment of funds obtained by Bank to maintain any LIBOR Rate Loan or from
fees payable to terminate the deposits from which such funds were obtained)
which Bank actually sustains or incurs as a consequence of (a) a default by
Borrower in payment when due of the principal amount of or interest on any LIBOR
Rate Loan, (b) the failure of Borrower to make a borrowing under, or to convert
the Applicable Interest Rate of, a Loan after Borrower has given a request for a
borrowing or an Interest Rate Election Notice, (c) the failure of Borrower to
make any prepayment of a LIBOR Rate Loan after Borrower has given notice of such
intention to make such a prepayment, (d) the termination of the LIBOR option
pursuant to SECTION 3.3, and/or (e) the making by Borrower of a prepayment of a
LIBOR Rate Loan on a day which is not the last day of the Interest Period for
such LIBOR Rate Loan. This SECTION 3.4 shall survive termination or expiration
of this Agreement and payment of all Obligations.

         3.5      INCREASED COSTS - CAPITAL ADEQUACY.

         In case of any change in law or governmental rules, regulations,
guidelines or orders (or any interpretations thereof) or the introduction of new
laws, regulations or guidelines regarding capital adequacy, capital maintenance
or similar requirement or has the effect thereof (including a requirement which
affects the manner in which Bank allocates capital resources to any of its
commitments, including its commitments hereunder) and as a result of such change
or introduction, in the opinion of Bank (in its discretion), the rate of return
on Bank's capital as a consequence of its lending commitments hereunder is
reduced to a level below that which Bank could have achieved but for such
circumstances (taking into consideration Bank's policies with respect to capital
adequacy and capital maintenance) by an amount deemed by Bank to be material,
then and in each such case Bank may charge Borrower an additional fee which will
compensate Bank for such reduction in the rate of return caused by such
requirements ("Additional Fee"). In the event any Additional Fee is charged to
Borrower by Bank under this SECTION 3.5, Borrower may prepay the Loans in full
without payment of the termination fee under SECTION 11.3 so long as such
prepayment in full is tendered to Bank within ninety (90) days following the
date Bank either first imposed the Additional Fee or subsequently increased such
Additional Fee for a reason other than a change in the balance of the Loans or
the interest rates.

         3.6      CLOSING FEE.

         The Borrower shall pay Bank a closing fee of One Hundred Twenty-Two
Thousand Five Hundred Dollars ($122,500), payable on the Effective Date.

         3.7      UNUSED FACILITY FEE.

         Borrower shall pay to the Bank, for the period from and including the
Effective Date and continuing until the termination of this Agreement pursuant
to SECTION 11 hereof, an unused facility fee computed at the rate of one-quarter
of one percent (0.25%) per annum on the

                                       23

<PAGE>

Unused Revolving Loan Facility Amount, payable for each month (or, in the
case of the first such payment, portion of the calendar month since the
Effective Date) by Borrower monthly in arrears on the first day of the
following calendar month, commencing on February 1, 2001, and on the date
this Agreement shall have been terminated pursuant to SECTION 11 hereof.

         3.8      MANDATORY PREPAYMENT.

         Borrower agrees that if International shall sell, lease, transfer or
otherwise dispose of any of its assets other than in connection with the winding
up or dissolution of Subsidiaries of International which are dormant, or sell,
lease, transfer or otherwise dispose (a "Disposition") of all or substantially
all of the shares of stock in or of assets owned by International Borrower,
Vari-Lite Production Services Hong Kong Limited or Vari-Lite Hong Kong Limited,
Borrower shall immediately make a prepayment to Bank in an amount equal to
twenty-five percent (25%) of the after-tax proceeds received by International
from such Disposition (each such amount being a "Mandatory Prepayment;"
PROVIDED, HOWEVER, in no event shall International sell or dispose of any of the
capital stock or substantially all of the assets of Vari-Lite Europe Holdings
Limited, Vari-Lite Production Services Limited, or Vari-Lite Asia, Inc. Each
Mandatory Prepayment shall be applied to the outstanding and accrued and unpaid
interest of Term Loan A.

         3.9      INTEREST RATE PROTECTION.

         Borrower may, at Borrower's cost, obtain and maintain interest rate
protection acceptable to Bank, in its reasonable discretion, to protect against
future increases in the Prime Rate or LIBOR Rate.

         3.10     CALCULATION OF CERTAIN CHARGES.

         Accrued interest charges and the fees set forth in SECTION 3.7 shall be
computed on the basis of a year of three hundred sixty (360) days and applied to
actual days elapsed and shall be payable (a) as to Prime Rate Loans monthly to
Bank on the first day of each month hereafter and (b) as to LIBOR Rate Loans on
the dates as provided in SECTION 3.1(a) of this Agreement. All such interest
charges and other fees hereunder shall be paid in arrears, except that the fees
set forth in SECTION 3.5 shall be paid in accordance with such Section.

         3.11     CHARGING LOAN ACCOUNT.

         Borrower hereby authorizes Bank, at Bank's option, to charge any
account or charge or increase any Loan balance of Borrower at Bank for the
payment or repayment of any interest or principal of the Loans or any fees,
charges or other amounts due to Bank hereunder. Bank will notify Borrower
promptly of any such charge or increase.

         3.12     MAXIMUM RATE.

         If at any time the rate of interest computed in the manner provided in
this SECTION 3 ("Applicable Rate"), together with all fees and charges as
provided for herein or in any other Loan Document (collectively, the "Charges"),
which are treated as interest under applicable law exceeds the maximum lawful
rate (the "Maximum Rate") allowed under applicable law, the rate of interest
payable hereunder, together with all Charges, shall be limited to the Maximum

                                       24

<PAGE>

Rate; PROVIDED, HOWEVER, that any subsequent reduction in the Prime Rate shall
not reduce the Applicable Rate below the Maximum Rate until the total amount of
interest earned hereunder, together with all Charges, equals the total amount of
interest which would have accrued at the Applicable Rate if the Applicable Rate
had at all times been in effect. If any payment hereunder, for any reason,
results in Borrower having paid interest in excess of that permitted by
applicable law, then all excess amounts theretofore collected by Bank shall be
credited on the principal balance owing hereunder (or, if all sums owing
hereunder have been paid in full, refunded to Borrower), and the amounts
thereafter collectible hereunder shall immediately be deemed reduced, without
the necessity of the execution of any new document, so as to comply with
applicable law and permit the recovery of the fullest amount otherwise called
for hereunder.

4.       MONTHLY ACCOUNTINGS.

         Bank will provide Borrower monthly with a statement of advances,
charges and payments made pursuant to this Agreement and such account rendered
by Bank shall be presumptive evidence of the amount of the Obligations owing and
unpaid by Borrower and, fifteen (15) Business Days after Bank shall have
delivered such statement, shall be deemed binding as against Borrower unless
such statement contains manifest errors or unless within said period of time
Bank received a written notice from Borrower describing in detail any errors.

5.       SECURITY.

         The Obligations shall be secured by the documents and collateral
described in this SECTION 5 and the documents described in the Exhibits and
Schedules to this Agreement, each of which are incorporated herein by reference.
The following documents shall be in form and substance satisfactory to Bank and
its counsel, and the Collateral and other assets and property covered thereby
shall secure the Obligations in such order as may be determined by Bank in its
sole discretion.

         5.1      SECURITY AGREEMENT.

         The Obligations shall be secured by a security interest in all of
Borrower's Collateral, pursuant to a Security Agreement executed by Borrower in
substantially the form of EXHIBIT A attached hereto and incorporated herein by
reference (the "Security Agreement"), and (ii) accompanying financing statements
in form and substance suitable for filing under the applicable state(s)
version(s) of the Uniform Commercial Code.

         5.2      PATENT ASSIGNMENT.

         The Obligations shall be secured by an assignment of Borrower's
interests in its patents, trademarks, licenses and related rights and interests,
pursuant to a Patent, Trademark and License Security Agreement executed by
Borrower in substantially the form attached hereto as EXHIBIT B and incorporated
herein by reference (the "Patent Assignment").

         5.3      PLEDGES.

         The Obligations shall be secured by a pledge of (a) all of
International's stock of each of Borrower and IGNITION! Creative Group, Inc.,
and (b) no less than sixty-five percent

                                       25

<PAGE>

(65%) of the stock held by International of Vari-Lite Europe Holdings Limited
and Vari-Lite Asia, Inc., pursuant to a Pledge and Security Agreement(s)
executed by International and delivered to Bank in substantially the form of
EXHIBIT D attached hereto and incorporated herein by reference (collectively,
the "Pledge Agreements").

         5.4      LANDLORD WAIVER.

         Each landlord with respect to any of the Leased Premises shall execute
and deliver a Landlord Waiver in substantially the form attached hereto as
EXHIBIT E (collectively, the "Landlord Waivers"), and incorporated herein by
reference.

         5.5      GUARANTY.

         The Obligations shall be unconditionally guaranteed by International
(the "International Guaranty") pursuant to a Guaranty in substantially the form
of EXHIBIT C attached hereto and incorporated herein by reference.

         5.6      SUBORDINATION AGREEMENTS.

         The Obligations shall be secured by Subordination Agreements (the
"Subordination Agreements") executed and delivered to Bank by each of
International and Vari-Lite Asia, Inc. in substantially the form of EXHIBIT U
attached hereto and incorporated herein by reference.

6.       DELIVERIES PRIOR TO DISBURSEMENT; FURTHER ASSURANCES.

         Prior to the initial disbursement of proceeds of the Loans, Borrower
shall have delivered to Bank all of the documents, instruments and other
information and shall have satisfied all other conditions described in EXHIBIT
G-1 attached hereto and incorporated herein by reference. Prior to the
disbursement of proceeds of any CapEx Term Loan, Borrower shall have delivered
to Bank all of the documents, instruments and other information and shall have
satisfied all other conditions described in EXHIBIT G-2 attached hereto and
incorporated herein by reference. Borrower agrees to execute and deliver or
cause to be executed and delivered any and all further documents and instruments
and to take any and all further actions as may be determined by Bank to be
necessary or appropriate to the transactions contemplated herein.

7.       RECEIVABLES; COLLECTION OF RECEIVABLES; DISPUTED RECEIVABLES.

         7.1      REPRESENTATIONS AND WARRANTIES REGARDING RECEIVABLES.

         (a) Borrower agrees, represents and warrants that each Receivable and
each invoice representing any such Receivable (other than proceeds of letters of
credit, insurance proceeds, contract rights, instruments and documents not
arising directly out of a sale or lease of goods or services) will cover a bona
fide sale or lease of merchandise usually dealt in by Borrower, or the rendition
by Borrower of related services or sale of related products to customers in the
ordinary course of business, and will be for a liquidated amount maturing as
stated in the schedule thereof and in the invoice or Contract covering said sale
or lease, and Receivables constituting Eligible Receivables will not be subject
to any offset, deduction,

                                       26

<PAGE>

counterclaim, lien or other condition. None of Borrower's invoices shall be
backdated, postdated or redated, and Borrower shall not make any sales or
enter into any Contracts with respect to Rental Inventory on extended dating
or credit terms beyond that customary in Borrower's industry. If any warranty
is breached as to any Receivable or as to the invoice representing any such
Receivable, then Bank, in addition to its other rights and remedies
hereunder, may deem ineligible any and all Receivables owing by that customer
or account debtor; but Bank shall in all events retain its security interest
in such Receivable, until all Obligations have been fully satisfied. Borrower
shall notify Bank promptly upon, but in no event later than three (3)
Business Days after Borrower's learning thereof, in the event any Eligible
Receivable becomes ineligible for any reason other than the aging of such
receivable and of the reasons for such ineligibility.

         7.2      DISPUTES AND CLAIMS REGARDING RECEIVABLES.

         Borrower shall notify Bank promptly of each return or recovery of sold
goods in excess of $100,000, and, on request, deliver the merchandise returned
or recovered to Bank at a location or locations selected by Bank, in its sole
discretion. Borrower shall also notify Bank promptly of all disputes and claims
and settle or adjust them at no expense to Bank, but no discount, credit or
allowance outside the ordinary course of business or adverse extension,
compromise or settlement shall be granted to any customer or account debtor and
no returns of merchandise outside the ordinary course of business shall be
given, made or accepted by Borrower without Bank's prior written consent.

         7.3      LOCKED BOX.

         Borrower shall rent a post office box at the U.S. Post Office which
post office boxes bear the following addresses (or such other addresses as Bank
may notify the applicable Borrower of from time to time (the "Locked Box")):
Vari-Lite, Inc., P.O. 641845, Cincinnati, Ohio 45264-1845; Borrower shall notify
all of its customers, lessees and account debtors to forward all remittances of
every kind due Borrower ("Remittances") to the Locked Box (such notices to be in
such form and substance as Bank may require from time to time), and immediately
upon receipt thereof, Borrower shall deposit all other proceeds of Receivables
or other Collateral into its Locked Box (or into its Special Account, as defined
below). Bank shall have sole access to the Locked Box at all times, and Borrower
shall take all action necessary to grant Bank such sole access. At no time shall
Borrower remove any item from its Locked Box without Bank's prior written
consent, and Borrower may not notify any customer, lessee or account debtor to
pay any Remittance to any other place or address without Bank's prior written
consent. If Borrower should neglect or refuse to notify any customer, lessee or
account debtor to pay any Remittance to its Locked Box, Bank shall be entitled
to make such notification. Borrower hereby grants to Bank an irrevocable power
of attorney, coupled with an interest, to take in Borrower's name all action
necessary (i) to grant Bank sole access to its Locked Box, (ii) to contact
customers, lessees and account debtors to pay any Remittance to its Locked Box
or for any other reason, and (iii) to endorse each Remittance delivered to a
Locked Box for deposit to the Borrower's Special Account.

                                       27

<PAGE>

         7.4      SPECIAL ACCOUNT.

         Upon collection of Remittances and other proceeds of Receivables, other
Collateral and any other security for the Obligations from the Locked Box of
Borrower, Bank shall, on the same day of such collection if such Remittances and
other proceeds are deposited into such Locked Box at or prior to 12:00 noon,
Cincinnati, Ohio time, or on the immediately following day if such Remittances
and other proceeds are deposited into such Locked Box after 12:00 noon,
Cincinnati, Ohio time, deposit the same into a corresponding account of Borrower
at Bank, as follows: Account No. 821652963 at Bank (such account being herein
referred to as a "Special Account,"). Any Remittance or other proceeds of
Receivables, other Collateral or other security for the Obligations received by
Borrower shall be deemed held by Borrower in trust and as fiduciary for Bank,
and Borrower shall immediately deposit the same, in its original form, into its
Locked Box or Special Account. Pending such deposit, Borrower agrees that it
will not commingle any such Remittance or other proceeds of Receivables, other
Collateral or any other security for the Obligations with any of Borrower's
other funds or property, but will hold it separate and apart therefrom in trust
and as fiduciary for Bank until deposit is made into the appropriate Locked Box
or Special Account. All deposits to the Special Account shall be Bank's property
and shall be subject only to the signing authority designated from time to time
by Bank, and Borrower shall not have any interest therein or control thereover.
Bank shall have sole access to the Special Account, and Borrower shall not have
any access thereto. Bank shall have, and Borrower hereby grants to Bank, a
security interest in all funds held in Borrower's Locked Box and Special Account
as security for the Obligations. No Special Account will be subject to any
deduction, set-off, banker's lien or any other right in favor of any person or
entity other than Bank. Prior to the occurrence of an Event of Default, Deposits
to the Special Account will be applied, FIRST, to all Obligations then due and
owing; SECOND, to the principal and/or interest of the Revolving Loans; and
THIRD, if the Revolving Loans have been repaid in full and absent any
instruction to the contrary from the Borrower, to an interest bearing account of
Borrower established with Bank. Upon the occurrence of an Event of Default
deposits to the Special Account may be applied against the principal and/or
interest of the Revolving Loans and/or other Obligations of the Borrower to Bank
in such order and method of application as may be elected by Bank in its sole
discretion. Borrower hereby indemnifies and holds Bank harmless from and against
any loss or damage with respect to any Remittance deposited in Borrower's
Special Account which is dishonored or returned for any reason. If any
Remittance deposited in a Special Account is dishonored or returned unpaid for
any reason, Bank, in its sole discretion, may charge the amount of such
dishonored or returned Remittance directly against the Borrower and/or any
account maintained by Borrower with Bank and such amount shall be deemed part of
the Obligations hereunder. Bank shall not be liable for any loss or damage
resulting from any error, omission, failure or negligence on the part of Bank
under this Agreement, other than loss or damage determined by a court of
competent jurisdiction after exhaustion of all appeals to be the consequences of
Bank's gross negligence or willful misconduct. Borrower hereby agrees that it
will not assert any claims or set-off rights against Bank solely as a result of
Borrower's maintaining a Special Account with Bank.

         7.5      CREDITING OF REMITTANCES.

         For the purpose of calculating interest, all Remittances and other
proceeds of Receivables, other Collateral and any other security for the
Obligations shall be credited to the

                                       28

<PAGE>

Borrower (conditional upon final collection) two (2) Business Days after Bank
receives notice of deposit of the same into Borrower's Special Account;
PROVIDED, HOWEVER, in the event that Bank receives notice of such deposit
later than 12:00 noon Cincinnati, Ohio time on any Business Day, such
Remittance deposited shall be credited to Borrower (conditional upon final
collection) three (3) Business Days after such deposit. For the purpose of
determining the aggregate loan availability hereunder, all such Remittances
shall be credited on the Business Day on which Bank receives notice of such
deposit into the Borrower's Special Account. From time to time, Bank may
adopt such regulations and procedures as it may deem reasonable and
appropriate with respect to the operation of the Special Account, the Locked
Box and the services to be provided by Bank under this Agreement.

         7.6      COSTS OF COLLECTION.

         All costs of collection of Borrower's Receivables, including
Attorney's Fees, out-of-pocket expenses, administrative and record-keeping
costs, and all service charges and costs related to the establishment and
maintenance of the Locked Box and the Special Account, shall be the sole
responsibility of Borrower, whether the same are incurred by Bank or
Borrower, and Bank, in its sole discretion, may charge the same against
Borrower and/or any account maintained by Borrower with Bank and the same
shall be deemed part of the Obligations hereunder.

8.       EXAMINATION OF COLLATERAL AND THE PREMISES; REPORTING.

         8.1      MAINTENANCE OF BOOKS AND RECORDS.

         Borrower shall keep and maintain complete books of account, records and
files with respect to its business in accordance with generally accepted
accounting principles consistently applied and shall accurately and completely
record all transactions therein.

         8.2      ACCESS AND INSPECTION.

         Bank may at all reasonable times have access to and the right to
examine and inspect all of Borrower's real and personal property, and access to
and the right to inspect, audit and make extracts from all of Borrower's
records, files and books of account, and Borrower shall execute and deliver at
the request of Bank such instruments as may be necessary for Bank to obtain such
information concerning the business of Borrower as Bank may require from any
Person. Borrower shall furnish Bank with such statements and reports regarding
Borrower's financial condition and the results of Borrower's operations, in
addition to those hereinafter required, and such other information as Bank may
reasonably request from time to time. Borrower shall permit Bank to discuss
Borrower's financial matters with Borrower's officers and accountants (and
hereby authorizes such officers and accountants to discuss Borrower's financial
matters with Bank).

         8.3      REPORTING REGARDING RECEIVABLES.

         (a) After the creation or acquisition of any Receivables, Borrower
shall provide to Bank, as frequently as required by Bank, schedules in such form
and substance and accompanied by such copies of original source and background
documents (including, without

                                       29

<PAGE>

limitation, sales, credit and remittance journals) as Bank may require
describing all Receivables created or acquired.

         (b) No later than thirty (30) days after the end of each month, the
Borrower shall deliver to Bank a borrowing base certificate in the form of
EXHIBIT H attached hereto and incorporated herein by reference (a "Borrowing
Base Certificate"), reconciled to the financial statements required to be
delivered pursuant to SECTION 8.5 hereof, and, together with the Borrowing Base
Certificate, monthly reports of Borrower's sales, leases, credits to sales,
credits to leases, or credit memoranda applicable to sales, leases, collections
and non-cash charges (from whatever source, including, without limitation, sales
and noncash journals or other credits to Receivables).

         (c) No later than thirty (30) days after the end of each month, or
sooner if available, the Borrower shall deliver to Bank (i) monthly agings,
broken down by invoice date, of accounts receivable, identifying which accounts
receivable are attributable to sales and which are attributable to the rental of
Rental Inventory and which are evidenced by Chattel Paper, reconciled to the
Borrowing Base Certificate and Borrower's general ledger, and setting forth any
changes in the reserves made for bad accounts or any extensions of the maturity
of, refinancing of, or other changes in the terms of any accounts, and (ii) a
statement describing in such detail as Bank shall require all Contracts for
Rental Inventory providing for a term of four (4) or more months, together with
such further information with respect thereto as Bank may require. No later than
thirty (30) days after the end of each month, or sooner if available, the
Borrower shall also deliver to Bank monthly agings of accounts payable listed by
invoice date reconciled to Borrower's general ledger, together with such further
information with respect thereto as Bank may require.

         8.4      REPORTING REGARDING INVENTORY.

         (a) Borrower shall conduct a full and complete physical count of its
Inventory at least annually or more frequently if Bank shall reasonably require,
in a manner and in accordance with procedures approved by Borrower's independent
certified public accountants and Bank, and shall promptly extend, price and
summarize such physical counts and submit a report thereof to Bank.

         (b) Values shown on reports of Inventory shall be at the lower of cost
or market value determined on a "first in first out" basis, consistently
applied.

         (c) No later than thirty (30) days after the end of each month, or more
frequently, if Bank shall so request, Borrower shall submit to Bank (i) a
monthly Borrowing Base Certificate reporting the value of Borrower's Inventory,
and (ii) an inventory report reconciled to the Borrowing Base Certificate for
such month, Borrower's perpetual inventory records and its general ledger,
broken down into such detail and with such categories as Bank shall require
(including, but not limited to, a report indicating the type, location and
amount of raw materials, evaporants, work-in-process and finished goods, and all
other information deemed necessary by Bank to determine levels of that which is
and is not Eligible Inventory).

                                       30

<PAGE>

         8.5      MONTHLY FINANCIAL STATEMENTS.

         Promptly when available and in any event not later than thirty (30)
days after the end of each month, Borrower shall furnish to Bank monthly
statements, on a consolidated basis, showing International's consolidated
financial condition and the results of International's operations for the
periods covered by such statements in such detail as Bank may from time to time
require, prepared in accordance with generally accepted accounting principles
consistently applied and containing all disclosures required to fully and
accurately present the consolidated financial position and results of operations
of International and to make such statements not misleading under the
circumstances. International will notify the Bank at least thirty (30) days
prior to any change in its monthly accounting periods.

         8.6      ANNUAL PROJECTIONS.

         No later than thirty (30) days prior to the end of International's
fiscal years, Borrower shall furnish to Bank detailed projections, prepared on a
consolidated basis, for the next fiscal year setting forth projected balance
sheets, income statements, capital expenditures and debt repayment schedules for
each fiscal quarter of such fiscal year and the projected balance sheet as of
the end of each such fiscal quarter. Such projections shall be prepared in a
manner consistent with the financial projections for International provided to
Bank by Borrower prior to the Effective Date, PROVIDED that, except as provided
in SECTION 9.11 below, Borrower makes no representations or warranties regarding
such projections.

         8.7      CERTIFIED QUARTERLY FINANCIAL STATEMENTS.

         Promptly when available and in any event not later than forty-five (45)
days after the end of each quarter, Borrower shall furnish to Bank quarterly
financial statements, on a consolidated basis, showing International's financial
condition and results of International's operations for the periods of time
covered by such statements in such detail as Bank may from time to time require,
prepared in accordance with generally accepted accounting principles
consistently applied and containing all disclosures required to fully and
accurately present the financial position and results of International and to
make such statements not misleading under the circumstances, and in each
instance certified by the chief financial officer or other responsible officer
of International as being filed with the Securities and Exchange Commission.
Said statements shall include: (i) a comparison prepared by International of its
projected financial position and results of operations of International provided
for in SECTION 8.6 hereof with the actual financial position and results of
operations of International and an explanation of any variations between them;
and (ii) a comparison between actual calculated results and the covenanted
results for each of the Financial Covenants contained in EXHIBIT I attached
hereto and incorporated herein by reference.

         8.8      AUDITED ANNUAL FINANCIAL STATEMENTS.

         Promptly when available and in any event not later than one hundred
twenty (120) days after the end of Borrower's fiscal years, Borrower shall
submit to Bank statements, prepared on a consolidated and consolidating basis,
showing International's financial condition, the results of operations, a
consolidated balance sheet and related statements of income, shareholders'

                                       31

<PAGE>

equity, and changes in the International's cash flows and financial position
for the year then ended. Such statements shall be audited in accordance with
generally accepted auditing standards by an independent certified public
accountant acceptable to Bank and shall be prepared and presented in
accordance with generally accepted accounting principles consistently
applied. Such statements shall be delivered to Bank together with an audit
report of such independent certified public accountant. Said statements shall
be accompanied by: (i) a comparison prepared by International of the
projected financial position and results of operations of International
provided for in SECTION 8.6 hereof with the actual financial position and
results of operations of International and an explanation of any variations
between them; and (ii) a comparison between actual calculated results and the
covenanted results for each of the Financial Covenants contained in EXHIBIT J.

         8.9      MANAGEMENT REPORTS.

         Borrower shall furnish to Bank promptly upon receipt copies of all
management letters and any other material reports provided by Borrower's and
International's independent accountants. Borrower hereby authorizes Bank to
communicate directly with Borrower's independent accountants to discuss
Borrower's affairs, finances, accounts and such other matters as Bank deems
necessary, PROVIDED that so long as no Event of Default has occurred, Bank shall
provide Borrower with a reasonable opportunity to participate in any such
communications. After the occurrence of an Event of Default, Bank shall be given
notice of and the right to attend any meetings between Borrower and the
independent accountants with respect to any such matters.

         8.10     FINANCIAL CERTIFICATE.

         Borrower shall furnish to Bank, together with all materials required
pursuant to SECTION 8.5 and SECTION 8.7 hereof, a certificate signed by the
Chief Financial Officer of Borrower in the form of EXHIBIT I attached hereto.

         8.11     PUBLIC FILINGS.

         Borrower shall furnish to Bank promptly upon any filing thereof by
Borrower or by International with the Securities and Exchange Commission, any
annual, periodic or special report or registration statement (without exhibits)
generally available to the public.

         8.12     MONTHLY REPORTING REGARDING INVENTORY AND EQUIPMENT.

         Borrower will deliver to Bank on a monthly basis a report (a)
specifically identifying all Equipment and Inventory which is or reasonably
anticipated to be at any location other than a Filed Jurisdiction for four (4)
consecutive months or more and (b) listing each such location by street address,
city, county and state.

         8.13     ADDITIONAL MONTHLY REPORTING.

         Borrower will deliver to Bank on a monthly basis a report, identifying
in form and detail satisfactory to Bank in its discretion, the following items
to the extent there has been any change thereto from the Effective Date and as
the same have been described on Schedules 9.5,

                                       32

<PAGE>

9.13, 9.17, 9.18, 9.19, 9.23 and 9.24 (a) all judgments, decrees or orders
specifically binding on Borrower, (b) all collective bargaining agreements to
which Borrower is a party or which is binding on Borrower, (c) any labor
dispute, (d) all Affiliates of Borrower, (e) all noncompetition agreements
restricting Borrower in any line of business with any Person, (f) all
accounts maintained by Borrower with any bank, brokerage house or other
financial institution, (g) all litigation which if adversely determined is
likely to have a Material Adverse Effect, (h) all leases or agreements for
the purchase of sale of real estate, and (i) patents, copyrights, trade names
and trademarks.

9.       WARRANTIES, REPRESENTATIONS AND COVENANTS.

         In order to induce Bank to enter into this Agreement and to make Loans
hereunder, Borrower warrants, represents and covenants that, as of the Effective
Date, and, to the extent not limited to the Effective Date, any date upon which
a Loan is made hereunder and until the Obligations are fully paid, performed and
satisfied, the representations, warranties and covenants set forth below are and
shall remain true and correct.

         9.1      ORGANIZATION, ETC.

         Borrower is and shall remain duly organized, validly existing and in
good standing under the laws of the State of Delaware. International is and
shall remain duly organized, validly existing and in good standing under the
laws of the State of Delaware. Borrower is and shall remain qualified to do
business and is and shall remain in good standing as a foreign corporation in
each other jurisdiction in which the failure to be so qualified and in good
standing would have a Material Adverse Effect. Borrower has and shall maintain
all requisite power and authority, corporate or otherwise, to conduct its
business, to own its property and to execute, deliver and perform all of its
obligations under this Agreement and each of the other Loan Documents to which
it is a party.

         9.2      DUE AUTHORIZATION, VALIDITY, ETC.

         This Agreement and each of the other Loan Documents have been duly
executed and delivered and authorized by all requisite corporate, organizational
or other action of Borrower, and each constitutes or will constitute, upon the
due execution and delivery thereof, the legal, valid, and binding obligation of
Borrower, enforceable in accordance with its respective terms.

         9.3      NO VIOLATION.

         The execution, delivery and/or performance by Borrower of this
Agreement and the other Loan Documents to which it is a party does not and will
not (i) constitute a violation of any applicable law or a breach of any
provision contained in Borrower's Articles/Certificate of Incorporation or
Regulations/By-Laws or contained in any order of any court or other governmental
agency or in any agreement, instrument or document to which Borrower is a party
or by which Borrowers or any of Borrower's properties is bound or (ii) result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of Borrowers' properties (other than in favor of Bank
hereunder).

                                       33

<PAGE>

         9.4      USE OF LOAN PROCEEDS.

         Borrower's uses of the proceeds of the Loans made by Bank to Borrower
pursuant to this Agreement are, and will continue to be, legal and proper
corporate uses (duly authorized by Borrower's Board of Directors), such uses do
not and shall not violate any applicable laws or statutes as in effect as of the
date hereof or hereafter, and the Loans are not and shall not be secured,
directly or indirectly, by or used for the purpose of purchasing or carrying any
margin stock or for any purpose which would violate either Regulation U, 12
C.F.R. Part 221, or Regulation X, 12 C.F.R. Part 224, promulgated by the Board
of Governors of the Federal Reserve System.

         9.5      MANAGEMENT; OWNERSHIP OF ASSETS, LICENSES, PATENTS, ETC.

         Borrower possesses, either alone or through the services of its
Affiliates, and shall continue to possess active, full-time, professional
management adequate to handle its affairs and adequate employees, assets,
governmental approvals, permits, licenses, patents, copyrights, trademarks and
trade names to continue to conduct its business in a manner substantially
similar to the manner as heretofore conducted by it, and all patents,
copyrights, trademarks and trade names on the Effective Date are described in
SCHEDULE 1 attached hereto and incorporated herein by reference.

         9.6      INDEBTEDNESS.

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

         9.7      TITLE TO PROPERTY; NO LIENS.

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

         9.8      RESTRICTIONS; LABOR DISPUTES; COLLECTIVE BARGAINING
                  AGREEMENTS, ETC.

         Except as described in SCHEDULE 4 attached hereto and incorporated
herein by reference as of the Effective Date, Borrower is not a party or subject
to any judgment, decree or order specifically binding upon Borrower.

                                       34

<PAGE>

         9.9      NO VIOLATION OF LAW; HAZARDOUS MATERIALS.

         Except as described in SCHEDULE 5 attached hereto and incorporated
herein by reference, Borrower is not in violation of any applicable statute,
regulation or ordinance of any governmental entity (including, but not by way of
limitation, any Environmental Law), the violation of which is likely to have a
Material Adverse Effect. Without limiting the generality of the foregoing
sentence, no Hazardous Material (a) is located on any real property owned or
leased by Borrower except to the extent that such presence is maintained in full
compliance with all applicable laws, or (b) has been discharged or is
penetrating into any real property or surface or subsurface rivers or streams
crossing or adjoining any real property owned or leased by Borrower or the
aquifer underlying any real property owned or leased by Borrower except to the
extent that such discharge or penetration does not violate any applicable law.
"Hazardous Material" as used herein means any existing or future asbestos,
polychlorinated byphenyls and petroleum products, solid wastes,
ureaformaldehyde, discharges of sewer or effluent, paint containing lead and any
other hazardous or toxic material, substance or waste which is defined,
determined or identified by those or similar terms or is regulated as such under
any such statute, law, ordinance, rule or regulation (whether now existing or
hereafter promulgated) or any local, state or federal authority, or any judicial
or administrative interpretation of any such statute, law, ordinance, rule or
regulation, including but not limited to any material, substance or waste which
is a hazardous substance within the meaning of 33 U.S.C. Section 1251 ET SEQ.,
as amended, or 42 U.S.C. Section 9601 ET SEQ., as amended, or a hazardous waste
within the meaning of 42 U.S.C. Section 6901 ET SEQ., as amended). Borrower has
made reasonably diligent inquiry with respect to environmental matters bearing
upon the property owned, operated or leased by such Borrower and the operation
of Borrower's business to be conducted on and after the Effective Date. All
inventory manufactured and produced by Borrower has been and shall continue to
be manufactured and produced in compliance with all applicable requirements of
Sections 6, 7 and 12 of the Fair Labor Standards Act, as amended, and all
regulations and orders of the United States Department of Labor.

         9.10     ABSENCE OF DEFAULT.

         Borrower is not in default under (i) any note, indenture, loan
agreement, mortgage, lease, or other similar agreement relating to the borrowing
of monies or the incurring of indebtedness to which Borrower is a party or by
which Borrower or any of its assets are bound, the default under which could
have a Material Adverse Effect, or (ii) any agreement with any of its
shareholders or other equity holders (whether present or contingent).

         9.11     ACCURACY OF FINANCIALS; NO MATERIAL CHANGES.

         All Financials, other than projections delivered by Borrower to Bank
prior to the Effective Date and projections delivered by Borrower to Bank under
SECTION 8.6 of this Agreement, have been prepared in accordance with generally
accepted accounting principles consistently applied and are true, correct and
complete in all material respects, and fairly present Borrower's assets,
liabilities and financial condition and results of operations and those of such
other Persons described therein as of the date thereof. All projections
delivered by Borrower to Bank have been prepared in good faith and are based on
assumptions that management of Borrower considers reasonable and appropriate in
light of the circumstances in effect at the time

                                       35

<PAGE>

of the delivery of such projections, and represent management's good faith
estimate of the future financial performance of International on a
consolidated basis. There are no omissions from such Financials (other than
Projections) or other facts or circumstances not reflected in such Financials
(other than Projections) which are or may be material. There has been no
material and adverse change in Borrower's assets, liabilities or financial
condition except as disclosed in Borrower's filings with the Securities and
Exchange Commission since September 30, 1999; and Borrower's outstanding
advances to any Person do not constitute any equity or long-term investment
in any Person which is not reflected in the Financials.

         9.12     PENSION PLANS.

         No "reportable event" or "prohibited transaction," as defined by the
Employee Retirement Income Security Act of 1974 ("ERISA"), has occurred or is
continuing as to any plan of Borrower or any Controlled Group member, which
poses a threat of termination of such Pension Plans (or trusts related thereto)
or the imposition of taxes or penalties against such Pension Plans (or trusts
related thereto); neither Borrower nor any Controlled Group member has violated
the tax qualification requirements contained in Section 401(a) of the Internal
Revenue Code of 1986, as amended applicable to a Pension Plan, except for any
violation that cannot be corrected through a voluntary correction program or
done anything to create liability under the Multi-Employer Pension Plan
Amendments Act; and except as set forth in SCHEDULE 6 attached hereto and
incorporated herein by reference, neither Borrower nor any Controlled Group
member has incurred any liability to the Pension Benefit Guaranty Corporation in
connection with such Pension Plans.

         9.13     TAXES AND OTHER CHARGES.

         Borrower has filed and shall file all federal, state and local tax
returns and other reports which it is required by law to file, other than with
respect to the tax deficiencies set forth in SCHEDULE 7 attached hereto and
incorporated herein by reference, has paid as of the Effective Date, and will,
except as allowed under SECTION 10.10 to this Agreement, pay all taxes,
assessments and other similar charges that are due and payable has withheld all
employee and similar taxes which it is required by law to withhold, and has
maintained adequate reserves for the payment of all taxes and similar charges.
No tax liens have been filed with respect to Borrower and no claims are being
asserted with respect to any such taxes, assessments or charges (and no basis
exists for any such claims), except to the extent contested in accordance with
SECTION 10.10 of this Agreement.

         9.14     NO LITIGATION.

         There is not any litigation, action or proceeding pending or, to the
best of Borrower's knowledge (after due inquiry), threatened, against Borrower,
which, if adversely determined, is likely to have a Material Adverse Effect.
SCHEDULE 8 attached hereto and incorporated herein by reference correctly sets
forth all litigation, actions and proceedings pending or, to the best of
Borrower's knowledge (after due inquiry), threatened, against Borrower as of the
Effective Date (none of which is likely to have a Material Adverse Effect).

                                       36

<PAGE>

         9.15     NO BROKERAGE FEE.

         No brokerage, finder's or similar fee or commission is due to any party
by reason of the Borrower entering into this Agreement or by reason of any of
the transactions contemplated hereby, and Borrower shall indemnify and hold Bank
harmless from all such fees and commissions.

         9.16     AFFILIATES.

         All Persons who are Affiliates of Borrower as of the Effective Date are
identified in Schedule 9 attached hereto and incorporated herein by reference.
Except as set forth on SCHEDULE 9, neither International nor Borrower has any
Subsidiaries.

         9.17     CAPITALIZATION; WARRANTS, ETC.

         Each share of each Borrower's capital stock outstanding as of the
Effective Date is duly authorized, validly issued, fully paid and nonassessable.
Set forth in SCHEDULE 10 attached hereto and incorporated herein by reference is
a complete and accurate description, as of the Effective Date, of all issued and
outstanding shares of capital stock of International, of Borrower and of each
Subsidiary of Borrower and International, and a complete and accurate list of
all Persons who are record and beneficial owners of the capital stock of
Borrower and of each Subsidiary of Borrower or Subsidiary of International. All
warrants, puts, subscriptions, options, instruments and agreements under which
any shares of capital stock of Borrower or each Subsidiary of International or
of any Subsidiary thereof are or may be redeemed, retired, encumbered, bought,
sold or issued are described in SCHEDULE 10 attached hereto.

         9.18     NONCOMPETITION AGREEMENTS.

         Borrower is not subject to any contract or agreement containing a
covenant not to compete restricting Borrower as of the Effective Date in any
line of business with any Person, except as disclosed on SCHEDULE 18 hereto.

         9.19     DEPOSIT AND OTHER ACCOUNTS.

         All of the accounts maintained by Borrower (other than with Bank) as of
the Effective Date with any bank, brokerage house or other financial institution
are set forth in SCHEDULE 11 attached hereto and incorporated herein by
reference, and PROVIDED, HOWEVER, on and after February 1, 2001, the permitted
balances of such accounts (not with Bank) shall be limited to (a) no more than
One Hundred Thousand ($100,000) in the Wells Fargo Account No. 4759-613730 in
Dallas, Texas and (b) with respect to all other accounts not to exceed One
Hundred Thousand Dollars ($100,000) in the aggregate.

         9.20     SOLVENCY.

         Borrower will be Solvent after (i) receipt and application of the Loans
in accordance with the terms of this Agreement and (ii) the execution, delivery
and performance of this Agreement and the other Loan Documents to which it is a
party.

                                       37

<PAGE>

         9.21     FULL DISCLOSURE.

         No representation or warranty made by Borrower or any of its
Affiliates, as the case may be, in this Agreement, or any Loan Document or other
document furnished from time to time in connection herewith or therewith
contains or will contain at the time such representation is made or such
document is furnished, any untrue statement of a material fact or omits or will
omit to state any material fact necessary to make the statements herein or
therein not misleading. There is no fact known to Borrower or any of its
respective officers, directors, shareholders, corporate management-level
employees, parent company, or subsidiaries which has had or which could
reasonably be expected in the future to have a Material Adverse Effect.

         9.22     CASUALTIES.

         Neither the business nor the properties of Borrower is affected by any
fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of God
or of the public enemy or other Casualty Loss (whether or not covered by
insurance) which could have a Material Adverse Effect.

         9.23     REAL PROPERTY AND LEASES.

         Except as described in SCHEDULE 12 attached hereto and incorporated
herein by reference, as of the Effective Date Borrower owns no real property and
is not a party to any lease, assignment, sublease, or other agreement relating
to any real property or leasehold.

         9.24     INSURANCE POLICIES.

         SCHEDULE 13 attached hereto and incorporated herein by reference
correctly sets forth all of the insurance policies maintained by Borrower as of
the Effective Date, including, without limitation, the carriers thereof, and the
types of coverage (which coverage shall include environmental liability
insurance) and insured amounts covered thereby. Borrower is in compliance with
all requirements of such insurance and is in compliance with all insurance
requirements set forth in any material purchase orders or other material
agreements with its customers.

         9.25     CONSENTS.

         No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or other Person is
required for the due execution, delivery and performance by Borrower of any Loan
Document to which it is or will be a party.

         9.26     UPDATING REPRESENTATIONS AND WARRANTIES.

         To the extent necessary to cause the representations and warranties set
forth in this SECTION 9 and in SECTION 7.1 to remain true, complete and accurate
as of the date hereof and as of each day on which a Loan is made hereunder,
Borrower shall promptly update in writing any Schedules provided for in this
SECTION 9 and in SECTION 7.1 upon learning of any circumstance which might make
any such representation or warranty contained in this SECTION 9 and in SECTION
7.1 untrue. Such updating by Borrower shall be subject to the written consent
and

                                       38

<PAGE>

approval of Bank. The requirement of Borrower to update any Schedule provided
for herein shall not be and shall not be deemed by Bank a cure of any Event
of Default occurring prior to any such update or existing at the time of any
such update without the written waiver of such Event of Default by Bank.

10.      COVENANTS.

         Until the Obligations are fully paid, performed and satisfied and this
Agreement is terminated, Borrower will comply with each of the covenants set
forth below in this SECTION 10.

         10.1     PAYMENT OF CERTAIN EXPENSES.

         Borrower will pay to Bank immediately any and all fees, costs and
expenses which Bank pays to a bank or other similar institution arising out of
or in connection with (i) the forwarding to Borrower, or any other Person on
Borrower's behalf, by Bank of proceeds of Loans made by Bank to Borrower
pursuant to this Agreement, and (ii) the depositing for collection by Bank of
any check or item of payment received and/or delivered to Bank on account of the
Obligations and reimburse Bank, immediately, for any claims asserted by any bank
at which a blocked account is established for the deposit of proceeds of the
Collateral in connection with such blocked account or any returned or
uncollected checks received by such bank as proceeds of the Collateral.

         10.2     NOTICE OF LITIGATION.

         Borrower will notify Bank in writing, promptly upon Borrower's learning
thereof, of any litigation, suit or administrative proceeding which may have a
Material Adverse Effect, whether or not the claim is considered by Borrower to
be covered by insurance. Notwithstanding the foregoing sentence, to the extent
any such litigation, suit or administrative proceeding seeks monetary damages or
could subject Borrower to the payment any fines and/or other penalties, Borrower
shall not be obligated to notify Bank thereof unless the damages sought or the
potential fines and/or penalties involved are in an amount of Two Hundred Fifty
Thousand Dollars ($250,000) or more.

         10.3     NOTICE OF ERISA EVENTS.

         Borrower will notify Bank in writing (i) promptly upon the occurrence
of any event described in Section 4043 of ERISA, other than a termination,
partial termination or merger of a Pension Plan or a transfer of a Pension
Plan's assets, and (ii) prior to any termination, partial termination or merger
of a Pension Plan or a transfer of a Plan's assets.

         10.4     NOTICE OF LABOR DISPUTES AND COLLECTIVE BARGAINING AGREEMENTS.

         Borrower will notify Bank in writing, promptly upon Borrower's learning
thereof, of (i) any labor dispute to which it may become a party and which may
have a Material Adverse Effect, (ii) any strikes or walkouts relating to any of
its plants or other facilities, and (iii) the entering into any collective
bargaining agreement by Borrower or by which Borrower is bound or the expiration
of any collective bargaining agreement to which Borrower is a party or by which
Borrower is bound.

                                       39

<PAGE>

         10.5     COMPLIANCE WITH LAWS, ETC.

         Borrower will comply with the requirements of all applicable laws,
statutes, regulations, rules or ordinances of any governmental entity, or of any
agency thereof (including, but not limited to, all Environmental Laws), the
noncompliance with which is likely to have a Material Adverse Effect.

         10.6     NOTICE OF VIOLATIONS OF LAW, TAX ASSESSMENTS.

         Borrower will notify Bank in writing, promptly upon Borrower's learning
thereof, of (i) any violation by Borrower of any law, statute, regulation, rule
or ordinance of any governmental entity, or of any agency thereof, the violation
of which may have a Material Adverse Effect, and (ii) any federal, state or
local tax assessment of any failure by Borrower to pay when applicable to
Borrower in excess of Twenty-Five Thousand Dollars ($25,000).

         10.7     COMPLIANCE WITH OTHER AGREEMENTS.

         Borrower will comply with the provisions of (i) each note, indenture,
loan agreement, mortgage, lease, deed or other similar agreement to which
Borrower is a party or by which Borrower is bound, the noncompliance with which
is likely to have a Material Adverse Effect, and (ii) all agreements with any of
its shareholders or other equity holders (whether present or contingent).

         10.8     NOTICE OF VIOLATIONS OF CERTAIN AGREEMENTS.

         Borrower will notify Bank in writing, promptly upon the occurrence
thereof, of Borrower's default under any note, indenture, loan agreement,
mortgage, material lease (including without limitation any lease agreement),
deed or other similar agreement to which Borrower is a party or by which
Borrower is bound with respect to a payment obligation in the amount of Two
Hundred Fifty Thousand Dollars ($250,000) or more.

         10.9     NOTICE OF CUSTOMER DEFAULTS.

         Borrower will notify Bank in writing, promptly upon the occurrence
thereof, of any default by any obligor under any note or other evidence of debt
payable to Borrower having outstanding indebtedness thereunder or relating
thereto (or face amount in the case of any letter of credit) of One Hundred
Thousand Dollars ($100,000) or more.

         10.10    TAXES AND CHARGES.

         Borrower will (i) file all federal, state and local tax returns and
other reports which it is required by law to file, (ii) pay all taxes,
assessments and other similar charges that are due and payable; PROVIDED,
HOWEVER, that no such taxes, assessments or charges need be paid during such
period as they are being contested in good faith by Borrower, in appropriate
proceedings promptly commenced and diligently prosecuted, if adequate reserves
in accordance with generally accepted accounting principles have been set aside
on Borrower's books, and the continuance of such contest shall neither result in
any part of the Collateral or any other property of Borrower being made the
subject of any proceeding in foreclosure, or of any levy or

                                       40

<PAGE>

execution, which shall not have been stayed or dismissed, or the subject of
any seizure or other loss, nor prevent Bank from acquiring a perfected first
priority security interest in the Collateral after the Effective Date or with
respect to future advances hereunder; and PROVIDED, FURTHER, that Borrower
will promptly pay such tax when the dispute is finally settled, (iii)
withhold all employee and similar taxes which it is required by law to
withhold, and (iv) maintain adequate reserves for the payment of all taxes
and similar charges.

         10.11    INDEBTEDNESS; GUARANTIES.

         Borrower will not incur or pay any Indebtedness other than (i) the
Obligations, (ii) subject to the terms of any applicable subordination
agreement, Indebtedness reflected in the Financials delivered on or before the
Effective Date or described in SCHEDULE 2 or SCHEDULE 12 attached hereto, (iii)
Indebtedness owing to trade creditors in the ordinary course of business, (iv)
Indebtedness in respect of capitalized leases and purchase money Indebtedness so
long as the aggregate amount of such Indebtedness incurred by Borrower (x)
during its fiscal year ending September 30, 2001 does not exceed the amount of
Zero Dollars ($0) and (y), thereafter, in any fiscal year of the Borrower does
not exceed One Million Dollars ($1,000,000), and PROVIDED FURTHER, that at no
time shall the aggregate amount of all purchase money Indebtedness (excluding
that described in clause (ii) hereof) exceed Three Million Dollars ($3,000,000),
(v) Indebtedness in respect of taxes, assessments or governmental charges to the
extent that payment thereof shall not at the time be required to be made in
accordance with the provisions of SECTION 10.10, (vi) Indebtedness which is
subordinated to the prior payment and performance of the Obligations pursuant to
a subordination agreement in form and substance satisfactory to Bank, in its
sole discretion, but only so long as the payment of any such Indebtedness would
not violate the terms of the applicable subordination agreement), (vii)
operating leases, and (viii) Intercompany Loans to Borrower from International
and Vari-Lite Asia, Inc., PROVIDED that no Indebtedness otherwise permitted to
be incurred shall be permitted to be incurred if, after giving effect to the
incurrence thereof, any Event of Default shall have occurred. No Borrower will
guarantee the obligations of any other Person except as set forth on SCHEDULE 2
or SCHEDULE 15 attached hereto.

         10.12    TITLE TO PROPERTY; NO LIENS.

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

         10.13 RESTRICTIONS; LABOR DISPUTES, ETC.

         Borrower will not become a party or subject to any charge, restriction,
judgment, decree or order, which could have a Material Adverse Effect.

                                       41

<PAGE>

         10.14    PENSION PLANS.

         Borrower will not permit any "reportable event" or "prohibited
transaction," as defined by ERISA, to occur or to continue as to any Pension
Plan of Borrower or any Controlled Group member, which poses a threat of (i)
termination of such Pension Plans (or trusts related thereto) or (ii) the
imposition of taxes or penalties against such Pension Plans (or trusts related
thereto); Borrower will not violate, or permit any Controlled Group member to
violate, the tax qualification requirements contained in Section 401(a) of the
Internal Revenue Code of 1986, as amended, applicable to any Pension Plan or do
anything to create liability to Borrower or any Controlled Group Member under
the Multi-Employer Pension Plan Amendments Act; and except as set forth on
SCHEDULE 6 attached hereto and incorporated herein by reference, Borrower will
not incur, or permit any Controlled Group member to incur, any liability to the
Pension Benefit Guaranty Corporation in connection with such plans.

         10.15    SOLVENCY.

         Borrower will continue to be, and will cause each of its Subsidiaries
(if any), Persons of which such Borrower is a Subsidiary, and any guarantors of
the Obligations to continue to be, Solvent.

         10.16    PROPERTY INSURANCE.

         (a) Borrower will insure all of its real and personal property,
including, without limitation, the Collateral, and any other security for the
Obligations, in Bank's name against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards as Bank shall specify in
amounts and under policies by insurers acceptable to Bank.

         (b) The policies or a certificate thereof signed by the insurer
evidencing that such insurance coverage is in effect for periods of not less
than one (1) year shall be delivered to Bank within five (5) Business Days after
the issuance of the policies to Borrower and after each renewal thereof.

                  (c) All premiums thereon shall be paid by the Borrower monthly
in advance; each such policy shall name only Bank as mortgagee under a New York
Standard Mortgage clause or other similar clause acceptable to Bank; each policy
shall contain a lender's loss payable clause acceptable to Bank naming only Bank
as loss payee thereunder and shall provide that such policy may not be amended
or cancelled without thirty (30) days prior written notice to Bank; and if the
Borrower fails to do so, Bank may (but shall not be required to) procure such
insurance and charge the cost to Borrower's account as part of the Obligations
payable on demand and secured by the Collateral and any other security for the
Obligations.

         10.17    LIABILITY INSURANCE.

         Borrower will, at all times, maintain in full force and effect such
liability insurance with respect to its activities and business interruption,
product liability and other insurance as may be reasonably required by Bank,
such insurance to be provided by insurer(s) acceptable to Bank, and if requested
by Bank such insurance shall name Bank as an additional insured.

                                       42

<PAGE>

         10.18    DEPOSIT ACCOUNTS.

         Borrower will consider maintaining throughout the term of this
Agreement all of Borrower's depository, disbursement, trust, payroll and other
account relationships with Bank and not alter existing account relationships
which bear on the creditworthiness of Borrower and/or the pricing of the Loans
or this credit arrangement or such other account relationships. Borrower hereby
agrees that it will not assert any claims or set off rights against Bank solely
as a result of Borrower's maintaining any account relationship with Bank or any
Affiliate of Bank.

         10.19    MERGER, ETC.

         Borrower will not merge or consolidate or form a joint venture or
partnership with or acquire any other Person.

         10.20    INVESTMENTS.

         Other than as disclosed in SCHEDULE 14 attached hereto and incorporated
by reference herein, Permitted Investments, or as permitted in SECTION 10.37
hereof, Borrower will not make any investment in the securities of any Person.

         10.21    DIVIDENDS.

         Borrower will not declare or pay cash or stock dividends upon any of
Borrower's stock (including, without limitation, any preferred stock now or
hereafter issued by Borrower) or make any distributions of Borrower's assets;
PROVIDED, HOWEVER, Borrower may make Permitted Payments.

         10.22    REDEMPTION OF STOCK.

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

         10.23    STOCK RIGHTS.

         Borrower will not change the rights or obligations associated with, or
the terms of any class of stock of such Borrower or issue any new class of stock
of Borrower without Bank's prior written consent.

         10.24    CHANGE IN BUSINESS.

         Borrower will not engage in any business other than the design,
manufacture and distribution of automated lighting systems and related
equipment.

                                       43

<PAGE>

         10.25    AFFILIATE TRANSACTIONS.

         Except to the extent permitted under SECTIONS 10.21 AND 10.37 hereof,
Borrower will not enter into, or be a party to, any transaction with any of
Borrower's Affiliates, except in the ordinary course of business, pursuant to
the reasonable requirements of Borrower's business, and upon fair and reasonable
terms which are fully disclosed to Bank and are no less favorable to Borrower
than Borrower could obtain in a comparable arm's length transaction with a
Person not a Borrower's Affiliate.

         10.26    WITHDRAWALS FROM ACCOUNTS.

         Except in connection with transactions otherwise permitted herein,
Borrower will not make deposits to or withdrawals from any of Borrower's deposit
accounts for the benefit of any of its Affiliates.

         10.27    SALE OF ASSETS.

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

         10.28    CONSIGNMENTS, ETC.

         Borrower will not make a sale to any customer on a bill-and-hold,
guaranteed sale, sale and return, sale on approval, consignment or any other
repurchase or return basis.

         10.29    CHANGE IN MANAGEMENT OR BUSINESS.

         Borrower will not permit to occur any seizure, vesting or intervention
by or under the authority of any government by which Borrower's management is
displaced or its authority in the conduct of its business is materially
curtailed.

         10.30    CLAIMS AGAINST COLLATERAL.

         Borrower will not permit to occur any attachment or distraint of any of
the Collateral, or other security for the Obligations and will not permit any of
the Collateral, or other security for the Obligations to become subject, at any
time, to any mandatory court order or other legal process.

                                       44

<PAGE>

         10.31    JUDGMENTS.

         Borrower will not permit any judgment or any number of judgments in
excess of Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate to
be rendered against it unless such judgment is paid within thirty (30) days of
the date such judgment becomes final and non-appealable (without violating any
other covenants herein) or such judgment is otherwise bonded in a manner and on
terms satisfactory to Bank.

         10.32    FILED JURISDICTIONS.

                  Borrower will not cause or allow any of its Inventory or
Equipment to be removed from and remain outside of any Filed Jurisdiction for
four (4) or more consecutive months without first providing Bank with notice as
required under SECTION 8.12 hereof.

         10.33    FINANCIAL COVENANTS.

         The Borrower will comply with all of the financial covenants contained
in EXHIBIT J (the "Financial Covenants") attached hereto and incorporated herein
by reference.

         10.34    GOOD STANDING CERTIFICATE.

         Upon Bank's request therefor, Borrower will furnish to Bank a
certificate from the Secretary of State of the state of incorporation of
Borrower indicating that Borrower is in good standing as a corporation under the
laws of such state and certificates indicating that Borrower is qualified to do
business under the laws of all states and jurisdictions where the failure to be
so qualified would have a Material Adverse Effect.

         10.35    DIRECTOR'S FEES.

         Borrower will not pay any director's fees to any member of Borrower's
Board of Directors in excess of Fifteen Thousand Dollars ($15,000) annually.

         10.36    CHATTEL PAPER.

         Borrower shall not create or allow to exist Chattel Paper in electronic
form. All Chattel Paper created on or after February 1, 2001 will bear the
legend, clearly printed at the top or in the margin thereof, "THIS CHATTEL PAPER
IS PLEDGED TO FIRSTAR BANK, NATIONAL ASSOCIATION AND ITS SUCCESSORS AND
ASSIGNS".

         10.37    INTERCOMPANY LOANS.

         There are no Intercompany Loans payable to Borrower as of the Effective
Date except as set forth on SCHEDULE 15 attached hereto, and Borrower shall not
make Intercompany Loans except (i) as are set forth on SCHEDULE 15 attached
hereto and (ii) additional Loans to International and its Subsidiaries not to
exceed at any time the principal amount of One Million Dollars (US $1,000,000);
PROVIDED, Borrower will not repay Intercompany Loans except for Permitted
Payments.

                                       45

<PAGE>

11.      EFFECTIVE DATE; TERMINATION.

         11.1     EFFECTIVE DATE AND TERMINATION DATE.

         This Agreement shall be effective on the date upon which all of the
conditions set forth herein and in EXHIBIT G-1 attached hereto have been fully
satisfied in a manner satisfactory to Bank and upon which the initial Loans have
been made by Bank to Borrower. Unless otherwise terminated or extended in
accordance with the provisions of this SECTION 11, this Agreement shall
terminate on December 31, 2003.

         11.2     TERMINATION BY BANK.

         Recourse to security will not be required at any time. Borrower waives
presentment and protest of any instrument and notice thereof, notice of default
and all other notices to which Borrower might otherwise be entitled. This
Agreement may be extended by Bank, in its sole discretion, for successive one
(1) year periods. Borrower may request a one (1) year extension of this
Agreement by giving Bank its written request for such extension not earlier than
one hundred twenty (120) days and not later than ninety (90) days prior to the
date on which this Agreement is to terminate. In such event, Bank may, in its
sole discretion, elect to so extend this Agreement by giving Borrower written
notice of its election to so extend this Agreement no later than sixty (60) days
of the date of which this Agreement is to terminate. If Borrower has not
received the notice as set forth in the immediately preceding sentence, this
Agreement shall terminate on December 31 of the applicable calendar year.

         11.3     VOLUNTARY TERMINATION.

         Borrower may terminate this Agreement by giving Bank notice of the date
on which this Agreement is to terminate ("Voluntary Termination Date"), which
date must be not earlier than ten (10) Business Days before the Voluntary
Termination Date and by paying, on such Voluntary Termination Date (i) as
compensation to Bank for loss of bargain with respect to the credit advanced
hereunder, and not as a penalty, a termination fee in amounts as set forth
below:

<TABLE>
<CAPTION>
         Voluntary Termination Date                    Termination Fee
         --------------------------                    ----------------
<S>                                                    <C>
         On or before December 31, 2001                2% of the Calculated Termination Amount as of
                                                       such date

         Between January 1, 2002                       1% of the Calculated Termination Amount as of
         and December 31, 2002 (inclusive)             such date

         Between January 1, 2003                       .5% of the Calculated Termination Amount as of
         and September 30, 2003 (inclusive)            such date
</TABLE>
and (ii) all of the other Obligations (including, but not limited to, the fees
described in SECTION 3.7 and SECTION 3.8 hereof). Notwithstanding the foregoing
provisions of this

                                       46

<PAGE>

SECTION 11.3, in the event that (a) Borrower terminates this Agreement (i) in
accordance with this SECTION 11.3 and refinances the Loans with credit made
available by the conventional Commercial Lending Department of Bank, or (ii)
in response to an Additional Fee being charged to Borrower by Bank so long as
the conditions set forth in SECTION 3.5 shall have been satisfied, or (b)
Bank is acquired by another financial institution, no termination fee shall
be due and owing by Borrower. Moreover, notwithstanding the foregoing
provisions of this SECTION 11.3, in the event that the Borrower terminates
this Agreement in accordance with this SECTION 11.3 in connection with a sale
or transfer of all or substantially all of the stock or assets of
International or the Borrower to a third party prior to September 30, 2003,
then the termination fee payable by the Borrower upon such a termination will
equal 0.5% of the Calculated Termination Amount.

         11.4     ACCELERATION UPON TERMINATION.

         Upon the effective date of termination, all of Borrower's Obligations
to Bank shall become immediately due and payable without notice or demand. If
this Agreement is terminated upon the occurrence or during the continuance of an
Event of Default, the Obligations shall include an amount equal to the
termination fee and the fees described in SECTION 3.7 and SECTION 3.8 hereof
which would be payable by Borrower if Borrowers had terminated this Agreement
pursuant to SECTION 11.3 as of the last day of the month in which Bank
terminates this Agreement, said amounts to compensate Bank for loss of bargain
with respect to the credit advanced hereunder, and not as a penalty.

         11.5     BORROWERS REMAIN LIABLE.

         Notwithstanding any termination, until all of the Obligations have been
fully performed, paid and satisfied, Borrower shall remain liable for the full
and prompt performance and payment of the Obligations and the indemnification
set forth in SECTION 15.10, and Bank shall retain all of its rights and
privileges hereunder, including, without limitation, the retention of its
interest in and to all of the Collateral and any other security for the
Obligations.

12.      EVENTS OF DEFAULT.

         Each of the following shall constitute an "Event of Default" hereunder:

          (a)  Borrower shall fail to pay, (i) when due (whether by demand or
               otherwise), any portion of the principal or interest of any of
               the Obligations owing from Borrower to Bank, including, without
               limitation, any Deficiency other than a Deficiency resulting from
               an Advance Rate Change, (ii) within three (3) Business Days of
               when due (whether by demand or otherwise) any other Obligations
               owing under the terms of this Agreement other than a Deficiency
               resulting from an Advance Rate Change, and (iii) immediately upon
               delivery of written notice in accordance with SECTION 2.12(b),
               any Deficiency owing with respect to an Advance Rate Change.

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

                                       47

<PAGE>

          (c)  Borrower shall commit any breach of any provision of this
               Agreement other than those provisions identified in SECTION 12(a)
               or SECTION 12(b) of this Agreement and Borrower shall not have
               cured such breach within fifteen (15) Business Days after the
               occurrence of such breach;

          (d)  any representation or warranty made by the Borrower herein, in
               connection with this Agreement, in connection with any
               transaction relating to this Agreement or in any of the other
               Loan Documents, is, or becomes, untrue or misleading in any
               material respect (except for any such representation or warranty
               (or portion thereof) that is qualified by reference to a specific
               materiality standard, in which case such representation or
               warranty must be and remain true and accurate in all respects);

          (e)  any representation or warranty made by any guarantor of the
               Obligations herein or in any other Loan Document to which it is a
               party is, or becomes, untrue or misleading in any material
               respect (except for any such representation or warranty (or
               portion thereof) that is qualified by reference to a specific
               materiality standard, in which case such representation or
               warranty must be and remain true and accurate in all respects);

          (f)  International, Borrower or any guarantor of the Obligations, as
               the case may be, shall: (i) fail to be Solvent, (ii) become
               generally unable to pay its debts as they become due, (iii) make
               an assignment for the benefit of creditors, or (iv) call a
               meeting of creditors for the composition of debts;

          (g)  (i) there shall be filed by or against International, Borrower or
               any guarantor of the Obligations, as the case may be, a petition
               in bankruptcy or for reorganization which shall continue
               undischarged or undismissed for a period of forty-five (45)
               consecutive days to the extent any such filing is involuntary,
               (ii) a custodian, receiver or agent shall be appointed or
               authorized to take charge of any of their respective properties,
               or (iii) International, Borrower or any guarantor of the
               Obligations shall dissolve for any reason;

          (h)  there shall occur any event which has or may have a Material
               Adverse Effect;

          (i)  any guarantor of the Obligations shall be in default under its
               guaranty of the Obligations or demand is made on any such
               guarantor thereunder;

          (j)  Borrower, International or any guarantor of the Obligations shall
               be in default under any other agreement to which it is a party
               providing for the borrowing of money in the amount equal to or
               greater than Two Hundred Fifty Thousand Dollars ($250,000) and
               such default continues beyond any applicable cure or grace
               periods provided for in such agreement;

          (k)  any guarantor of the Obligations dies, denies its obligation to
               guarantee any then existing Obligations or attempts to limit or
               terminate its obligation to guarantee any future Obligations
               (including, without limitation, any future advance by Bank to a
               Borrower);

                                       48

<PAGE>

          (l)  there shall occur a Casualty Loss with respect to the Collateral
               or other security for the Obligations which is not covered by
               insurance (exclusive of any deductible) and which is greater than
               Two Hundred Fifty Thousand Dollars ($250,000);

          (m)  the audit report required pursuant to SECTION 8.7 is not an
               unqualified audit report, unless the reason for qualification is
               not material to Borrower's financial condition in Bank's sole
               opinion;

          (n)  a contribution failure occurs with respect to any Pension Plan,
               Multiemployer Plan or Welfare Plan sufficient to give rise to a
               lien under Section 302(f) of ERISA;

          (o)  there shall have been instituted against Borrower any criminal
               proceedings for which forfeiture of any asset or assets with a
               net book value equal to or greater than Two Hundred Fifty
               Thousand Dollars ($250,000) is a potential penalty;

          (p)  International or Borrower or any Subsidiary of International or
               Borrower shall default in the due performance and observance of
               any covenant or agreement contained in any Loan Document (other
               than this Agreement) beyond any applicable grace period to which
               it is a party; or

          (q)  International shall fail to own one hundred percent (100%) of the
               voting stock of each of the Borrower, Vari-Lite Europe Holdings,
               Limited or Vari-Lite Asia, Inc.

13.      BANK'S RIGHTS AND REMEDIES.

         13.1     ACCELERATION, ETC.

         Upon the occurrence of any Event of Default, in addition to all other
rights and remedies provided herein or available at law or in equity, Bank may,
without further notice or demand, declare the Loans and all other Obligations to
be immediately due and payable (except that with respect to any Event of Default
under SECTION 12(f) OR (g), such acceleration of the Loans shall be automatic),
and, to the extent that the maximum amount of the Total Facility has not yet
been used or fully drawn on by Borrower, terminate the undrawn balance of same,
and Bank shall have all rights to realize upon the Collateral and any other
security for the Obligations set forth in the documents providing for such
security as described in SECTION 5 hereof, the terms of which are incorporated
herein by reference as if set forth herein in full, and as otherwise provided by
applicable law. Bank's rights and remedies under this Agreement shall be
cumulative and not exclusive of any other right or remedy which Bank may have.

         13.2     FEES AND EXPENSES.

         Borrower shall pay to Bank, immediately and as part of the Obligations,
all costs and expenses, including court costs, Attorneys' Fees and costs of
sale, incurred by Bank in exercising any of its rights or remedies hereunder.

                                       49

<PAGE>

14.      WAIVER; AMENDMENTS; SUCCESSORS AND ASSIGNS.

         14.1     RELEASE OF COLLATERAL.

         Bank's rights with respect to the Collateral and other security for the
Obligations and its liens thereon and security interest therein shall continue
unimpaired, and Borrower shall remain obligated in accordance with the terms
hereof, notwithstanding the release or substitution of any Collateral or other
security for the Obligations at any time(s), or any rights or interests therein,
or any delay, extension of time, renewal, compromise or other indulgence granted
by Bank in reference to any Obligations, and Borrower hereby waives all notice
of the same. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.

         14.2     WAIVERS AND AMENDMENTS IN WRITING.

         Failure by Bank to exercise any right, remedy or option under this
Agreement or any supplement hereto or in any other agreement between Borrower
and Bank or delay by Bank in exercising the same shall not operate as a waiver
by Bank of its right to exercise any such right, remedy or option. No waiver by
Bank shall be effective unless it is in writing and then only to the extent
specifically stated. This Agreement cannot be changed or terminated orally.

         14.3     ASSIGNMENT.

         Bank shall have the right to assign this Agreement. Borrower may not
assign, transfer or otherwise dispose of any of its rights or obligations
hereunder or under any of the other Loan Documents to which it is a party, by
operation of law or otherwise, and any such assignment, transfer or other
disposition without Bank's written consent shall be void. All of the rights,
privileges, remedies and options given to Bank hereunder shall inure to the
benefit of Bank's successors and assigns, and all the terms, conditions,
covenants, provisions and warranties herein shall inure to the benefit of and
bind the representatives, successors and assigns of each Borrower and Bank,
respectively.

15.      MISCELLANEOUS.

         15.1     SEVERABILITY.

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

         15.2     GOVERNING LAW.

         THIS AGREEMENT HAS BEEN DELIVERED AND ACCEPTED AT AND SHALL BE DEEMED
TO HAVE BEEN MADE AT CLEVELAND, OHIO. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO. For
purposes of any action or proceeding involving this Agreement, Borrower hereby
expressly submits to the nonexclusive jurisdiction of all federal and state
courts located in the State of Ohio and consents

                                       50

<PAGE>

that it may be served with any process or paper by registered mail or by
personal service within or without the State of Ohio in accordance with
applicable law, provided a reasonable time for appearance is allowed.

         15.3     WAIVER OF JURISDICTION.

         AS A SPECIFICALLY BARGAINED INDUCEMENT FOR BANK TO ENTER INTO THIS
AGREEMENT AND EXTEND CREDIT TO BORROWERS, BORROWER AGREES THAT ANY ACTION, SUIT
OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AGREEMENT, ITS VALIDITY OR
PERFORMANCE, AT THE SOLE OPTION OF BANK, ITS SUCCESSORS AND ASSIGNS, AND WITHOUT
LIMITATION ON THE ABILITY OF BANK, ITS SUCCESSORS AND ASSIGNS, TO EXERCISE ALL
RIGHTS AS TO THE COLLATERAL AND OTHER SECURITY FOR THE OBLIGATIONS OR INITIATE
AND PROSECUTE IN ANY APPLICABLE JURISDICTION ACTIONS RELATED TO REPAYMENT OF THE
OBLIGATIONS, SHALL BE INITIATED AND PROSECUTED AS TO ALL PARTIES AND THEIR
SUCCESSORS AND ASSIGNS AT CLEVELAND, OHIO. BANK AND BORROWER EACH CONSENTS TO
AND SUBMITS TO THE EXERCISE OF JURISDICTION OVER ITS PERSON BY ANY COURT
SITUATED AT CLEVELAND, OHIO HAVING JURISDICTION OVER THE SUBJECT MATTER, WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED MAIL DIRECTED TO BORROWER AND BANK AT
THEIR RESPECTIVE ADDRESSES SET FORTH IN SECTION 15.9 BELOW OR AS OTHERWISE
PROVIDED UNDER THE LAWS OF THE STATE OF OHIO. BORROWER WAIVES ANY OBJECTION
BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER, AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITable
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

         15.4     SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

         Borrower covenants, warrants and represents that all of Borrower's
representations and warranties contained in this Agreement are true at this
time, shall survive the execution, delivery and acceptance hereof by the parties
hereto and the closing of the transactions described herein or related hereto,
and shall remain true until the Obligations are fully performed, paid and
satisfied, subject to such changes as may not be prohibited hereby, do not
constitute Events of Default hereunder, and have been consented to by Bank in
writing.

         15.5     EVIDENCE OF LOANS.

         Each loan or advance made by Bank to Borrower pursuant to this
Agreement may or may not (at Bank's sole discretion) be evidenced by notes or
other instruments issued or made by Borrower to Bank. Where such loans or
advances are not so evidenced, such loans and advances shall be evidenced solely
by entries upon Bank's books and records.

         15.6     BANK'S ABILITY REGARDING COLLATERAL AND PREMISES.

         All of the Obligations shall constitute one loan secured by all
security as described in SECTION 5 above and by all other security now and from
time to time hereafter

                                       51

<PAGE>

granted by Borrower to Bank. Bank may, in its sole discretion, (i) exchange,
enforce, waive or release any such security or portion thereof, (ii) apply
such security and direct the order or manner of sale thereof as Bank may,
from time to time, determine and (iii) settle, compromise, collect or
otherwise liquidate any such security in any manner following the occurrence
of any Event of Default without affecting or impairing its right to take any
other further action with respect to any security or any part thereof.

         15.7     APPLICATION OF PAYMENTS, ETC.

         Bank shall have the continuing right to apply or reverse and reapply
any payments to any portion of the Obligations. To the extent Borrower makes a
payment or payments to Bank or Bank receives any payment or proceeds of the
Collateral or any other security for Borrower's benefit, which payment(s) or
proceeds or any part thereof are subsequently voided, invalidated, declared to
be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy act, state or federal
law, common law or equitable cause, then, to the extent of such payment or
proceeds received, the Obligations or part thereof intended to be satisfied
shall be revived and shall continue in full force and effect, as if such payment
or proceeds had not been received by Bank.

         15.8     FEES AND EXPENSES.

         Borrower shall reimburse Bank for all costs, fees, expenses and
liabilities incurred by Bank or for which Bank becomes obligated in connection
with or arising out of: (i) the negotiation, preparation, closing and
enforcement of this Agreement, any amendment hereof and any agreements,
documents and instruments in any way relating hereto and any of Bank's rights
hereunder; (ii) any loans or advances made by Bank hereunder; (iii) any
transaction contemplated by this Agreement; (iv) any inspection and/or audit
and/or verification (the "Audit Fees") of the Collateral, and/or other security
for the Obligations and/or Borrower (Bank currently charges an auditing fee of
Seven Hundred Fifty Dollars ($750) per diem based on an eight (8) hour day plus
out-of-pocket expenses per auditor or field examiner for the services of its
auditors and field examiners, and a potentially greater amount if the auditor is
not a Bank employee), PROVIDED, HOWEVER, that unless an Event of Default has
occurred or is occurring or Bank in its reasonable discretion believes or has
cause to believe that Borrower has committed or is committing fraud, the
aggregate amount of Audit Fees payable by Borrower to Bank in each fiscal
quarter of Borrower shall not exceed Seven Thousand Five Hundred Dollars
($7,500.00); (v) any liability under Section 3505 of the Internal Revenue Code
and all other local, state and federal statutes of similar import; and (vi)
costs of settlement incurred by Bank after the occurrence of an Event of Default
(a) in enforcing any Obligation or in foreclosing against the Collateral or
exercising or enforcing any other right or remedy available by reason of such
Event of Default, (b) in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement in the nature of a "work-out"
or in any insolvency or bankruptcy proceeding, (c) in commencing, defending or
intervening in any litigation or in filing a petition, complaint, answer, motion
or other pleadings in any legal proceeding relating to Borrower and related to
or arising out of the transactions contemplated hereby or by any of the Loan
Documents, (d) in taking any other action in or with respect to any suit or
proceeding (whether in bankruptcy or otherwise), (e) in protecting, preserving,
collecting, leasing, selling, taking possession of, or liquidating any of the
Collateral, (f) attempting to enforce or enforcing any lien

                                       52

<PAGE>

on or security interest in any of the Collateral or any other rights under
the Loan Documents or (g) in meeting with Borrower to discuss such Event of
Default and the course of action to be taken in connection therewith; the
foregoing to include, without limitation, Attorneys' Fees and fees of other
professionals, all lien search and title search fees, all title insurance
premiums, all filing and recording fees and all travel expenses. All of the
foregoing shall be part of the Obligations, payable upon demand, and secured
by the Collateral and other security for the Obligations described in SECTION
5 above. The Obligations described under this SECTION 15.8 shall survive any
termination of this Agreement.

         15.9     NOTICES.

         Any notice required, permitted or contemplated hereunder shall be in
writing and addressed to the party to be notified at the address set forth below
or at such other address as each party may designate for itself from time to
time by notice hereunder, and shall be deemed validly given (i) three (3) days
following deposit in the U.S. mails, with proper postage prepaid, or (ii) the
next business day after such notice was delivered to a regularly scheduled
overnight delivery carrier with delivery fees either prepaid or an arrangement,
satisfactory with such carrier, made for the payment thereof, or (iii) upon
receipt of notice given by telecopy, mailgram, telegram, telex or personal
delivery:

         To Bank:          Firstar Bank, National Association
                           425 Walnut Street
                           Cincinnati, OH 45202
                           Attention:  Steven Kieffner, Executive Vice President
                           Telephone No: 513/632-4204
                           Telecopy No:     513/632/2040

         To Borrower:      Vari-Lite, Inc.
                           201 Regal Row
                           Dallas, Texas 75247
                           Attention: Chief Financial Officer
                           Telephone No: (214) 819-3244
                           Telecopy No: (214) 630-5867

         15.10    INDEMNIFICATION.

         In consideration of the execution and delivery of this Agreement by
Bank and the extension of the commitments hereunder, Borrower hereby, jointly
and severally, indemnifies, exonerates and holds Bank and each of its officers,
directors, employees and agents (collectively the "INDEMNIFIED PARTIES" and,
individually, an "INDEMNIFIED PARTY") free and harmless from and against any and
all actions, causes of action, suits, losses, costs, liabilities, damages, and
expenses actually incurred in connection therewith (irrespective of whether such
Indemnified Party is a party to the action for which indemnification hereunder
is sought), including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to, or as a direct or indirect
result of:

                                       53

<PAGE>

         (a) any transaction financed or to be financed in whole or in part or
directly or indirectly with the proceeds of any Loan;

         (b) the entering into and performance of this Agreement and the other
Loan Documents by any of the Indemnified Parties;

         (c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by Borrower of all or any portion of the
stock or all or substantially all the assets of any Person, whether or not Bank
is party thereto; and

         (d) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real property
owned or operated by Borrower of any Hazardous Material (including, without
limitation, any losses, liabilities, damages, injuries, costs, expenses or
claims asserted or arising under the Comprehensive Environmental Response,
Compensation and Liability Act, any so-called "Superfund" or "Superlien" law, or
any other federal, state, local or other statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing liability or
standards on conduct concerning, any Hazardous Material), regardless of whether
or not caused by, or within the control of, Borrower;

except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of Indemnified Party's gross negligence
or willful misconduct or breach by such Indemnified Party of its obligations
under the Loan Documents, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, Borrower hereby agrees to make
the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law, except as
aforesaid to the extent not payable by reason of the Indemnified Party's gross
negligence or willful misconduct or breach of such obligations. The Obligations
described under this SECTION 15.10 shall survive any termination of this
Agreement.

         15.11    USE OF BANK'S DISCRETION.

         Wherever in this Agreement or in any Related Document reference is made
to use of or exercise by Bank of its discretion, such provision shall mean the
sole and absolute discretion of Bank.

         15.12    EQUITable RELIEF.

         Borrower recognizes that, in the event Borrower fails to perform,
observe or discharge any of its obligations or liabilities under this Agreement
or any of the other Loan Documents, any remedy of law may prove to be inadequate
relief to Bank; therefore, Borrower agrees that Bank, if Bank so requests, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.

         15.13    ENTIRE AGREEMENT.

         This Agreement sets forth the entire agreement of the parties with
respect to its subject matter and supersedes all previous understandings,
written or oral, in respect thereof.

                                       54

<PAGE>

         15.14    HEADINGS.

         Section headings in this Agreement are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.

         15.15    WAIVER OF JURY TRIAL.

         AS A SPECIFICALLY BARGAINED INDUCEMENT FOR BANK TO ENTER INTO THIS
AGREEMENT AND EXTEND CREDIT TO BORROWERS, BORROWER AND BANK EACH WAIVES TRIAL BY
JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR
ARISING OUT OF THIS AGREEMENT AND/OR THE CONDUCT OF THE RELATIONSHIP BETWEEN
BANK AND BORROWER.

         15.16    CONFESSION OF JUDGMENT.

         Borrower hereby irrevocably authorizes and empowers any attorney-at-law
to appear for Borrower in any action upon or in connection with this Agreement
at any time after the Loans and/or other Obligations become due, as herein
provided, in any court in or of the State of Ohio or elsewhere, and waives the
issuance and service of process with respect thereto, and irrevocably authorizes
and empowers any such attorney-at-law to confess judgment in favor of Bank
against Borrower, the amount due thereon or hereon, plus interest as herein
provided, and all costs of collection, and waives and releases all errors in
said proceedings and judgments and all rights of appeal from the judgment
rendered. Borrower agrees and consents that the attorney confessing judgment on
behalf of Borrower may also be counsel to the Bank or any of Bank's Affiliates,
waives any conflict of interest which might otherwise arise, and consents to
Bank paying such confessing attorney a reasonable legal fee or allowing such
attorney's reasonable fees to be paid from the proceeds of collection of the
Loans and/or Obligations or proceeds of Collateral, or any other security for
the Loans and the other Obligations.

                  [Remainder of Page Intentionally Left Blank]

                                       55

<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed by each
Borrower as of the 29th day of December, 2000.

WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.

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

-------------------------                   By:
Name:                                          -------------------------------
     --------------------                            Jerome L. Trojan III,
-------------------------                            Vice President-Finance and
Name:--------------------                            Chief Financial Officer

                                       56

<PAGE>

STATE OF OHIO              )
                           ) ss:
COUNTY OF CUYAHOGA         )

         The foregoing instrument was acknowledged before me this 29th day
of, December, 2000, by Jerome L. Trojan III, Vice President-Finance and CFO
of Vari-Lite, Inc., an ________ corporation, on behalf of the corporation.

                                       ------------------------------
                                       Notary Public

STATE OF OHIO              )
                           ) ss:
COUNTY OF CUYAHOGA         )

                  The foregoing instrument was acknowledged before me this
___ day of _____________, _______, by _______________, [Vice President] of
Vari-Lite, Inc., an ________ corporation, on behalf of the corporation.

                                       ------------------------------
                                       Notary Public

Accepted at Cleveland, Ohio,
as of _________________.

FIRSTAR BANK, NATIONAL ASSOCIATION

By:
   ---------------------------
     Name:
          ----------------------
        Title:
              ----------------------

                                       57

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