-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BFzgBp12zgniGBa7roe+RlQOx09/5iy95pIcIUD1938R2bwpHCExh1tF7oGwDWly g3LAqtuRhNAr6R9gchlnyA== 0000950005-97-000712.txt : 19970815 0000950005-97-000712.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950005-97-000712 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIBERSTARS INC /CA/ CENTRAL INDEX KEY: 0000924168 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 943021850 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24230 FILM NUMBER: 97661299 BUSINESS ADDRESS: STREET 1: 2883 BAYVIEW DR CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5104900719 MAIL ADDRESS: STREET 1: 2883 BAYVIEW DR CITY: FREMONT STATE: CA ZIP: 94538 10QSB 1 FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-QSB (Mark one) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the quarterly period ended June 30, 1997 [ ] 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 0-24564 FIBERSTARS, INC. (Exact name of registrant as specified in its charter) California 94-3021850 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2883 Bayview Drive, Fremont, CA 94538 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code): (510) 490-0719 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Number of shares of Common Stock outstanding as of June 30, 1997: 3,433,345 Index to Exhibits is at page 14 FIBERSTARS, INC. TABLE OF CONTENTS Page ---- Part I - FINANCIAL INFORMATION Item 1 Financial Statements: a. Balance Sheets June 30, 1997 and December 31, 1996........................3 b. Statements of Operations Three and six months ended June 30, 1997 and 1996..........4 c. Statements of Cash Flows Six months ended June 30, 1997 and 1996....................5 d. Notes to Financial Statements............................6-7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations..........................8-11 Part II - OTHER INFORMATION Item 4 Submission of Matters to a Vote of Securities Holders..........12 Item 6 Exhibits and Reports on Form 8-K...............................12 Signatures.....................................................13 EXHIBITS Index to Exhibits...........................................14 Exhibit 10.18 Loan Agreement dated as of June 28, 1997, between the Registrant and Wells Fargo Bank.........................15 Exhibit 10.19 Term Commitment Note of the Registrant dated as of June 28, 1997, to Wells Fargo Bank..........................23 Exhibit 10.20 Revolving Line of Credit Note of the Registrant dated as of June 28, 1997, to Wells Fargo Bank....................26 Exhibit 11 Computation of Net Income Per Share.........................30 Exhibit 27 Financial Data Schedule..................................... Page 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements FIBERSTARS, INC. BALANCE SHEETS (amounts in thousands) -------------------- June 30, December 31, 1997 1996 ----------- ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,681 $ 1,520 Short-term investments 3,269 3,315 Accounts receivable trade, net 3,601 2,621 Notes and other accounts receivable 163 91 Inventories 2,503 2,168 Prepaid expenses and other assets 169 181 Deferred income taxes 249 585 -------- -------- Total current assets 11,635 10,481 Fixed assets, net 867 832 Investment in joint ventures 52 52 Other assets 122 144 Deferred income taxes 553 553 -------- -------- Total assets $ 13,229 $ 12,062 ======== ======== LIABILITIES Current Liabilities: Accounts payable $ 1,045 $ 967 Accrued expenses 1,683 1,122 Current portion of long-term debt 13 13 -------- -------- Total current liabilities 2,741 2,102 Long-term debt, less current portion 23 28 -------- -------- Total liabilities 2,764 2,130 -------- -------- SHAREHOLDERS' EQUITY Common stock 0 0 Additional paid-in capital 11,932 11,903 Note receivable from shareholder (75) (75) Accumulated deficit (1,392) (1,896) -------- -------- Total shareholders' equity 10,465 9,932 -------- -------- Total liabilities and shareholders' equity $ 13,229 $ 12,062 ======== ======== The accompanying notes are an integral part of these financial statements Page 3 FIBERSTARS, INC. STATEMENTS OF OPERATIONS (amounts in thousands except per share amounts) (Unaudited) ----------
Three Months Ended June 30, Six Months Ended June 30, 1997 1996 1997 1996 -------- -------- -------- -------- Net sales $ 5,831 $ 4,316 $ 10,075 $ 8,062 Cost of sales 3,213 2,430 5,519 4,621 -------- -------- -------- -------- Gross profit 2,618 1,886 4,556 3,441 Operating expenses: Research and development 303 267 588 496 Sales and marketing 1,354 1,040 2,498 1,981 General and administrative 364 322 726 629 -------- -------- -------- -------- Income from operations 597 257 744 335 Other income (expense): Equity in joint venture income (loss) 0 0 0 (7) Interest income and expense 42 43 95 92 -------- -------- -------- -------- Income before income taxes 639 300 839 420 Provision for income taxes (256) (123) (335) (175) -------- -------- -------- -------- Net income $ 383 $ 177 $ 504 $ 245 ======== ======== ======== ======== Net income per share $ 0.10 $ 0.05 $ 0.14 $ 0.07 ======== ======== ======== ======== Shares used in per share calculation 3,715 3,534 3,667 3,526 ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements
Page 4 FIBERSTARS INC. STATEMENTS OF CASH FLOWS (amounts in thousands) (unaudited) ----------
Six Months Ended June 30, 1997 1996 ------- ------- Cash flows from operating activities: Net income $ 504 $ 245 ------- ------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 215 149 Provision for doubtful accounts receivable 37 19 Deferred income taxes 336 175 Equity in joint venture (income) loss 0 7 Changes in assets & liabilities: Accounts receivable, trade (1,017) (277) Inventories (335) (63) Prepaid expenses and other current assets 12 13 Other assets -- 8 Accounts payable 78 (68) Accrued expenses 561 307 ------- ------- Total adjustments (113) 270 ------- ------- Net cash provided by operating activities 391 515 ------- ------- Cash flows from investing activities: Sale (purchase) of short-term investments 46 (323) Loans made to officers (50) Sale of equity in joint venture -- 59 Acquisition of fixed assets (250) (226) ------- ------- Net cash used in investing activities (254) (490) ------- ------- Cash flows from financing activities: Proceeds from issuances of common stock 29 33 Repayment of long term debt (5) (7) ------- ------- Net cash provided by financing activities 24 26 ------- ------- Net increase in cash and cash equivalents 161 51 Cash and cash equivalents, beginning of period 1,520 1,756 ------- ------- Cash and cash equivalents, end of period $ 1,681 $ 1,807 ======= ======= Supplemental schedule of non-cash investing and financing activities: Note receivable from sale of investment in joint venture $ 0 $ 239 ======= ======= The accompanying notes are an integral part of these financial statements
Page 5 FIBERSTARS, INC. NOTES TO FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Interim Financial Statements (unaudited) Although unaudited, the interim financial statements in this report reflect all adjustments, consisting of normal recurring accruals, which are, in the opinion of management, necessary for a fair statement of financial position, results of operations and cash flows for the interim periods covered and of the financial condition of the Company at the interim balance sheet dates. The results of operations for the interim periods presented are not necessarily indicative of the results expected for the entire year. The year-end balance sheet information was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. These financial statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended December 31, 1996, contained in the Company's 1996 Annual Report to Shareholders. Net Income Per Share Net income per share is computed using the weighted average number of shares of common stock outstanding and common equivalent shares. Common stock equivalent shares from stock options and warrants are excluded to the extent that their effect is antidilutive. Recent Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," (SFAS 128) which specifies the computation, presentation and disclosure requirements for Earnings per Share. SFAS 128 will become effective for the Company's 1997 fiscal year. 2. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following (in thousands): June 30, December 31, -------- ------------ 1997 1996 -------- -------- (unaudited) Raw materials $ 1,850 $ 1,528 Finished Goods 653 640 -------- -------- $ 2,503 $ 2,168 ======== ======== Page 6 3. Lines of Credit As of June 28, 1997, the Company's bank lines of credit were renewed under terms substantially equivalent to the previous borrowing arrangements. The current arrangements consist of the following: a) A $1.0 million revolving line of credit, bearing interest at prime plus 0.125%. Borrowings under this line are unsecured, and the Company must maintain a zero balance for at least 30 consecutive days during each fiscal year. b) A $500,000 term loan commitment to finance equipment purchases. Under this note, the Company may finance up to 80% of the cost of new equipment and 75% of the cost of used equipment. The note is secured by a security interest in all equipment financed with the proceeds. Borrowings bear interest at prime plus 0.5%. Interest only is payable monthly until June 28, 1998, after which the principal plus interest is repayable in 36 monthly installments. These borrowing arrangements require the Company to meet certain financial covenants with respect to net worth, liquidity and profitability. Both expire June 28, 1998. At June 30, 1997, the Company had no borrowings outstanding against either of these lines of credit. Page 7 FIBERSTARS, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the attached financial statements and notes thereto. Net Sales
Q2'97 Q2'96 change YTD'97 YTD'96 change Net Sales ($000) $5,831 $4,316 35% $10,075 $8,062 25%
Overall net sales increased on a quarterly and year-to-date basis as a result of increased unit sales in both the Commercial and Pool Lighting markets. Commercial Lighting sales were substantially higher domestically, as well as in Europe and the Far East. Growth in the swimming pool market was comprised of increases in shipments of pool lighting products, supplemented by sales of the new Fiberstars Catalyst products, which reduce the need for chlorine in pool sanitation, and by sales of new OEM products to spa manufacturers. Gross Profit
Q2'97 Q2'96 change YTD'97 YTD'96 change Gross Profit ($000) $2,618 $1,886 39% $4,556 $3,441 32% Percentage of net sales 45% 44% 45% 43%
Improvement in the Company's gross margin resulted primarily from reductions in fiber processing costs attributable to in-house equipment and processing currently in place, and from spreading fixed manufacturing costs over increased sales. Generally, the Company's practice is to decrease selling prices as costs are reduced, in an effort to increase sales while maintaining margins. It is thus anticipated that the gross margin percentage may be somewhat lower in the second half of 1997 than in the first half of the year, as lower costs may lead to lower pricing. Research and Development
Q2'97 Q2'96 change YTD'97 YTD'96 change Research & Development ($000) $303 $267 13% $588 $496 19% Percentage of net sales 5% 6% 6% 6%
Research and Development expenses increased 13% for the quarter and 19% year-to-date, over the comparable periods of 1996, but decreased as a percentage of sale due to the greater rate of sales growth. The increase in Research and Development expenses represents increased project activity, including several new illuminators being designed and developed for anticipated release Page 8 in 1997 and 1998. Continuing to improve product performance and achieve lower costs are two of the Company's main goals and the Company expects to continue to expand research and development activities over time; however, the expense dollars and percentages may vary from period to period. Selling and Marketing
Q2'97 Q2'96 change YTD'97 YTD'96 change Selling & Marketing ($000) $1,354 $1,040 30% $2,498 $1,981 26% Percentage of net sales 23% 24% 25% 25%
Selling and marketing expenses increased over the comparable periods of 1996. Increases occurred principally in commissions and certain promotional expenses that are directly related to sales volume. General and Administrative
Q2'97 Q2'96 change YTD'97 YTD'96 change General & Administrative ($000) $364 $322 13% $726 $629 15% Percentage of net sales 6% 7% 7% 8%
General and administrative expenses increased over the comparable periods of 1996 to support growth in the business. General and administrative expenses increased less rapidly than revenue and thus have decreased as a percentage of sales. Other Income (Expense)
Q2'97 Q2'96 change YTD'97 YTD'96 change Other Income (Expense) ($000) $42 $43 -2% $95 $85 12% Percentage of net sales 1% 1% 1% 1%
Other income is primarily comprised of net interest income, which varies from quarter to quarter based on fluctuations in interest rates and in the Company's cash balances, and which was substantially the same as in the comparable periods of 1996. Net Income
Q2'97 Q2'96 change YTD'97 YTD'96 change Net Income ($000) $383 $177 116% $504 $245 106% Percentage of net sales 7% 4% 5% 3%
The improvement in net income is attributable to a combination of increased sales, improved gross margin, and lower operating expenses as a percentage of sales. Page 9 Certain Factors Affecting Future Performance This Report contains forward looking statements, including without limitation those set forth in the "Gross Profit" and "Research and Development" sectios of "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company's actual performance may vary from such statements as a result of a variety of risk and other factors, including those set forth in this Report. The Company's operating results are subject to significant seasonal variations, especially in the pool and spa market. In general, the Company's sales tend to be strongest in the second and fourth quarters of the year. However, the variable impact of weather conditions and other factors makes revenue and profit levels difficult to predict. In addition, a wide variety of factors influence the Company's quarterly and annual operating results, any of which could materially affect revenues and profitability. These include, among others, business factors such as increases in competition and related pricing pressure, shortages or increases in prices of materials, manufacturing constraints, changes in distribution channels, variations in product mix, and potential problems and delays in new product development and introduction; as well as national economic and other factors, such as construction trends and interest rates. Competition is increasing in a number of the Company's markets. For example, the two largest pool equipment supply companies, Hayward Pool Products and Pac-Fab, Inc. now distribute fiber optic lighting systems. In addition, a number of companies offer fiber optic lighting products for commercial lighting, some of which compete directly with the Company's products. Some of these companies have substantially greater financial, technical and marketing resources than the Company. The Company anticipates that any future growth in fiber optic lighting will be accompanied by continuing increases in competition, which could accelerate growth in the market for fiber optic lighting, but which could adversely affect the Company's operating results. The Company believes that the success of its business depends primarily on its technical innovation, 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, among other things, the prosecution of patents with respect to certain of the Company's technologies. There are many issued patents and pending patent applications in the field of fiber optic technology, and certain of the Company's 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 or asserting intellectual property rights of others, the Company has in the past received communications from third parties asserting rights in the Company's patents or that the Company's technology infringes intellectual property rights held by such third parties. Although, based on information currently available to it, the Company does not believe that any such claims involving its technology or patents are meritorious, there can be no assurance that the Company will not be required to engage in litigation to protect its patent rights or to defend the claims of others. In the event of litigation to determine the validity of any third party claims or claims by the Company against such third party, such litigation, whether or not determined in favor of the Company, could result in significant expense to the Company. Page 10 Liquidity and Capital Resources For the six months ended June 30, 1997, cash and short term investments increased by $115,000 to $4.95 million. Cash provided by operating activities totaled $391,000, which was partly offset by $250,000 used for acquisition of fixed assets. The Company has a $1 million unsecured line of credit for working capital purposes and a $500,000 term loan commitment to finance equipment purchases. Both lines were renewed in June 1997 and expire on June 28, 1998. At June 30, 1997, the Company had no borrowings outstanding against either of these lines of credit. 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. Page 11 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Securities Holders At the Company's Annual Meeting of Stockholders held on May 21, 1997, the shareholders approved a proposal to amend the 1994 Stock Option Plan (the "Plan") to increase the number of shres of the Company's Common Stock reserved for issuance under the plan by 500,000 shares (with 1,731,800 affirmative votes, 417,331 negative votes, 38,076 abstentions and 583,063 broker non-votes). The shareholders also elected the following persons to serve as directors in the ensuing year: VOTES VOTES BROKER NAME FOR WITHHELD NON-VOTES ---- --------- -------- --------- Theodore L. Eliot, Jr. 2,707,326 62,944 - Michael D. Ernst 2,709,224 61,046 Michael Feuer, Ph.D. 2,709,893 60,377 - B. J. Garet 2,707,326 62,944 - David N. Ruckert 2,662,026 108,244 - John B. Stuppin 2,707,326 62,944 - Paul P. Wang, Ph.D. 2,710,093 60,177 Philip E. Wolfson, M.D. 2,710,193 60,077 - The shareholders also ratified the appointment of Coopers & Lybrand L.L.P. as the Corporation's independent accountants for fiscal 1997 (with 2,755,195 affirmative votes, 127 negative votes, 14,948 abstentions and zero broker non-votes). Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits have been filed with this Report: Exhibit 10.18 - Loan Agreement dated as of June 28, 1997, between the Registrant and Wells Fargo Bank. Exhibit 10.19 - Term Commitment Note of the Registrant dated as of June 28, 1997, to Wells Fargo Bank. Exhibit 10.20 - Revolving Line of Credit Note of the Registrant dated as of June 28, 1997, to Wells Fargo Bank. Exhibit 11 - Computation of Net Income Per Share Exhibit 27 - Financial Data Schedule (b) No reports on Form 8-K were filed by the Company during the period covered by this report. Items 1, 2, 3 and 5 are not applicable and have been omitted. Page 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIBERSTARS, INC. Date: August 14, 1997 By: /s/ William C. Lapworth ------------------------------------- William C. Lapworth, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Page 13 INDEX TO EXHIBITS Exhibit Page Number Number ------ ------ 10.18 Loan Agreement dated as of June 28, 1997, between the Registrant and Wells Fargo Bank. 15 10.19 Term Commitment Note of the Registrant dated as of June 28, 1997, to Wells Fargo Bank. 23 10.20 Revolving Line of Credit Note of the Registrant dated as of June 28, 1997, to Wells Fargo Bank. 26 11 Computation of Net Income Per Share 30 27 Financial Data Schedule Page 14 EX-10.18 2 LOAN AGREEMENT Exhibit 10.18 WELLS FARGO BANK LOAN AGREEMENT This Loan Agreement (this "Agreement") is entered into by and between FIBERSTARS, INC. ("Borrower") and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") and sets forth the terms and conditions which govern all Borrower's commercial credit accommodations from Bank, whether now existing or hereafter granted (each, a "Credit" and collectively, "Credits"), which terms and conditions are in addition to those set forth in any other contract, instrument or document (collectively with this Agreement, the "Loan Documents") required by this Agreement or heretofore or at any time hereafter delivered to Bank in connection with any Credit. 1. REPRESENTATIONS AND WARRANTIES. Borrower makes the following representations and warranties to Bank, which representations and warranties shall be true as of the date hereof and on the date of each extension of credit under each Credit with the same effect as though made on each such date: (a) Legal Status. Borrower is a corporation, duly organized and existing and in good standing under the laws of the State of California, and is qualified or licensed to do business in all jurisdictions in which such qualification or licensing is required or in which the failure to be qualified or licensed could have a material adverse effect on Borrower. (b) Authorization and Validity. Each of the Loan Documents has been duly authorized, and upon its execution and delivery to Bank will constitute a legal, valid and binding obligation of Borrower or the party which executes the same, enforceable in accordance with its respective terms. (c) No Violation. The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of law or regulation, or contravene any provision of Borrower's Articles of Incorporation or By-Laws, or result in any breach of or default under any agreement, indenture or other instrument to which Borrower is a party or by which Borrower may be bound. (d) No Litigation. There is no litigation or other action or proceeding pending or threatened against Borrower which could have a material adverse effect on the financial condition or operation of Borrower except as disclosed by Borrower to Bank in writing prior to the date hereof. (e) Financial Statements. The most recent annual financial statement of Borrower, and all interim financial statements delivered to Bank since the date of said annual financial statement, true copies of which have been delivered by Borrower to Bank prior to the date hereof, are complete and correct, present fairly the financial condition of Borrower and disclose all liabilities of Borrower, and have been prepared in accordance with generally accepted accounting principles. Since the dates of such financial statements there has been no material adverse change in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as otherwise permitted by Bank in writing. Page 15 (f) Tax Returns. Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year except as disclosed by Borrower to Bank in writing prior to the date hereof. II. ADDITIONAL TERMS. (a) Conditions Precedent. The obligation of Bank to grant any Credit is subject to the condition that Bank shall have received all contracts, instruments and documents, duly executed where applicable, deemed necessary by Bank to evidence such Credit and all terms and conditions applicable thereto, all of which shall be in form and substance satisfactory to Bank. (b) Application of Payments. Each payment made on each Credit shall be applied first, to any interest then due, second, to any fees and charges then due, and third, to the outstanding principal balance thereof. III. COVENANTS. So long as any Credit remains available or any amounts under any Credit remain outstanding, Borrower shall, unless Bank otherwise consents in writing: (a) Insurance. Maintain and keep in force insurance of the types and in amounts customarily carried in lines of business similar to that of Borrower, including but not limited to fire, extended coverage, public liability, property damage, flood and workers' compensation, carried with companies and in amounts satisfactory to Bank, and deliver to Bank from time to time at Bank's request schedules setting forth all insurance then in effect. (b) Compliance. Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; and comply with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to Borrower and/or its business, including without limitation, the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time, and all state or Federal environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any operations and/or properties of Borrower. (c) Indebtedness. Not create, incur, assume or permit to exist any indebtedness or other liabilities, whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, direct or contingent (including any contingent liability under any guaranty of the obligations of any person or entity), except (i) the liabilities of Borrower to Bank, (ii) trade debt incurred by Borrower in the normal course of its business, and (iii) any other liabilities of Borrower existing as of, and disclosed to Bank in writing prior to, the date hereof. (d) Merger; Consolidation; Transfer of Assets. Not merge into or consolidate with any other entity; nor make any substantial change in the nature of Borrower's business as conducted as of the date hereof; nor acquire all or substantially all of the assets of any other person or entity; nor sell lease, transfer or otherwise dispose of all or a substantial or material portion of Borrower's assets except in the ordinary course of its business. (e) Pledge of Assets. Not mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower's assets now owned or hereafter acquired, except in favor of Bank and except any of the foregoing existing as of, and disclosed to Bank in writing prior to, the date hereof. Page 16 (f) Financial Statements. Provide to Bank all of the following, in form and detail satisfactory to Bank, together with such current financial and other information as Bank from time to time may reasonably request: (i) As soon as available, but in no event later than 120 days after and as of the end of each fiscal year, an audited financial statement of Borrower, prepared by Borrower and certified as correct by an officer of Borrower authorized to borrow under the most current Corporate Borrowing Resolution delivered by Borrower to Bank, to include a balance sheet and income statement, together with all supporting schedules and footnotes. (ii) As soon as available, but in no event later than 45 days after and as of the end of each fiscal quarter, a financial statement of Borrower, prepared by Borrower and certified as correct by an officer of Borrower authorized to borrow under the most current Corporate Borrowing Resolution delivered by Borrower to Bank, to include a balance sheet and income statement, together with all supporting schedules and footnotes. (g) Financial Condition. Maintain Borrower's financial condition as follows using generally accepted accounting principles consistently applied and used consistently with prior practices, except to the extent modified by the following definitions: (i) Total Liabilities divided by Tangible Net Worth not at any time greater than 0.75 to 1.0, with "Total Liabilities" defined as the aggregate of current liabilities and non-current liabilities less subordinated debt, and with "Tangible Net Worth" defined as the aggregate of total stockholders' equity plus subordinated debt less any intangible assets. (ii) Quick Ratio not at any time less than 2.00 to 1.0, with "Quick Ratio" defined as the aggregate of unrestricted cash, unrestricted marketable securities and receivables convertible into cash divided by total current liabilities. (iii) Net income after taxes not less than $1.00 on an annual basis, determined as of each fiscal year end, and determined as of the end of the second fiscal quarter of each year. (iv) EBITDA Coverage Ratio not less than 1.50 to 1.0 as of each fiscal year end, with "EBITDA" defined as net profit before tax plus interest expense (net of capitalized interest expense), depreciation expense and amortization expense, and with "EBITDA Coverage Ratio" defined as EBITDA divided by the aggregate of interest expense plus the prior period current maturity of long-term debt and the prior period current maturity of subordinated debt. IV. DEFAULT; REMEDIES. (a) Events of Default. The occurrence of any of the following shall constitute an "Event of Default" Under this Agreement: (i) The failure to pay any principal, interest, fees or other charges when due under any of the Loan Documents. (ii) Any representation or warranty hereunder or under any other Loan Document shall prove to be incorrect, false or misleading in any material respect when made. Page 17 (iii) Any violation or breach of any term or condition of this Agreement or any other of the Loan Documents. (iv) Any default in the payment or performance of any obligation, or any defined event of default, under any provisions of any contract, instrument or document pursuant to which Borrower or any guarantor hereunder has incurred debt or any other liability of any kind to any person or entity, including Bank. (v) The filing of a petition by or against Borrower or any guarantor hereunder under any provisions of the Bankruptcy Reform Act, Title 11 of the United States code, as amended or recodified from time to time, or under any similar or other law relating to bankruptcy, insolvency, reorganization or other relief for debtors; the appointment of a receiver, trustee, custodian or liquidator of or for any part of the assets or property of Borrower or any such guarantor; Borrower or any such guarantor becomes insolvent, makes a general assignment for the benefit of creditors or is generally not paying its debts as they become due; or any attachment or like levy on any property of Borrower or any such guarantor. (vi) Any material adverse change, as determined solely by Bank, in the financial condition of Borrower. (vii) The death or incapacity of any individual guarantor hereunder or the dissolution or liquidation of Borrower or of any guarantor hereunder which is a corporation, partnership or other type of entity. (viii) Any change in ownership during the term hereof of an aggregate of 25% or more of the common stock of Borrower. (b) Remedies. Upon the occurrence of any Event of Default: (i) the entire balance of principal, interest, fees and charges on each Credit shall, at Bank's option, become immediately due and payable in full without presentment, demand, protest or notice of dishonor, all of which are expressly waived by Borrower; (ii) the obligation, if any, of Bank to extend any further credit to Borrower under any Credit shall immediately cease and terminate; and (iii) Bank shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any security for any Credit. All rights, powers and remedies of Bank shall be cumulative. V. MISCELLANEOUS (a) No Waiver. No delay, failure or discontinuance of Bank in exercising any right, power or remedy shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under this Agreement, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing. (b) Notices. All notices, requests and demands required under this Agreement must be in writing, addressed to the applicable party at its address specified below or to such other address Page 18 as any party may designate by written notice to each other party, and shall be deemed to have been given or made as follows: (i) if personally delivered, upon delivery: (ii) if sent by mail, upon the earlier of the date of receipt or 3 days after deposit in the U.S. mail, first class and postage prepaid; and (iii) if sent by telecopy, upon receipt. (c) Costs, Expenses and Attorneys' Fees. Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), incurred by Bank in connection with (i) the negotiation and preparation of this Agreement and the other Loan Documents, and Bank's continued administration of each Credit, (ii) the enforcement of Bank's rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (iii) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, and including any of the foregoing incurred in connection with any bankruptcy proceeding relating to Borrower. (d) Successors; Assignment. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interests or rights hereunder without Bank's prior written consent. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in; Bank's rights and benefits under each of the Loan Documents. In connection therewith Bank may disclose all documents and information which Bank now has or may hereafter acquire relating to any Credit, Borrower or its business, any guarantor of any Credit or the business of any such guarantor, or any collateral for any Credit. (e) Controlling Agreement; Amendment. In the event of any direct conflict between any provision of this Agreement and any provision of any other Loan Document, the terms of this Agreement shall control. This Agreement may amended or modified only in writing signed by Bank and Borrower. (f) No Third Party Beneficiaries. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other Loan Document to which it is not a party. (g) Severability of Provisions. If any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any remaining provisions of this Agreement. (h) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. (i) Cancellation of Prior Loan Agreements. This Agreement cancels and supersedes all prior loan agreements between Borrower and Bank relating to any Credit. Page 19 VI. ARBITRATION. (a) Arbitration. Upon the demand of any party, any Dispute shall be resolved by binding arbitration (except as set forth in (e) below) in accordance with the terms of this Agreement. A "Dispute" shall mean any action, dispute, claim or controversy of any kind, whether in contract or tort, statutory or common law, legal or equitable, now existing or hereafter arising under or in connection with, or in any way pertaining to, any of the Loan Documents, or any past, present or future extensions of credit and other activities, transactions or obligations of any kind related directly or indirectly to any of the Loan Documents, including without limitation any of the foregoing arising in connection with the exercise of any self-help, ancillary or other remedies pursuant to any of the Loan Documents. Any party may by summary proceedings bring an action in court to compel arbitration of a Dispute. Any party who fails or refuses to submit to arbitration following a lawful demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any Dispute. (b) Governing Rules. Arbitration proceedings shall be administered by the American Arbitration Association ("AAA") or such other administrator as the parties shall mutually agree upon in accordance with the AAA Commercial Arbitration Rules. All Disputes submitted to arbitration shall be resolved in accordance with the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the Loan Documents. The arbitration shall be conducted at a location in California selected by the AAA or other administrator. If there is any inconsistency between the terms hereof and any such rules, the terms and procedures set forth herein shall control. All statutes of limitation applicable to any Dispute shall apply to any arbitration proceeding. All discovery activities shall be expressly limited to matters directly relevant to the Dispute being arbitrated. Judgment upon any award rendered in an arbitration may be entered in any court having jurisdiction; provided however, that nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. ss.91 or any similar applicable state law. (c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No provision hereof shall limit the right of any party to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary remedies, including without limitation injunctive relief, sequestration, attachment, garnishment or the appointment of a receiver, from a court of competent jurisdiction before, after or during the pendency of any arbitration or other proceeding. The exercise of any such remedy shall not waive the right of any party to compel arbitration or reference hereunder. (d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be active members of the California State Bar or retired judges of the state or federal judiciary of California, with expertise in the substantive laws applicable to the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes by summary rulings in response to motions filed prior to the final arbitration hearing. Arbitrators (i) shall resolve all Disputes in accordance with the substantive law of the state of California, (ii) may grant any remedy or relief that a court of the state of California could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award, and (iii) shall have the power to award recovery of all costs and fees, to impose sanctions and to take such other actions as they deem necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Any Dispute in which the amount in controversy is $5,000,000 or less shall be decided by a single arbitrator who shall not render an award of Page 20 greater than $5,000,000 (including damages, costs, fees and expenses). By submission to a single arbitrator, each party expressly waives any right or claim to recover more than $5,000,000. Any Dispute in which the amount in controversy exceeds $5,000,000 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. (e) Judicial Review. Notwithstanding anything herein to the contrary, in any arbitration in which the amount in controversy exceeds $25,000,000, the arbitrators shall be required to make specific, written findings of fact and conclusions of law in such arbitrations (A) the arbitrators shall not have the power to make any award which is not supported by substantial evidence or which is based on legal error, (B) an award shall not be binding upon the parties unless the findings of fact are supported by substantial evidence and the conclusions of law are not erroneous under the substantive law of the state of California, and (C) the parties shall have in addition to the grounds referred to in the Federal Arbitration Act for vacating, modifying or correcting an award the right to judicial review of (1) whether the findings of fact rendered by the arbitrators are supported by substantial evidence, and (2) whether the conclusions of law are erroneous under the substantive law of the state of California. Judgment confirming an award in such a proceeding may be entered only if a court determines the award is supported by substantial evidence and not based on legal error under the substantive law of the state of California. (f) Real Property Collateral Judicial Reference. Notwithstanding anything herein to the contrary, no Dispute shall be submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such Dispute is not submitted to arbitration, the Dispute shall be referred to a referee in accordance with California Code or Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA's selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645. (9) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the Dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business, by applicable law or regulation, or to the extent necessary to exercise any judicial review rights set forth herein. If more than one agreement for arbitration by or between the parties potentially applies to a Dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the Dispute shall control this arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties. Page 21 IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement as of June 28, 1997. FIBERSTARS, INC. WELLS FARGO BANK NATIONAL ASSOCIATION By: /s/ William C. Lapworth By: /s/ Laura Zaragoza ---------------------------- --------------------------- Title: CFO Title: Relationship Manager --------------------------- ------------------------- Address: 2883 BAYVIEW DRIVE Address: 121 Park Center Plaza 3rd Flr FREMONT, CA 94538 San Jose, CA 95115 Page 22 EX-10.19 3 TERM COMMITMENT NOTE Exhibit 10.19 WELLS FARGO BANK TERM COMMITMENT NOTE $500,000.00 San Jose, California June 28, 1997 FOR VALUE RECEIVED, the undersigned FIBERSTARS, INC. ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at Santa Clara Valley RCBO, 121 Park Center Plaza 3rd Flr, San Jose, CA 95115, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of $500,000.00, or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein. INTEREST/FEES: (a) Interest. The outstanding principal balance of this Note shall bear interest at a rate per annum (computed on the basis of a 360-day year, actual days elapsed) .50000% above the Prime Rate in effect from time to time. The "Prime Rate" is a base rate that Bank from time to time establishes and which serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto. Each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced within Bank. (b) Payment of Interest. Interest accrued on this Note shall be payable on the 28th day of each month, commencing July 28,1997. (c) Default Interest. From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to 4% above the rate of interest from time to time applicable to this Note. (d) Commitment Fee. Prior to the initial extension of credit under this Note, Borrower shall pay to Bank a non-refundable commitment fee of $500.00. (e) Collection of Payments. Borrower authorizes Bank to collect all interest and fees due hereunder by charging Borrower's demand deposit account number ___________ with Bank, or any other demand deposit account maintained by any Borrower with Bank, for the full amount thereof. Should there be insufficient funds in any such demand deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower. BORROWING AND REPAYMENT: (a) Use of Proceeds; Limitation on Borrowings. Each advance under this Note shall be available solely to finance Borrower's purchase of new and/or used equipment to be used in Borrower's business. Each advance shall be available to a maximum of 80.0% of the cost or appraised value (as required by Bank) of the new equipment Page 23 purchased with the proceeds thereof, and 75.0% of the cost or appraised value (as required by Bank) of the used equipment purchased with the proceeds thereof, as evidenced by copies of invoices and/or appraisals acceptable to Bank. (b) Borrowing and Repayment. Borrower may from time to time during the term of this Note borrow and partially or wholly repay its outstanding borrowings, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with, or at any time as a supplement to, this Note; provided however, that amounts repaid may not be reborrowed; and provided further, that the total borrowings under this Note shall not exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of any principal payments made hereon by or for any Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on June 28, 1998, unless said balance is refinanced by Bank pursuant to the provisions of (d) below. (c) Advances. Advances hereunder, to the total amount of the principal sum available hereunder, may be made by the holder at the oral or written request of (i) DAVID N. RUCKERT or WILLIAM C. LAPWORTH, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any account of any Borrower with the holder, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of each Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by any Borrower. (d) Refinancing. So long as Borrower is in compliance with all terms and conditions contained herein and in any loan agreement or other loan documents in effect between Borrower and Bank on the maturity date set forth above (or on such earlier date as may be requested by Borrower), and Borrower executes a new promissory note and such other documents as Bank shall require, all in form and substance satisfactory to Bank, Bank agrees to refinance the then outstanding principal balance of this Note on the following terms and conditions: (i) The outstanding principal balance of this Note shall be amortized over 3 years and shall be repaid in 36 monthly installments over said term, as set forth in the promissory note executed by Borrower to evidence such refinancing. (ii) The outstanding principal balance so refinanced shall bear interest at a rate per annum (computed on the basis of a 360-day year, actual days elapsed) 0.500% above Bank's Prime Rate in effect from time to time. COLLATERAL: As security for the payment and performance of all obligations of Borrower under this Note, Borrower grants to Bank security interests of first priority (except as agreed otherwise by Bank in writing) in the following property of Borrower, now owned or at any time hereafter acquired: all equipment financed with the proceeds of this note, together with security interests in all other personal property of Borrower now or at any time hereafter pledged to Bank as collateral for any Page 24 other commercial credit accommodation granted by Bank to Borrower. All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for all costs and expenses incurred by Bank in connection with any of the foregoing security, including without limitation, filing fees and allocated costs of collateral audits. EVENTS OF DEFAULT: Any default in the payment or performance of any obligation under this Note, or any defined event of default under any loan agreement now or at any time hereafter in effect between Borrower and Bank (whether executed prior to, concurrently with or at any time after this Note), shall constitute an "Event of Default" under this Note. MISCELLANEOUS: (a) Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal, interest, fees and charges outstanding hereunder to be immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are expressly waived by each Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Each Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, and including any of the foregoing incurred in connection with any bankruptcy proceeding relating to any Borrower. (b) Obligations Joint and Several. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several. (c) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above. FIBERSTARS, INC. By: /s/ William C. Lapworth --------------------------- Title: CFO ------------------------- Page 25 EX-10.20 4 REVOLVING LINE OF CREDIT NOTE Exhibit 10.20 WELLS FARGO BANK REVOLVING LINE OF CREDIT NOTE $1,000,000 San Jose, California June 28, 1997 FOR VALUE RECEIVED, the undersigned FIBERSTARS, INC. (" Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (Bank ) at its office at Santa Clara Valley RCBO, 121 Park Center Plaza 3rd Flr, San Jose, CA 95115, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of $1,000,000.00, or so much thereof as may be advanced and be outstanding with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein. INTEREST/FEES: (a) Interest. The outstanding principal balance of this Note shall bear interest at a rate per annum (computed on the basis of a 360-day year, actual days elapsed) 0.12500% above the Prime Rate in effect from time to time. The "Prime Rate" is a base rate that Bank from time to time establishes and which serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto. Each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced within Bank. (b) Payment of Interest. Interest accrued on this Note shall be payable on the 28th day of each month, commencing July 28, 1997. (c) Default Interest. From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to 4% above the rate of interest from time to time applicable to this Note. (d) Commitment Fee. Prior to the initial extension of credit under this Note, Borrower shall pay to Bank a non-refundable commitment fee of $2,500.00. (e) Collection of Payments. Borrower authorizes Bank to collect all interest and fees due hereunder by charging Borrower's demand deposit account number ___________ with Bank, or any other demand deposit account maintained by any Borrower with Bank, for the full amount thereof. Should there be insufficient funds in any such demand deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower. SIGHT AND USANCE COMMERCIAL LETTER OF CREDIT SUBFEATURE: (a) Letter of Credit Subfeature. As a subfeature under this Note, Bank agrees from time to time during the term hereof to issue sight commercial and usance commercial letters or credit for the account of Borrower to finance Borrower's inventory purchases (each, a "Letter of Credit" and collectively, "Letters of Credit"); provided however, that the form and substance of each Letter of Credit shall be subject to approval by Bank, in its sole discretion; and provided further, that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed Page 26 $250,000.00. Each Letter of Credit shall be issued for a term not to exceed 180 days, as designated by Borrower; provided however, that no Letter of Credit shall have an expiration date more than 30 days beyond the maturity date of this Note. The undrawn amount of all Letters of Credit shall be reserved under this Note and shall not be available for borrowings hereunder. Each Letter of Credit shall be subject to the additional terms and conditions of the Letter of Credit Agreement and related documents, if any, required by Bank in connection with the issuance thereof. Each draft paid by Bank under a Letter of Credit shall be deemed an advance under this Note and shall be repaid by Borrower in accordance with the terms and conditions of this Note; provided however, that if advances hereunder are not available, for any reason, at the time any draft is paid by Bank, then Borrower shall immediately pay to Bank the full amount of such draft, together with interest thereon from the date such amount is paid by Bank to the date such amount is fully repaid by Borrower, at the rate of interest applicable to advances hereunder. In such event Borrower agrees that Bank, in its sole discretion, may debit any demand deposit account maintained by Borrower with Bank for the amount of any such draft. Notwithstanding the foregoing, usance commercial Letters of Credit shall be issued only to finance Borrower's importation of goods into the United States, and shall contain such provisions and be issued in such manner as to satisfy Bank that any banker's acceptance created by Bank's acceptance or a draft thereunder shall be eligible for discount by a Federal Reserve Bank, will not result in a liability of Bank subjected to reserve requirements under any law, regulation or administrative order, and will not cause Bank to violate any lending limit imposed upon Bank by any law, regulation or administrative order Usance commercial Letters of Credit shall provide for drafts thereunder with terms which do not exceed the lesser of 180 days or such other period of time as may be necessary for the acceptance created thereunder to be eligible for discount and otherwise comply with the terms and conditions of this Note; provided however, that no usance commercial Letter of Credit shall provide for drafts with terms that extend more than 30 days beyond the maturity date of this Note. The amount of each draft accepted by Bank under a usance commercial Letter of Credit shall be paid by Borrower in accordance with the terms and conditions of this Note applicable to Acceptances. (b) Letter of Credit Fees. Borrower shall pay to Bank fees upon the issuance of each Letter of Credit, upon the payment or negotiation by Bank of each draft under any Letter of Credit and upon the occurrence of any other activity with respect to any Letter of Credit (including without limitation, the transfer, amendment or cancellation of any Letter of Credit) determined in accordance with Bank's standard fees and charges then in effect for such activity. CLEAN AND DOCUMENTARY ACCEPTANCE SUBFEATURE: (a) Acceptance Subfeature. As a subfeature under this Note, Bank agrees from time to time during the term hereof to create banker's acceptances (each, an "Acceptance" and collectively, "Acceptances" ) for the account of Borrower (i) by accepting drafts drawn on Bank by Borrower for the purpose of financing Borrower's importation of goods into the United States and (ii) by accepting time drafts presented under usance commercial Letters of Credit issued by Bank for the account of Borrower under this Note; provided however, that the form and substance of each Acceptance shall be subject to approval by Bank, in its sole discretion and provided further, that the aggregate amount of all outstanding Acceptances shall not at any time exceed $250,000.00. Each Acceptance created by Bank's acceptance of a draft drawn on Bank by Borrower shall be in the minimum amount of $5,000.00. Each Acceptance shall be subject to the additional terms and conditions of an Acceptance Agreement in form and substance satisfactory to Bank. Each Acceptance shall be created for a term not to exceed the lesser of 180 days, as designated by Page 27 Borrower, or such period of time as may be necessary to comply with the terms of the Acceptance Agreement; provided however, that no Acceptance shall mature more than 30 days beyond the maturity date of this Note. The outstanding amount of all Acceptances shall be reserved under this Note and shall not be available for borrowings hereunder. The amount of each Acceptance which matures shall be deemed an advance under this Note and shall be repaid by Borrower in accordance with the terms and conditions of this Note; provided however that if advances hereunder are not available, for any reason, at the time any Acceptance matures, then Borrower shall immediately pay to Bank the full amount of such matured Acceptance, together with interest thereon from the date such Acceptance matures to the date such amount is fully repaid by Borrower, at the rate of interest applicable to advances hereunder. In such event Borrower agrees that Bank, in its sole discretion, may debit any demand deposit account maintained by Borrower with Bank for the amount of any such Acceptance. All Acceptances created by Bank's acceptance of drafts drawn on Bank by Borrower shall be discounted with Bank. Bank shall not be obligated to discount Acceptances created by Bank's acceptance of time drafts presented under usance commercial Letters of Credit. (b) Acceptance Fees. For each Acceptance created hereunder, Borrower shall pay to Bank on the date such Acceptance is created an acceptance fee determined in accordance with Bank's standard fees and charge then in effect for the creation of Acceptances. BORROWING AND REPAYMENT: (a) Use of Proceeds. Advances under this Note shall be available solely to finance working capital requirements. (b) Borrowing and Repayment. Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with, or at any time as a supplement to, this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above and provided further, that Borrower shall maintain a zero balance on advances under this Note for a period of at least 30 consecutive days during each fiscal year. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of any principal payments made hereon by or for any Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on June 28, 1998, except with respect to any draft paid by Bank under a commercial Letter of Credit and any Acceptance which matures subsequent to said date, the full amount of which shall be due and payable by Borrower immediately upon payment by Bank or at such maturity as applicable. (c) Advances. Advances hereunder, to the total amount of the principal sum available hereunder, may be made by the holder at the oral or written request of (i) DAVID N. RUCKERT or WILLIAM C. LAPWORTH, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any account of any Borrower with the holder, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of each Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account. The holder shall have no obligation Page 28 to determine whether any person requesting an advance is or has been authorized by any Borrower. EVENTS OF DEFAULT: Any default in the payment or performance of any obligation under this Note, or any denied event of default under any loan agreement now or at any time hereafter in effect between Borrower and Bank (whether executed prior to, concurrently with or at any time after this Note), shall constitute an "Event of Default" under this Note. MlSCELLANEOUS: (a) Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal, interest, fees and charges outstanding hereunder to be immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are expressly waived by each Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Each Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, and including any of the foregoing incurred in connection with any bankruptcy proceeding relating to any Borrower. (b) Obligations Joint and Several. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several. (c) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above. FIBERSTARS, INC. By: /s/ William C. Lapworth ----------------------------- Title: CFO --------------------------- Page 29 EX-11 5 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Exhibit 11 FIBERSTARS INC. COMPUTATION OF NET INCOME PER SHARE (in thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended 6/30/97 6/30/96 6/30/97 6/30/96 ------------------------ ------------------------ Primary and Fully Diluted: Weighted average common shares outstanding for the period 3,419 3,392 3,416 3,389 Common equivalent shares assuming conversion of stock options and warrants under the treasury stock method 296 142 251 137 ------------------------ ------------------------ Shares used in per share calculations 3,715 3,534 3,667 3,526 ======================== ======================== Net income $383 $177 $504 $245 Net income per share: $ 0.10 $ 0.05 $ 0.14 $ 0.07 Calculated in accordance with the guidelines of item 601 of Regulation S-B. Page 30
EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1997 APR-01-1997 JUN-30-1997 1,681 3,269 4,015 251 2,503 11,635 2,320 1,453 13,229 2,741 0 10,465 0 0 0 13,229 10,075 10,171 5,519 5,519 3,812 0 1 839 335 0 0 0 0 504 0.14 0.14
-----END PRIVACY-ENHANCED MESSAGE-----