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
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE>
FIBERSTARS, INC.
STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
(Unaudited)
----------
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
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
======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>
Page 4
<PAGE>
<TABLE>
FIBERSTARS INC.
STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
----------
<CAPTION>
Six Months Ended June 30,
1997 1996
------- -------
<S> <C> <C>
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
======= =======
<FN>
The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>
Page 5
<PAGE>
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
<PAGE>
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
<PAGE>
FIBERSTARS, INC.
<TABLE>
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
<CAPTION>
Q2'97 Q2'96 change YTD'97 YTD'96 change
<S> <C> <C> <C> <C> <C> <C>
Net Sales ($000) $5,831 $4,316 35% $10,075 $8,062 25%
</TABLE>
<TABLE>
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
<CAPTION>
Q2'97 Q2'96 change YTD'97 YTD'96 change
<S> <C> <C> <C> <C> <C> <C>
Gross Profit ($000) $2,618 $1,886 39% $4,556 $3,441 32%
Percentage of net sales 45% 44% 45% 43%
</TABLE>
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.
<TABLE>
Research and Development
<CAPTION>
Q2'97 Q2'96 change YTD'97 YTD'96 change
<S> <C> <C> <C> <C> <C> <C>
Research & Development ($000) $303 $267 13% $588 $496 19%
Percentage of net sales 5% 6% 6% 6%
</TABLE>
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
<PAGE>
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.
<TABLE>
Selling and Marketing
<CAPTION>
Q2'97 Q2'96 change YTD'97 YTD'96 change
<S> <C> <C> <C> <C> <C> <C>
Selling & Marketing ($000) $1,354 $1,040 30% $2,498 $1,981 26%
Percentage of net sales 23% 24% 25% 25%
</TABLE>
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.
<TABLE>
General and Administrative
<CAPTION>
Q2'97 Q2'96 change YTD'97 YTD'96 change
<S> <C> <C> <C> <C> <C> <C>
General & Administrative ($000) $364 $322 13% $726 $629 15%
Percentage of net sales 6% 7% 7% 8%
</TABLE>
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.
<TABLE>
Other Income (Expense)
<CAPTION>
Q2'97 Q2'96 change YTD'97 YTD'96 change
<S> <C> <C> <C> <C> <C> <C>
Other Income (Expense) ($000) $42 $43 -2% $95 $85 12%
Percentage of net sales 1% 1% 1% 1%
</TABLE>
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.
<TABLE>
Net Income
<CAPTION>
Q2'97 Q2'96 change YTD'97 YTD'96 change
<S> <C> <C> <C> <C> <C> <C>
Net Income ($000) $383 $177 116% $504 $245 106%
Percentage of net sales 7% 4% 5% 3%
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
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
<PAGE>
(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
<PAGE>
(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.
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(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
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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.
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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
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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.
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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
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
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<PAGE>
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
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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
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
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$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
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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
<PAGE>
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
Exhibit 11
<TABLE>
FIBERSTARS INC.
COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
6/30/97 6/30/96 6/30/97 6/30/96
------------------------ ------------------------
<S> <C> <C> <C> <C>
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
<FN>
Calculated in accordance with the guidelines of item 601 of Regulation S-B.
Page 30
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,681
<SECURITIES> 3,269
<RECEIVABLES> 4,015
<ALLOWANCES> 251
<INVENTORY> 2,503
<CURRENT-ASSETS> 11,635
<PP&E> 2,320
<DEPRECIATION> 1,453
<TOTAL-ASSETS> 13,229
<CURRENT-LIABILITIES> 2,741
<BONDS> 0
<COMMON> 10,465
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,229
<SALES> 10,075
<TOTAL-REVENUES> 10,171
<CGS> 5,519
<TOTAL-COSTS> 5,519
<OTHER-EXPENSES> 3,812
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 839
<INCOME-TAX> 335
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 504
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
