10-K405

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-K

/x/
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the fiscal year ended DECEMBER 31, 2000

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                

Commission file number 0-24230

FIBERSTARS, INC.
(Exact name of registrant as specified in its charter)

California
(State or other jurisdiction of
incorporation or organization) 94-3021850
(I.R.S. Employer Identification No.)

44259 Nobel Drive, Fremont, CA 94538
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (510) 490-0719

Securities registered under section 12(b) of the Exchange Act:	None
Securities registered under Section 12(g) of the Exchange Act:	Title of Each Class Common Stock $0.0001 par value	Name of each exchange on which registered Nasdaq National Market

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

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

   The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $12,209,895 as of March 20, 2001 based upon the last trading price of the Common Stock of registrant on the Nasdaq National Market as of that date. This calculation does not reflect a determination that any person is an affiliate of the registrant for any other purpose.

   As of March 20, 2001, there were 4,298,902 shares of the registrant's Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

   Part III of this Report on Form 10-K incorporates information by reference from registrant's definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for registrant's 2001 Annual Meeting of Shareholders to be held May 23, 2001.

When used in this Report, the words "expects," "anticipates," "estimates," "plans," and similar expressions are intended to identify forward-looking statements. These are statements that relate to future periods and include statements as to the Company's future operating results, capital expenditures, product development and enhancements, liquidity and strategy, development and marketing of new products, relationships with customers and distributors, relationships with suppliers and ability to obtain components, as well as our remarks concerning our ability to compete in the fiber optic lighting market, the evolution of the fiber optic lighting market, the future size of the fiber optic lighting market, our expectations concerning the future performance of our recently completed acquisitions, the rate of adoption of fiber optic lighting in Europe and in the United States, trends in the price and performance of fiber optic lighting products, the future performance of our lighting products, our relationship with Advanced Lighting Technology, Inc. ("ADLT") and future technologies expected to result from our relationship with ADLT. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, those risks discussed below, as well as our ability to retain and obtain customer and distributor relationships, the cost of accessing or acquiring technologies or intellectual property, risks relating to developing and marketing new products, manufacturing difficulties, possible delays in the release of products, our ability to obtain components at reasonable prices, the impact of technological advances and competitive products, our ability to attract and retain qualified employees; and the risks set forth below under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Results" and in the Company's other periodic filings with the Securities and Exchange Commission (the "SEC"). These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

    Fiberstars®, BritePak®, MaxCore™, Deckstars™, Fiberstars EFO™ and High Performance Downlights™ are our registered trademarks. We also refer to trademarks of other corporations and organizations in this document.

PART I

Item 1. Description of Business

Overview

    Fiberstars, Inc. ("Fiberstars" or the "Company"), incorporated in California in 1985, develops and markets fiber optic lighting systems which are used in a variety of commercial and residential applications. The Company pioneered the use of fiber optic technology in lighting. By continuing to improve the price and performance of its products and by expanding its marketing efforts, Fiberstars has become the world's leading supplier in this emerging market.

    The Company's products often have advantages over conventional lighting in areas of efficiency, safety, maintenance and beauty, and thus can be used in place of conventional lighting in a number of applications. By delivering special lighting effects which conventional lighting often cannot match, fiber optic lighting systems are especially attractive for a wide range of decorative applications, such as the lighting of swimming pools and spas, signage, "neon" decoration, landscaping, and other areas of use within the commercial and residential markets.

    The Company designs, develops and manufactures its fiber optic lighting systems and distributes its products worldwide, primarily through independent sales representatives, distributors and swimming pool builders.

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Products

    Fiberstars' lighting systems combine three types of products—illuminators, fiber tubing, and fixtures—in configurations which meet the needs of specific markets. The electrically powered illuminators generate and focus light into the ends of optical fiber. Fiber tubing products connect to the illuminators and are designed to emit light either at the end of the tube as a spot source of light, or along the length of the tube, similar in effect to neon lighting. The systems can also include fixtures and other accessories designed for specific applications.

Illuminators

    The Company manufactures a number of different illuminators for use in different applications. Most commercial illuminators utilize metal halide high intensity discharge (H.I.D.) lamps to provide long life and maximum brightness. Some include patented reflectors which have been designed by Fiberstars to enhance performance. Our lower cost illuminators use quartz halogen lamps, some of which are custom products manufactured to Fiberstars' specifications.

    New products shipped in 2000 include the FS ¹/2, a low cost spa and jetted tub lighting system; "Sarah", an inexpensive lighting system for above ground pools; and the FS 11, FS 12 and FS 13, which are systems designed for display cases.

    Fiberstars made additional Illuminator technology advances in 2000 which we intend to begin utilizing in certain illuminator products in 2001, including the development of the model 701 illuminator for the neon alternative market. Additionally, several products are emerging from the new fiber and optics technology acquired from Unison Fiber Optic Lighting Systems, LLC ("Unison"). The Company expects to market this new technology under the name Fiberstars EFO™.

Fiber Tubing

    Our fiber tubing products are manufactured in various lengths and diameters to meet the requirements of each particular market and application. Fiberstars' patented BritePak® products can maintain reasonably consistent brightness for side-lit fiber runs up to 100 feet in length. For end-lit applications, several spotlights are typically connected to a single illuminator and are placed within fifty feet from the illuminator.

    In the fourth quarter, Fiberstars began selling MaxCore™ solid core fiber developed from Rohm and Haas patents acquired from Unison. MaxCore™delivers a significant improvement in brightness and flexibility over Fiberstars' initial solid core offering. (see "Research and Product Development" in this section).

Fixtures and Accessories

    Certain fixtures and accessories are designed by Fiberstars for the Company's product lines. Other fixtures are supplied by third parties. The Company's Commercial Lighting Division produces a broad assortment of ceiling and landscape fixtures from which lighting designers may choose, including the Company's High Performance Downlights™ which are targeted at the downlight market.

    Fiberstars also produces a patented lighted paver, a fixture which can be imbedded in flooring or pavings. This product won an award as one of the most innovative prducts at the 1999 Light Fair International trade show. The product also has application in the pool market and to that end is released in that market as Deckstars™. The Company also markets Light Emitting Diode (LED) pavers in Europe.

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    As part of its acquisition of Lightly Expressed, Ltd. ("Lightly Expressed") in May, 2000 Fiberstars acquired a process for the manufacture of a series of lightbars used for lighting display cases which it has added to its product offerings.

Applications and End-Users

    The Company's fiber optic lighting products are manufactured to the specifications of architects, professional lighting designers, swimming pool builders or end-users. Our products have been installed for commercial lighting applications in fast food restaurants such as Burger King and McDonald's; retail stores such as Albertson's, Giant Food and Toys R Us; hotels such as the MGM Grand and the Stratosphere Tower in Las Vegas; and entertainment facilities such as theme parks operated by the Walt Disney Company and Universal Studios. Fiberstars commercial lighting systems also have been used in a number of specialty applications, including theatrical productions, bridges, theater aisles and ceilings, and have been used by the Monterey Bay Aquarium, Marathon Coach, HBO Studios, AMC theaters, Chevron, the Trump Towers and New York Life.

    The Company's primary products for pool and spa lighting are designed to provide underwater lighting for newly constructed pools. In addition, Fiberstars markets pool products for spa lighting, pool perimeter lighting, patios, decks and landscape lighting. The Company's underwater lighting systems are installed in pools and spas built by major national pool builders and builder groups, as well as numerous regional and local pool builders throughout the United States and Canada.

    Additionally, a series of residential landscape lighting products is being test marketed on a limited basis through retail distribution channels. These products were not a material portion of the Company's business in 2000 and are not expected to be material in 2001.

Sales, Marketing and Distribution

Commercial Lighting Products

    In the commercial lighting market, the Company's marketing efforts are directed at creating specifications for Fiberstars' systems in plans developed by architects, professional lighting designers and building owners. The Company reaches these professionals through approximately 60 independent lighting representative organizations throughout the United States, approximately 20 of which account for a substantial majority of the Company's commercial lighting product sales. The independent lighting representatives assist in the specification process, directing orders to electrical equipment distributors, who, in turn, typically purchase products from Fiberstars. Domestic distributors of commercial lighting products typically do not engage in marketing efforts or stock any inventory of the Company's products. The Company's arrangements with its independent representatives do not prohibit the handling of conventional lighting products, including products that may be competitive with those of the Company, although such representatives typically do not handle competing fiber optic lighting products. Sonic Corporation, the Company's largest commercial lighting customer, accounted for 2% of the Company's net sales in 2000 and 7% of the Company's net sales in 1999. As of the end of 2000, the Company is nearing the completion of the remodel program for Sonic's stores. As a result, the Company expects that sales to Sonic will remain at a level consistent with that of supplying new Sonic stores as they come on line each year along with providing maintenance on lighting systems installed in Sonic stores in prior years.

    Internationally, the Company's products are sold in Europe through two subsidiaries, Crescent Lighting Ltd. in the UK and Lichberatung Mann (LBM) in Germany. Together, these two companies oversee the sales operations in Europe which include sub-distributors and sales representatives.

    Outside of Europe, Fiberstars' commercial lighting products are sold internationally in more than 34 countries by approximately 17 distributors, including Mitsubishi and Venture (an ADLT Company)

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in Japan and ADLT Australia. In February 2000, Fiberstars Australasia Pty Ltd., the Company's 46.5%-owned joint venture in Australia, sold its net assets and the distribution rights to its products for Australia, New Zealand, Indonesia, Malaysia and Fiji to ADLT Australia. The Company retains its interest in the joint venture through which it recognizes a small income from royalties on certain illuminator sales.

Swimming Pool and Spa Products

    The Company's underwater lighting products are sold primarily for installation in new swimming pools and spas. Accordingly, our marketing efforts for swimming pool and spa products depend on swimming pool builders to recommend our products to their customers and to adapt their swimming pool designs to include Fiberstars lighting systems. The Company utilizes regional sales representative organizations that specialize in selling swimming pool products to pool builders and pool product distributors. Each representative organization typically has the exclusive right to sell the Company's products within its territory, receiving commissions on sales in its territory. Regional and national distributors in the swimming pool market stock the Company's products to fill orders received from swimming pool builders. Some of these distributors engage in limited marketing activities for the Company's products. In July 2000, the Company entered into an exclusive marketing and distribution agreement with Laars, Inc. for certain pool products.

    The Company enters into incentive arrangements to encourage pool builders to purchase the Company's products. The Company has entered into agreements with certain large national pool builders, under which the builders may purchase Fiberstars systems directly from the Company and offer the Company's products with their swimming pools. The Company provides pool builders and independent sales representatives with marketing tools, including promotional videos, showroom displays and demonstration systems. The Company also uses trade advertising and direct mail in addition to an ongoing program of sales presentations to pool builders and distributors.

    South Central Pools ("SCP"), the largest Pool distributor in the U.S. and the Company's largest pool customer, accounted for approximately 9% of the Company's net sales in 2000 and 10% in 1999. The Company expects to maintain its business relationship with SCP; however, a cessation or substantial decrease in the volume of purchases by this customer could reduce availability of the Company's products to end users and could, in turn, have a material adverse effect on the Company's net sales and results of operations.

    Sales of the Company's pool and spa products follow a seasonal pattern, which typically results in higher sales in the second and fourth quarters as pool distributors stock shelves for the spring and summer seasons.

    The majority of sales of the Company's swimming pool lighting systems to date have been made in the U.S. and Canada. However, the Company has entered into a distribution agreement in Europe in 1998 with Astral, a European pool equipment company. Sales to Astral were not material in 1999 or 2000.

Geographic Areas and Product Lines

    The Company sells its products worldwide and has two product lines: Pool and Spa Lighting and Commercial Lighting. Information on the geographic split of revenues and revenues by product line may be found in Note 11 to the Company's Consolidated Financial Statements.

Backlog

    The Company normally ships product within a few days after receipt of an order and generally does not have a significant backlog of orders. The Company's backlog at the end of 2000 was

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$2,161,000 compared to $1,893,000 at the end of 1999. The Company does not consider backlog to be an indicator of future performance.

Competition

    The Company's products compete with a wide variety of lighting products, including conventional electric lighting in various forms and decorative neon lighting. The Company has also experienced increased competition from other companies offering products containing fiber optic technology. Principal competitive factors include price, performance (including brightness, reliability and other factors), aesthetic appeal (including light color), market presence, installation, power consumption and maintenance requirements.

    The Company believes that its products compete favorably against conventional lighting in such areas as aesthetic appeal, ease of installation, maintenance and power consumption. The unique characteristics of fiber optic lighting (such as no heat or electricity at the light fixture, ability to change colors and remote lamp replacement) enable our products to be used in some situations where conventional lighting is not practical. However, the initial purchase price of the Company's products is typically higher than conventional lighting, and the Company's products tend to be less bright than conventional alternatives. In the case of neon lighting, certain popular neon colors, such as bright red, cannot be achieved as effectively with the Company's products.

    Fiberstars is engaged in ongoing efforts to develop and improve its products, adapt its products for new applications and design and engineer new products. The Company expects that its ability to compete effectively with conventional lighting technologies, other fiber optic lighting products and new lighting technologies that may be introduced will depend substantially upon achieving greater brightness and reducing the cost of the Company's systems. In 2000, the Company redesigned several illuminators and fiber products to improve performance. In addition to continuing work with outside lamp, power supply and optic companies, the Company also continues to work on advanced product development with ADLT, the world leader in metal halide lamp technology. Some of this work is an outgrowth of furthering technology acquired as part of the Company's acquisition of Unison (see "Research and Product Development" in this section).

    Providers of conventional lighting systems include large lamp manufacturers and lighting fixture companies, which have substantially greater resources than the Company. These conventional lighting companies may introduce new and improved products, which may reduce or eliminate some of the competitive advantages of the Company's products. In commercial lighting, the Company also competes primarily with local and regional neon lighting manufacturers and craftspeople who in many cases are better established in their local markets than the Company.

    Direct competition from other fiber optic lighting products has continued to increase. Competitive products are offered in the pool market by Pentair, Inc.'s American Products Division and Hayward Pool Products—major manufacturers of pool equipment and supplies. In commercial lighting, fiber optic lighting products are offered by an increasing number of smaller companies, some of which compete aggressively on price. Some of these competitors offer products with performance characteristics similar to those of the Company's products. The Company is aware that several large companies in the conventional lighting industry are developing fiber optic lighting systems that may compete in the near future with the Company's products. In Europe, both Philips, a Dutch lighting company, and Schott, a German glass fiber company, offer fiber optic lighting systems. Schott has formed an entity to enter the U.S. market. In Europe, Philips markets Fiberstars' BritePak® fiber tubing on an OEM basis, along with Philips' own illuminators and other products. Many companies compete with the Company in Asia, including Mitsubishi, Bridgestone and Toray. Mitsubishi sells Fiberstars BritePak® fiber tubing in Japan.

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    The Company cannot predict the impact of competition on its business. The Company believes that an increase in the rate of market expansion may be accompanied by an increase in competition. Increased competition could result in price reductions, reduced profit margins and loss of market share, which would adversely affect the Company's operating results. There can be no assurance that the Company will be able to continue to compete successfully against current and future competitors.

Assembly, Testing and Quality Assurance

    The Company's illuminator manufacturing consists primarily of final assembly, testing and quality control. The Company uses independent contractors to manufacture some components and subassemblies, and has worked with a number of its vendors to design custom components to meet Fiberstars' specific needs. Inventories of domestically produced component parts are managed on a just-in-time basis when practicable. The Company's quality assurance program provides for testing of all sub-assemblies at key stages in the assembly process as well as testing of finished products.

    Under a supply agreement which was renewed in January 2001, Mitsubishi is the sole supplier of the Company's fiber, other than the large core fiber the Company now manufactures following the Unison acquisition. The Company expects to maintain its relationship with Mitsubishi. Mitsubishi owns approximately 2.8% of the Company's outstanding common stock and distributes certain Fiberstars' products in Japan. The Company also relies on sole source suppliers for certain lamps, reflectors, remote control devices and power supplies. Although the Company cannot predict the effect that the loss of one or more of such suppliers would have on the Company, such loss could result in delays in the shipment of products and additional expenses associated with redesigning products and could have a material adverse effect on the Company's operating results.

    As a result of the energy shortage which has impacted parts of California in the fourth quarter of 2000 and the first quarter of 2001, and which may continue for some time, the Company may experience some production delays during fiscal 2001. If the level of delays is significant, there could be a material impact on the future operating results of the Company.

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Research and Product Development

    The Company believes that growth in fiber optic lighting will be driven by improvements in technology to provide increased brightness at lower costs. Accordingly, the Company is committing much of its research and development resources to those challenges. In 2000, the Company redesigned its high-end commercial illuminator, improving brightness by 50%. Pool illuminator lamp life was increased from a few hundred hours to 6,000 hours by moving to H.I.D. technology. Despite its ongoing development efforts, there can be no assurance that the Company will be able to achieve future improvements in brightness and cost, or that competitors will not develop lighting technologies that are brighter, less expensive or otherwise superior to those of the Company.

    On February 1, 2000, the Company completed an agreement to acquire selected assets and all of the technology of Unison, the fiber optic lighting joint venture between ADLT and Rohm & Haas Company. As part of the agreement, the Company acquired key personnel, technologies and other assets. The Company believes that the acquisition has provided and may yet continue to provide the following benefits:

1.

The Company expects Unison personnel to be contributors to its long range plans. For example, John Davenport, former manager of reseach and development at GE Lighting, has become the Company's Chief Technology Officer.

2.

The Company believes that the technology acquired has the potential to deliver the light output of certain electric lamps at competitive pricing, which has been a major goal of the Company. Additionally, the Company acquired 12 patents and a number of patents-pending, including technology in lamps, optics and fiber.

3.

In connection with the acquisition, the Company entered into an ongoing technology exchange and supply agreement with ADLT covering lamps, power supplies, optical coatings and fixtures for fiber optic lighting applications.

4.

The agreement provided the Company with $2,000,000 in research and development funds, paid over five quarters, against milestones for the completion of development work on large core plastic optical fiber as well as new technology lamp/optics projects. In exchange, the Company will pay royalties on the sales of products these technologies produce at a rate of 3% for five years, 2% for the next two years and 1% for the next three years, after which the Company assumes exclusive royalty-free rights.

5.

The acquisition also included certain tangible assets valued, in the aggregate at $625,000, including large core fiber manufacturing and fiber making equipment and certain other research and development equipment.

    In exchange for the assets, the Company provided ADLT with warrants to purchase one million shares of the Company's common stock exercisable at one penny per share. These warrants may not be exercised until the price of the Company's common stock reaches certain trading levels on the Nasdaq National Market, as follows: 250,000 will be exercisable when the price of the Company's common stock reaches $6.00; 250,000 when the price of the Company's common stock reaches $8.00; 250,000 when the price of the Company's common stock reaches $10.00; and 250,000 when the price of the Company's common stock reaches $12.00. These prices must be maintained as an average over at least 30 days. In addition, at each price level, certain sales milestones must be reached on products developed from Unison technology before the warrants can be exercised. At ADLT's option, the warrants may be exchanged by ADLT, regardless of their exercisability, for up to 445,000 newly issued shares of the Company's common stock.

    Previously, ADLT acquired approximately 18% of the Company's outstanding shares of common stock in a private transaction during 1997 and in the first quarter of fiscal 1998 ADLT increased that

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position to approximately 29%. Following the Company's five acquisitions since the first quarter of 1998 along with the exercise of stock options, ADLT's position was reduced to 24% of outstanding equity, excluding warrants and options, at the end of fiscal year 2000. Additional purchases by ADLT of the Company's common stock, beyond that stock which may be acquired by virtue of the warrants held by ADLT, will require approval of the Company's Board of Directors. The Company and ADLT are working together to design next generation lighting systems. The Company's goal is to improve the price/performance of fiber optic lighting systems to compete more directly with conventional lighting across a much broader spectrum of the general lighting market.

    In 2000 the Company received a federal grant with the National Institute of Standards and Technology ("NIST") for up to $2,000,000 in funding over three years for research and development of solid core fiber for lighting purposes. This contract provides the Company with $520,000 in funding for the one-year period beginning November 2000. Additional amounts under the contract are to be released each year in November.

    The Company augments its internal research and development efforts by involving certain of its component suppliers, independent consultants and other third parties in the process of seeking improvements in the Company's products and technology. The Company depends substantially on these parties to undertake research and development efforts necessary to achieve improvements that would not otherwise be possible given the multiple and diverse technologies that must be integrated in the Company's products and the Company's limited engineering, personnel and financial resources. These third parties have no material contractual commitments to participate in these efforts, and there can be no assurance that they will continue to do so.

Intellectual Property

    The Company believes that the success of its business depends primarily on its technical innovations, marketing abilities and responsiveness to customer requirements, rather than on patents, trade secrets, trademarks, copyrights and other intellectual property rights. Nevertheless, the Company has a policy of seeking to protect its intellectual property through patents, license agreements, trademark registrations, confidential disclosure agreements and trade secrets. There can be no assurance, however, that the Company's issued patents are valid or that any patents applied for will be issued. There can be no assurance that the Company's competitors or customers will not copy aspects of the Company's fiber optic lighting systems or obtain information that the Company regards as proprietary. There also can be no assurance that others will not independently develop products similar to those sold by the Company. The laws of some foreign countries in which the Company sells or may sell its products do not protect the Company's proprietary rights in its products to the same extent as do the laws of the United States.

    The Company is aware that a large number of patents and pending patent applications exist in the field of fiber optic technology. The Company also believes that certain of its competitors hold and have applied for patents related to fiber optic lighting. Although, to date, the Company has not been involved in litigation challenging its intellectual property rights, the Company has in the past received communications from third parties asserting rights in its patents or that the Company's technology infringes intellectual property held by such third parties. There can be no assurance that third parties will not assert claims that the Company's products infringe third party patents or other intellectual property rights or that, in case of a dispute, licenses to such technology will be available, if at all, on reasonable terms. In the event of litigation to determine the validity of any third-party claims, such litigation, whether or not determined in favor of the Company, could result in significant expense to the Company and divert the efforts of the Company's technical and management personnel from productive tasks. Also, in the event of an adverse ruling in such litigation, the Company might be required to expend significant resources to develop non-infringing technology or to obtain licenses to the infringing technology, which licenses may not be available on acceptable terms. In the event of a

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successful claim against the Company and the Company's failure to develop or license a substitute technology, the Company's operating results could be adversely affected.

Employees

    As of December 31, 2000, the Company had 160 full time employees, of whom 70 were involved in sales, marketing and customer service, 15 in research and product development, 62 in assembly and quality assurance, and 13 in finance and administration. From time to time the Company also employs part time personnel in various capacities, primarily assembly and clerical support. The Company has never experienced a work stoppage, no employees are subject to any collective bargaining agreement, and the Company considers its employee relations to be good.

    The Company's future success will depend to a large extent on the continued contributions of certain employees, many of whom would be difficult to replace. The future success of the Company also will depend on its ability to attract and retain qualified technical, sales, marketing and management personnel, for whom competition is intense. The loss of or failure to attract and retain any such persons could delay product development cycles, disrupt the Company's operations or otherwise harm the Company's business or results of operations.

Item 2. Description of Property

    The Company's principal executive offices and manufacturing and assembly facilities are located in a 60,000 square foot facility in Fremont, California, under a lease agreement expiring in 2006. The Company has other local offices under lease in the United States in Seattle, Washington, in Dallas, Texas, and in Roanoke, Virginia and in Europe in the United Kingdom in Thatcham. It also owns a local office in Berching, Germany. The Company believes that its current facilities are adequate to support its current and anticipated near-term operations and that it can obtain additional space it may need in the future at commercially reasonable terms.

Item 3. Legal Proceedings

    On December 20, 2000, Oklahoma Lighting Sales, LLC ("OLS") filed an action against Fiberstars, Inc. and Sonic Industries, Inc. ("Sonic") in the District Court of Oklahoma County, Oklahoma, claiming breach of oral contract and tortious interference among other things, requesting unspecified damages in excess of $10,000. OLS was the supplier of the Company's products to Sonic Corporation from October 1997 to November 2000. OLS was replaced as the supplier by Sonic in November 2000. The new supplier is a company which Fiberstars was using as a warranty service provider for Sonic stores. OLS claims Fiberstars' use of this warranty service provider resulted in OLS losing the supplier assignment with Sonic. Fiberstars and Sonic believe that Sonic was acting entirely within its right to hire a new distributor and that the legal action by OLS is without merit.

    The Company is engaged in certain legal and administrative proceedings incidental to its normal business activities. While it is not possible to determine the ultimate outcome of these actions at this time, management believes that any liabilities resulting from such proceedings, or claims which are pending or known to be threatened, will not have a material adverse effect on the Company's financial position or results of operations.

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

    There were no matters submitted to a vote of security holders during the quarter ended December 31, 2000.

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PART II

Item 5. Market for Common Equity and Related Stockholder Matters

    The Company's Common Stock trades on the Nasdaq National Market tier of the Nasdaq Stock Market^SM under the symbol "FBST". The following table sets forth the high and low sale prices for the Company's Common Stock, as reported on the Nasdaq National Market for the periods indicated. These reported prices reflect interdealer prices without adjustments for retail markups, markdowns or commissions.

	High	Low
First quarter 1999	51/2	23/4
Second quarter 1999	47/8	3
Third quarter 1999	55/8	31/4
Fourth quarter 1999	529/32	37/8
First quarter 2000	103/8	41/4
Second quarter 2000	13	65/8
Third quarter 2000	111/8	513/16
Fourth quarter 2000	713/16	57/8

    There were approximately 225 holders of record of the Company's Common Stock as of March 20, 2001, and the Company estimates that at that date there were approximately 800 additional beneficial owners.

    The Company has not declared or paid any cash dividends and does not anticipate paying cash dividends in the foreseeable future.

    The Company issued 100,000 shares of section 144 common stock to the shareholders of Lightly Expressed in 2000 as part of the acquisition of this company.

Item 6. Selected Consolidated Financial Data

    The Selected Operations and Balance Sheet Data set forth below have been derived from the Consolidated Financial Statements of the Company, which have been audited by PricewaterhouseCoopers LLP, independent accountants. It should be read in conjunction with the information appearing under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7 of this report and the Consolidated Financial Statements and related notes found in Item 14 of this report.

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SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEARS ENDED DECEMBER 31,			2000			1999			1998			1997			1996
OPERATING SUMMARY
	Net Sales		$	36,921		$	33,311		$	22,682		$	17,871		$	15,576
	Gross profit			15,019			14,333			8,546			7,824			6,544
		As a percent of net sales		40.7	%		43.0	%		37.7	%		43.8	%		42.0	%
	General and administrative expenses			4,023			2,558			1,675			1,419			1,254
		As a percent of net sales		10.9	%		7.7	%		7.4	%		7.9	%		8.1	%
	Net income (loss)			(454	)		1,413			762			644			511
		As a percent of net sales		(1.2	)%		4.2	%		3.4	%		3.6	%		3.3	%
	Net income (loss) per share
		Basic	$	(0.10	)	$	0.35		$	0.21		$	0.19			—
		Diluted	$	(0.10	)	$	0.35		$	0.21		$	0.18		$	0.15
	Weighted average shares of common and common stock equivalents outstanding:
		Basic		4,551			3,986			3,623			3,446			—
		Diluted		4,551			4,080			3,695			3,597			3,468
FINANCIAL POSITION SUMMARY
	Total assets		$	24,619		$	20,392		$	18,924		$	13,124		$	12,062
	Cash, cash equivalents and short-term investments			1,230			1,904			1,290			5,120			4,835
	Working capital			10,602			8,948			7,423			9,525			8,379
	Current maturities of long-term debt			8			8			107			13			13
	Long-term debt			482			626			667			17			28
	Stockholders' equity			18,560			14,668			13,354			10,708			9,932
	Book value per share			4.35			3.66			3.35			3.05			2.91
	Common shares outstanding			4,267			4,004			3,983			3,510			3,413

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

    The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with "Selected Consolidated Financial Data" and the Consolidated Financial Statements and related Notes included elsewhere in this Report.

When used in this discussion, the words "expects," "anticipates," "estimates," and similar expressions are intended to identify forward-looking statements. These statements, which include statements as to the Company's future operating results, expected expenses and capital expenditure levels, expected cash flows, expected inventory levels, the adequacy of capital resources and growth in operations, are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, those risks discussed below, as well as our ability to retain and obtain customer and distributor relationships, our ability to maintain relationships with strategic partners and ADLT, our ability to manage expenses and inventory levels, our ability to reduce manufacturing overhead and general and administrative expenses as a percentage of sales, our ability to collect on doubtful accounts receivable, our ability to increase cash balances in future quarters, the cost of accessing or acquiring technologies or intellectual property, the cost of enforcing or defending intellectual property, risks relating to developing and marketing new products, the ability of our lighting products to meet customer expectations, manufacturing difficulties, possible delays in the release of products, risks associated with the evolution and growth of the fiber optic lighting market, trends in price performance and adoption rates of fiber optic lighting products in Europe and the United States, our dependence on a limited number of

12

suppliers for components and distributors for sales, our ability to obtain high-quality components at reasonable prices, the impact of limited energy resources on our manufacturing operations and business, the impact of technological advances and competitive products, and seasonal and other fluctuations in the construction industry; and the matters discussed in "Factors That May Affect Results." These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Results of Operations

NET SALES

    Net sales increased 11% to $36,921,000 in 2000 as compared to 1999. The increase was a result of growth in the sales of pool products along with additional revenues from Unison and Lightly Expressed acquisitions which was partially offset by a decline in sales of commercial lighting products. Pool lighting sales grew as a result of increases in sales of in-ground pool lighting products and in spa lighting products. The decline in commercial lighting product sales was due to decreased sales from Europe, primarily in the UK, along with a decline in sales from one significant commercial lighting customer in the US as that customer reached the end of its contract.

    Net sales increased 47% to $33,311,000 in 1999 as compared to 1998. The increase was a result of growth in the sales of pool products as well as commercial lighting products. The growth in commercial lighting product sales in 1999 was partially due to an increase in European revenues associated with companies acquired at the end of 1998 and which experienced a full year of sales in 1999 versus a partial year of sales in 1998.

    International sales accounted for approximately 28% of net sales in 2000 as compared to 31% of net sales in 1999 and 17% in 1998. The relative decrease in international sales in 2000 from 1999 was due to the decline in sales by the Company's European subsidiaries which was partially due to the significant drop in exchange rates for European currencies relative to the US dollar in 2000.

GROSS PROFIT

    Gross profit increased to $15,019,000 in 2000, a 5% increase over 1999. The increase in gross profit was less than the revenue increase due to an increase in inventory reserves taken in the fourth quarter along with a relative increase in manufacturing overhead during the year from companies acquired in 2000. The increase in inventory reserves was largely against Catalyst inventories still held at the end of 2000. The Catalyst product, a pool chemical product, has been discontinued by the Company. The Company is working toward selling off this inventory, but at this time it cannot guarantee that such a sale will occur. The increase in manufacturing overhead came as a result of acquiring Unison and Lightly Expressed in 2000. The Company expects to decrease the amount of manufacturing overhead as a percentage of sales in 2001.

    Gross profit increased to $14,333,000 in 1999, a 68% increase over 1998. The increase in gross profit was a result of the increased sales and an increase in the gross profit margin. The gross profit margin was 43% in 1999, an increase of 5 percentage points over the 38% gross profit margin achieved in 1998. The increase in gross margin was primarily due to savings in 1999 on warranty and repair costs as well as cost reductions achieved on some of the Company's higher volume products.

OPERATING EXPENSES

    Research and development expenses were $1,673,000 in 2000, a 13% increase over 1999. The increase was largely due to higher personnel and project costs in 2000. Much of the project work

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performed in 2000 was in preparation of new products scheduled to be released in 2001. The Company expects its research and development expenses to increase significantly in 2001 as personnel and project costs which were assigned to a development agreement with ADLT and categorized in cost of sales in 2000, will be categorized as a research and development expense in 2001 as a result of the development contract having been completed in 2000. This increase in research and development expenses in 2001 will be partially offset by a credit to such expenses associated with Fiberstars' NIST federal grant. Research and development expenses were 4.5% of sales in 2000, the same percentage of sales as in 1999. Sales and marketing expenses were $9,038,000 in 2000, a 12% increase over $8,044,000 in expenses for 1999. The increase in sales and marketing expenses was due to additional expenses from companies acquired in 2000 of $250,000, higher personnel expenses of $250,000 and higher commissions of $300,000. Sales and marketing expenses were 24% of sales in 2000, the same percentage of sales as occurred in 1999. General and administrative expenses were $4,023,000 in 2000 as compared to $2,558,000 in 1999, representing a 57% increase. The significant increase in general and administrative expenses was largely due to a charge of $800,000 to increase the allowance for doubtful accounts for one of the Company's distributors, which accounts receivable is deemed to be uncollectible. This distributor does not have the ability to pay and disputes the amounts outstanding, and, while the Company continues to work toward a settlement, any amounts receivable against this account are in doubt. Other increases in general and administrative expenses are due to higher legal fees of $120,000 associated with settling with the distributor, higher amortization of intangibles from the companies acquired in 2000 of $220,000 and higher personnel costs of $230,000. General and administrative expenses were 11% of sales in 2000 as compared to 8% of sales in 1999. Excluding the charge for allowance for doubtful accounts, general and administrative expenses were 9% of sales in 2000. The Company expects to decrease its general and administrative expenses as a percentage of sales in 2001. Included in total operating expenses for 2000 was a write-off of in-process technology acquired of $938,000 as part of the Unison acquisition in the first quarter. There was no such write-off in total operating expenses in 1999. The $938,000 allocated to in-process technology acquired was for certain lamp and optics technology and certain fiber producing technology the development of which had not yet reached a stage where it was certain that marketable products would result. There is currently no alternative use for this technology as it was designed specifically for the lighting industry. In accordance with generally accepted accounting principles, the amount allocated to in-process technology acquired, which was determined by an independent valuation, was recorded as a charge to expense in the first quarter of 2000.

    Research and development expenses were $1,484,000 in 1999, a 16% increase over 1998. The increase was largely due to additional personnel and product development expenses associated with releasing new products in 1999 and product development on products which were to be released in 2000. Research and development expenses were 4.5% of sales in 1999, down from 6% in 1998. Sales and marketing expenses were $8,044,000 in 1999 as compared to $5,381,000 in 1998, an increase of 49%. A portion of the increase was due to $1,908,000 in additional expenses from the companies acquired in 1998 for which there were expenses of $333,400 in 1998. The balance of the increase was largely a result of additional commission expenses paid for sales in Europe in 1999 and as compared to those paid in 1998. Sales and marketing expenses remained constant at 24% of sales in 1999 and 1998. General and administrative costs were $2,558,000 in 1999, an increase of 53% over 1998 costs. This increase was largely a result of higher goodwill amortization expenses in 1999 which were $492,000 as compared to $63,000 for goodwill amortized in 1998. Other increases in general and administrative expenses were associated with moving the Company's corporate offices to a new location in 1999 and with additional administrative costs from the European subsidiaries which were acquired in 1998. Total operating expenses were 36% of sales in 1999 as compared to 37% in 1998.

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OTHER INCOME AND EXPENSES

    Net interest expense was $62,000 in 2000 as compared to net interest income of $26,000 in 1999. The reduction of net interest income to expense was a result of higher borrowings experienced in the first half of 2000 as compared to the first half of 1999.

    Other income and expense for 1999 includes interest income and expense, income (loss) from the Company's joint venture as recognized under the equity method, and income from divestitures. Net interest income was $26,000 in 1999 compared to $223,000 in 1998. The decrease was primarily due to lower cash balances in 1999 as compared to 1998 as a result of cash spent to acquire three companies in the second half of 1998. In addition, there was interest expense in 1999 primarily for a bank loan to the Company's German subsidiary. There was no such expense in 1998. The bank loan was obtained for completion of the German subsidiary's primary office outside Munich, Germany. The loss from the Company's joint venture was $18,000 in 1999 versus a loss of $22,000 in 1998. In February 2000 the net assets of the Company's Australian joint venture were sold at book value to the Australian subsidiary of Advanced Technology Lighting, Inc. The divestiture income of $801,000 for 1998 was a result of the Company selling its rights to its phototherapy fiber optic product to Respironics, Inc.

INCOME TAXES

    The income tax (benefit) rate was 36% in 2000 as compared to 37% in 1999 and 37% in 1998. There can be no assurance that the income tax rate in future periods will be maintained at the level experienced in 2000.

NET INCOME

    As a result of the write-off of in-process technology acquired, the write-down of inventory and increased reserves for doubtful accounts receivable, the decreased gross profit margin and the increase in expenses in 2000, there was a net loss for the year of $454,000 as compared to net income of $1,413,000 achieved in 1999. The net income of $1,413,000 in 1999 represented a gain of 85% over net income of $762,000 achieved in 1998.

    Total write-offs and increased reserves taken in 2000 can be summarized as follows:

Write-off of in-process technology acquired	$	938,000
Reserve for accounts receivable deemed not collectible		800,000
Write-down of certain inventories		350,000
Total write-offs and reserves increases	$	2,088,000

    Excluding the effects of the write-offs and reserves increases, the Company would have had net income of $881,000 for the year as compared to net income of $1,413,000 achieved in 1999.

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Liquidity and Capital Resources

    For the year ended December 31, 2000, cash and cash equivalents when combined with short-term investments were $1,230,000 as compared to $1,904,000 for the year ended December 31, 1999. There was a net utilization of cash in the amount of $645,000 from operating activities in 2000. This was a result of cash utilized to fund the loss of $454,000 along with cash utilized to fund increases in accounts receivable of $1,785,000 and inventory of $1,369,000. This cash utilized was partially offset by cash contributions from adjustments for non-cash items included in the net loss. These were realized from depreciation and amortization of $1,513,000 and from the write-off of in-process technology of $938,000 acquired as part of the Unison acquisition. In addition, cash for investing activities totaling $856,000 was used to fund acquisitions of fixed assets, $400,000 of which was used to acquire tooling for new products scheduled to be introduced in 2001. Cash from financing activities amounted to $873,000 in 2000 and related mainly to proceeds from issuances of common stock, primarily the exercise of stock options. Total cash utilization in 2000 was $674,000 as compared to net generated cash in 1999 of $614,000. The primary cause of the change in cashflow in 2000 was the utilization of cash in operations in 2000 versus the cash provided from operations in 1999. Cash balances decline during the first quarter of each fiscal year, but then increase in the third quarter as a result of the seasonal variance in cash needs of the Company, primarily as a result of the seasonal purchasing and payment patterns in the Pool industry.

    In August 2000, the Company increased its unsecured bank line of credit with Wells Fargo Bank for working capital purposes from $2,500,000 to $5,000,000. At the same time it renewed its $500,000 term loan commitment to finance equipment purchases. Both lines expire in August 2001. As of December 31, 2000, the Company had no borrowings outstanding against either of these lines of credit. Certain covenants associated with the bank line of credit require the Company to remain profitable. The Company was not profitable for the year ended December 31, 2000, however, it would have achieved a profit, but for the write-off of in-process technology acquired. The bank has waived this covenant in recognition of the fact that the Company would have been profitable but for this write-off.

    The Company also has a $404,000 bank overdraft agreement with Lloyds Bank Plc through its UK subsidiary. There were no net borrowings against the overdraft agreement as of December 31, 2000. In addition, at year end the Company had a total borrowing of $490,000 against a credit facility which totals $747,000 held by its German subsidiary. This borrowing is largely held in order to finance the building of new offices owned by the Company in Basching, Germany.

    The Company believes that existing cash balances, together with the Company's bank lines of credit and funds that may be generated from operations, will be sufficient to finance the Company's currently anticipated working capital requirements and capital expenditure requirements for at least the next twelve months.

Recent Pronouncements

    In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, or SFAS 138, "Accounting for Certain Derivative Instruments and Hedging Activities—an amendment of FASB No. 133". SFAS 133 establishes new standards of accounting and reporting for derivative instruments and hedging activities. SFAS 133 requires that all derivatives be recognized at fair value in the statement of financial position, and that the corresponding gains or losses be reported either in the statement of operations or as a component of comprehensive income, depending on the type of hedging relationship that exists. SFAS 133, as amended, will be effective for fiscal years beginning after June 15, 2000. The Company does not currently hold derivative instruments or engage in hedging activities.

    In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements. SAB No. 101 expresses the

16

views of the SEC staff in applying generally accepted accounting principles to certain revenue recognition issues. SAB 101 did not have a material impact on the Company's financial position, results of operations, or cash flows.

Factors that May Affect Results

Our quarterly operating results are subject to fluctuations caused by many factors which could result in decreased revenues and a drop in the price of our common stock.

    Our quarterly operating results can vary significantly depending upon a number of factors. It is difficult to predict the lighting market's acceptance of our products on a quarterly basis, and the level and timing of orders received can fluctuate substantially. Our sales volumes also fluctuate. Historically we have shipped a substantial portion of our quarterly sales in the last month of each of the second and fourth quarters of the year. Our product development and marketing expenditures may vary significantly from quarter to quarter and are made well in advance of potential resulting revenue. Significant portions of our expenses are relatively fixed in advance based upon our forecasts of future sales. If sales fall below our expectations in any given quarter, we will not be able to make any significant adjustment in our operating expenses, and our operating results will be adversely affected.

Our sales are dependent upon new construction levels and are subject to seasonal trends.

    Sales of our pool and spa lighting products, which currently are available only with newly constructed pools and spas, depend substantially upon the level of new construction of pools. Sales of commercial lighting products also depend significantly upon the level of new building construction and renovation. Construction levels are affected by housing market trends, interest rates and the weather. Because of the seasonality of construction, our sales of swimming pool and commercial lighting products, and thus our overall revenues and income, have tended to be significantly lower in the first quarter of each year. Various economic and other trends may alter these seasonal trends from year to year, and we cannot predict the extent to which these seasonal trends will continue. The U.S. economy has been softening at the end of 2000 and the beginning of 2001. If this trend continues, as appears likely, we may experience difficulties collecting accounts receivable, sales and demand for our products may decrease and our operating results will probably suffer.

If we are not able to successfully develop, manufacture, market and sell our new products, our operating results will decline.

    In 2001, the Company will be introducing several new products in the downlight, neon replacement, display case and pool markets. We could have difficulties manufacturing these new products as a result of our inexperience with them. Also, it is difficult to predict whether the market will accept of these new products. If any of these new products fails to meet expectations, our operating results will be adversely affected.

We operate in markets that are intensely and increasingly competitive.

    Competition is increasing in a number of our markets. A number of companies offer directly competitive products, including fiber optic lighting products for downlighting, display case and water lighting, and neon and other lighted signs. Our competitors include some very large and well-established companies such as Philips, Schott, 3M, Bridgestone, Mitsubishi and Osram/Siemens. All of these companies have substantially greater financial, technical and marketing resources than we do. We anticipate that any future growth in fiber optic lighting will be accompanied by continuing increases in competition, which could adversely affect our operating results if we cannot compete effectively.

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We rely on intellectual property and other proprietary information that may not be protected and that may be expensive to protect.

    We were awarded our twenty-third patent in the fourth quarter of 2000. There can be no assurance, however, that our issued patents are valid or that any patents applied for will be issued. We have a policy of seeking to protect our intellectual property through, among other things, the prosecution of patents with respect to certain of our technologies. There are many issued patents and pending patent applications in the field of fiber optic technology, and certain of our competitors hold and have applied for patents related to fiber optic lighting. Although, to date, we have not been involved in litigation challenging our intellectual property rights or asserting intellectual property rights of others, we have in the past received communications from third parties asserting rights in our patents or that our technology infringes intellectual property rights held by such third parties. Based on information currently available to us, we do not believe that any such claims involving our technology or patents are meritorious. However, we may be required to engage in litigation to protect our patent rights or to defend against the claims of others. In the event of litigation to determine the validity of any third party claims or claims by us against such third party, such litigation, whether or not determined in our favor, could result in significant expense and divert the efforts of our technical and management personnel, regardless of the outcome of such litigation.

We rely on distributors for a significant portion of our sales and terms and conditions of sales are subject to change with very little notice.

    Most of the Company's products are sold through distributors and the Company does not have long-term contracts with its distributors. Some of these distributors are quite large, particularly in the pool products market. If these distributors significantly change their terms with the Company or change their historical pattern of ordering products from the Company, there could be a significant impact on the Company's revenues and profits.

We depend on key employees in a competitive market for skilled personnel, and the loss of the services of any of our key employees could materially affect our business.

    The Company's future success will depend to a large extent on the continued contributions of certain employees, many of whom would be difficult to replace. The future success of the Company also will depend on its ability to attract and retain qualified technical, sales, marketing and management personnel, for whom competition is intense. The loss of or failure to attract and retain any such persons could delay product development cycles, disrupt the Company's operations or otherwise harm the Company's business or results of operations.

We depend on a limited number of suppliers from whom we do not have a guarantee to adequate supplies, increasing the risk that loss of or problems with a single supplier could result in impaired margins, reduced production volumes, strained customer relations and loss of business.

    Mitsubishi is the sole supplier of the Company's fiber, other than the large core fiber the Company now manufactures following the Unison acquisition. The Company also relies on a sole source for certain lamps, reflectors, remote control devices and power supplies. The loss of one or more of the Company's suppliers could result in delays in the shipment of products, additional expense associate with redesigning products, impaired margins, reduced production volumes, strained customer relations, loss of business or otherwise harm the results of operations.

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We may experience power blackouts and higher electricity prices as a result of California's current energy crisis, which could disrupt our operations and increase our expenses.

    California is in the midst of an energy crisis that could disrupt our operations and increase our expenses. We rely on the major Northern California public utility, Pacific Gas & Electric Company, or PG&E, to supply electric power to our facilities in Northern California. Due to problems associated with the de-regulation of the power industry in California and shortages in wholesale electricity supplies, customers of PG&E have been faced with increased electricity prices, power shortages and, in some cases, rolling blackouts. If blackouts interrupt our power supply, we may be temporarily unable to continue operations at our facilities. Any such interruption in our ability to continue operations at our facilities could delay our ability to develop, manufacture or market our products, which could damage our reputation and result in lost revenue, either of which could substantially harm our business and results of operations.

Other factors

    Our business is subject to additional risks that could materially and adversely affect our future business, including:

•

manufacturing risks, including the risks of shortages in materials or components necessary to our manufacturing and assembly operations, and the risks of increases in the prices of raw materials and components;



•

sales and distribution risks, such as risks of changes in product mix or distribution channels that result in lower margins;



•

risks of the loss of a significant distributor or sales representative;



•

risks of the loss of a significant customer or swimming pool builder;



•

risks of the effects of volume discounts that we grant from time to time to our larger customers, including reduced profit margins;



•

risks of product returns and exchanges: we cannot be assured that we will not experience component problems in the future that could require increased warranty reserves and manufacturing costs;



•

risks associated with product development and introduction problems, such as increased research, development and marketing expenses associated with new product introductions; and



•

risks associated with delays in the introduction of new products and technologies, including lost sales and loss of market share.

Item 7A. Qualitative or Quantitative Disclosures About Market Risk

    At year end December 31, 2000, the Company had $302,000 in cash held in foreign currencies as translated at period end foreign currency exchange rates. The balances for cash held overseas in foreign currencies is subject to exchange rate risk. The Company has a policy of maintaining cash balances in local currencies unless an amount of cash is occasionally transferred in order to repay intercompany debts.

    The following table summarizes the outstanding loans held by the Company's German subsidiary. The amounts outstanding and due in future years are translated at the rate of 2.08 DM to $1.00, which was in effect at year end December 31, 2000. This debt held in overseas foreign currency is subject to exchange rate risk.

(in thousands)	Base currency	2001		2002		2003		2004		2005
Amounts outstanding	DM	$	481	$	481	$	336	$	336	$	336
Amounts due	DM					$	145

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Item 8. Consolidated Financial Statements and Supplementary Data

    The Company's Consolidated Financial Statements and related notes thereto required by this item are listed and set forth in this report following Item 14. The accompanying notes are an integral part of these consolidated financial statements.

Supplementary Financial Information

    The following table sets forth selected unaudited financial information for the Company for the eight quarters in the period ended December 31, 2000. This information has been prepared on the same basis as the audited financial statements and, in the opinion of management, contains all adjustments necessary for a fair presentation thereof.

QUARTERLY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

2000 QUARTERS ENDED		DEC. 31			SEP. 30			JUN. 30			MAR. 31
Net sales		$	10,056		$	8,249		$	9,834		$	8,782
Gross profit			4,030			3,294			4,003			3,692
	As a percent of net sales		40.1	%		39.9	%		40.7	%		42.0	%
Net income (loss)			(340	)		9			255			(378	)
	As a percent of net sales		(3.4	)%		0.1	%		2.6	%		(4.3	)%
Net income (loss) per share:
	Basic	$	(0.07	)	$	0.00		$	0.06		$	(0.09	)
	Diluted	$	(0.07	)	$	0.00		$	0.05		$	(0.09	)

Note: Included in these results are a $938,000 write-off of in-process technology acquired in the quarter ending March 31, 2000, and an $800,000 addition to reserves for doubtful accounts receivable and $350,000 write-down of certain inventories in the quarter ending December 31, 2000.

1999 QUARTERS ENDED		DEC. 31			SEP. 30			JUN. 30			MAR. 31
Revenue		$	9,228		$	8,056		$	8,845		$	7,182
Gross profit			4,219			3,399			3,739			2,976
	As a percent of net sales		45.7	%		42.2	%		42.3	%		41.4	%
Net income			497			319			437			160
	As a percent of net sales		5.4	%		4.0	%		4.9	%		2.2	%
Net income per share:
	Basic	$	0.12		$	0.08		$	0.11		$	0.04
	Diluted	$	0.12		$	0.08		$	0.11		$	0.04

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

    Not applicable.

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PART III

Item 10. Directors and Executive Officers of the Registrant

    The information required by this Item regarding directors and nominees is incorporated herein by reference to the information under the caption "PROPOSAL NO. 1: ELECTION OF DIRECTORS" in the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commision in connection with the solicitation of proxies for the Company's 2001 Annual Meeting of Shareholders to be held on May 23, 2001 (the "Proxy Statement").

Executive Officers

    The executive officers of the Company who are not directors, and their ages as of December 31, 2000, are as follows:

Name	Age	Position
Simon Chen	50	Vice President, Engineering
Robert A. Connors	52	Vice President, Finance, Chief Financial Officer
John Davenport	56	Vice President, Chief Technology Officer
Barry R. Greenwald	54	Senior Vice President and General Manager, Pool Division
J. Arthur Hatley	51	Vice President and General Manager, Commercial Lighting
J. Steven Keplinger	41	Senior Vice President, Operations and Retail

    Mr. Chen joined the Company in 1997 as Director of Engineering. He was promoted to Vice President, Engineering in January 1999. Prior to joining the Company, from 1994 to 1997 Mr. Chen served as Engineering Manager for The Watt Stopper, a lighting control company. Prior to that Mr. Chen worked for Toshiba Electronic Component Corp. in the sales department as a field sales engineer. Prior to working for Toshiba, Mr. Chen worked for Halmark Electronics as the Distribution Center Manager.

    Mr. Connors joined the Company in July 1998 as Vice President, Finance, Chief Financial Officer. From 1984 to 1998, Mr. Connors held a variety of positions for Micro Focus Group Plc, a software company with 1997 revenues of $165 million, including Chief Financial Officer and Chief Operating Officer. Prior to working for Micro Focus Group Plc, he held senior finance positions with Eagle Computer and W. R. Grace.

    Mr. Davenport joined the Company in November 1999 as Vice President, Chief Technology Officer. Prior to joining the Company, Mr. Davenport served as President of Unison from 1998 to 1999. Mr. Davenport began his career at GE Lighting in 1972 as a research physicist and thereafter served 26 years in various capacities including GE Lighting's research and development Manager and as development manager for high performance LED projects. He is a recognized global expert in light sources, lighting systems and lighting applications, with special emphasis in low wattage discharge lamps, electronic ballast technology and distributed lighting systems using fiber optics.

    Mr. Greenwald joined the Company in October 1989 as General Manager, Pool Division. He became Vice President in September 1993 and Senior Vice President in February 1997. Prior to joining the Company, Mr. Greenwald served as National Sales Manager at Aquamatic, a swimming pool accessory company, from August 1987 to October 1989. From May 1982 to August 1987, Mr. Greenwald served as National Sales Manager at Jandy Inc., a swimming pool equipment company.

    Mr. Hatley joined the Company in July 1995 as National Sales Manager, Commercial Lighting Division. He was promoted to General Manager in January 1996 and was named Vice President in

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December 1996. Prior to joining the Company, Mr. Hatley served in sales management capacities for Reggiani and Capri Lighting companies. Mr. Hatley was previously a commercial lighting agency principal and also served at Graybar Electric, a national lighting and electrical products distributor.

    Mr. Keplinger joined the Company in August 1988 as Manager of Operations. He became Vice President in 1991 and Senior Vice President in February 1997. From June 1986 to August 1988, Mr. Keplinger was a sales representative at Leemah Electronics, an electronics manufacturing company. From February 1983 to June 1986, Mr. Keplinger was a sales manager with California Magnetics Corp, a custom transformer manufacturing company.

Item 11. Executive Compensation

    The information regarding executive compensation required by Item 11 is incorporated herein by reference to the information in the Proxy Statement under the caption "Executive Compensation."

Item 12. Security Ownership of Certain Beneficial Owners and Management

    The information regarding security ownership of certain beneficial owners and management required by Item 12 is incorporated herein by reference to the information in the Proxy Statement under the caption "Security Ownership of Principal Shareholders and Management."

Item 13. Certain Relationships and Related Transactions

    The information regarding certain relationships and related transactions required by Item 13 is incorporated herein by reference to the information in the Proxy Statement under the caption "Certain Transactions."

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PART IV.

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K

(a)

(1) Financial Statements

REPORT OF INDEPENDENT ACCOUNTANTS

    To the Board of Directors and Shareholders of Fiberstars, Inc.
Fremont, California

    In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows present fairly, in all material respects, the financial position of Fiberstars, Inc. and its subsidiaries (the Company) at December 31, 2000 and 1999 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Jose, California
February 16, 2001

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FIBERSTARS, INC.
CONSOLIDATED BALANCE SHEETS, December 31, 2000 and 1999

(amounts in thousands except share and per share amounts)

				2000			1999
ASSETS
Current assets:
	Cash and cash equivalents			$	1,230		$	1,904
	Accounts receivable, net of allowances for doubtful accounts of $1,356 in 2000 and $428 in 1999				7,329			6,533
	Notes and other receivables				125			250
	Inventories, net				5,672			4,269
	Prepaids and other current assets				411			428
	Deferred income taxes				1,412			662
		Total current assets			16,179			14,046
Fixed assets, net					2,888			2,242
Goodwill, net					5,150			3,800
Other assets					245			218
Deferred income taxes					157			86
		Total assets		$	24,619		$	20,392
LIABILITIES
Current liabilities:
	Accounts payable			$	3,513		$	2,572
	Accrued liabilities				2,056			2,518
	Current portion of long-term debt				8			8
		Total current liabilities			5,577			5,098
Long-term debt, less current portion					482			626
		Total liabilities			6,059			5,724
Commitments and contingencies (Note 8).
SHAREHOLDERS' EQUITY
Preferred stock, par value $0.0001 per share:
	Authorized: 2,000,000 shares in 2000 and 1999
	Issued and outstanding: no shares in 2000 and 1999
Common stock, par value $0.0001 per share:
	Authorized: 30,000,000 shares in 2000 and 1999
	Issued and outstanding: 4,288,514 shares in 2000 and 4,003,514 shares in 1999				1			0
Additional paid-in capital					15,721			13,973
Value of warrants outstanding					2,722			0
Notes receivable from shareholder					(75	)		(75	)
Accumulated other comprehensive loss					(278	)		(153	)
Retained earnings					469			923
		Total shareholders' equity			18,560			14,668
			Total liabilities and shareholders' equity	$	24,619		$	20,392

The accompanying notes are an integral part of these financial statements

24

FIBERSTARS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2000, 1999 and 1998

(amounts in thousands except per share amounts)

				2000			1999			1998
Net sales				$	36,921		$	33,311		$	22,682
Cost of sales					21,902			18,978			14,136
			Gross profit		15,019			14,333			8,546
Operating expenses:
	Research and development				1,673			1,484			1,283
	Sales and marketing				9,038			8,044			5,381
	General and administrative				4,023			2,558			1,675
	Write-off in-process technology acquired				938
		Total operating expenses			15,672			12,086			8,339
			Income (loss) from operations		(653	)		2,247			207
Other income (expense):
	Equity in joint venture's income (loss)				4			(18	)		(22	)
	Divestiture										801
	Interest and other income				30			71			224
	Interest expense				(92	)		(45	)		(1	)
		Income (loss) before income tax			(711	)		2,255			1,209
Benefit from (provision for) income taxes					257			(842	)		(447	)
		Net income (loss)		$	(454	)	$	1,413		$	762
Net income (loss) per share—basic				$	(0.10	)	$	0.35		$	0.21
Shares used in per share calculation—basic					4,572			3,986			3,623
Net income (loss) per share—diluted				$	(0.10	)	$	0.35		$	0.21
Shares used in per share calculation—diluted					4,572			4,080			3,695

The accompanying notes are an integral part of these financial statements

25

FIBERSTARS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended December 31, 2000, 1999 and 1998
(amounts in thousands)

			2000			1999			1998
Net income (loss)			$	(454	)	$	1,413		$	762
Other comprehensive loss:
	Foreign currency translation adjustments			(196	)		(239	)		0
	Income tax benefit			71			86			0
		Comprehensive income (loss)	$	(579	)	$	1,260		$	762

The accompanying notes are an integral part of these financial statements

26

FIBERSTARS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 2000, 1999 and 1998
(amounts in thousands)

	Common Stock							Notes Receivable from Shareholder
				Additional Paid-In Capital		Value of Warrants Outstanding					Accumulated Other Comprehensive Loss			(Accumulated Deficit) Retained Earnings
	Shares	Amount															Total
Balances, January 1, 1998	3,510	$	—	$	12,035	$		$	(75	)	$			$	(1,252	)	$	10,708
Exercise of common stock options	46				164													164
Issuance of common stock under employee stock purchase plan	10				35													35
Issuance of common stock pursuant to exercise of warrants	12				11				(11	)								—
Issuance of common stock for acquisitions	405				1,685													1,685
Net income															762			762
Balances, December 31, 1998	3,983		—		13,930		—		(86	)		—			(490	)		13,354
Exercise of common stock options	13				11													11
Issuance of common stock under employee stock purchase plan	8				32													32
Issuance of common stock pursuant to exercise of warrants									11									11
Foreign exchange rate translation adjustment												(153	)					(153	)
Net income															1,413			1,413
Balances, December 31, 1999	4,004		—		13,973		—		(75	)		(153	)		923			14,668
Exercise of common stock options	180		1		777													778
Tax benefit from exercise of stock options					174													174
Issuance of common stock under employee stock purchase plan	4				22													22
Issuance of common stock for acquisitions	100				775													775
Warrants issued during the year							2,722											2,722
Foreign exchange rate translation adjustment												(125	)					(125	)
Net loss															(454	)		(454	)
Balances, December 31, 2000	4,288	$	1	$	15,721	$	2,722	$	(75	)	$	(278	)	$	469		$	18,560

The accompanying notes are an integral part of these financial statements

27

FIBERSTARS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2000, 1999 and 1998
(amounts in thousands)

					2000			1999			1998
Cash flows from operating activities:
	Net income (loss)				$	(454	)	$	1,413		$	762
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Depreciation and amortization				1,513			937			647
		Write-off in-process technology acquired				938
		Provision for doubtful accounts receivable				936			97			77
		Deferred income taxes				(821	)		(154	)		135
		Equity in joint venture				(4	)		18			22
		Changes in assets & liabilities:
			Accounts receivable, trade			(1,785	)		(1,518	)		(1,072	)
			Inventories			(1,369	)		(152	)		(275	)
			Prepaid and other current assets			63			(60	)		36
			Other assets			(222	)		177			(463	)
			Accounts payable			926			58			240
			Accrued liabilities			(366	)		350			671
				Total adjustments		(191	)		(247	)		18
		Net cash provided by (used in) operating activities				(645	)		1,166			780
Cash flows from investing activities:
	Sale of short-term investments											4,597
	Acquisition of business, net of cash acquired											(3,232	)
	Loans made under notes receivable											(610	)
	Repayment of loans made under notes receivable					79			656
	Acquisition of fixed assets					(935	)		(1,308	)		(479	)
		Net cash provided by (used in) investing activities				(856	)		(652	)		276
Cash flows from financing activities:
	Proceeds from issuances of common stock					974			54			199
	Repayment of long-term debt					(101	)		(270	)		(488	)
	Proceeds from line of credit					1,500
	Repayment of line of credit					(1,500	)
	Proceeds from additional long-term debt								257
		Net cash provided by (used in) financing activities				873			41			(289	)
Effect of exchange rate changes on cash						(46	)		59
Net increase (decrease) in cash and cash equivalents						(674	)		614			767
Cash and cash equivalents, beginning of period						1,904			1,290			523
Cash and cash equivalents, end of period					$	1,230		$	1,904		$	1,290
Supplemental information:
	Interest paid				$	93		$	45		$	1
	Income taxes paid				$	577		$	669		$	66
The Company purchased certain businesses during 2000 and 1998. In conjunction with the acquisitions, assets and liabilities were assumed as follows:
Fair value of assets acquired					$	3,497					$	7,649
Cash paid for capital stock												(3,232	)
Capital stock and warrants issued						(3,497	)					(1,685	)
Liabilities assumed					$	0					$	2,732

The accompanying notes are an integral part of these financial statements

28

FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Nature of Operations:

    Fiberstars, Inc. (the "Company") develops and assembles lighting products using fiber optic technology for commercial lighting and swimming pool and spa lighting applications. The Company markets its products for worldwide distribution primarily through independent sales representatives, distributors and swimming pool builders.

2.  Summary of Significant Accounting Policies:

Basis of Consolidation:

    The consolidated financial statements include the accounts of Fiberstars, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated.

Use of Estimates:

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

Cash Equivalents:

    The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents.

Inventories:

    Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market.

Investments in Joint Ventures:

    The Company records its investments in joint ventures under the equity method of accounting.

Fair Value of Financial Instruments:

    Carrying amounts of certain of the Company's financial instruments including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and other accrued liabilities approximate fair value due to their short maturities. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of long-term debt obligations also approximates fair value.

Revenue Recognition:

    The Company recognizes sales upon shipment. Sales and related costs of sales are recognized when persuasive evidence of an arrangement exists, delivery has occurred, price is fixed or determinable, and collectibility is probable. The Company's products are generally subject to warranties, and the Company provides for the estimated future costs of repair, replacement or customer accommodation in costs of sales. Fees for research and development services are determined on a cost-plus basis and are recognized as revenue when performed.

29

Depreciation and Amortization:

    Fixed assets are stated at cost and depreciated by the straight-line method over the estimated useful lives of the related assets (two to five years). Leasehold improvements are amortized on a straight-line basis over their estimated useful lives or the lease term, whichever is less. Intangible assets from acquisitions are amortized on a straight-line basis over 10 Years, the estimated life of the assets acquired, but in no case for a period longer than 10 years. When events or changes in circumstances indicate that assets may be impaired, an evaluation is performed comparing the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount to determine if a write-down to market value or discounted cash flow is required.

Certain Risks and Concentrations:

    The Company invests its excess cash in deposits and high-grade short-term securities with two major banks.

    The Company sells its products primarily to commercial lighting distributors and residential pool distributors and pool installation contractors in North America, Europe and the Far East. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Although the Company maintains allowances for potential credit losses that it believes to be adequate, a payment default on a significant sale could materially and adversely affect its operating results and financial condition. At December 31, 2000, one customer accounted for 9% of accounts receivable and at December 31, 1999, one customer accounted for more than 20% of accounts receivable.

    One customer accounted for 9%, 10% and 13% of net sales in 2000, 1999 and 1998, respectively.

    The Company currently buys all of its fiber, the main component of its products, from one supplier. Although there is a limited number of fiber suppliers, management believes that other suppliers could provide fiber on comparable terms. A change in suppliers, however, could cause delays in manufacturing and a possible loss of sales which would adversely affect operating results.

    The Company also relies on sole source suppliers for certain lamps, reflectors, remote control devices and power supplies. Although the Company cannot predict the effect that the loss of one or more of such suppliers would have on the Company, such loss could result in delays in the shipment of products and additional expenses associated with redesigning products and could have a material adverse effect on the Company's operating results.

Research and Development:

    Research and development costs are charged to operations as incurred. In 2000 the Company received a federal grant under NIST for up to $2,000,000 over three years for research and development of solid core fiber for lighting purposes. This award provides the company with $520,000 in funding for the year beginning November 2000, $75,000 of which had been recorded by December 31, 2000.

Income Taxes:

    Deferred tax assets or liabilities are recognized for the expected tax consequences of temporary differences between the income tax bases of assets and liabilities and the amounts reported for financial reporting purposes. Deferred tax balances are calculated at the balance sheet date using current tax laws and rates in effect.

30

Earnings Per Share:

    Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental shares upon exercise of stock options.

    A reconciliation of the numerator and denominator of basic and diluted EPS is provided as follows (in thousands, except per share amounts):

						Years Ended December 31,
			2000			1999		1998
Numerator—Basic and Diluted EPS
	Net income (loss)		$	(454	)	$	1,413	$	762
Denominator—Basic EPS
	Weighted average shares outstanding			4,572			3,986		3,623
Basic earnings (loss) per share			$	(0.10	)	$	0.35	$	0.21
Denominator—Diluted EPS
	Denominator—Basic EPS			4,572			3,986		3,623
	Effect of dilutive securities:
		Stock options and warrants					94		72
				4,572			4,080		3,695
Diluted earnings (loss) per share			$	(0.10	)	$	0.35	$	0.21

    Options and warrants to purchase 1,662,861 shares, 985,335 shares and 584,626 shares of common stock were outstanding at December 31, 2000, 1999 and 1998, respectively, but were not included in the calculations of diluted EPS because their exercise prices were greater than the average fair market price of the common shares.

Foreign Currency Translation:

    The Company's international subsidiaries use their local currency as their functional currency. For those subsidiaries, assets and liabilities are translated at exchange rates in effect at the balance sheet date and income and expense accounts at average exchange rates during the year. Resulting translation adjustments are recorded directly to a separate component of shareholders' equity.

Recent Pronouncements:

    In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, or SFAS 138, "Accounting for Certain Derivative Instruments and Hedging Activities—an amendment of FASB No. 133". SFAS 133 establishes new standards of accounting and reporting for derivative instruments and hedging activities. SFAS 133 requires that all derivatives be recognized at fair value in the statement of financial position, and that the corresponding gains or losses be reported either in the statement of operations or as a component of comprehensive income, depending on the type of hedging relationship that exists. SFAS 133, as amended, will be effective for fiscal years beginning after June 15, 2000. The Company does not currently hold derivative instruments or engage in hedging activities.

    In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements. SAB No. 101 expresses the views of the SEC staff in applying generally accepted accounting principles to certain revenue

31

recognition issues. SAB 101 did not have a material impact on the Company's financial position, results of operations, or cash flows.

3.  Inventories (in thousands):

	December 31,
	2000		1999
Raw materials	$	3,764	$	2,736
Finished goods		1,909		1,533
	$	5,672	$	4,269

4.  Fixed Assets (in thousands):

	December 31,
	2000			1999
Equipment	$	5,151		$	3,888
Furniture and fixtures		356			341
Computer software		498			414
Leasehold improvements		731			629
		6,736			5,272
Less accumulated depreciation and amortization		(3,848	)		(3,030	)
	$	2,888		$	2,242

5.  Acquisitions:

    On February 1, 2000 the Company completed the acquistion of selected assets of Unison Fiber Optic Systems, LLC ("Unison"), a joint venture between Advanced Lighting Technologies, Inc. ("ADLT") and Rohm & Haas Company. ADLT is a 24% shareholder of Fiberstars, Inc. common stock. The Company acquired key personnel, technology and fixed assets totaling $625,000 and, subject to achievement of development milestones, up to $2 million in development funds from Unison. In exchange for this the Company issued warrants to ADLT for the purchase of up to 1 million shares of the Company's common stock at $0.01 per share. These warrants may not be exercised until the price of the Company's stock reaches certain trading levels on the Nasdaq National Market, as follows: 250,000 will be exercisable when the Company's stock price reaches $6.00; 250,000 when the price reaches $8.00; 250,000 when the price reaches $10.00; and 250,000 when the price reaches $12.00. These prices must be maintained as an average over at least 30 days. In addition, at each price level, certain sales milestones must be reached on products of Unison technology before the warrants can be exercised. At ADLT's option, the warrants may be exchanged by ADLT, regardless of their exercisability, for up to 445,000 newly issued Fiberstars shares. Additionally, the Company agreed to pay royalties on certain products over a 10 year period at rates ranging from 3% to 1% over a 10 year period. Also, as part of the acquisition agreement for Unison, the Company agreed to provide $2,000,000 in development services to ADLT. The fees earned under this contract were recognized as revenue in 1999 and 2000, with associated development costs included in cost of sales. The Company valued the acquisition based on the value of the warrants. The acquisition was valued at $2,550,000 of which $987,000 was included in goodwill, $625,000 for fixed assets acquired and $938,000 for in-process technology, which was written-off. The $938,000 allocated to in-process technology acquired was for certain lamp and optics technology and certain fiber producing technology the development of which had not yet reached a stage where it was certain that marketable products would result. There is

32

currently no alternative use for this technology as it was designed specifically for the lighting industry. In accordance with generally accepted accounting principles, the amount allocated to in-process technology acquired, which was determined by an independent valuation, was recorded as a charge to expense in the first quarter of 2000.

    On April 18, 2000 the Company acquired Lightly Expressed, Ltd ("Lightly Expressed") for 100,000 shares of Fiberstars common stock and warrants to purchase 100,000 additional shares, provided certain operating profits are met in succeeding years. The acquisition was accounted for as a purchase. The Company valued the acquisition based on the value of stock and warrants issued. The value of the acquisition was $947,000 of which $815,000 was for intangibles and $132,000 for net assets acquired.

    The following table presents the unaudited pro forma results for the years ended December 31, 2000 and 1999, respectively, assuming the Company had acquired Unison and Lightly Expressed at the beginning of 2000 and 1999. Net loss and diluted loss per share amounts have been adjusted to include goodwill amortization of $197,000 for 2000 and 1999. This information may not necessarily be indicative of the future combined results of the Company.

	Year Ended December 31,
	2000			1999
Revenues	$	37,121		$	34,996
Net loss		(551	)		(1,829	)
Diluted loss per share		(0.12	)		(0.40	)
Basic loss per share		(0.12	)		(0.40	)

6.  Accrued Liabilities (in thousands):

	December 31,
	2000		1999
Sales commissions and incentives	$	1,074	$	1,213
Accrued warranty expense		200		305
Accrued legal and accounting fees		139		123
Accrued employee benefits		235		209
Others		408		668
	$	2,056	$	2,518

7.  Lines of Credit and Long-term Debt:

    The Company entered into the following borrowing arrangements with its banks:

a)

A $5,000,000 revolving line of credit expiring August 1, 2001, bearing interest equal to prime or a fixed rate term option of LIBOR plus 1.75%. Borrowings under this line are uncollateralized, and the Company must maintain a zero balance for at least 30 consecutive days during each fiscal year. There were no borrowings against this facility at December 31, 2000. Certain covenants associated with the bank line of credit require the Company to remain profitable. Since the Company did not achieve a profit for the year ended December 31, 2000 as a result of the write-off of in-process technology acquired, the bank has waived this covenant in recognition of the fact that the Company would have been profitable but for this write-off.

b)

A $500,000 term loan commitment to finance equipment purchases, expiring August 1, 2001. Borrowings bear interest at prime plus 0.50% (9% at December 31, 2000). Under this note, the Company may finance up to 80% of the cost of new equipment and 75% of the cost of

33

used equipment. The note is collateralized by a security interest in all equipment financed with the proceeds. Interest only is payable monthly until August 15, 2001, after which, through a refinancing clause the principal plus interest is repayable in 36 monthly installments. There were no amounts outstanding at December 31, 2000. The Company is required to maintain certain financial ratios on a quarterly basis, including specified levels of working capital and tangible net worth.

c)

A $374,000 (in UK pound sterling) bank overdraft agreement with Lloyds Bank Plc. There were no borrowings against this facility at December 31, 2000.



d)

A $552,000 (in German Deutsche Mark) bank borrowing facility in Germany with Sparkasse Neumarkt Bank for the German office facility. There was $435,000 and $555,000 in borrowings against this facility as of December 31, 2000 and 1999, respectively. $232,000 of this facility terminates in 2003 and $360,000 terminates in 2008. In addition, there is a revolving line of credit of $155,000 (in German Deutsche Mark) with Sparkasse Neumarkt Bank. As of December 31, 2000, there was $55,000 in borrowings against this facility.

8.  Commitments and Contingencies:

    The Company occupies manufacturing and office facilities under operating leases expiring in 2006 under which it is responsible for related maintenance, taxes and insurance. Minimum lease commitments under the leases are as follows (in thousands):

	Minimum lease commitments
2001	$	844
2002		871
2003		855
2004		881
2005		917
2006		717
Total minimum lease payments	$	5,085

    Rent expense approximated $979,000, $652,000, and $388,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

    At December 31, 2000, $250,000 (in German Deutsche Mark) of cash was restricted in terms of a guarantee issued by the Company. The guarantee expired in January 2001.

    On December 20, 2000, Oklahoma Lighting Sales, LLC ("OLS") filed an action against Fiberstars, Inc. and Sonic Industries, Inc. ("Sonic") in the District Court of Oklahoma County, Oklahoma, claiming breach of oral contract and tortious interference among other things, requesting unspecified damages in excess of $10,000. OLS was the supplier of the Company's products to Sonic Corporation from October 1997 to November 2000. OLS was replaced as the supplier by Sonic in November 2000. The new supplier is a company which Fiberstars was using as a warranty service provider for Sonic stores. OLS claims Fiberstars' use of this warranty service provider resulted in OLS losing the supplier assignment with Sonic. Fiberstars and Sonic believe that Sonic was acting entirely within its right to hire a new distributor and that the legal action by OLS is without merit.

    The Company is engaged in certain legal and administrative proceedings incidental to its normal business activities. While it is not possible to determine the ultimate outcome of these actions at this time, management believes that any liabilities resulting from such proceedings, or claims which are pending or known to be threatened, will not have a material adverse effect on the Company's financial position or results of operations.

34

9.  Shareholders' Equity:

Common Stock:

    The notes receivable from shareholders for common stock bear interest at a rate of 9% and are payable ten years from the date of issuance.

    Under the terms of certain agreements with the Company, the holders of approximately 1,489,000 shares of common stock have certain demand and piggyback registration rights. All registration expenses generally would be borne by the Company.

Warrants:

    As part of the acquisition of Unison, the Company provided ADLT with warrants to purchase one million shares of the Company's common stock exercisable at one penny per share. These warrants may not be exercised until the price of the Company's common stock reaches certain trading levels on the Nasdaq National Market, as follows: 250,000 will be exercisable when the price of the Company's common stock reaches $6.00; 250,000 when the price of the Company's common stock reaches $8.00; 250,000 when the price of the Company's common stock reaches $10.00; and 250,000 when the price of the Company's common stock reaches $12.00. These prices must be maintained as an average over at least 30 days. In addition, at each price level, certain sales milestones must be reached on products developed from Unison technology before the warrants can be exercised. At ADLT's option, the warrants may be exchanged by ADLT, regardless of their exercisability, for up to 445,000 newly issued shares.

    As part of the acquisition of Lightly Expressed, the Company granted the Lightly Expressed shareholders warrants to purchase 100,000 shares which may be exercised in three years if certain operating profits from sales of the products acquired are met.

    Warrant activity comprised:

			Warrants Outstanding
	Shares		Exercise Price		Amount
					(in thousands)
Balances, December 31, 1997	111,041		$	0.90—$5.40	$	550
Warrants exercised/cancelled	(11,041	)	$	0.90—$5.40	$	(10	)
Balances, December 31, 1998	100,000		$	5.40	$	540
Warrants cancelled	(100,000	)	$	5.40	$	(540	)
Balances, December 31, 1999	—				$	—
Warrants granted	1,100,000		$	2.00-$6.00	$	3,000
Balances, December 31, 2000	1,100,000		$	2.00-$6.00	$	3,000

    At December 31, 2000, there were 1,100,000 warrants outstanding.

1988 Stock Option Plan:

    Upon adoption of the 1994 Stock Option Plan (see below), the Company's Board of Directors determined to make no further grants under the 1988 Stock Option Plan (the 1988 Plan). Upon cancellation or expiration of any options granted under the 1988 Plan, the related reserved shares of common stock will become available instead for options granted under the 1994 Stock Option Plan.

35

1994 Stock Option Plan:

    At December 31, 2000, an aggregate of 1,550,000 shares of the Company's common stock had been reserved for issuance under the 1994 Stock Option Plan to employees, officers, and consultants at prices not lower than the fair market value of the common stock of the Company on the date of grant in the case of incentive stock options, and not lower than 85% of the fair market value on the date of grant in the case of non-statutory stock options. Options granted may be either incentive stock options or nonstatutory stock options. The plan administrator (the Board of Directors or a committee of the Board) determines the terms of options granted under the plan including the number of shares subject to the option, exercise price, term and exercisability.

1994 Directors' Stock Option Plan:

    At December 31, 2000, a total of 300,000 shares of common stock had been reserved for issuance under the 1994 Directors' Stock Option Plan. The plan provides for the granting of nonstatutory stock options to nonemployee directors of the Company.

Activity Under the Stock Option Plans:

    Option activity under all plans comprised:

				OPTIONS OUTSTANDING
		Options available for grant		Number of Shares		Weighted average Exercise Price Per Share		Amount
		(in thousands)		(in thousands)				(in thousands)
Balances, December 31, 1997		119		1,031					5,022
	Additional shares reserved	550
	Granted	(282	)	282		$	4.04		1,088
	Cancelled	18		(18	)	$	4.93		(90	)
	Exercised			(46	)	$	3.54		(164	)
Balances, December 31, 1998		405		1,249					5,856
	Additional shares reserved	100
	Granted	(563	)	563		$	3.87		2,411
	Cancelled	106		(106	)	$	6.10		(637	)
	Exercised			(13	)	$	0.93		(11	)
Balances, December 31, 1999		48		1,693				$	7,619
	Additional shares reserved	200
	Granted	(304	)	304		$	5.69		1,810
	Cancelled	149		(149	)	$	5.07		(751	)
	Exercised			(180	)	$	4.36		(778	)
Balances, December 31, 2000		95		1,668					7,900

36

    At December 31, 2000, 1999 and 1998, options to purchase 1,131,892 shares, 869,336 shares and 623,169 shares of common stock, respectively, were exercisable at weighted average fair values of $4.52, $4.71 and $4.78, respectively.

OPTIONS OUTSTANDING						OPTIONS CURRENTLY EXERCISABLE
			Weighted Average Remaining Contractual Life
Exercise Prices		Number of Shares Outstanding		Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
		(in thousands)	(in years)			(in thousands)
$	0.90-$0.90	48	1.6	$	0.90	48	$	0.90
$	3.38-$3.94	274	3.7	$	3.55	197	$	3.55
$	4.00-$4.88	819	3.0	$	4.57	585	$	4.57
$	5.13-$5.88	317	2.8	$	5.44	264	$	5.44
$	6.25-$7.13	210	5.5	$	6.75	38	$	6.86

1994 Employee Stock Purchase Plan:

    At December 31, 2000, a total of 100,000 shares of common stock had been reserved for issuance under the 1994 Employee Stock Purchase Plan. The plan permits eligible employees to purchase common stock through payroll deductions at a price equal to the lower of 85% of the fair market value of the Company's common stock at the beginning or end of the offering period. Employees may end their participation at any time during the offering period, and participation ends automatically on termination of employment with the Company. At December 31, 2000, 51,889 shares had been issued under this plan.

Stock-Based Compensation:

    The Company has adopted the disclosure only provision of Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation." The Company, however, continues to apply APB 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for options granted under the Stock Option Plans nor for shares issued under the Employee Stock Purchase Plan. Had compensation cost for these plans been determined based on the fair value of the options at the grant date for awards in 2000, 1999 and 1998 consistent with the provisions of SFAS 123, the Company's net (loss) income and net (loss) income per share would have been reduced (increased) to the pro forma amounts indicated below (in thousands, except per share amounts):

	December 31,
	2000			1999		1998
Net Income (Loss)—As reported	$	(454	)	$	1,413	$	762
Net Income (Loss)—Pro Forma	$	(984	)	$	1,072	$	538
Basic Earnings (Loss) Per Share—As reported	$	(0.10	)	$	0.35	$	0.21
Basic Earnings (Loss) Per Share—Pro Forma	$	(0.22	)	$	0.27	$	0.15
Diluted Earnings (Loss) Per share—As reported	$	(0.10	)	$	0.35	$	0.21
Diluted Earnings (Loss) Per share—Pro Forma	$	(0.22	)	$	0.26	$	0.15

37

    The fair value of each option grant is estimated on the date of grant using a type of Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 2000, 1999 and 1998:

	2000			1999			1998
Fair value of options issued	$	3.79		$	1.60		$	1.72
Exercise price	$	6.20		$	4.30		$	3.80
Expected life of option		3.95 years			3.95 years			3.88 years
Risk-free interest rate		6.23	%		5.69	%		4.82	%
Expected volatility		78	%		37	%		50	%

10. Income Taxes

    The components of the benefit from (provision for) income taxes are as follows (in thousands):

	Years Ended December 31,
	2000			1999			1998
Current:
Federal	$	(424	)	$	(783	)	$	(265	)
State		(69	)		(127	)		(47	)
		(493	)		(910	)		(312	)
Deferred:
Federal		646			59			(115	)
State		104			9			(20	)
		750			68			(135	)
Benefit from (provision for) income taxes	$	257		$	(842	)	$	(447	)

    The principal items accounting for the difference between income taxes computed at the United States statutory rate and the provision for income taxes reflected in the statements of operations are as follows:

	Years Ended December 31,
	2000		1999		1998
United States statutory rate	(34.0	)%	(34.0	)%	(34.0	)%
State Taxes (net of federal tax benefit)	(5.5	)%	(5.5	)%	(5.5	)%
Other	3.4	%	2.2	%	2.5	%
	(36.1	)%	(37.3	)%	(37.0	)%

38

    The tax effects of temporary differences that give rise to significant portions of the deferred tax asset are as follows (in thousands):

	Years Ended December 31,
	2000		1999
Allowance for doubtful accounts	$	339	$	119
Accrued expenses and other reserves		719		599
Installment sales		—		(125	)
In-process research and development		301		—
Foreign currency translation adjustment		157		86
Other		53		69
Total deferred tax asset	$	1,569	$	748

    The deferred tax is not reduced by a valuation allowance as management believes it will fully realize the benefit from its deferred tax assets. Realization is dependent on generating sufficient future taxable income. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

11. Segments and Geographic Sales:

    The Company has two primary product lines: the pool and spa lighting product line and the commercial lighting product line, each of which markets and sells fiber optic lighting products. The Company markets its products for worldwide distribution primarily through independent sales representatives, distributors and swimming pool builders in North America, Europe and the Far East.

    A summary of geographic sales is as follows (in thousands):

	Years Ended December 31,
	2000		1999		1998
U.S. Domestic	$	26,533	$	22,972	$	18,912
U.S. Export		3,727		2,330		3,002
European subsidiaries		6,661		8,009		768
	$	36,921	$	33,311	$	22,682

    A summary of sales by product line is as follows (in thousands):

	Years Ended December 31,
	2000		1999		1998
Pool and Spa Lighting	$	18,987	$	15,261	$	11,505
Commercial Lighting		16,235		17,355		10,136
Other		1,699		695		1,041
	$	36,921	$	33,311	$	22,682

12. Employee Retirement Plan:

    The Company maintains a 401(k) profit sharing plan for its employees who meet certain qualifications. The Plan allows eligible employees to defer up to 15% of their earnings, not to exceed the statutory amount per year on a pretax basis through contributions to the Plan. The Plan provides

39

for employer contributions at the discretion of the Board of Directors; however, no such contributions were made in 2000, 1999 and 1998.

13. Related Party Transactions:

    In previous years, the Company advanced amounts to certain officers by way of promissory notes. The notes are collateralized by certain issued or potentially issuable shares of the Company's common stock. The notes bear interest at rates ranging from 6% to 8% per annum and are repayable at various dates through April 2001. At December 31, 2000 and 1999, $80,000 and $159,000 were outstanding and included with notes receivable.

40

Item 14 (continued)

(a)

(continued)



(2)

Financial Statement Schedules

    The following Financial Statement Schedule of Fiberstars, Inc. is filed as part of this Form 10-K included in Item 14(d) below.

(3)

Exhibits

See Item (c) below.

Each management contract or compensatory plan or arrangement required to be filed has been identified.

(b)

Reports on Form 8-K.

No current reports on Form 8-K were filed during the fourth quarter of 2000.

(c)

Exhibits

Exhibit Number	Description of Documents
3.1	Amended and Restated Articles of Incorporation of the Registrant.
3.2	Bylaws of Registrant, as amended (composite copy).
4.1	Form of warrant issued to the Underwriters in the Company's initial public offering (incorporated by reference to Exhibit 1.1 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.1†	Form of Indemnification Agreement for directors and officers of the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.2†	1988 Stock Option Plan, as amended, and forms of stock option agreement (incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.3†	1994 Stock Option Plan, amended as of May 24, 2000, (incorporated by reference to Exhibit 99.1 to the Registrant's Registration Statement on Form S-8 (Commission File No. 333-52042) filed with the SEC on December 18, 2000).
10.4†	1994 Employee Stock Purchase Plan, amended as of December 7, 2000, (incorporated by reference to Exhibit 99.3 to the Registrant's Registration Statement on Form S-8 (Commission File No. 333-52042) filed with the SEC on December 18, 2000).
10.5†	1994 Directors' Stock Option Plan, amended as of May 12, 1999, (incorporated by reference to Exhibit 99.2 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 333-52042) filed with the SEC on December 18, 2000).
10.6	Registration Rights Agreement dated as of June 27, 1990, between the Registrant and certain holders of the Registrant's capital stock, as amended by Amendment No. 1 dated as of February 6, 1991 and Amendment No. 2 dated as of April 30, 1994 (incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.7	Amendment No. 3 to Registration Rights Agreement to include Warrant shares as Registerable Securities (incorporated by reference to Exhibit 1.2 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).

41

10.8†	Stock Purchase Agreement and related Promissory Note between David N. Ruckert and the Registrant dated as of December 9, 1987, as amended (incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.9†	Common Stock Purchase Warrant dated as of June 27, 1988 issued by the Registrant to Philip Wolfson (incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.10	Lease Agreement dated December 20, 1993 between the Registrant and Bayside Spinnaker Partners IV (incorporated by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.11	Form of Agreement between the Registrant and independent sales representatives (incorporated by reference to Exhibit 10.20 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.12†	Consulting Agreement dated August 25, 1994, between the Registrant and Philip Wolfson, M.D. (incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994).
10.13*	Distribution Agreement dated March 21, 1995, between the Registrant and Mitsubishi International Corporation (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994).
10.14	Stock Purchase Agreement dated March 21, 1995, among the Registrant, Mitsubishi International Corporation and Mitsubishi Corporation (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994).
10.15	Promissory Note dated as of October 7, 1996, issued in favor of the Registrant by Steve Keplinger (incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1996).
10.16	Promissory Note dated as of March 25, 1997, issued in favor of the Registrant by Barry Greenwald (incorporated by reference to Exhibit 10.23 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1996).
10.17	Promissory Note dated as of March 15, 1998, issued in favor of the Registrant by Barry Greenwald (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1997).
10.18*	Asset Purchase Agreement dated August 31, 1998, by and among Fibre Optics International, Inc., Douglas S. Carver, Dave M. Carver, and the Registrant (incorporated by reference to Exhibit 10.32 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998).
10.19	Asset Purchase Agreement dated as of November 19, 1998, by and among the Registrant, Hillgate (4) Limited, Crescent Lighting Limited, Michael Beverly Morrison and Corinne Bertrand (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the SEC on December 4, 1998).
10.20*	Purchase and Take-over Agreement between Frau Claudia Mann, acting for LBM Lichtleit-Fasertechnik and Fiberstars Deutschland GmbH, represented by its Managing Director Herr Bernhard Mann (incorporated by reference to Exhibit 10.34 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998).

42

10.21*	Asset Purchase Agreement dated as of December 30, 1998, between Respironics, Inc. and the Registrant (incorporated by reference to Exhibit 10.35 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998).
10.22	Multi-tenant Industrial Triple Net Lease last executed December 1, 1998, between the Registrant and Catellus Development Corporation (incorporated by reference to Exhibit 10.36 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998).
10.23	Multi-tenant Industrial Lease Agreement (Modified Gross) dated September 15, 1998 between the Registrant and Harsch Investment Corp., as Agent for MacArthur/Broadway Center, Inc. (incorporated by reference to Exhibit 10.37 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998), as amended by First Amendment to Lease dated December 13, 1999 (incorporated by reference to Exhibit 10.37 to the Registrant's Amended Annual Report on Form 10-K 405/A for the year ended December 31, 1999).
10.24	Amended and Restated Promissory Note dated March 25, 1999, between the Registrant and J. Steven Keplinger (incorporated by reference to Exhibit 10.40 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998).
10.25	Asset Purchase Agreement dated as of January 14, 2000 among Fiberstars, Inc. and Unison Fiber Optic Lighting Systems, LLC (incorporated by reference to Exhibit 7.0 to Advanced Lighting Technologies, Inc.'s Amendment No.  3 to Schedule 13D filed with the SEC on March 9, 2000).
10.26	Agreement and Plan of Reorganization dated April 18, 2000 between Fiberstars, Inc. and Lightly Expressed, Ltd. (VA), Lightly Expressed, Ltd. (CA), William Leaman and Michael Weber (incorporated by reference to Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
10.27	Loan Agreement dated September 1, 2000, between the Registrant and Wells Fargo Bank (incorporated by reference to Exhibit 10.32 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
10.28	Term Commitment Note of the Registrant dated as of September 1, 2000, to Wells Fargo Bank (incorporated by reference to Exhibit 10.30 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
10.29	Revolving Line of Credit Note of the Registrant dated as of September 1, 2000, to Wells Fargo Bank (incorporated by reference to Exhibit 10.31 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
10.30*	Three (3) Year Supply Agreement dated November 30, 2000 between the Registrant and Mitsubishi International Corporation.
10.31	Restated Investor Agreement dated January 31, 2000, between the Registrant, Advanced Lighting Technologies, Inc., and Unison Fiber Optic Lighting Systems, LLC (incorporated by reference to Exhibit 7(d) to Advanced Lighting Technologies, Inc.'s Amendment No. 3 to Schedule 13D filed with the SEC on March 9, 2000).
10.32*	Exclusive Marketing and Distribution Agreement between Fiberstars, Inc. and Laars, Inc. effective July 31, 2000.
21.1	Significant subsidiaries of Fiberstars, Inc.
23.1	Consent of Independent Accountants.

*

Confidential treatment requested

†

Management Compensatory Plan or Arrangement

43

(d)

Financial Statement Schedules

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareholders of Fiberstars, Inc.
  Fremont, California

    Our audits of the consolidated financial statements referred to in our report dated February 16, 2001 appearing in the 2000 Annual Report to the Shareholders of Fiberstars, Incorporated (which report and consolidated financial statements are incorporated in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

San Jose, CA
February 16, 2001

45

SCHEDULE II

FIBERSTARS, INC.

SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

Description	Balance at Beginning of year	Charges for the Year	Deductions	Balance at End of Year
Year Ended December 31, 2000
Allowance for doubtful accounts	428,225	935,811	8,473	1,355,563
Allowance for warranties	305,000	10,000	115,000	200,000
Year Ended December 31, 1999
Allowance for doubtful accounts	369,977	96,912	38,664	428,225
Allowance for warranties	325,000	60,000	80,000	305,000
Year Ended December 31, 1998
Allowance for doubtful accounts	292,766	77,300	89	369,977
Allowance for warranties	217,900	240,000	132,900	325,000

46

SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereto duly authorized, on the 2^nd day of April, 2001.

FIBERSTARS, INC.
By:	/s/ DAVID N. RUCKERT David N. Ruckert Chief Executive Officer (Principal Executive Officer)

    In accordance with the Securities Exchange Act of 1934, this Report has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ DAVID N. RUCKERT David N. Ruckert	Chief Executive Officer and Director (Principal Executive Officer)	March 30, 2001
/s/ ROBERT A. CONNORS Robert A. Connors	Chief Financial Officer (Principal Financial and Accounting Officer)	April 2, 2001
/s/ JOHN B. STUPPIN John B. Stuppin	Director	March 27, 2001
/s/ THEODORE L. ELIOT, JR. Theodore L. Eliot, Jr.	Director	March 27, 2001
/s/ MICHAEL FEUER, PH.D. Michael Feuer, Ph.D.	Director	March 27, 2001
/s/ B.J. GARET B.J. Garet	Director	March 30, 2001
/s/ WAYNE R. HELLMAN Wayne R. Hellman	Director	March 28, 2001
/s/ JOHN MERRIMAN John Merriman	Director	March 27, 2001
/s/ AL RUUD Al Ruud	Director
/s/ PHILIP WOLFSON Philip Wolfson	Director	March 26, 2001

47

EXHIBIT INDEX

Exhibit Number	Description of Documents
3.1	Amended and Restated Articles of Incorporation of the Registrant.
3.2	Bylaws of Registrant, as amended (composite copy).
4.1	Form of warrant issued to the Underwriters in the Company's initial public offering (incorporated by reference to Exhibit 1.1 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.1†	Form of Indemnification Agreement for directors and officers of the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.2†	1988 Stock Option Plan, as amended, and forms of stock option agreement (incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.3†	1994 Stock Option Plan, amended as of May 24, 2000, (incorporated by reference to Exhibit 99.1 to the Registrant's Registration Statement on Form S-8 (Commission File No. 333-52042) filed with the SEC on December 18, 2000).
10.4†	1994 Employee Stock Purchase Plan, amended as of December 7, 2000, (incorporated by reference to Exhibit 99.3 to the Registrant's Registration Statement on Form S-8 (Commission File No. 333-52042) filed with the SEC on December 18, 2000).
10.5†	1994 Directors' Stock Option Plan, amended as of May 12, 1999, (incorporated by reference to Exhibit 99.2 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 333-52042) filed with the SEC on December 18, 2000).
10.6	Registration Rights Agreement dated as of June 27, 1990, between the Registrant and certain holders of the Registrant's capital stock, as amended by Amendment No. 1 dated as of February 6, 1991 and Amendment No. 2 dated as of April 30, 1994 (incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.7	Amendment No. 3 to Registration Rights Agreement to include Warrant shares as Registerable Securities (incorporated by reference to Exhibit 1.2 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.8†	Stock Purchase Agreement and related Promissory Note between David N. Ruckert and the Registrant dated as of December 9, 1987, as amended (incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.9†	Common Stock Purchase Warrant dated as of June 27, 1988 issued by the Registrant to Philip Wolfson (incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.10	Lease Agreement dated December 20, 1993 between the Registrant and Bayside Spinnaker Partners IV (incorporated by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).

48

10.11	Form of Agreement between the Registrant and independent sales representatives (incorporated by reference to Exhibit 10.20 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA) which became effective on August 17, 1994).
10.12†	Consulting Agreement dated August 25, 1994, between the Registrant and Philip Wolfson, M.D. (incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994).
10.13*	Distribution Agreement dated March 21, 1995, between the Registrant and Mitsubishi International Corporation (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994).
10.14	Stock Purchase Agreement dated March 21, 1995, among the Registrant, Mitsubishi International Corporation and Mitsubishi Corporation (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994).
10.15	Promissory Note dated as of October 7, 1996, issued in favor of the Registrant by Steve Keplinger (incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1996).
10.16	Promissory Note dated as of March 25, 1997, issued in favor of the Registrant by Barry Greenwald (incorporated by reference to Exhibit 10.23 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1996).
10.17	Promissory Note dated as of March 15, 1998, issued in favor of the Registrant by Barry Greenwald (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1997).
10.18*	Asset Purchase Agreement dated August 31, 1998, by and among Fibre Optics International, Inc., Douglas S. Carver, Dave M. Carver, and the Registrant (incorporated by reference to Exhibit 10.32 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998).
10.19	Asset Purchase Agreement dated as of November 19, 1998, by and among the Registrant, Hillgate (4) Limited, Crescent Lighting Limited, Michael Beverly Morrison and Corinne Bertrand (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the SEC on December 4, 1998).
10.20*	Purchase and Take-over Agreement between Frau Claudia Mann, acting for LBM Lichtleit-Fasertechnik and Fiberstars Deutschland GmbH, represented by its Managing Director Herr Bernhard Mann (incorporated by reference to Exhibit 10.34 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998).
10.21*	Asset Purchase Agreement dated as of December 30, 1998, between Respironics, Inc. and the Registrant (incorporated by reference to Exhibit 10.35 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998).
10.22	Multi-tenant Industrial Triple Net Lease last executed December 1, 1998, between the Registrant and Catellus Development Corporation (incorporated by reference to Exhibit 10.36 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998).

49

10.23	Multi-tenant Industrial Lease Agreement (Modified Gross) dated September 15, 1998 between the Registrant and Harsch Investment Corp., as Agent for MacArthur/Broadway Center, Inc. (incorporated by reference to Exhibit 10.37 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998), as amended by First Amendment to Lease dated December 13, 1999 (incorporated by reference to Exhibit 10.37 to the Registrant's Amended Annual Report on Form 10-K 405/A for the year ended December 31, 1999).
10.24	Amended and Restated Promissory Note dated March 25, 1999, between the Registrant and J. Steven Keplinger (incorporated by reference to Exhibit 10.40 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998).
10.25	Asset Purchase Agreement dated as of January 14, 2000 among Fiberstars, Inc. and Unison Fiber Optic Lighting Systems, LLC (incorporated by reference to Exhibit 7.0 to Advanced Lighting Technologies, Inc.'s Amendment No.  3 to Schedule 13D filed with the SEC on March 9, 2000).
10.26	Agreement and Plan of Reorganization dated April 18, 2000 between Fiberstars, Inc. and Lightly Expressed, Ltd. (VA), Lightly Expressed, Ltd. (CA), William Leaman and Michael Weber (incorporated by reference to Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
10.27	Loan Agreement dated September 1, 2000, between the Registrant and Wells Fargo Bank (incorporated by reference to Exhibit 10.32 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
10.28	Term Commitment Note of the Registrant dated as of September 1, 2000, to Wells Fargo Bank (incorporated by reference to Exhibit 10.30 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
10.29	Revolving Line of Credit Note of the Registrant dated as of September 1, 2000, to Wells Fargo Bank (incorporated by reference to Exhibit 10.31 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
10.30*	Three (3) Year Supply Agreement dated November 30, 2000 between the Registrant and Mitsubishi International Corporation.
10.31	Restated Investor Agreement dated January 31, 2000, between the Registrant, Advanced Lighting Technologies, Inc., and Unison Fiber Optic Lighting Systems, LLC (incorporated by reference to Exhibit 7(d) to Advanced Lighting Technologies, Inc.'s Amendment No. 3 to Schedule 13D filed with the SEC on March 9, 2000).
10.32*	Exclusive Marketing and Distribution Agreement between Fiberstars, Inc. and Laars, Inc. effective July 31, 2000.
21.1	Significant subsidiaries of Fiberstars, Inc.
23.1	Consent of Independent Accountants.

*

Confidential treatment requested

†

Management Compensatory Plan or Arrangement

50

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DOCUMENTS INCORPORATED BY REFERENCE
PART I
PART II
QUARTERLY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
PART III
PART IV.
FIBERSTARS, INC. CONSOLIDATED BALANCE SHEETS, December 31, 2000 and 1999 (amounts in thousands except share and per share amounts)
FIBERSTARS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2000, 1999 and 1998 (amounts in thousands except per share amounts)
FIBERSTARS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the years ended December 31, 2000, 1999 and 1998 (amounts in thousands)
FIBERSTARS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years ended December 31, 2000, 1999 and 1998 (amounts in thousands)
FIBERSTARS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2000, 1999 and 1998 (amounts in thousands)
FIBERSTARS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Item 14 (continued)

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
SIGNATURES
EXHIBIT INDEX

EX-3.1

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EXHIBIT 3.1

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

FIBERSTARS, INC.

    David N. Ruckert and James L. Brock certify that:

    1.  They are the President and Assistant Secretary, respectively, of Fiberstars, Inc., a California corporation.

    2.  The Articles of Incorporation of this corporation are amended and restated in their entirety as follows:

"I.

    The name of this corporation is FIBERSTARS, INC.

II.

    The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporation Code.

III.

    (a) This corporation is authorized to issue two classes of shares designated "Preferred Stock" and "Common Stock," respectively. The total number of shares which this corporation shall have authority to issue is Thirty-Two Million (32,000,000) with par value of $0.0001 per share. The number of shares of Preferred Stock authorized to be issued is Two Million (2,000,000), and the number of shares of Common Stock authorized to be issued is Thirty Million (30,000,000). Upon the filing of these Amended and Restated Articles of Incorporation, each outstanding share of Common Stock shall be reconstituted as one share of Common Stock, $0.0001 par value.

    (b) The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized, within the limitations and restrictions stated in these Articles of Incorporation, to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and the number of shares constituting any such series and the designation thereof, or any of them; and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

IV.

    (a) The liability of directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.

    (b) The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) to the fullest extent permissible under California law.

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    (c) Any amendment, repeal or modification of any provision of this Article IV shall not adversely affect any right or protection of an agent of this corporation existing at the time of such amendment, repeal or modification.

V.

    No Action shall be taken by the shareholders of the corporation other than at an annual or special meeting of the shareholders, upon due notice and in accordance with the provisions of the corporation's bylaws."

    3.  The foregoing amendment and restatement of the Articles of Incorporation has been duly approved by the Board of Directors.

    4.  The foregoing amendment and restatement of the Articles of Incorporation has been duly approved by the required vote of shareholders in accordance with Sections 902 and 903 of the Corporations Code. The total number of outstanding shares of the corporation was 702,557 shares of Common Stock, 143,306 shares of Series A Preferred Stock, 730,145 shares of Series B Preferred Stock, 225,488 shares of Series C Preferred Stock, 405,862 shares of Series D Preferred Stock and no shares of Series E Preferred Stock. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was more than 50% of the Common Stock voting separately as a class, more than 50% of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, voting together as a single class, more than 50% of the Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock voting together as a single class and more than 50% of the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock voting together as a single class. No other class or series of shares is outstanding as of the date of approval; the Preferred Stock was automatically converted into Common Stock after receipt of such approval.

    The undersigned further declare under penalty of perjury that the matters set forth in the foregoing certificate are true and correct of our own knowledge.

    Executed at Fremont, California, on 8/18, 1994.

/s/ DAVID N. RUCKERT David N. Ruckert, President

/s/ JAMES L. BROCK James L. Brock, Assistant Secretary

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AMENDED AND RESTATED ARTICLES OF INCORPORATION OF FIBERSTARS, INC.

EX-3.2

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EXHIBIT 3.2

BYLAWS

OF

FIBERSTARS, INC.

COMPOSITE COPY
Last amendment: December 5, 1995

BYLAWS
OF
FIBERSTARS, INC.

TABLE OF CONTENTS

			Page
ARTICLE I		CORPORATE OFFICES	1
	1.1	PRINCIPAL OFFICE	1
	1.2	OTHER OFFICES	1
ARTICLE II		MEETINGS OF SHAREHOLDERS	1
	2.1	PLACE OF MEETINGS	1
	2.2	ANNUAL MEETING	1
	2.3	SPECIAL MEETING	1
	2.4	NOTICE OF SHAREHOLDERS' MEETINGS	2
	2.5	MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE	2
	2.6	QUORUM	2
	2.7	ADJOURNED MEETING; NOTICE	3
	2.8	VOTING	3
	2.9	VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT	4
	2.10	SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING	4
	2.11	RECORD DATE FOR SHAREHOLDER NOTICE;VOTING; GIVING CONSENTS	4
	2.12	PROXIES	4
	2.13	INSPECTORS OF ELECTION	5
ARTICLE III		DIRECTORS	5
	3.1	POWERS	5
	3.2	NUMBER OF DIRECTORS	5
	3.3	ELECTION AND TERM OF OFFICE OF DIRECTORS	6
	3.4	RESIGNATION AND VACANCIES	6
	3.5	PLACE OF MEETINGS; 9 MEETINGS BY TELEPHONE	6
	3.6	REGULAR MEETINGS	7
	3.7	SPECIAL MEETINGS; NOTICE	7
	3.8	QUORUM	7
	3.9	WAIVER OF NOTICE	7
	3.10	ADJOURNMENT	7
	3.11	NOTICE OF ADJOURNMENT	7
	3.12	BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING	8
	3.13	FEES AND COMPENSATION OF DIRECTORS	8
	3.14	APPROVAL OF LOANS TO OFFICERS	8
ARTICLE IV		COMMITTEES	8
	4.1	COMMITTEES OF DIRECTORS	8
	4.2	MEETINGS AND ACTION OF COMMITTEES	9
ARTICLE V		OFFICERS	9
	5.1	OFFICERS	9
	5.2	ELECTION OF oFFICERS	9
	5.3	SUBORDINATE OFFICERS	9

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	5.4	REMOVAL AND RESIGNATION OF OFFICERS	9
	5.5	VACANCIES IN OFFICES	9
	5.6	CHAIRMAN OF THE BOARD	10
	5.7	PRESIDENT	10
	5.8	VICE PRESIDENTS	10
	5.9	SECRETARY	10
	5.10	CHIEF FINANCIAL OFFICER	10
ARTICLE VI		INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS	11
	6.1	INDEMNIFICATION OF DIRECTORS AND OFFICERS	11
	6.2	INDEMNIFICATION OF OTHERS	11
	6.3	PAYMENT OF EXPENSES IN ADVANCE	11
	6.4	INDEMNITY NOT EXCLUSIVE	11
	6.5	INSURANCE INDEMNIFICATION	12
	6.6	CONFLICTS	12
ARTICLE VII		RECORDS AND REPORTS	12
	7.1	MAINTENANCE AND INSPECTION OF SHARE REGISTER	12
	7.2	MAINTENANCE AND INSPECTION OF BYLAWS	12
	7.3	MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS	13
	7.4	INSPECTION BY DIRECTORS	13
	7.5	ANNUAL REPORT TO SHAREHOLDERS; WAIVER	13
	7.6	FINANCIAL STATEMENTS	13
	7.7	REPRESENTATION OF SHARES OF OTHER CORPORATIONS	14
ARTICLE VIII		GENERAL MATTERS	14
	8.1	RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING	14
	8.2	CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS	14
	8.3	CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED	14
	8.4	CERTIFICATES FOR SHARES	15
	8.5	LOST CERTIFICATES	15
	8.6	CONSTRUCTION; DEFINITIONS	15
ARTICLE IX		AMENDMENTS	15
	9.1	AMENDMENT BY SHAREHOLDERS	15
	9.2	AMENDMENT BY DIRECTORS	15

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BYLAWS
OF
FIBERSTARS, INC.

ARTICLE I

CORPORATE OFFICES

    1.1  PRINCIPAL OFFICE

    The board of directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside such state and the corporation has one or more business offices in such state, then the board of directors shall fix and designate a principal business office in the State of California.

    1.2  OTHER OFFICES

    The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF SHAREHOLDERS

    2.1  PLACE OF MEETINGS

    Meetings of shareholders shall be held at any place within or outside the State of California designated by the board of directors. In the absence of any such designation, shareholders' meetings shall be held at the principal executive office of the corporation.

    2.2  ANNUAL MEETING

    The annual meeting of shareholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of shareholders shall be held on the first Wednesday of May in each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At the meeting, directors shall be elected, and any other proper business may be transacted.

    2.3  SPECIAL MEETING

    A special meeting of the shareholders may be called at any time by the board of directors, or by the chairman of the board, or by the president, or by one or more shareholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting.

    If a special meeting is called by any person or persons other than the board of directors or the president or the chairman of the board, then the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of these Bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting, so long as that time is not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, then the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the board of directors may be held.

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    2.4  NOTICE OF SHAREHOLDERS' MEETINGS

    All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws not less than ten (10) (or, if sent by third-class mail pursuant to Section 2.5 of these Bylaws, thirty (30)) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date, and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted (no business other than that specified in the notice may be transacted) or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders (but subject to the provisions of the next paragraph of this Section 2.4 any proper matter may be presented at the meeting for such action). The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, the board intends to present for election.

    If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 3.10 of the Corporations Code of California (the "Code"), (ii) an amendment of the articles of incorporation, pursuant to Section 902 of the Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of the Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of the Code, then the notice shall also state the general nature of that proposal.

    2.5  MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

    Written notice of any meeting of shareholders shall be given either (i) personally or (ii) by first-class mail or (iii) by third-class mail but only if the corporation has outstanding shares held of record by five hundred (500) or more persons (determined as provided in Section 605 of the Code) on the record date for the shareholders' meeting, or (iv) by telegraphic or other written communication. Notices not personally delivered shall be sent charges prepaid and shall be addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporation's books or is given, notice shall be deemed to have been given if sent to that shareholder by mail or telegraphic or other written communication to the corporation's principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.

    If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, then all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one (1) year from the date of the giving of the notice.

    An affidavit of the mailing or other means of giving any notice of any shareholders' meeting, executed by the secretary, assistant secretary or any transfer agent of the corporation giving the notice, shall be prima facie evidence of the giving of such notice.

    2.6  QUORUM

    The presence in person or by proxy of the holders of a majority of the shares entitled to vote thereat constitutes a quorum for the transaction of business at all meetings of shareholders. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a

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quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

    2.7  ADJOURNED MEETING; NOTICE

    Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy. In the absence of a quorum, no other business may be transacted at that meeting except as provided in Section 2.6 of these Bylaws.

    When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at the meeting at which the adjournment is taken. However, if a new record date for the adjourned meeting is fixed or if the adjournment is for more than forty-five (45) days from the date set for the original meeting, then notice of the adjourned meeting shall be given. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 2.4 and 2.5 of these Bylaws. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.

    2.8  VOTING

    The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 2.11 of these Bylaws, subject to the provisions of Sections 702 through 704 of the Code (relating to voting shares held by a fiduciary, in the name of a corporation or in joint ownership).

    The shareholders' vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder at the meeting and before the voting has begun.

    Except as provided in the last paragraph of this Section 2.8, or as may be otherwise provided in the articles of incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of the shareholders. Any shareholder entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or, except when the matter is the election of directors, may vote them against the proposal; but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares which the shareholder is entitled to vote.

    If a quorum is present, the affirmative vote of the majority of the shares represented and voting at a duly held meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number or a vote by classes is required by the Code or by the articles of incorporation.

    At a shareholders' meeting at which directors are to be elected, a shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast) if the candidates' names have been placed in nomination prior to commencement of the voting and the shareholder has given notice prior to commencement of the voting of the shareholder's intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination either (i) by giving one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholder's shares are normally entitled or (ii) by distributing the shareholder's votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of affirmative votes, up to the number of directors to be elected, shall be elected; votes against any candidate and votes withheld shall have no legal effect.

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    2.9  VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT

    The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. The waiver of notice or consent or approval need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 2.4 of these Bylaws, the waiver of notice or consent or approval shall state the general nature of the proposal. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

    Attendance by a person at a meeting shall also constitute a waiver of notice of and presence at that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required by the Code to be included in the notice of the meeting but not so included, if that objection is expressly made at the meeting.

    2.10  SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

    No action shall be taken by the shareholders of the corporation other than at an annual or special meeting of the shareholders, upon due notice and in accordance with the other provisions of these Bylaws.

    2.11  RECORD DATE FOR SHAREHOLDER NOTICE;VOTING; GIVING CONSENTS

    For purposes of determining the shareholders entitled to notice of any meeting or to vote thereat or entitled to give consent to corporate action without a meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in such event only shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Code.

    If the board of directors does not so fix a record date:

    (a) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held; and

    (b) the record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action by the board has been taken, shall be at the close of business on the day on which the board adopts the resolution relating to that action, or the sixtieth (60th) day before the date of such other action, whichever is later.

    The record date for any other purpose shall be as provided in Article VIII of these Bylaws.

    2.12  PROXIES

    Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the shareholder or the shareholder's attorney-in-fact. A validly executed proxy which does not state

4

that it is irrevocable shall continue in full force and effect unless (i) the person who executed the proxy revokes it prior to the time of voting by delivering a writing to the corporation stating that the proxy is revoked or by executing a subsequent proxy and presenting it to the meeting or by voting in person at the meeting, or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the Code.

    2.13  INSPECTORS OF ELECTION

    Before any meeting of shareholders, the board of directors may appoint an inspector or inspectors of election to act at the meeting or its adjournment. If no inspector of election is so appointed, then the chairman of the meeting may, and on the request of any shareholder or a shareholder's proxy shall, appoint an inspector or inspectors of election to act at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting pursuant to the request of one (1) or more shareholders or proxies, then the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, then the chairman of the meeting may, and upon the request of any shareholder or a shareholder's proxy shall, appoint a person to fill that vacancy.

    Such inspectors shall:

    (a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;

    (b) receive votes, ballots or consents;

    (c) hear and determine all challenges and questions in any way arising in connection with the right to vote;

    (d) count and tabulate all votes or consents;

    (e) determine when the polls shall close;

    (f)  determine the result; and

    (g) do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.

ARTICLE III

DIRECTORS

    3.1  POWERS

    Subject to the provisions of the Code and any limitations in the articles of incorporation and these Bylaws relating to actions required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.

    3.2  NUMBER OF DIRECTORS

    The number of directors of the corporation shall not be less than five (5) nor more than nine (9). The exact number of directors shall be nine (9) until changed, within the limits specified above, by a bylaw amending this Section 3.2, duly adopted by the board of directors or by the shareholders. The

5

indefinite number of directors may be changed, or a definite number may be fixed without provision for an indefinite number, by a duly adopted amendment to the articles of incorporation or by an amendment to this bylaw duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however that an amendment reducing the fixed number or the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of an action by written consent, are equal to more than sixteen and two-thirds percent (16²/3%) of the outstanding shares entitled to vote thereon. No amendment may change the stated maximum number of authorized directors to a number greater than two (2) times the stated minimum number of directors minus one (1).

    No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires.

    3.3  ELECTION AND TERM OF OFFICE OF DIRECTORS

    Directors shall be elected at each annual meeting of shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.

    3.4  RESIGNATION AND VACANCIES

    Any director may resign effective on giving written notice to the chairman of the board, the president, the secretary or the board of directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective.

    Vacancies in the board of directors may be filled by a majority of the remaining directors, even if less than a quorum, or by a sole remaining director; however, a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute a majority of the required quorum), or by the unanimous written consent of all shares entitled to vote thereon. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.

    A vacancy or vacancies in the board of directors shall be deemed to exist (i) in the event of the death, resignation or removal of any director, (ii) if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, (iii) if the authorized number of directors is increased, or (iv) if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be elected at that meeting.

    The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election other than to fill a vacancy created by removal, if by written consent, shall require the consent of the holders of a majority of the outstanding shares entitled to vote thereon.

    3.5  PLACE OF MEETINGS; MEETINGS BY TELEPHONE

    Regular meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board may be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the corporation.

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    Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another; and all such directors shall be deemed to be present in person at the meeting.

    3.6  REGULAR MEETINGS

    Regular meetings of the board of directors may be held without notice if the times of such meetings are fixed by the board of directors.

    3.7  SPECIAL MEETINGS; NOTICE

    Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any two directors.

    Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.

    3.8  QUORUM

    A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.10 of these Bylaws. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of Section 3.10 of the Code (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of the Code (as to appointment of committees), Section 317(e) of the Code (as to indemnification of directors), the articles of incorporation, and other applicable law.

    A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

    3.9  WAIVER OF NOTICE

    Notice of a meeting need not be given to any director (i) who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or (ii) who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. All such waivers, consents, and approvals shall be filed with the corporate records or made part of the minutes of the meeting. A waiver of notice need not specify the purpose of any regular or special meeting of the board of directors.

    3.10  ADJOURNMENT

    A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.

    3.11  NOTICE OF ADJOURNMENT

    Notice of the time and place of holding an adjourned meeting need not be given unless the meeting is adjourned for more than twenty-four (24) hours. If the meeting is adjourned for more than twenty-four (24) hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified in Section 3.7 of these Bylaws, to the directors who were not present at the time of the adjournment.

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    3.12  BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

    Any action required or permitted to be taken by the board of directors may be taken without a meeting, provided that all members of the board individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent and any counterparts thereof shall be filed with the minutes of the proceedings of the board.

    3.13  FEES AND COMPENSATION OF DIRECTORS

    Directors and members of committees may receive such compensation, if any, for their services and such reimbursement of expenses as may be fixed or determined by resolution of the board of directors. This Section 3.13 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise and receiving compensation for those services.

    3.14  APPROVAL OF LOANS TO OFFICERS

    The corporation may, upon the approval of the board of directors alone, make loans of money or property to, or guarantee the obligations of, any officer of the corporation or its parent or subsidiary, whether or not a director, or adopt an employee benefit plan or plans authorizing such loans or guaranties provided that (i) the board of directors determines that such a loan or guaranty or plan may reasonably be expected to benefit the corporation, (ii) the corporation has outstanding shares held of record by 100 or more persons (determined as provided in Section 605 of the Code) on the date of approval by the board of directors, and (iii) the approval of the board of directors is by a vote sufficient without counting the vote of any interested director or directors.

ARTICLE IV

COMMITTEES

    4.1  COMMITTEES OF DIRECTORS

    The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one (1) or more committees, each consisting of two or more directors, to serve at the pleasure of the board. The board may designate one (1) or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to:

    (a) the approval of any action which, under the Code, also requires shareholders' approval or approval of the outstanding shares;

    (b) the filling of vacancies on the board of directors or in any committee;

    (c) the fixing of compensation of the directors for serving on the board or any committee;

    (d) the amendment or repeal of these Bylaws or the adoption of new Bylaws;

    (e) the amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable;

    (f)  a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or

    (g) the appointment of any other committees of the board of directors or the members of such committees.

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    4.2  MEETINGS AND ACTION OF COMMITTEES

    Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these Bylaws, Section 3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section 3.12 (action without meeting), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws.

ARTICLE V

OFFICERS

    5.1  OFFICERS

    The officers of the corporation shall be a president, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3 of these Bylaws. Any number of offices may be held by the same person.

    5.2  ELECTION OF OFFICERS

    The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of these Bylaws, shall be chosen by the board, subject to the rights, if any, of an officer under any contract of employment. Any contract of employment with an officer shall be unenforceable unless in writing and specifically authorized by the board of directors.

    5.3  SUBORDINATE OFFICERS

    The board of directors may appoint, or may empower the president to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the board of directors may from time to time determine.

    5.4  REMOVAL AND RESIGNATION OF OFFICERS

    Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors at any regular or special meeting of the board or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.

    Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

    5.5  VACANCIES IN OFFICES

    A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to that office.

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    5.6  CHAIRMAN OF THE BOARD

    The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these Bylaws. If there is no president, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of these Bylaws.

    5.7  PRESIDENT

    Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or these Bylaws.

    5.8  VICE PRESIDENTS

    In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these Bylaws, the president or the chairman of the board.

    5.9  SECRETARY

    The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors and shareholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at shareholders' meetings, and the proceedings thereof.

    The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.

    The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required to be given by law or by these Bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these Bylaws.

    5.10  CHIEF FINANCIAL OFFICER

    The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.

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    The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these Bylaws.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS

    6.1  INDEMNIFICATION OF DIRECTORS AND OFFICERS

    The corporation shall, to the maximum extent and in the manner permitted by the Code, indemnify each of its directors and officers against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, a "director" or "officer" of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.

    6.2  INDEMNIFICATION OF OTHERS

    The corporation shall have the power, to the extent and in the manner permitted by the Code, to indemnify each of its employees and agents (other than directors and officers) against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, an "employee" or "agent" of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.

    6.3  PAYMENT OF EXPENSES IN ADVANCE

    Expenses incurred in defending any civil or criminal action or proceeding for which indemnification is required pursuant to Section 6.1 or for which indemnification is permitted pursuant to Section 6.2 following authorization thereof by the Board of Directors shall be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined that the indemnified party is not entitled to be indemnified as authorized in this Article VI.

    6.4  INDEMNITY NOT EXCLUSIVE

    The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the articles of incorporation.

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    6.5  INSURANCE INDEMNIFICATION

    The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against or incurred by such person in such capacity or arising out of such person's status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VI.

    6.6  CONFLICTS

    No indemnification or advance shall be made under this Article VI, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:

     (i) That it would be inconsistent with a provision of the articles of incorporation, these Bylaws, a resolution of the shareholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or

    (ii) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.

ARTICLE VII

RECORDS AND REPORTS

    7.1  MAINTENANCE AND INSPECTION OF SHARE REGISTER

    The corporation shall keep either at its principal executive office or at the office of its transfer agent or registrar (if either be appointed), as determined by resolution of the board of directors, a record of its shareholders listing the names and addresses of all shareholders and the number and class of shares held by each shareholder.

    A shareholder or shareholders of the corporation who holds at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation or who holds at least one percent (1%) of such voting shares and has filed a Schedule 14B with the Securities and Exchange Commission relating to the election of directors, may (i) inspect and copy the records of shareholders' names, addresses, and shareholdings during usual business hours on five (5) days' prior written demand on the corporation, (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such transfer agent's usual charges for such list, a list of the names and addresses of the shareholders who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. Such list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or five (5) days after the date specified in the demand as the date as of which the list is to be compiled.

    The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holder's interests as a shareholder or as the holder of a voting trust certificate.

    Any inspection and copying under this Section 7.1 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand.

    7.2  MAINTENANCE AND INSPECTION OF BYLAWS

    The corporation shall keep at its principal executive office or, if its principal executive office is not in the State of California, at its principal business office in California the original or a copy of these

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Bylaws as amended to date, which Bylaws shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in such state, then the secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of these Bylaws as amended to date.

    7.3  MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS

    The accounting books and records and the minutes of proceedings of the shareholders, of the board of directors, and of any committee or committees of the board of directors shall be kept at such place or places as are designated by the board of directors or, in absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form, and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form.

    The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holder's interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney and shall include the right to copy and make extracts. Such rights of inspection shall extend to the records of each subsidiary corporation of the corporation.

    7.4  INSPECTION BY DIRECTORS

    Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind as well as the physical properties of the corporation and each of its subsidiary corporations. Such inspection by a director may be made in person or by an agent or attorney. The right of inspection includes the right to copy and make extracts of documents.

    7.5  ANNUAL REPORT TO SHAREHOLDERS; WAIVER

    The board of directors shall cause an annual report to be sent to the shareholders not later than one hundred twenty (120) days after the close of the fiscal year adopted by the corporation. Such report shall be sent at least fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days) before the annual meeting of shareholders to be held during the next fiscal year and in the manner specified in Section 2.5 of these Bylaws for giving notice to shareholders of the corporation.

    The annual report shall contain (i) a balance sheet as of the end of the fiscal year, (ii) an income statement, (iii) a statement of changes in financial position for the fiscal year, and (iv) any report of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation.

    The foregoing requirement of an annual report shall be waived so long as the shares of the corporation are held by fewer than one hundred (100) holders of record.

    7.6  FINANCIAL STATEMENTS

    If no annual report for the fiscal year has been sent to shareholders, then the corporation shall, upon the written request of any shareholder made more than one hundred twenty (120) days after the close of such fiscal year, deliver or mail to the person making the request, within thirty (30) days thereafter, a copy of a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year.

    If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the then current fiscal year ended more than thirty (30) days before the date of the request, and for a balance sheet of the

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corporation as of the end of that period, then the chief financial officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent to the shareholders its annual report for the last fiscal year, the statements referred to in the first paragraph of this Section 7.6 shall likewise be delivered or mailed to the shareholder or shareholders within thirty (30) days after the request.

    The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation or by the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation.

    7.7  REPRESENTATION OF SHARES OF OTHER CORPORATIONS

    The chairman of the board, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

ARTICLE VIII

GENERAL MATTERS

    8.1  RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING

    For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the shareholders entitled to exercise any rights in respect of any other lawful action (other than action by shareholders by written consent without a meeting), the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days before any such action. In that case, only shareholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the Code.

    If the board of directors does not so fix a record date, then the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later.

    8.2  CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS

    From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.

    8.3  CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED

    The board of directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

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    8.4  CERTIFICATES FOR SHARES

    A certificate or certificates for shares of the corporation shall be issued to each shareholder when any of such shares are fully paid. The board of directors may authorize the issuance of certificates for shares partly paid provided that these certificates shall state the total amount of the consideration to be paid for them and the amount actually paid. All certificates shall be signed in the name of the corporation by the chairman of the board or the vice chairman of the board or the president or a vice president and by the chief financial officer or an assistant treasurer or the secretary or an assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile.

    In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on a certificate ceases to be that officer, transfer agent or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent or registrar at the date of issue.

    8.5  LOST CERTIFICATES

    Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and canceled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of replacement certificates on such terms and conditions as the board may require; the board may require indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate.

    8.6  CONSTRUCTION; DEFINITIONS

    Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Code shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person.

ARTICLE IX

AMENDMENTS

    9.1  AMENDMENT BY SHAREHOLDERS

    New Bylaws may be adopted or these Bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that if the articles of incorporation of the corporation set forth the number of authorized directors of the corporation, then the authorized number of directors may be changed only by an amendment of the articles of incorporation.

    9.2  AMENDMENT BY DIRECTORS

    Subject to the rights of the shareholders as provided in Section 9.1 of these Bylaws, Bylaws, other than a bylaw or an amendment of a bylaw changing the authorized number of directors (except to fix the authorized number of directors pursuant to a bylaw providing for a variable number of directors), may be adopted, amended or repealed by the board of directors.

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QuickLinks

BYLAWS OF FIBERSTARS, INC.
TABLE OF CONTENTS
ARTICLE I CORPORATE OFFICES
ARTICLE II MEETINGS OF SHAREHOLDERS
ARTICLE III DIRECTORS
ARTICLE IV COMMITTEES
ARTICLE V OFFICERS
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
ARTICLE VII RECORDS AND REPORTS
ARTICLE VIII GENERAL MATTERS
ARTICLE IX AMENDMENTS

EX-10.30

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EXHIBIT 10.30

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

THREE (3) YEAR SUPPLY AGREEMENT

    THIS AGREEMENT, made and entered into this 30th day of November, 2000, by and between FIBERSTARS, INC., a company organized and existing under laws of the state of California, having its principal place of business at 44259 Nobel Drive Fremont, CA 94538 (hereinafter called the "Buyer") and MITSUBISHI INTERNATIONAL CORPORATION, a company organized and existing under the laws of the State of New York having its principal place of business at 520 Madison Avenue, New York, NY 10022 (hereinafter called the "Seller")

WITNESSETH

    WHEREAS, the Buyer requires a stable supply of ESKA fiber optics hereinafter more particularly specified (hereinafter called the "Products"); and

    WHEREAS, the Seller is desirous of furnishing the Buyer's requirements by selling the Products to the Buyer throughout the period hereinafter more particularly specified;

    NOW, THEREFORE, in consideration of the foregoing and the obligations of the Seller and the Buyer herein contained, the parties hereby agree as follows:

ARTICLE 1. DEFINITIONS

    In this agreement, the following terms shall have the following meanings, except where the context otherwise requires:

(a)

"Contract Period" means a period of 3 years commencing on January 1, 2001 and ending on December 31, 2003.



(b)

"$" means the lawful currency of the United States of America.



(c)

"Month" means a calendar month.



(d)

"Price" means the price of the Products DDP Port of Oakland. "DDP" means the delivery terms of Delivered Duty Paid that is construed in accordance with 1990 Incoterms Edition.



(e)

"Products" means ESKA plastic fiber optics Item No. LK-30, meeting the description and specifications produced by Mitsubishi Rayon Co., Ltd. Japan and other items to be mutually agreed by the Buyer and the Seller and to be supplied by the Seller.



(f)

"Competitive Products" means



(i)

any other plastic fiber optics that are similar in composition and performance to the Products and also technically suppliable from the Seller and



(ii)

any fiber optics produced in Japan.




(g)

"Stage 1" means the period which the Seller sell and deliver the Products or Competitive Products from 1 meter to [*] meters from the beginning of the Contract Period.

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(h)

"Stage 2" means the period which the Seller sell and deliver the Products or Competitive Products to the Buyer from [*] meters to [*] meters after completion of Stage 1 during the Contract Period.



(i)

"Stage 3" means the period which the Seller sell and deliver Products or Competitive Products to the Buyer from [*] meters to [*] meters after completion of Stage 2 during the Contract Period.

    In this Agreement, unless the context requires otherwise, the singular includes the plural and vice versa.

ARTICLE 2. SALES AND PURCHASE OF PRODUCTS

2.1

Subject to the terms and conditions hereinafter set forth, the Seller shall sell and deliver the Buyer's requirements of the Products and the Buyer shall purchase and take delivery of the Products for the period of Contract. It is the intention of the parties hereto that in recognition that the long term contractual relationship is the essense of this Agreement, unless specifically provided for in this Agreement, neither party may in any way be exempted from those obligations to sell or to purchase the Products, as the case may be, during the term of this Agreement, nor may terminate this Agreement.



2.2

Subject to the conditions set forth in this section, the Buyer shall purchase the Products and the Competitive Products solely from the Seller and shall not purchase the Products or the Competitive Products from any individual firm or company other than the Seller for the Contract Period. But at the end of Stage 1 and Stage 2 the Buyer can purchase the Competitive Products from third party only when the Seller's Price of the Products and the Competitive products for next stage is higher than third party's price with comparable conditions including quantities by more than [*] percent and the Seller cannot offer at the price higher than third party's price by [*] percent even though the Buyer provide the Seller with a reasonable opportunity to supply the Product or the Competitive products.



2.3

The Seller represents and warrants that the Prices are and will be during the Contract Period the best prices offered or charged by Seller to any other purchaser of the Products or Competitive Products. In addition, the Prices to the Buyer of the Products shall be substantially lower than the prices of the Products or the Competitive Products sold by the Seller to any other purchaser who is not contractually obligated to purchase at least the quantities to be sold to the Buyer hereunder on an annual basis, with the difference in pricing to the Buyer and others based on the difference in quantity purchased.



2.4

If the Buyer shall purchase plastic fiber optics other than the Products and the Competitive Products during the Contract Period from suppliers other than the Seller, the Buyer shall provide the Seller with a reasonable opportunity to supply such other plastic fiber optics providing that the Seller can supply equal quality product at equal or better prices and upon equivalent or more favorable terms.



2.5

During the Term of this Agreement, the Seller shall not, directly or indirectly through any affiliate, dealer, or distributor or otherwise, offer, sell or supply the Products to any party worldwide other than the Buyer.

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ARTICLE 3. PRICE AND QUANTITY

3.1

QUANTITY

Contract quantity is [*] meters.

The Buyer shall make best efforts to purchase all of contract quantity no later than the end of Contract Period on the basis of the following estimated quantities of the Products with the Seller expects to deliver to the Buyer and of which the Buyer expects to take delivery in each year:

2001	[*] meters	Stage 1
2002	[*] meters	Stage 2
2003	[*] meters	Stage 3

LK30 for the Buyer's affiliated companies such as Lightly Express and LBM to be counted as part of the Products in this Agreement.

3.2

If the Buyer shall fail to take all of contract quantity by the end of 2003, then the Buyer shall continue to purchase the Products at above prices and this contract is considered to be completed only when the total purchasing quantity comes up to [*] meters.



3.3

If Seller's shipping quantity reaches [*] meters before the end of November 2003:

The price for Stage 3 is to be applied for over [*] meters.

3.4

PRICE

Item LK30, length per spool: 9,000 meter, Price in $ per meter

Exchange Rate (Yen/$TTB) Quantity (Spool)	Higher than 125	124.99 - -115	114.99 105	104.99 - -95	Lower than 94.99
Stage 1 (up to [*] meters)	[*]	[*]	[*]	[*]	[*]
Stage 2 ([*] meters)	[*]	[*]	[*]	[*]	[*]
Stage 3 ([*] meters)	[*]	[*]	[*]	[*]	[*]

The inland freight from the Port of Oakland (CA) to any destination designated by the Buyer shall be charged by the Seller to the Buyer additionally.

Price of LK30 for Buyer's affiliated companies such as Lightly Express and LBM shall follow the Price above. However, in order to adjust extra charges to born, actual LK30 Prices for such companies shall be discussed and determined separately between them and the Seller or Seller's affiliated companies who would sell LK30 to them.

ARTICLE 4. DELIVERY SCHEDULE

The delivery of Products shall be made once a month and the monthly delivery quantity for each calendar quarter in each Stage shall be confirmed by the Buyer to the Seller in writing no later than 45 days prior to the first monthly delivery of each calendar quarter.

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ARTICLE 5. INSPECTION

The Seller shall have the Products inspected by the manufacturer, prior to each shipment, in accordance with the manufacturer's usual inspection method.

ARTICLE 6. PACKING AND MARKING

Packing of the Products shall be made in the usual manner of the manufacturer; however, the Buyer and the Seller shall continue to investigate possible improvements in the packing of the Products for the purpose of reducing damage.

ARTICLE 7. TERMINATION

7.1

The Seller and the Buyer shall negotiate and make reasonable best efforts to agree upon the extension or renewal of this Agreement for the next 3 year period following the Contract Years no later than October 15, 2003.



7.2

If any one of following shall occur:



(a)

Either party hereto shall fail to perform any material obligation under this Agreement.



(b)

Either party shall become unable to pay its debts generally as they become due, or shall hold a meeting of its creditors, or shall make a general assignment for the benefit of its creditors, or shall file a petition for bankruptcy, or shall be adjudicated or declared a bankrupt or insolvent, or shall file a petition or an answer seeking, consenting to or acquiescing in any reorganization, arrangement, adjustment, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, or shall file an answer admitting or not contesting the material allegations of a petition or answer filed against it for or opposing any such relief, or



(c)

a trustee, receiver or liquidator of either party or of any material part of such party's assets or properties shall be appointed with the consent or acquiescence of such party, or if any such appointment, not so consented to or acquiesced in, shall remain unvacated or unstayed or such trustee, receiver or liquidator shall not have been dismissed or discharged for an aggregate of (90) days (whether or not consecutive), then, in addition to any other rights or remedies stipulated herein and at law, the other party ("Non-Defaulting Party") shall give written notice of such breach or default and to the effect that if the breach or default is not remedied or made good, the Non-Defaulting Party may terminate this Agreement.

In the Event that the party alleged to be in breach or default ("Defaulting Party"), within thirty (30) days after the receipt of such notice, dose not remedy such breach or make good such default and pay or agree to indemnify the Non-Defaulting Party for and against all loss or damage that may be incurred by the Non-Defaulting Party as a result thereof, the Non-Defaulting Party forthwith may terminate this Agreement and any other contract or agreement then effective with Defaulting Party.

7.3

Neither of the parties hereto shall be responsible for any incidental or consequential damage (e.g., loss of profit or loss of production) to be sustained as a result of breach or default of the Agreement on the part of either party.

ARTICLE 8. OTHER TERMS AND CONDITIONS

    The terms and conditions of the Seller's GENERAL TERMS AND CONDITIONS OF SALE attached hereto as Exhibit A shall be amended as follows: (the amendments are numbered to correspond to the numbered terms.)

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8.1

The first sentence is deleted and following substituted: "the Seller warrants only that the Products conform to the description and specification".



8.2

The Buyer agrees to inspect the Products within 30 days of delivery. The period for the Buyer to make claims for nonconformity with the specification is extended to 60 days from delivery.



8.3

Clause 3 Increased Costs is modified to delete the phrase "shall be for the Buyer's account" and to replace it with "shall be negotiated and agreed by the Seller and the Buyer as to who bears such increase".



8.9

Clause 9 Entire Agreement is deleted in its entirety.



8.12

Delete and substitute: "This contract shall be governed by and construed in accordance with the law of the State of California".



8.13

Substitute San Francisco, California as the location for arbitration under the contract.

    Any other terms and conditions which are not stipulated hereof shall be negotiated separately and confirmed in writing by the Seller and the Buyer.

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives in duplicate, each duplicate to be considered an original and each party to retain one duplicate, as of the day and year first above written.

FIBERSTARS, INC.	MITSUBISHI INTERNATIONAL CORPORATION
/s/ David N. Ruckert	/s/ Tsukasa Nagai
David N. Ruckert	Tsukasa Nagai,
President and C.E.O.	Senior Vice President, General Manager, Textile Division

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THREE (3) YEAR SUPPLY AGREEMENT
WITNESSETH

EX-10.32

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EXHIBIT 10.32

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXCLUSIVE MARKETING AND DISTRIBUTION AGREEMENT

    This EXCLUSIVE MARKETING AND DISTRIBUTION AGREEMENT (the "Agreement") is made by and between Fiberstars, Inc., a California corporation with its principal place of business at 44259 Nobel Drive, Fremont, California 94538 ("Fiberstars"), and Laars, Inc., a Delaware corporation with its principal place of business at 6000 Condor Drive, Moorpark, California 93021-2601("Distributor"), and is effective as of the 31st of July, 2000 (the "Effective Date").

RECITALS

    A.  Fiberstars is engaged in the manufacture and sale of certain pool products including fiber-optic lighting systems.

    B.  Distributor is engaged in the marketing, sale and distribution of pool products.

    C.  Distributor desires to obtain from Fiberstars, and Fiberstars desires to grant to Distributor, exclusive rights to market, sell and distribute pool products manufactured by Fiberstars upon the terms and conditions set forth in this Agreement.

    NOW, THEREFORE, in consideration of the mutual representations, promises and covenants set forth herein, the parties agree as follows:

AGREEMENT

    1.  Definitions.

    1.1. "Affiliate" of any specified person means any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person.

    1.2. "Change in Control" with respect to any entity shall mean the occurrence of any of the following: (i) any acquisition of fifty percent (50%) or more of the outstanding shares of the voting stock of such entity by any person or group (as defined in Section 13d of the Securities Exchange Act of 1934, as amended); (ii) the dissolution, liquidation, sale, lease or other disposition of all or substantially all of the assets of such entity; or (iii) a merger, share exchange, reorganization or consolidation of such entity with any other entity in which the stockholders of such entity immediately preceding such merger, reorganization or consolidation will not own a majority of the outstanding capital stock or equity interests of the surviving entity (whether or not such entity is the surviving entity) immediately after such merger, reorganization or consolidation.

    1.3. "Net Sales" shall mean for any period, the aggregate dollar amount invoiced by Fiberstars or any of its Affiliates during such period in connection with the sale or other distribution of the Products in the Territory, less sales or excise taxes, customs, and duties and assuming no discounts, rebates or other incentives or promotions given with respect to the Products.

    1.4. "Products" shall mean the pool products set forth on Schedule 1 hereto which constitute all pool products that Fiberstars manufacturers as of the date hereof for the in-ground pool market business. Products may be discontinued or changed by Fiberstars, upon at least 60 days prior written notice to Distributor and pursuant to Section 6.3. Additional Products may be added to Schedule 1 and become subject to the terms and conditions of this Agreement. In addition, Fiberstars agrees to make

1

available to Distributor to market, sell and distribute within the Territory any improved, modified, enhanced, upgraded or replacement Product, and such product shall be treated as a Product hereunder and shall be added to Schedule 1.

    1.5. "Territory" shall mean (a) the United States (including Alaska and Hawaii) and (b) Canada.

    2.  Appointment and Authority of Distributor.

    2.1.  Appointment.  Subject to the terms and conditions set forth herein, Fiberstars appoints Distributor as the exclusive distributor to promote, market, distribute and sell the Products in the Territory and Distributor accepts such appointment. Distributor shall not directly or indirectly solicit customers for the Product who are located outside the Territory without the prior written consent of Fiberstars.

    2.2.  Independent Contractors.  The relationship of Fiberstars and Distributor shall be that of independent contractors, and nothing contained in this Agreement shall constitute the parties as partners, joint ventures, employer and employee, or otherwise as agents or participants in a joint undertaking. Other than as set forth in this Agreement, neither party may direct or control the activities of the other party or incur or assume any obligation on behalf of the other party or bind such other party to any obligation for any purpose whatsoever.

    3.  Responsibilities of Distributor.

    3.1.  Sales Force.  Distributor, at its expense, will maintain its existing mainstream sales force to provide marketing and sales support of the Products for Fiberstars' in-ground pool market business. Distributor will use commercially reasonable efforts to ensure that its Fiberstars Product Sales Force will have sufficient Product knowledge. Distributor will provide quality sales coverage throughout the Territory.

    3.2.  Marketing.  Prior to the beginning of each annual selling season the parties will work together to plan, and mutually agree upon a budget for, the Marketing Activities to be performed by Distributor. The Marketing Activities shall be reviewed by the parties on a quarterly basis if desired by either party. Distributor shall fund the budget, with reimbursement from Fiberstars as provided below under "Marketing Fee". For purposes of this Agreement, "Marketing Activities" shall be the following: (1) holding regular sales meetings, (2) representing Fiberstars in trade shows, (3) creating and distributing product literature, (4) supporting cooperative advertising (5) advertising Fiberstars products, (6) handling public relations for Fiberstars products, (7) conducting direct mail programs, and miscellaneous sales promotion activities as appropriate, and (8) creating customer showroom pools and/or displays according to the mutual agreement of the parties (for such projects, Fiberstars will provide fiber optic lighting materials and Distributor will provide workmanship, design, and all other non-fiber optic lighting materials). The proposed 1^st year budget as agreed is attached as Exhibit A. Distributor shall use commercially reasonable efforts to perform the Marketing Activities in a manner consistent with generally accepted marketing practices for such services in the industry.

    4.  Responsibilities of Fiberstars.

    4.1.  Product Responsibilities.  Fiberstars, at its expense, will provide the following: (a) subject to Section 6.1, reasonable quantities of price lists for the Products to Distributor, (b) all aspects of manufacturing of the Products and maintenance of adequate inventory of the Products and all storage and storage facilities for the Products until they are shipped to customers, (c) all customer service functions relating to the Products, (d) payment of all transportation and shipping costs associated with the Products, (e) samples of the Products for dealer demos (subject to budget limitations set by Fiberstars), (f) all costs and expenses associated with Fiberstars' employees, agents and sales force working directly for Fiberstars, (g) all order processing for the Products, including, without limitation,

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order handling, credit approvals, invoicing, collections, and shipment of the Products to customers, and (h) all warranty costs and administration associated with the Products.

    4.2.  Promotions.  Fiberstars, at its expense and in its sole discretion, may provide the following (and, with respect to (a) through (c), whenever possible, at least 45 days notice to Distributor): (a) dealer incentive plans and early buy promotions and other deals for the Products, (b) distributor rebates and growth programs for the Products, (c) any additional discounts for the Products, and (d) technical updates and manuals concerning the Products. Fiberstars will provide sufficient personnel to participate in sales meetings, training and customer events.

    5.  Payments to Distributor.

    5.1.  Sales Fee.  During the continuation of this Agreement and as compensation for services rendered by Distributor pursuant to Section 3.1, Distributor shall receive (a) [*] percent ([*]%) of the monthly Net Sales (the "Sales Fee"), and (b) (i) for the fiscal year beginning November 1, 2000 and ending October 31, 2001("FY 2001"), a bonus of [*] percent ([*]%) of the aggregate Net Sales during FY2001 provided such Net Sales exceed $[*] provided the product code named "Jazz" is shipped by April 30, 2001, otherwise the million provided the product code named "Jazz" is shipped by April 30, 2001, otherwise the bonus will be payable if Net Sales exceed [*]% of the prior year's Net Sales, and (ii) for each fiscal year after FY 2001, a bonus of [*] percent ([*]%) of the aggregate Net Sales during such fiscal year provided such Net Sales equal or exceed [*]% of the prior fiscal year's Net Sales. The Sales Fee for each month shall be due and payable by Fiberstars to Distributor by the 15th day of the following month. Bonuses for any fiscal year beginning with FY2001 are payable to Distributor by December 15th following the end of such fiscal year. Each such payment shall be accompanied by an itemized statement by Product indicating the calculation of such Sales Fee and bonus amount.

    5.2.  Marketing Fee.  In addition to the compensation payable pursuant to Section 5.1, Distributor shall also receive [*] percent ([*]%) of the monthly Net Sales (the "Marketing Fee") for services performed pursuant to Section 3.2 beginning January 1, 2001. The Marketing Fee for each month shall be due and payable by Fiberstars to Distributor by the 15th day of the following month. Each such payment shall be accompanied by an itemized statement by Product indicating the calculation of such Marketing Fee. In addition, from July 31, 2000 through December 31, 2000 Fiberstars will pay Distributor for the cost to produce one (1) piece of product literature with the price, content, artwork, and other terms to be mutually agreed upon. Additionally, Fiberstars will pay Distributor for the cost to incorporate the Products into Distributor's tradeshow booths as mutually agreed upon.

    5.3.  Late Payments.  Any payment not made by its due date under this Agreement shall accrue interest at the lesser of two (2) percent per annum or the maximum rate permitted by law.

    6.  Products.

    6.1.  Price of Products.  The prices for the Products shall be as listed in Exhibit B. Changes to the prices in Exhibit B may be made effective by Fiberstars only upon Fiberstars's prior written notice to Distributor provided at least sixty (60) days prior to the effective date.

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    6.2.  Standards.  Fiberstars shall produce the Products in accordance with the standards and terms contained in all labels, Product information and specifications. Fiberstars shall produce the Products in accordance with all applicable laws and regulations. Fiberstars will provide Distributor with 15 days prior written notice of any alterations to the specifications of any Product, including significant changes in Fiberstars' manufacturing processes or materials used. Fiberstars represents and warrants to Distributor that it has all right, title and interest in the Products to rightfully sell and transfer such Products to customers, dealers, distributors and the Distributor free of any liens or other encumbrances of any nature and the provisions of this Agreement. Furthermore, Fiberstars represents and warrants that no person or entity other than Fiberstars and its Affiliates has any claim or ownership of the Products or of the know-how or other intellectual property rights relating to the Products and that the Products do not and will not infringe upon any patent or trademark, valid or invalid, or any other ownership right of any other person or entity.

    6.3.  Additional Products.  Subject to the terms and conditions of this Agreement, if Fiberstars offers for sale any new product in the in-ground pool market business (an "Additional Product"), Fiberstars will notify Distributor in writing of such Additional Product at least sixty (60) days prior to Fiberstars' projected launch date of such Additional Product. During the continuation of the Agreement, Distributor shall be required to add such additional Products to its product offering. Such Additional Product shall constitute a Product hereunder and be added (or deemed to be added) to Schedule 1.

    6.4.  Taxes.  All prices quoted in Exhibit B are exclusive of any applicable taxes and/or duties.

    6.5.  Purchase Orders.

    6.5.1.  Placement of Purchase Orders.  All orders for Products will be placed pursuant to a written purchase order placed by Distributor or dealers or distributors in the Products and shall include: (i) a description of the Products; (ii) the quantity of Products; (iii) the requested shipping dates; and (iv) destination and routing instructions.

    6.5.2.  Order Processing.  Fiberstars will handle processing of all purchase orders including, without limitation, order handling, credit approvals, invoicing, collections and shipment of Products to customers. Fiberstars will use its best efforts to fill purchase orders promptly. Fiberstars shall use its best efforts to notify Distributor, dealer or distributor in writing within fifteen (15) days of receipt of a purchase order if any changes are necessary. All or a portion of any purchase order placed hereunder may be canceled, provided Fiberstars is notified of such cancellation at least thirty (30) days prior to the scheduled date of shipment of the affected Product. Delivery shall be scheduled as mutually agreed upon between Fiberstars and Distributor, dealer or distributor. Fiberstars shall use commercially reasonable efforts to meet any delivery dates on such purchase orders.

    6.6.  Shipment, Packing, Risk of Loss.

    6.6.1.  Shipping Charges and Risk of Loss.  Fiberstars will be responsible for all expenses incurred with transportation and shipment (including routing, rigging and accessorial charges) of the Products to customers. Fiberstars hereby assumes the risk of loss or damage to any Products until such Products are received by the ultimate purchaser and agrees that at no time will title to the Products and/or risk of loss or damage to the Products pass to Distributor. Fiberstars shall also be responsible for paying insurance charges incurred with any transportation or shipment of Products.

    6.6.2.  Method of Shipment.  Unless otherwise agreed, Fiberstars will ship the Products to customers in accordance with its standard shipping practices.

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    6.6.3.  Packing.  Unless otherwise agreed in writing, all Products shall be packed for shipment and storage in accordance with standard commercial practices.

    7.

    Sales Reports/Audits.  Upon execution of the Agreement, Fiberstars will provide Distributor with reports showing the last twelve months of Fiberstars' sales activity, sorted by month, customer and geographic region. Following execution of the Agreement, Fiberstars will provide sales reports to Distributor on a monthly basis by geographic region. Fiberstars will maintain complete and accurate books and records with respect to sales of the Products, and Distributor shall have the right to examine, audit and copy such books and records upon reasonable notice to Fiberstars at any time prior to the expiration of the term and for a period of one (1) year thereafter. As part of Distributor's examination of the books and records, Distributor may also inspect the facilities of Fiberstars which are used or provided in connection with the sale and stocking of the Product. In the event Distributor's examination of Fiberstars books and records reveal an underpayment to Distributor, then Fiberstars shall pay within fifteen (15) days any underpayment. Additionally, Distributor may audit Fiberstars records regarding order handling of orders from Distributor upon reasonable notice to Fiberstars once per year at Distributor's expense.

    8.  Trademarks.

    During the term of this Agreement, Distributor shall have the right to indicate to the public that it is an authorized distributor of Fiberstars' products. Fiberstars hereby grants to Distributor the nonexclusive right to use the trademarks, marks and trade names that Fiberstars' may adopt from time to time ("Fiberstars Trademarks"), including, without limitation, the right to advertise, within the Territory, such Products under the Fiberstars Trademarks. The Fiberstars Trademarks are registered in the United States and Canada. The Fiberstars name and logo shall be used for all Products and Distributor shall not alter or remove any Fiberstars Trademarks applied to Products by Fiberstars. Distributor will use the Fiberstars Trademarks to help promote the Products. All use of Fiberstars' trademarks and brand names is subject to Fiberstars' approval.

    9.  Noncompetition.

    9.1.  During the Term of this Agreement.  During the term of this Agreement (a) neither Distributor nor any of its Affiliates will engineer, develop, source, market, produce or manufacture any products in or for the pool lighting market; and (b) neither Fiberstars nor any of its Affiliates, will engineer, develop, source, market, produce or manufacture any non-lighting products for the pool equipment market.

    9.2.  Following Termination of this Agreement.  If Fiberstars terminates this Agreement pursuant to Section 15.1.3, 15.1.4, 15.1.6, 15.1.7 or 15.1.8, neither Distributor nor any of its Affilliates will engineer, develop, source, market, produce or manufacture any products in or for the pool lighting market during the one year period immediately following such termination of this Agreement. If Distributor terminates this Agreement pursuant to Section 15.1.2, 15.1.4,15.1.6, 15.1.7 or 15.1.8, neither Fiberstars nor any of its Affiliates, will engineer, develop, source, market, produce or manufacture any non-lighting products for the pool equipment market in which Distributor markets products, during the one year period immediately following such termination of this Agreement.

    10.  Publicity.  Any and all publicity or disclosure of any kind whatsoever with regard to this Agreement and/or the transactions contemplated hereby shall be determined by the parties based upon mutual agreement and approval signed in writing by both parties, except that any disclosures required to be made by a party under any applicable federal or state securities laws or any securities exchange or stock market shall not require approval of the other party. Notwithstanding the foregoing, each party shall cooperate with the other party to obtain a protective order or request confidential treatment with respect to any terms of this Agreement and/or the transactions contemplated hereby as requested by

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the other party in any filing with the Securities and Exchange Commission, any other governmental authority, or any securities exchange or stock market.

    11.  Liability Insurance.  Fiberstars shall maintain insurance as described below during the term of this Agreement, and shall provide Distributor within fifteen (15) days following the Effective Date with Certificates of Insurance showing that such types and amounts of insurance have been obtained:

     (i) Commercial general liability insurance which shall include products/completed operations liability, contractual liability, personal injury and advertising liability and broad form property damage coverage with limits of at least $5,000,000 per occurrence combined single limit. Required coverage limit may be satisfied through a combination of Commercial General Liability and Umbrella/Excess Liability policies. All policies shall be endorsed to provide and certificates of insurance will be issued to reflect that the Distributor is named as an additional insured under such policies.

    (ii) Insurance covering loss or damage of any Products during storage or transportation and/or shipment.

    (iii) Worker's compensation and Employer's Liability insurance providing statutory coverage with a limit of liability for Employer's Liability (Coverage B) of not less than $250,000 per occurrence.

    12.  Limited Warranty.

    12.1.  Warranty; Disclaimer.  Fiberstars warrants that all Products except lamps, shall conform to the requirements and terms in the labeling, specifications, product literature and this Agreement and shall be free from defects in design, manufacturing, materials, and workmanship for a period beginning upon delivery and ending one (1) year after delivery by Fiberstars to the customer. Additionally, Fiberstars warrants all Products against all latent defects in design, manufacturing, materials, and workmanship discovered at any time. In the event of any breach of the foregoing warranty, the purchaser may return the Product to Fiberstars (delivery or postage paid by Fiberstars) for repair or replacement, at Fiberstars' option. This warranty shall apply to Distributor, dealers and other distributors and any ultimate purchaser of any of the Products. Fiberstars further agrees to reimburse Distributor, dealers and other distributor for all costs incurred in the recall of defective Products and for all expenditures made in the settlement of any claim against Distributor relating to the defective Products. Distributor may not modify or increase Fiberstars' product warranty in any respect, whether expressly or by implication.

EXCEPT AS PROVIDED HEREIN, FIBERSTARS MAKES NO WARRANTY CONCERNING THE PRODUCTS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. ALL SUCH WARRANTIES ARE EXPRESSLY DISCLAIMED.

    12.2.  Repairs Not Covered Under Warranty.  In addition to repairs provided for under Section 12.1, Fiberstars agrees to provide repair services on all Products during the respective periods during which the Products are manufactured by Fiberstars, and for a period of five (5) years after the Products have been discontinued. Repair charges shall be at Fiberstars' prevailing repair charge rates. In cases where component parts for specific Products are no longer available from the component manufacturer after the Products have been discontinued, repair services will mean Fiberstars will offer to sell a newer model as a replacement unit at prevailing replacement charge rates.

    13.  Indemnification.

    13.1.  Fiberstars' Indemnity.  Fiberstars agrees to indemnify, defend and hold harmless Distributor and its Affiliates from and against any claims, losses, damages, liabilities, causes of action, suits, costs and expenses, including all reasonable attorneys' fees and disbursements of counsel and expenses of

6

investigation, incurred by Distributor or such Affiliates arising out of or relating to (a) any breach by Fiberstars of its representations, warranties, covenants and agreements under this Agreement; (b) any third party claims, actions, suits or proceedings whether in tort, contract or otherwise alleging personal injury or death, or any damage to any property, caused or allegedly caused by any negligent act or omission by Fiberstars, any defect in any Product, or the failure to warn any person of any defect in any Product; (c) any infringement or alleged infringement or violation or alleged violation of the Fiberstars Trademarks or any other intellectual property utilized in the Products; and (d) any loss or damage to any Products incurred during storage or transportation or shipment from Fiberstars to any customers.

    13.2.  Distributor's Indemnity.  Distributor agrees to indemnify, defend and hold harmless Fiberstars and its Affiliates from and against any claims, losses, damages, liabilities, causes of action, suits, costs and expenses, including all reasonable attorneys' fees and disbursements of counsel and expenses of investigation, incurred by Fiberstars or such Affiliates arising out of or relating to (a) any breach by Distributor of its representations, warranties, covenants and agreements under this Agreement; (b) any unauthorized alteration or change by or on behalf of Distributor of any Product; and (c) any use made by or on behalf of Distributor of any Product in violation of this Agreement.

    13.3.  Claims for Indemnification.  Whenever any indemnification claim arises under this Agreement, the party seeking indemnification (the "Indemnified Party") shall promptly notify the other party (the "Indemnifying Party") of the claim and, when known, the facts constituting the basis of such claim; provided, however, that failure to give such notice shall not relieve the Indemnifying Party of its obligation hereunder unless and to the extent that such failure substantially prejudices the Indemnifying Party.

    13.4.  Third Party Claims.  In the event of a third party claim giving rise to indemnification hereunder, the Indemnifying Party may, upon prior written notice to the Indemnified Party, assume the defense of such claim with counsel reasonably satisfactory to the Indemnified Party, and shall thereafter be liable for all expenses incurred in connection with such defense, including attorneys' fees and expenses; provided, however, that if the Indemnifying Party assumes the defense of any such claim, the Indemnified Party may participate in such defense at its own expense and with counsel of its choice; provided further, however, that if there are one or more legal defenses available to the Indemnified Party that conflict with those available to the Indemnifying Party or there exists any other conflict of interest, the Indemnifying Party shall not have the right to assume the defense of such claim but the Indemnified Party shall have the right to employ separate counsel at the expense of the Indemnifying Party and to participate in the defense thereof. If the Indemnifying Party elects to control the defense of such claim, it shall do so diligently and shall have the right to settle any claim for monetary damages, provided such settlement includes a complete and absolute release of the Indemnified Party. Notwithstanding anything to the contrary, the Indemnifying Party may not settle any claims for fines, penalties or the like without the prior written consent of the Indemnified Party.

    13.5.  Remedy.  The indemnification provided for under this Section 13 is not the exclusive remedy for breach of any provision of this Agreement.

    14.  Term.  The term of this Agreement shall commence on July 31, 2000 and shall continue until July 31, 2003, unless earlier terminated pursuant to Section 15. This Agreement shall be renewed automatically for successive three (3) year periods, unless either party provides notice of its intent not to renew the agreement not less than 90 days or more than 180 days prior to the end of any three (3) year period. Each renewal period shall be on the same terms and conditions as contained in this Agreement.

7

    15.  Termination.

    15.1.  This Agreement may be terminated as follows:

    15.1.1.  By the parties upon their mutual written agreement.

    15.1.2.  By Distributor if Fiberstars (a) fails to ship orders within 30 days (60 days, if failure is due to the failure of a component supplier to supply parts) of receipt of orders for the Products for the majority of purchase orders received over any continuous 60-day period, (b) fails to pay any amount due hereunder within 15 days of when such payment is otherwise due, (c) fails to allow Distributor to represent any of its existing or new product lines, and/or (d) materially fails to provide quality products.

    15.1.3.  By Fiberstars if the Net Sales for any fiscal year fall below [*]% of sales for the prior fiscal year's Net Sales, unless such shortfall is in conjunction with either: (a) significant warranty claims or product returns; (b) the material non-performance by Fiberstars of its obligations hereunder, or (c) any material economic or market factors affecting the pool business beyond the reasonable control of Distributor.

    15.1.4.  Other than for the reasons set forth in Sections 15.1.2 and 15.1.3, either party shall have the right to terminate this Agreement upon at least thirty (30) days prior written notice to the other party in the event that the other party has breached a material provision of this Agreement and has not cured such breach during said thirty (30) day period.

    15.1.5.  By either party upon a Change in Control but only as follows: if a party (the "Initiating Party") becomes party to or involved in a transaction which could cause a Change in Control, the Initiating Party shall immediately notify the other party (the "Responding Party"). The Responding Party will have fifteen (15) days from the date of receipt of such notice to withhold its consent to such Change in Control, by notifying the Initiating Party in writing. If the Responding Party does not respond during such fifteen (15) day period, the Responding Party will be deemed to have consented to the transaction. If the Responding Party does withhold its consent to the Change in Control as described above, then this Agreement will terminate on the consummation of such Change in Control transaction.

    15.1.6.  By either party upon notice to the other party, in the event that the other party (i) files a petition in bankruptcy or similar proceeding, (ii) has a petition in bankruptcy or similar proceeding filed against it and such proceeding is not dismissed within sixty (60) days after filing, (iii) has a receiver appointed for its assets which is not withdrawn within sixty (60) days or (iv) makes a general assignment for the benefit of its creditors.

    15.1.7.  By either party, with or without cause, upon 90 days notice to the other party, provided that the effective date of such notice is the end of any three year agreement period.

    15.1.8.  By either party upon 60 days notice if the net book value of the other party falls below 50% of the net book value of such company on the effective date, unless such decrease in net book value is a direct result of a merger, disposition, equity transaction or some other non-operational cause.

[*]

CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

8

    15.1.9.  By either party upon 60 days notice unless as a result of one or more of paragraphs 15.1.1 through 15.1.8, provided the terminating party pays a $[*] severance payment to the other party. In the event Fiberstars terminates this Agreement under this paragraph 15.1.9, such $[*] payment shall be in lieu of any other payment by Fiberstars to Distributor hereunder excepting any payments due for sales or marketing activities through the termination date under paragraphs 5.1(a), 5.1(b) or 5.2, except that if termination is prior to May 1 in any year paragraph 5.1(b) shall not apply. If termination is on or after May 1 but before October 31 in any year, then paragraph 5.1(b) shall apply and the [*]% bonus shall be payable provided that Net Sales from November 1 of the prior year through the termination date are greater than [*]% of the prior year's Net Sales for the same period.

    15.2.  Post Termination Deliveries.  In the event of termination of this Agreement by either party pursuant to Section 15.1. Fiberstars shall continue to make delivery of Products on order within ninety (90) days following the date of termination of this Agreement unless otherwise requested by Distributor in writing. In the event of termination, Distributor agrees to immediately discontinue the use of the Fiberstars logo and trademarks and to return within 90 days any material in its possession which contains the Fiberstars logo.

    16.  Miscellaneous.

    16.1.  Notices.  Any notices or other communications given by either party under this Agreement shall be in writing and shall be (a) delivered personally, (b) transmitted by facsimile machine with confirmation in writing mailed first class, (c) sent by a nationally recognized overnight courier or overnight mail that guarantees overnight delivery or (d) sent by registered or certified United States mail with return receipt requested, postage prepaid, addressed as follows:

If to Fiberstars:	Fiberstars, Inc. 44259 Nobel Drive Fremont, California 94538 Attention: Barry Greenwald Facsimile No.: 510-490-0947
With a copy to:	Fiberstars, Inc. 44259 Nobel Drive Fremont, California 94538 Attention: Bob Connors Facsimile No.: 510-490-0947
If to Distributor:	Laars, Inc., 6000 Condor Drive Moorpark, California 93021-2601 Attention: Robert J. Rasp Facsimile No.: (805) 523-2314
With a copy to:	Water Pik Technologies, Inc. 23 Corporate Plaza, Suite 246 Newport Beach, CA 92660 Attention: Richard D. Tipton Facsimile No.: (949) 719-6472

    Any such notice shall be effective (a) upon receipt if personally delivered, (b) on the date of the facsimile transmission (which date is indicated by the facsimile machine of the party) if sent by facsimile and confirmed by mail, (c) on the first business day if sent by a nationally recognized overnight courier or overnight mail that guarantees overnight delivery and (d) on the third business day following the date of mailing if sent by registered or certified mail. Each party may change the address to which notices are to be delivered by giving notice as provided in this Section.

[*]

CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

9

    16.2.  Assignment.  This Agreement shall inure to the benefit of, and be binding upon the parties hereto, their successors and permitted assigns. This Agreement and the rights or obligations hereunder shall not be assignable by either party without the express written consent of the other party; provided, however, that Distributor may assign this Agreement or any of its rights or obligations hereunder to any Affiliate of Distributor, without the necessity of consent.

    16.3.  Waiver.  No waiver of any provision of this contract shall be effective unless made in writing. No waiver of any breach of any provision of this contract shall constitute a waiver of any subsequent breach of the same or of any other provision of this contract.

    16.4.  Governing Law and Dispute Resolution.  Any dispute regarding the interpretation of validity hereof shall be governed by the laws of the State of California, exclusive of that body of law relating to choice of law. The parties hereby agree that any and all disputes, controversies or differences arising from or in relation to or in connection with this Agreement shall be conducted in English and settled by mutual consultation between the parties hereto in good faith as promptly as possible, but failing an amicable settlement, shall be settled by arbitration in English. Any arbitration required by this Agreement shall be conducted before a single arbitrator in Los Angeles or Orange County, California in accordance with the commercial arbitration rules of the American Arbitration Association then existing, and any award, order or judgment pursuant to such arbitration may be enforced in any court of competent jurisdiction. The arbitrator shall apply rules of California law. All such arbitration proceedings shall be conducted on a confidential basis. Notwithstanding the foregoing, either party may seek injunctive or other equitable relief in a court of law without proceeding through arbitration. In the event either party to this Agreement shall bring any action to enforce any provision of this Agreement, the prevailing party in such action shall be entitled to recover all costs and expenses, including reasonable attorneys' fees, incurred by such party in connection with such action.

    16.5.  Force Majeure.  Neither party to this Agreement shall be liable for its failure to perform any of its obligations hereunder or under any purchaser order issued in furtherance of this Agreement, or for its failure to cure any default under this Agreement or any related purchase order, during any period in which such performance or cure is delayed or prevented by war, embargo, riot or intervention of any governmental authority, or any other similar circumstances beyond the control of such party; provided that such party shall immediately notify the other party in writing of the reasons for the delay and, if possible, the duration of such delay.

    16.6.  Severability.  The provisions of this Agreement are severable if any one or more such provisions are judicially determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions or portions of this Agreement shall nevertheless be binding on and enforceable by and between the parties hereto.

    16.7.  Entire Agreement.  This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings between them relating to the subject matter hereunder and no modifications of this Agreement shall be binding on either party unless it is in writing and signed by both parties.

    16.8.  Counterparts.  This Agreement may be executed in two counterparts, each of which shall be deemed an original and both of which together shall constitute one instrument.

    16.9.  Survival.  The provisions of Sections 7, 9.2, 10, 11, 12, 13, 15, 16.2, 16.4, 17.6, 16.7 and this Section 16.9, shall survive the termination of this Agreement.

    16.10.  Adherance to applicable laws.  Distributor shall all times conduct its efforts hereunder in strict accordance with all applicable federal, state and local laws and regulations.

    16.11  Non-disclosure.  (a) All business information and materials containing business information provided by the Disclosing Party ("Disclosing Party" is the one of either Fiberstars or Distributor who

10

is disclosing confidential information) to the Other Party ("Other Party" is the one of either Fiberstars or Distributor who has received the confidential information), including but not limited to lists of present or prospective customers or vendors or of persons that have or shall have dealt with Disclosing Party or purchased either Fiberstars' or Distributor's products through the Other Party or otherwise, customer requirements, preferences and methods of operation, management information reports and other computer-generated reports, pricing policies and details, details of contracts, operational methods, plans or strategies, business acquisition plans, new personnel acquistion plans and other business affairs of Disclosing Party and any of its affiliates learned by the Other Party heretofore or hereafter, are and shall be treated as confidential. The Other Party agrees for itself and on behalf of its directors, officers, employees and agents to whom such information and materials is disclosed, that it and they shall keep such information and materials confidential and retain them in strictest confidence both during and after the term of this Agreement. Such information shall not be disclosed by the Other Party to any person except to officers and employees of the other Party requiring such information or material to perform services pursuant to this Agreement, and shall not be used for the benefit of the Other Party or any third party except in connection with services rendered pursuant to this Agreement. The Other Party shall be liable to Disclosing Party for damages caused by any breach of this provision or by any unauthorized disclosure or use of such confidential information and materials by its officers and employees or third parties to whom unauthorized disclosure was made. In addition to any other rights or remedies which may be available to Disclosing Party, Disclosing Party shall be entitled to appropriate injunctive relief or specific performance against Other Party or Other Party's officers and employees to prevent unauthorized disclosure of such confidential information and materials or other breach of this provision. Other Party acknowledges and agrees that such unauthorized disclosure of other breach of this provision will cause irreparable injury to Disclosing Party and that money damages will not provide adequate remedy to Disclosing Party. Disclosing Party shall be entitled to recover from Other Party its costs, expenses and attorney's fees incurred in enforcing its rights under this Paragraph 16.11. Other Party shall return to Disclosing Party all such information and materials and all copies thereof immediately upon the termination of this Agreement. (b) This obligation of confidentiality shall not apply to any information which (i) was known to the receiving party at the time of receipt; (ii) was in the public domain at the time of receipt; (iii) becomes public through no fault of the party obligated to keep it confidential; (iv) such party legitimately learns from third parties who are under no obligation of confidentiality with respect to the information; (v) may be determined by analysis of the Products; or (vi) is required by applicable law to be divulged. (c) The provisions of this Paragraph 16.11 shall survive the termination or expiration of this Agreement.

[Remainder of Page Intentionally Left Blank—Signature Page Follows]

11

    IN WITNESS WHEREOF, these parties hereto have executed this Agreement by their duly authorized representatives, effective as of the date first set forth above.

FIBERSTARS, INC.		LAARS, INC.
By:	/s/ Robert A. Connors	By:	/s/ Robert J. Rasp
Name:	Robert A. Connors	Name:	Robert J. Rasp
Title:	Chief Financial Officer	Title:	General Manager

12

Exhibit A

    [Note: Set forth below is a preliminary marketing activity budget for the fiscal year beginning November 1, 2000 and ending October 31, 2001 ("FY 2000"). This budget is intended to serve as a general guideline for disbursement of marketing funds and is based upon first year sales of $18M. Actual disbursements will vary according to the needs of the marketing program, sales of product and other factors.]

Marketing Activity	% of Marketing Funds		Approximate Budget
(1) sales meetings	[*]	%	$	[*]
(2) trade shows	[*]	%	$	[*]
(3) literature	[*]	%	$	[*]
(4) co-op advertising	[*]	%	$	[*]
(5) advertising	[*]	%	$	[*]
(6) public relations	[*]	%	$	[*]
(7) direct mail, promotions	[*]	%	$	[*]
(8) displays, samples, demos	[*]	%	$	[*]
			$	[*]

[*]

CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

Exhibit B

[Graphic]

[Logo] Fiberstars
Lighting For The 21st Century-Registered Trademark-
44259 Nobel Drive
Fremont, CA 94538
Tel (800) 327-7877
Tel (510) 490-0719
Fax (510) 490-3247
www.fiberstars.com

Y2K_OK

IMPORTANT CHANGES FOR 2000

New Fiber Kit Part Numbers

    Fiberstars is using new, simplified part numbers to denote its fiber optic cable kits. Here is a diagram to explain the numbers. Note that the old number is in parenthesis next to the new one.

Fiber Size (# of Strands)	Kit	Fiber Length (in feet)	Old Part Number
B50K-40 (SHD-KIT-40) [GRAPHIC]

New Feature Illuminator Part Numbers

    Fiberstars is using 1500 as the new series number for the Feature Illuminator. This illuminator was formerly known as the FI Series. The RM1 Wireless remote control will now plug-in to the new style 1500 Series. The X-10 style FI-CR has been discontinued, and the 1504 replaces the FI-CJ. Note that the old number is in parenthesis next to the new one.

1500 (FI-W)—White Light Only
1504 (FI-C)—White Light Only

New RM6000 Configuation

    The RM6000 has a new lower price due to the separation of the Sensor Pack (RM-6000-SP) from the main unit. This allows the customer to have a Wireless remote control without the automatic operating portion, but can be added on as an option. Also new is the Time Clock plug-in option (RM-6000-TC). This option will be available Spring of 2000.

New B300K-14

    A 300 strand, 14' pool light kit.

New Fiberstars® Falls in 36" and 48"

    We now offer our popular fiber optic waterfall in 36" and 48" wide versions, in all fiber lengths.

New 30 strand FSCA Perimeter Fiber

    Our FSCA perimeter fiber, made to fit Cardinal, Arbor, and Cinderella copings, is now 30 strands; just like the FSSB fiber.

New Parts Pricing List

    Our complete line of replacement parts for all illuminators is listed at the end of the pricing, and can be referenced to our Parts Diagram section of the Product Book.

TERMS

    Terms: Payment terms are Net 30 days (OAC), unless otherwise agreed. Fiberstars reserves the right to hold any orders if an account has open invoices that extend beyond payment terms.

Orders: Orders will only be accepted with a written purchase order signed by an authorized agent of the issuing customer.

    Minimum Billing: Any order less than $100.00 will incur a $25.00 additional processing charge.

    Returns: All returns require a Return Authorization Number (RGA #). Fiberstars will not be responsible for product returned without an RGA #. Call Fiberstars Customer Support Department at (800) 327-7877 before returning any goods to Fiberstars, Inc. A minimum restocking charge of 25% applies. Customer is responsible for shipping both ways.

    Taxes: Any Federal or State Excise Tax for which we may be liable on any sale will be charged to and paid by the buyer. Customer is responsible for furnishing resale certificate.

Fiberstars 2000 Distributor Pricing

ITEM		PART#	DESCRIPTION	DIST	DEALER
Illuminators	Lifetime	6000	Lifetime Illuminator—Metal Halide White Light Only	[*]	[*]
	Illuminator	6004	Lifetime Illuminator—Metal-Halide 4-Position Color Wheel	[*]	[*]
		6008	Lifetime Illuminator—Metal-Halide 8-Position Color Wheel	[*]	[*]
NEW!		RM-6000	WIRELESS Remote Control System for Lifetime Illuminator	[*]	[*]
NEW!		RM-6000-SP	Plug-in Sensor Pack For Auto Operation	[*]	[*]
NEW!		RM-6000-TC	Plug-in Time Clock	[*]	[*]
		6008-M	Lifetime Illuminator—Metal-Halide MASTER SYNCH	[*]	[*]
		6008-S	Lifetime Illuminator—Metal-Halide SLAVE SYNCH	[*]	[*]
		6008-MR	Lifetime Illuminator—Metal-Halide MST SYNCH REMOTE	[*]	[*]
		6008-SR	Lifetime Illuminator—Metal-Halide SLV SYNCH REMOTE	[*]	[*]
	System	2000	System2000 Quartz-Halogen White Light Only	[*]	[*]
	2000	2004	System2000 Quartz-Halogen 4-Position Color Wheel	[*]	[*]
		2008	System2000 Quartz-Halogen 8-Position Color Wheel	[*]	[*]
		RM1	Remote Control-WIRELESS for System2000	[*]	[*]
		2008-M	System2000 Quartz-Halogen MASTER SYNCH	[*]	[*]
		2008-S	System2000 Quartz-Halogen SLAVE SYNCH	[*]	[*]
		2008-MR	System2000 Quartz-Halogen MST SYNCH REMOTE	[*]	[*]
		2008-SR	System2000 Quartz-Halogen SLV SYNCH REMOTE	[*]	[*]
	Feature	1500 (FI-W)	Feature Illuminator White Light Only	[*]	[*]
	Illuminator	1504 (FI-C)	Feature Illuminator Color, Manual	[*]	[*]
		RM1	Remote Control—WIRELESS for 1500 Series	[*]	[*]
	FS-250	FS250-EG	Quartz-Hlgn 4-Position, Manual	[*]	[*]
	"shoe box"	FS250-EGR	Quartz-Hlgn 4-Position, Remote	[*]	[*]
Pool Fiber	150 Strand	B150K-7 (FG-150-7)	150 Strand, 7' kit.	[*]	[*]
Kits		B150K-9 (FG-150-9)	150 Strand, 9' kit.	[*]	[*]
		B150K-12 (FG-150-12)	150 Strand, 12' kit.	[*]	[*]
		B150K-14 (FG-150-14)	150 Strand, 14' kit.	[*]	[*]
	225 Strand	B225K-7 (FG-225-7)	225 Strand, 7' kit.	[*]	[*]
		B225K-9 (FG-225-9)	225 Strand, 9' kit.	[*]	[*]
		B225K-12 (FG-225-12)	225 Strand, 12' kit.	[*]	[*]
		B225K-14 (FG-225-14)	225 Strand, 14' kit.	[*]	[*]
		B225K-18 (FG-225-18)	225 Strand, 18' kit.	[*]	[*]
	300 Strand	B300K-7 (FG-300-7)	300 Strand, 7' kit.	[*]	[*]
		B300K-9 (FG-300-9)	300 Strand, 9' kit.	[*]	[*]
		B300K-12 (FG-300-12)	300 Strand, 12' kit.	[*]	[*]
NEW!		B300K-14 (FG-300-14)	300 Strand, 14' kit.	[*]	[*]
		B300K-18 (FG-300-18)	300 Strand, 18' kit.	[*]	[*]
Supplemental	25 Strand	B25K-8 (SF-KIT-8)	25 Strand, 8' Kit	[*]	[*]
Fiber Kits		B25K-15 (SF-KIT-15)	25 Strand, 15' Kit	[*]	[*]
		B25K-25 (SF-KIT-25)	25 Strand, 25' Kit	[*]	[*]
		B25K-40 (SF-KIT-40)	25 Strand, 40' Kit	[*]	[*]

[*]

CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

	50 Strand	B50K-8 (SHD-KIT-8)	50 Strand, 8' Kit	[*]	[*]
		B50K-15 (SHD-KIT-15)	50 Strand, 15' Kit	[*]	[*]
		B50K-25 (SHD-KIT-25)	50 Strand, 25' Kit	[*]	[*]
		B50K-40 (SHD-KIT-40)	50 Strand, 40' Kit	[*]	[*]
		B50K-50 (SHD-KIT-50)	50 Strand, 50' Kit	[*]	[*]
	75 Strand	B75K-8 (BPF-KIT-8)	75 Strand, 8' Kit	[*]	[*]
		B75K-15 (BPF-KIT-15)	75 Strand, 15' Kit	[*]	[*]
		B75K-25 (BPF-KIT-25)	75 Strand, 25' Kit	[*]	[*]
		B75K-40 (BPF-KIT-40)	75 Strand, 40' Kit	[*]	[*]
		B50K-50 (BPF-KIT-50)	75 Strand, 50' Kit	[*]	[*]
		B75K-60 (BPF-KIT-60)	75 Strand, 60' Kit	[*]	[*]
	100 Strand	B100K-8 (B100-KIT-8)	100 Strand, 8' Kit	[*]	[*]
		B100K-15 (B100-KIT-15)	100 Strand, 15' Kit	[*]	[*]
		B100K-25 (B100-KIT-25)	100 Strand, 25' Kit	[*]	[*]
		B100K-40 (B100-KIT-40)	100 Strand, 40' Kit	[*]	[*]
		B100K-50 (B100-KIT-50)	100 Strand, 50' Kit	[*]	[*]
		B100K-60 (B100-KIT-60)	100 Strand, 60' Kit	[*]	[*]
Bulk Fiber	BULK	B12-250 (BAF-250)	12 strand fiber, 250' roll	[*]	[*]
Rolls	12 Strand	B12-125 (BAF-125)	12 strand fiber, 125' roll	[*]	[*]
		B-12 (BAF)	12 strand fiber, by the foot	[*]	[*]
	BULK	B25-250 (BSF-250)	25 Strand Fiber, 250' Roll	[*]	[*]
	25 Strand	B25-125 (BSF-125)	25 Strand Fiber, 125' Roll	[*]	[*]
		B25 (BSF)	25 Strand Fiber, By The Foot	[*]	[*]
	BULK	B50-500	50 Strand Fiber, 500' Roll	[*]	[*]
	50 Strand	B50-250	50 Strand Fiber, 250' Roll	[*]	[*]
		B50-125	50 Strand Fiber, 125' Roll	[*]	[*]
		B50	50 Strand Fiber, By The Foot	[*]	[*]
	BULK	B75-500 (BPF-500)	75 Strand Fiber, 500' Roll	[*]	[*]
	75 Strand	B75-250 (BPF-250)	75 Strand Fiber, 250' Roll	[*]	[*]
		B75-125 (BPF-125)	75 Strand Fiber, 125' Roll	[*]	[*]
		B75 (BPF)	75 Strand Fiber, By The Foot	[*]	[*]
	BULK	B100-500	100 Strand Fiber, 500' Roll	[*]	[*]
	100 Strand	B100-250	100 Strand Fiber, 250' Roll	[*]	[*]
		B100-125	100 Strand Fiber, 125' Roll	[*]	[*]
		B100	100 Strand Fiber, By The Foot	[*]	[*]
	BULK	B150-250 (FGF-250)	150 Strand Fiber, 250' Roll	[*]	[*]
	150 Strand	B150 -50 (FGF-50)	150 Strand Fiber, 50' Roll	[*]	[*]
		B150 (FGF)	150 Strand Fiber, By The Foot	[*]	[*]
	BULK	B225-250 (FGF-HD-250)	225 Strand Fiber, 250' Roll	[*]	[*]
	225 Strand	B225-50 (FGF-HD-50)	225 Strand Fiber, 50' Roll	[*]	[*]
		B225 (FGF-HD)	225 Strand Fiber, By The Foot	[*]	[*]
	BULK	B300-250	300 Strand Fiber, 250' Roll	[*]	[*]
	300 Strand	B300-50	300 Strand Fiber, 50' Roll	[*]	[*]
		B300	300 Strand Fiber, By The Foot	[*]	[*]
Lens Kits	Gunite-White	LNS-G	Lens Housing for Gunite—White	[*]	[*]
	Gunite-Black	LNS-GB	Lens Housing for Gunite—Black	[*]	[*]
	Gunite-Insider	LNS-GI	Lens Housing for Gunite—Insider	[*]	[*]
	Vinyl Liner	LNS-V	Lens Housing for Vinyl—White	[*]	[*]
	Acrylic/Fib	LNS-A	Lens Housing for Acrylic—White	[*]	[*]

[*]

CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

Feature Light		FLG	Feature Light for Gunite, Grey	[*]	[*]
		FLW	Feature Light for Gunite, White	[*]	[*]
		FLW-V	Feature Light for Vinyl, White	[*]	[*]
		FLW-A	Feature Light for Fib., White	[*]	[*]
Fiberstars	12" Wide	LF12-15	Fiberstars Falls, 12" Wide, with 15'	[*]	[*]
Falls		LF12-25	Fiberstars Falls, 12" Wide, with 25'	[*]	[*]
		LF12-40	Fiberstars Falls, 12" Wide, with 40'	[*]	[*]
	18" Wide	LF18-15	Fiberstars Falls, 18" Wide, with 15'	[*]	[*]
		LF18-25	Fiberstars Falls, 18" Wide, with 25'	[*]	[*]
		LF18-40	Fiberstars Falls, 18" Wide, with 40'	[*]	[*]
	24" Wide	LF24-15	Fiberstars Falls, 24" Wide, with 15'	[*]	[*]
		LF24-25	Fiberstars Falls, 24" Wide, with 25'	[*]	[*]
		LF24-40	Fiberstars Falls, 24" Wide, with 40'	[*]	[*]
NEW!	36" Wide	LF36-15	Fiberstars Falls, 36" Wide, with 15'	[*]	[*]
NEW!		LF36-25	Fiberstars Falls, 36" Wide, with 25'	[*]	[*]
NEW!		LF36-40	Fiberstars Falls, 36" Wide, with 40'	[*]	[*]
NEW!	48" Wide	LF48-15	Fiberstars Falls, 48" Wide, with 15'	[*]	[*]
NEW!		LF48-25	Fiberstars Falls, 48" Wide, with 25'	[*]	[*]
NEW!		LF48-40	Fiberstars Falls, 48" Wide, with 40'	[*]	[*]
Wall	FiberDisk	FD-WAVE	FiberDisk Clear Disk-Wave	[*]	[*]
Features		FD-DOLP	FiberDisk Clear Disk-Dolphin	[*]	[*]
		FD-PALM	FiberDisk Clear Disk-Palm Tree	[*]	[*]
		FDF-15	FiberDisk Frame with 15' fiber	[*]	[*]
		FDF-25	FiberDisk Frame with 25' fiber	[*]	[*]
		FDF-40	FiberDisk Frame with 40' fiber	[*]	[*]
		FDF-60	FiberDisk Frame with 60' fiber	[*]	[*]
	FiberSconce	WS1-15	FiberSconce with 15' fiber	[*]	[*]
		WS1-25	FiberSconce with 25' fiber	[*]	[*]
		WS1-40	FiberSconce with 40' fiber	[*]	[*]
		WS1-60	FiberSconce with 60' fiber	[*]	[*]
Fiber	Fiber	FF-G	Fiber Fountain, for Gunite	[*]	[*]
Fountain	Fountain	FF-V	Fiber Fountain, for Vinyl	[*]	[*]
		FF-A	Fiber Fountain, for Fib/Acrylic	[*]	[*]
Perimeter	Flat-Back	FSSB-1000	30 Strand, 1000' Roll	[*]	[*]
Fiber		FSSB-500	30 Strand, 500' Roll	[*]	[*]
		FSSB-200	30 Strand, 200' Roll	[*]	[*]
		FSSB-150	30 Strand, 150' Roll	[*]	[*]
		FSSB-125	30 Strand, 125' Roll	[*]	[*]
		FSSB	30 Strand, by the foot	[*]	[*]
	Flat-Back	FSEO-1000	21 Strand, 1000' Roll	[*]	[*]
		FSEO-500	21 Strand, 500' Roll	[*]	[*]
		FSEO-200	21 Strand, 200' Roll	[*]	[*]
		FSEO-150	21 Strand, 150' Roll	[*]	[*]
		FSEO-125	21 Strand, 125' Roll	[*]	[*]
		FSEO	21 Strand, by the foot	[*]	[*]
	Flat-Back	FSCA-200	30 Strand, 200' Roll	[*]	[*]
		FSCA-150	30 Strand, 150' Roll	[*]	[*]
		FSCA-125	30 Strand, 125' Roll	[*]	[*]
		FSCA	30 Strand, by the foot	[*]	[*]
	Flat-Back	FSSB-CBL42-1000	42 Strand CABLED, 1000' Roll	[*]	[*]
		FSSB-CBL42-500	42 Strand CABLED, 500' Roll	[*]	[*]
		FSSB-CBL42-200	42 Strand CABLED, 200' Roll	[*]	[*]
		FSSB-CBL42-150	42 Strand CABLED, 150' Roll	[*]	[*]
		FSSB-CBL42-125	42 Strand CABLED, 125' Roll	[*]	[*]
		FSSB-CBL42	42 Strand CABLED, by the foot	[*]	[*]
	Round	CBL42-1000	42 Strand CABLED, 1000' Roll	[*]	[*]
		CBL42-500	42 Strand CABLED, 500' Roll	[*]	[*]
		CBL42-200	42 Strand CABLED, 200' Roll	[*]	[*]
		CBL42-150	42 Strand CABLED, 150' Roll	[*]	[*]
		CBL42-125	42 Strand CABLED, 125' Roll	[*]	[*]
		CBL42	42 Strand CABLED, by the foot	[*]	[*]

[*]

CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

Perimeter		TRK-OVW50	50' White Track	[*]	[*]
Track		TRK-OVC50	50' Clear Track	[*]	[*]
		TRK-BBW50	50' White Bond Beam Track	[*]	[*]
		TRK-VLW100	100' Vinyl Liner Track 4' sections	[*]	[*]
		FS-130	165' Roll clear double-sided tape	[*]	[*]
		FS-136	10.3 oz. tube of Oxime-cure silicone	[*]	[*]
		FS-138	Case of 24 Oxime-cure silicone	[*]	[*]
		FS-120	Clear finish fitting for perimeter	[*]	[*]
		FS-134	Acrylic step entry fitting	[*]	[*]
		FS-139	Acrylic step kit	[*]	[*]
		FS-156	White adapter disk for LNS-A	[*]	[*]
Landscape	StarGlo	SG-100	Star Glo Landscape Fixture	[*]	[*]
Lighting		SG-KIT-15	Star Glo Kit—25 strand, 15'	[*]	[*]
		SG-KIT-25	Star Glo Kit—25 strand, 25'	[*]	[*]
		SG-KIT-40	Star Glo Fixture Kit—25 strand, 40'	[*]	[*]
	Fiberstix	FSTX-6	Fiberstix Landscape Fixture	[*]	[*]
		STX-KIT-4A	Fiberstix kit with 4 fixtures	[*]	[*]
		STX-KIT-4B	Fiberstix kit with 4 fixtures	[*]	[*]
		STX-KIT-6	Fiberstix kit with 6 fixtures	[*]	[*]
Tools/Misc		FS-118	Heavy Duty Hot Knife, 60 Watt	[*]	[*]
		FS-118A	Pkg. Of 5 Replacement Blades	[*]	[*]
		FS-115	Disposable Epoxy Kit	[*]	[*]
		FS-117	Lens Tightening Tool NEW!	[*]	[*]
		A9792/A9903	Centering device "large"	[*]	[*]
		A9787/A9904	Centering device "small"	[*]	[*]
		B10724	Fiber Glo® lens only	[*]	[*]
		B11458	Broadcast lens only	[*]	[*]
		B9937	Even Glo® lens only	[*]	[*]
		A8891	Lens o-ring, small	[*]	[*]
		A8892	Lens o-ring, large	[*]	[*]
Parts		A10689	COLOR WHEEL MOTOR FS4	[*]	[*]
		A10690	COLOR WHEEL MOTOR 3.6 RPM 19.7V FS250/ FS3 (LATE)	[*]	[*]
		A10711	SCREW COVER FS4/FS5	[*]	[*]
		A10751	PORT ASSEMBLY FS4	[*]	[*]
		A10759	TOP ASSEMBLY FS4	[*]	[*]
		A10980	PORT ASSEMBLY 2000	[*]	[*]
		A11212	PORT ASSEMBLY FS5	[*]	[*]
		A11213	COLOR WHEEL FS5/2008	[*]	[*]
		A11216	TOP ASSEMBLY FS5	[*]	[*]
		A11218	COLOR WHEEL MOTOR ASSEMBLY FS5	[*]	[*]
		A11246	SCREW CHASSIS TO BASE FS4/FS5/2000/6000	[*]	[*]
		A11285	LAMP BRACKET ASSEMBLY FS4/FS5	[*]	[*]
		A11526	TOGGLE SWITCH 3 POSITION	[*]	[*]
		A11598	FUSE 1/10A AUTO-CONTROL 2000/6000	[*]	[*]
		A11603	SCREW COVER 2000/6000	[*]	[*]
		A11604	TOP ASSEMBLY 2000	[*]	[*]
		A11678	LAMP HOLDER ASSEMBLY FOR 2000	[*]	[*]
		A11690	COLOR WHEEL FS5/2008 SYNC UNITS	[*]	[*]
		A12240	PORT ASSEMBLY 6000	[*]	[*]
		A12269	FUSE 7A MAIN POWER 6000	[*]	[*]
		A12679	COLOR WHEEL SYNC UNITS (6000 VER.3)(2000 VER.2)	[*]	[*]
		A7002	FAN (FS250, FS3, ALL 2000, ALL 6000)	[*]	[*]
		A7003	FAN CORD	[*]	[*]
		A7012	FUSE HOLDER	[*]	[*]
		A8092	COLOR WHEEL NUT (ALL MODELS)	[*]	[*]
		A8122	SCREW COVER FS250	[*]	[*]
		A8154	FAN 120V FS4/FS5 (OLD STYLE) REPLACE WITH FSRT-D	[*]	[*]
		A8630	COLOR WHEEL MOTOR 3.6 RPM 19.7V	[*]	[*]
		A8633	COLOR WHEEL MOTOR FLANGE	[*]	[*]
		A8935	COLOR WHEEL MOTOR 1.0 RPM 19.7V	[*]	[*]

[*]

CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

A9150	SCREW FOR COLOR WHEEL MOTOR FLANGE	[*]	[*]
A9161	X-10 RECEIVER MODULE	[*]	[*]
A9163	RELAY COLOR WHEEL	[*]	[*]
A9173	TOGGLE SWITCH 2 POSITION	[*]	[*]
A9182	FUSE 2.5A MAIN POWER	[*]	[*]
A9506	SCREWS FOR PANEL/ LID FS3	[*]	[*]
A9521	SPRING CLIP FOR LAMP FS3	[*]	[*]
A9547	MAGNET FOR SYNC COLOR WHEEL	[*]	[*]
A9811	SENSOR FOR SYNC UNITS	[*]	[*]
A9881	THERMAL OVERLOAD/FUSE ASSEMBLY FS3	[*]	[*]
B7094	FRONT PANEL (PORT END) FOR FS250	[*]	[*]
B9084	CLIP FOR FIBER PORT FS3	[*]	[*]
B9155	LAMP SOCKET—ALL QUARTZ-HALOGEN UNITS	[*]	[*]
B9785	LEXAN COVER SHADED FS3	[*]	[*]
C12467	CIRCUIT BOARD MASTER (REPLACES C11227)	[*]	[*]
C12468	CIRCUIT BOARD SLAVE (REPLACES C-9514)	[*]	[*]
C9171	BACK PANEL (CORD END) FOR FS250	[*]	[*]
C9516	TRANSFORMER C/W MOTOR 6008 SYNC UNITS	[*]	[*]
D10638	TOP ASSEMBLY SOLID BLACK FS4/FS5	[*]	[*]
D12028	FAN BAFFLE 2000	[*]	[*]
D9144E	TRANSFORMER 125V, FOR ALL QUARTZ-HALOGEN UNITS	[*]	[*]
D9577	TOP ASSEMBLY FS3	[*]	[*]
E12312	BOTTOM ASSEMBLY 2000/6000	[*]	[*]
E8004	BOTTOM ENCLOSURE FS250	[*]	[*]
E9167	TOP ENCLOSURE FS250	[*]	[*]
FS-108	PORT ASSEMBLY FS250	[*]	[*]
FS-115	DISPOSABLE EPOXY KIT	[*]	[*]
FS-122	PORT ASSEMBLY FS3	[*]	[*]
FS-126	X-10 4 BUTTON TRANSMITTER	[*]	[*]
FS-128	X-10 2 BUTTON WIRELESS OPTION	[*]	[*]
FS-162	INSTALLATION BASE FS4/FS5	[*]	[*]
FSRT-A	SCREEN AND SHIM KIT FOR FS4, FS5	[*]	[*]
FSRT-C	FAN KIT, LOW VOLTAGE	[*]	[*]
FSRT-D	DUAL FAN KIT WITH BAFFLE	[*]	[*]
FSRT-DSYNC	DUAL FAN KIT WITH BAFFLE SYNC UNITS	[*]	[*]
HI-109	LAMP 150W 21V HALOGEN FOR FEATURE ILLUMINATOR	[*]	[*]
HI-110	LAMP 183W 19.7V HALOGEN	[*]	[*]
HI-111	LAMP 200W 19.7V HALOGEN	[*]	[*]
PT-03C	COLOR WHEEL FS3/FS250	[*]	[*]
PT-03C-SYN	COLOR WHEEL FS4 SYNC UNITS	[*]	[*]
PT-03D	COLOR WHEEL FS4/2004	[*]	[*]
Y10-4005	COLOR WHEEL MOTOR ASSEMBLY 2004	[*]	[*]
Y10-4010	COLOR WHEEL MOTOR ASSEMBLY 6004	[*]	[*]
Y10-8005	COLOR WHEEL MOTOR ASSEMBLY 2008	[*]	[*]
Y10-8010	COLOR WHEEL MOTOR ASSEMBLY 6008	[*]	[*]
Y10-8030	COLOR WHEEL MTR ASSY SYNC MASTER (6000 V.3)(2000 V.2)	[*]	[*]
Y10-8031	COLOR WHEEL MTR ASSY SYNC SLAVE (6000 V.3)(2000 V.2)	[*]	[*]
Y10-8040	CIRCUIT BOARD W/ SENSOR MASTER (6000 V.3)(2000 V.2)	[*]	[*]
Y10-8041	CIRCUIT BOARD W/ SENSOR SLAVE (6000 V.3)(2000 V.2)	[*]	[*]
Y20-2050	LAMP BRACKET ASSEMBLY 2000	[*]	[*]
Y20-6000	LAMP ASSEMBLY 6000	[*]	[*]

[*]

CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

Y20-6050	HOT MIRROR BRACKET ASSEMBLY 6000	[*]	[*]
Y20-6900	THERMAL OVERLOAD ASSEMBLY UNIVERSAL	[*]	[*]
Y30-0020	THERMAL OVERLOAD (ALL MODELS)	[*]	[*]
Y30-6005	RM1 KEYCHAIN REMOTE (TRANSMITTER ONLY)	[*]	[*]
Y30-6110	PHOTO SENSOR ONLY RM6000	[*]	[*]
Y30-6900	FUSE HOLDER (INLINE) UNIVERSAL	[*]	[*]
Z30-0010	RESISTOR	[*]	[*]

[*]

CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

NOTES

Fiberstars, #1 in Fiber Optics™.

The Fiberstars 6000 Series Illuminator:
  •  Metal-Halide for a Brighter, Whiter Light
  •  Lifetime Limited Warranty, Including the Lamp!
  •  Up to 6000+ hours of Lamp Life
  •  Easy to Install, WIRELESS Remote Control

Pre-cut Fiber Kits
  •  Featuring Select LK Grade Fiber
  •  Pre-polished Output
  •  Easy to Install

NEW 36" and 48" Fiberstars® Falls

Quick and Easy FAX-Back Design Service
  •  Just FAX your pool plan to (510) 490-3247
  •  We design the optimum lighting system
  •  Includes a material list

Dealer Incentive Program
  •  One of the Best in the Industry
  •  Combines with Sta-Rite's Incentive Program

[Logo] Fiberstars
Lighting For The 21st Century®
44259 Nobel Drive
Fremont, CA 94538
Tel (800) 327-7877
Tel (510) 490-0719
Fax (510) 490-3247
www.fiberstars.com

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EXCLUSIVE MARKETING AND DISTRIBUTION AGREEMENT
RECITALS
AGREEMENT
Exhibit A
Exhibit B
IMPORTANT CHANGES FOR 2000
TERMS
Fiberstars 2000 Distributor Pricing

EX-21.1

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EXHIBIT 21.1

SIGNIFICANT SUBSIDIARIES

Name	Location	Doing business as
Lightly Expressed, Ltd	Roanoke, Virginia	Fiberstars
Crescent Lighting, Ltd	Thatcham, Berkshire, UK	Crescent Lighting
Lichtberatung Mann Gmbh	Berching, Germany	LBM

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EXHIBIT 21.1 SIGNIFICANT SUBSIDIARIES

EX-23.1

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EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

    We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 0-24230) of Fiberstars, Inc. of our reports dated March 30, 2001, relating to the consolidated financial statements and financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

San Jose, California
February 16, 2001

51

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CONSENT OF INDEPENDENT ACCOUNTANTS