SCHEDULE 14(a) INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [ X ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ X ] Definitive proxy statement
[ ] Definitive addition materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FIBERSTARS, INC.
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(Name of Registrant as Specified in Its Charter)
FIBERSTARS, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment Payment of filing fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transactions applies: N/A
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid: N/A
(2) Form, schedule or registration statement no.: N/A
(3) Filing party: N/A
(4) Date filed: N/A
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* Set forth the amount on which the filing fee is calculated and state how it
was determined.
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[Logo]
May 15, 1998
Dear Shareholder:
This year's annual meeting of shareholders will be held on Wednesday,
June 24, 1998 at 6:00 P.M. local time, at the Holiday Inn, San Jose North
(Milpitas/Silicon Valley), 777 Bellew Drive, Milpitas, California 95035. You are
cordially invited to attend.
The Notice of Annual Meeting of Shareholders and a Proxy Statement,
which describe the formal business to be conducted at the meeting, follow this
letter.
After reading the Proxy Statement, please promptly mark, sign, and
return the enclosed proxy in the prepaid envelope to assure that your shares
will be represented. Your shares cannot be voted unless you date, sign, and
return the enclosed proxy or attend the annual meeting in person. Regardless of
the number of shares you own, your careful consideration of, and vote on, the
matters before our stockholders are important.
A copy of the Company's 1997 Annual Report also is enclosed.
The Board of Directors and Management look forward to seeing you at the
annual meeting.
Very truly yours,
/s/ David N. Ruckert
--------------------------------
David N. Ruckert
Chief Executive Officer
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FIBERSTARS, INC.
2883 Bayview Drive
Fremont, California 94538
Notice Of Annual Meeting Of Shareholders
To Be Held Wednesday, June 24, 1998
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Fiberstars, Inc. (the "Company") will be held on Wednesday, June 24, 1998, at
6:00 P.M., local time, at the Holiday Inn, San Jose North (Milpitas/Silicon
Valley), 777 Bellew Drive, Milpitas, California 95035, for the following
purposes:
1. To elect seven (7) directors to serve for the ensuing year and
until their successors are elected and qualified;
2. To consider and vote upon a proposal to increase the number of
shares of the Company's Common Stock reserved for issuance under
its 1994 Stock Option Plan;
3. To consider and vote upon a proposal to increase the number of
shares of the Company's Common Stock reserved for issuance under
its 1994 Directors Stock Option Plan;
4. To ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent auditors for the fiscal year ending December
31, 1998; and
5. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 24, 1998
are entitled to notice of and to vote at the meeting and any adjournments or
postponements thereof.
FOR THE BOARD OF DIRECTORS
/s/ David N. Ruckert
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Chief Executive Officer
Fremont, California
May 15, 1998
IMPORTANT: Please fill in, date, sign and promptly mail the enclosed proxy card
in the accompanying post-paid envelope to assure that your shares are
represented at the meeting. If you attend the meeting, you may choose to vote in
person even if you have previously sent in your proxy card.
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
FIBERSTARS, INC.
2883 Bayview Drive
Fremont, California 94538
INFORMATION CONCERNING SOLICITATION AND VOTING OF PROXIES
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
Fiberstars, Inc., a California Corporation ("Fiberstars" or the "Company") for
use at the Annual Meeting of Shareholders (the "Annual Meeting") to be held on
June 24, 1998, or at any adjournments or postponements thereof, for the purposes
set forth herein and in an accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the Holiday Inn San Jose North
(Milpitas/Silicon Valley), 777 Bellew Drive, Milpitas, California 95035
The date of this Proxy Statement is May 15, 1998, the approximate date
on which this Proxy Statement and accompanying form of proxy were first sent or
given to Shareholders. The cost of soliciting these proxies will be borne by the
Company. Regular employees and directors of the Company may solicit proxies in
person, by telephone, or by mail. No additional compensation will be given to
employees or directors for such solicitation. The Company will request brokers
and nominees who hold stock in their names to furnish proxy material to
beneficial owners of the shares and will reimburse such brokers and nominees for
their reasonable expenses incurred in forwarding solicitation material to such
beneficial owners.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use either by delivering to the Company
(2883 Bayview Drive, Fremont, California 94538, Attention: David N. Ruckert) a
written notice of revocation or a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person. If a proxy is properly
signed and not revoked, the shares it represents will be voted in accordance
with the instructions of the shareholder.
Voting
Generally, each share of Common Stock entitles its holder to one vote
on matters to be acted upon at the Annual Meeting, including the election of
directors. However, if, prior to the voting to elect directors, any shareholder
gives notice at the Annual Meeting of his or her intention to cumulate his or
her votes, and if the names of the candidate or candidates for whom that
shareholder intends to vote have been placed in nomination prior to the voting,
then all shareholders may cumulate their votes for candidates in nomination.
This means that each shareholder may give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of shares he
or she holds, or such shareholder may distribute that total number of votes
among as many candidates as he or she thinks fit. The person authorized to vote
shares represented by executed proxies in the enclosed form (if authority to
vote for the election of directors is not withheld) will have full discretion
and authority to vote cumulatively and to allocate votes among any or all of the
nominees as he may determine or, if authority to vote for a specified candidate
or candidates has been withheld, among those candidates for whom authority to
vote has not been withheld. On all matters except the election of directors,
each share carries one vote.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Company's transfer agent, which will act as Inspector of
Elections. The Inspector of Elections will also determine whether or not a
quorum is present. Except with respect to the election of directors and except
in certain other specific circumstances, the affirmative vote of a majority of
shares represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute at least a majority
of the required quorum) is required under
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California law for approval of proposals presented to shareholders. In general,
California law also provides that a quorum consists of a majority of the shares
entitled to vote, represented either in person or by proxy. The Inspector of
Elections will treat abstentions as shares that are present and entitled to vote
for purposes of determining the presence of a quorum but as not voting for
purposes of determining the approval of any matter submitted to the shareholders
for a vote.
The shares represented by the proxies received, properly marked,
signed, dated and not revoked will be voted at the Annual Meeting. Where such
proxies specify a choice with respect to any matter to be acted upon, the shares
will be voted in accordance with the specifications made. Any proxy in the
enclosed form which is returned but is not marked will be voted FOR the election
of directors, FOR approval of the proposal to amend the 1994 Stock Option Plan
to increase the number of shares of the Company's Common Stock reserved for
issuance under the 1994 Stock Option Plan, FOR approval of the proposal to amend
the 1994 Directors' Stock Option Plan to increase the number of shares of the
Company's Common Stock reserved for issuance under the 1994 Directors' Stock
Option Plan, FOR the ratification of the appointment of the designated
independent auditors, and as the proxy holders deem advisable on other matters
that may come before the meeting. If a broker indicates on the enclosed proxy or
its substitute that it does not have discretionary authority as to certain
shares to vote on a particular matter ("broker non-votes"), those shares will
not be considered as voting with respect to that matter. While there is no
definitive statutory or case law authority in California concerning the proper
treatment of abstentions and broker non-votes, the Company believes that the
tabulation procedures to be followed by the Inspector of Elections are
consistent with the general statutory requirements in California concerning
voting of shares and determination of a quorum.
Record Date and Share Ownership
Only shareholders of record at the close of business on April 24, 1998
will be entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof. As of the record date, there were 3,555,056 shares of
Common Stock of the Company, par value $.0001 per share ("Common Stock"), issued
and outstanding.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Nominees
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the nominees named below, regardless of whether any other
names are placed in nomination by anyone other than one of the proxy holders. If
the candidacy of anyone or more of such nominees should, for any reason, be
withdrawn, the proxy holders will vote in favor of the remainder of those
nominated and for such substituted nominees, if any, as shall be designated by
the proxy holders, or the number of directors to be elected at this time may be
reduced by the Board of Directors. The Board of Directors has no reason to
believe that any of the persons named will be unable or unwilling to serve as a
nominee or as a director if elected.
If a quorum is present and voting, the nominees receiving the highest
number of votes will be elected as directors at the Annual Meeting to serve
until the next Annual Meeting and until their respective successors are elected
or appointed. Abstentions and shares held by brokers that are present, but not
voted because the brokers were prohibited from exercising discretionary
authority, i.e., "broker non-votes," will be counted as present for purposes of
determining if a quorum is present.
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As of the date of the Annual Meeting, the Company's Bylaws will provide
for the election of seven (7) directors. The names of the nominees, their ages
as of May 15, 1998, and their backgrounds are set forth below.
Name Age Director Since
- ---- --- --------------
John B. Stuppin 64 1993
David N. Ruckert 60 1987
Theodore L. Eliot, Jr. 70 1994
Michael Feuer, Ph.D. 55 1991
B.J. Garet 70 1995
Wayne R. Hellman 52 1997
Philip Wolfson 54 1987
Mr. Stuppin joined the Company as a director in February 1993 and was
elected Chairman of the Board in May 1995. Since September 1987, Mr. Stuppin has
served in various executive capacities with Neurological Technologies, Inc.
("NTI"), a biomedical development company he co-founded, and he currently serves
as a director of NTI. Mr. Stuppin also has been an investment banker and a
venture capitalist, with over 25 years of experience in the founding and
management of companies active in emerging technologies.
Mr. Ruckert joined the Company in November 1987 as President, Chief
Operating Officer and a director. He has served as Chief Executive Officer of
the Company since October 1988 and served as Secretary of the Company from
February 1990 to February 1994. From June 1985 to October 1987, he was Executive
Vice President of Greybridge, a toy company which he co-founded and that was
acquired by Worlds of Wonder in 1987. Prior to that time, he was Executive Vice
President of Atari from October 1982 to June 1984 and was a Manager/Vice
President of Bristol-Myers Company in New York from October 1966 to October
1982. Mr. Ruckert is also a director of Fiberstars Australasia Pty Ltd., a joint
venture of the Company.
Mr. Eliot has served as a director of the Company since May 1994. Mr.
Eliot retired from the United States Department of State in 1978 with the rank
of Ambassador. He served as the Dean of the Fletcher School of Law and Diplomacy
from 1979 to 1985 and as Secretary General for the United States of the
Bilderberg Meetings from 1981 to October 1993. Mr. Eliot also is a director of
Raytheon Company and NTI, a biomedical development company.
Dr. Feuer has served as a director of the Company since October 1991.
Since March 1992, Dr. Feuer has been president of Santa Clara Associates, Inc.,
and a general partner of Pacific Technology Fund, a venture capital firm in
Santa Clara, California. Prior to that time, Dr. Feuer was a technical partner
of Santa Clara Associates, Inc., from September 1987 to February 1992. From
April 1986 to September 1987, Dr. Feuer was President of Micro Integration
Corp., an integrated circuit company. From January 1984 to April 1986, he served
as Vice President, Engineering at Mentor Graphics, an electronic design
automation company.
Mr. Garet has served as a director of the Company since December 1995.
From 1984 until his retirement in 1993, Mr. Garet served as Chairman of Hanson
Lighting Group and Chief Executive Officer of USI Lighting. From 1973 to 1984,
he served in several executive capacities with U.S. Industries, Inc., a
diversified manufacturer of lighting and other products, where his
responsibilities included eight operating divisions.
Mr. Hellman has served as a director of the Company since September
1997. Since May 1995, Mr. Hellman has been chairman of the board and chief
executive officer of Advanced Lighting Technologies, Inc. ("ADLT"). From 1983
until May 1995, Mr. Hellman founded a total of seventeen affiliated companies
that specialize in the production and distribution of metal halide lighting
systems, all of which were eventually acquired by ADLT. From 1968 until 1983,
Mr. Hellman served in various capacities at General Electric, including Manager
of Strategy Analysis for the GE Lighting Business Group, Manager of Engineering
for the Photographic Lamp Department, and
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Manager of Metal Halide Product Engineering. While he was GE's Manager of Metal
Halide Product Engineering, Mr. Hellman developed what remains the standard in
metal halide technology.
Dr. Wolfson has served as a director of the Company since January 1986.
Dr. Wolfson has also served as a director and a consultant to NTI, a biomedical
development company. He has been Assistant Clinical Professor at the University
of California School of Medicine in San Francisco since 1986. Dr. Wolfson has
maintained a private practice in psychiatric medicine since 1982.
Board Meetings and Committees
The Board of Directors held a total of seven (7) meetings during the
fiscal year ended December 31, 1997. The Board of Directors has an Audit and
Finance Committee and a Compensation Committee. It does not have a nominating
committee or a committee performing the functions of a nominating committee.
The Audit and Finance Committee of the Board of Directors, which
currently consists of directors Eliot, Feuer, Garet, and Stuppin, held one (1)
meeting during fiscal year 1997. The Audit and Finance Committee reviews the
results and scope of the audit and other services provided by the Company's
independent auditors, and reviews the management of the Company's investments.
The Compensation Committee of the Board of Directors currently consists
of directors Eliot, Feuer, Garet, Stuppin and Wolfson, and held two (2) meetings
during fiscal year 1997. The Compensation Committee makes recommendations
concerning salaries and incentive compensation for employees of the Company and
administers the Company's stock plans and determines the terms and conditions of
stock option grants.
No incumbent director, except for director Feuer, attended fewer than
seventy-five percent of the aggregate number of meetings of the Board of
Directors and meetings of the committees of the Board of Directors on which he
serves.
Director Compensation
Each non-employee director receives $250 per Board or Committee meeting
attended to cover out-of-pocket expenses incurred in connection with such
attendance. During the fiscal year ended December 31, 1996, Messrs. Eliot,
Feuer, Garet, Hellman, Stuppin, and Wolfson received aggregate payments of
$2,000, $1,750, $2,250, $0, $2,500, $2,500 respectively, for their services as
directors.
Following his appointment as a director in June 1994, Mr. Eliot was
granted an option to purchase 10,000 shares of Common Stock at an exercise price
of $4.50 per share, which option has a ten-year term and vests in four equal
installments on the first four anniversaries of the date of his appointment to
the Board. Upon the effective date of the 1994 Directors' Stock Option Plan,
each of Messrs. Feuer, Eliot, Stuppin, Wang and Wolfson was automatically
granted an option to purchase 5,000 shares of Common Stock at an exercise price
of $4.50 per share, which options have ten-year terms and vest in twelve equal
monthly installments following the date of grant of the option. Dr. Wolfson,
under a consulting agreement with the Company dated August 25, 1994, received an
option to purchase 10,000 shares of the Company's Common Stock at an exercise
price of $5.875 per share (which was the fair market value of the Company's
Common Stock on the date of grant), which option vests in four equal
installments on the first four anniversaries of the date of the consulting
agreement. Dr. Wolfson does not receive any other compensation under the
consulting agreement. Subsequently, options have been granted automatically
under the Company's 1994 Directors' Stock Option Plan as follows, all of which
options have ten-year terms, vest in twelve equal monthly installments following
the date of grant of the option and have exercise prices equal to the fair
market value of the Company's Common Stock on the date of grant: Options to
purchase 5,000 shares each to Messrs. Stuppin, Eliot, Feuer, Wang and Wolfson
upon their election to the Board of Directors in May 1995 at an exercise price
per share of $5.625; options to purchase 5,000 shares each to Messrs. Stuppin,
Eliot, Feuer, Garet, and Wolfson upon their election to the Board of Directors
in May 1996 at an exercise price per share of $5.125; an option to purchase
10,000 shares to Mr. Garet upon his appointment as a director in December 1995
at an exercise price of $4.00 per share; options to purchase 5,000 shares to
Messrs. Stuppin, Eliot, Feuer, Garet, and Wolfson
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upon their election to the Board of Directors in May 1997 at an exercise price
per share of $4.625; and an option to purchase 10,000 shares to Mr. Hellman upon
his becoming a non-employee director in September 1997 at an exercise price of
$6.250 per share.
Required Vote
Seven (7) persons have been nominated by the Board of Directors for
election as directors at the Annual Meeting to serve until the next Annual
Meeting and until their respective successors are elected or appointed. The
seven (7) nominees receiving the highest number of votes at the Annual Meeting
will be elected as directors of the Company.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES LISTED
ABOVE.
PROPOSAL NO. 2: APPROVAL OF AMENDMENT TO 1994 STOCK OPTION PLAN
General
The Company's 1994 Stock Option Plan was adopted by the Board of
Directors and approved by the shareholders in 1994 (the "Option Plan"). As of
April 24, 1998, an aggregate of 83,350 shares were available for future grants
under the Option Plan. Of the shares available for grant, 47,659 shares were
originally issuable pursuant to options granted under the Company's 1988 Stock
Option Plan, which options were canceled, such that they were then available for
grant under the Option Plan pursuant to its terms.
The shareholders are being asked to approve the amendment to increase
the number of shares of Common Stock reserved for issuance under the Option Plan
by 500,000 shares from 850,000 to 1,350,000. The Board of Directors believes
that the availability of an adequate stock option program is an important factor
in attracting and retaining qualified officers, employees and consultants
essential to the success of the Company and in aligning their long-term
interests with those of the shareholders.
Summary of the Provisions of the Option Plan
The following summary of the Option Plan is qualified in its entirety
by the specific language of the Option Plan, a copy of which is available to any
shareholder upon request.
General
The Option Plan provides for the grant of incentive stock options
within the meaning of section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and nonstatutory stock options. As of April 24, 1998,
4,088 of the options to purchase Common Stock granted under the Option Plan had
been exercised, options to purchase an aggregate of 807,850 shares remained
outstanding, and options to purchase 83,350 shares remained available for future
grant under the Option Plan.
Shares Subject to Plan
The shareholders have previously authorized the reservation of an
aggregate of 850,000 shares of the Company's authorized but unissued or
reacquired shares of Common Stock for issuance upon the exercise of options
granted under the Option Plan. In addition, the Option Plan permits the issuance
of shares subject to options granted under the 1988 Stock Option Plan which
expire or are cancelled. As of April 24, 1998, there were 105,830 shares subject
to outstanding options under the 1988 Stock Option Plan. The Option Plan imposes
a limit under which no employee may receive in any fiscal year options to
purchase in excess of 750,000 shares (the
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"Grant Limit"). Appropriate adjustments will be made to the shares subject to
the Option Plan, to the Grant Limit, and to outstanding options upon any stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company. To
the extent that any outstanding option under the Option Plan expires or
terminates prior to exercise in full or if shares issued upon exercise of an
option are repurchased by the Company, the shares of Common Stock for which such
option is not exercised or the repurchased shares are returned to the Option
Plan and become available for future grant.
Administration
The Option Plan is administered by the Board of Directors or a duly
appointed committee of the Board (hereinafter referred to as the "Board").
Subject to the provisions of the Option Plan, the Board determines the persons
to whom options are to be granted, the number of shares to be covered by each
option, whether an option is to be an incentive stock option or a nonstatutory
stock option, the timing and terms of exercisability of each option or the
vesting of shares acquired upon the exercise of an option, including the effect
thereon of an optionee's termination of service, the exercise price of and the
type of consideration to be paid to the Company upon the exercise of each
option, the duration of each option, and all other terms and conditions of the
options. The Board will interpret the Option Plan and options granted
thereunder, and all determinations of the Board will be final and binding on all
persons having an interest in the Option Plan or any option.
Eligibility
Options may be granted under the Option Plan to employees, directors
and consultants of the Company or of any present or future corporations
affiliated with the Company. As of April 24, 1998, the Company had approximately
sixty-three (63) employees, including six (6) executive officers. The Company's
six (6) non-employee directors are ineligible under the Option Plan. The Option
Plan also permits options to be granted to prospective employees and consultants
in connection with written offers of employment or engagement, provided that
such options may not become exercisable prior to the individual's commencement
of service. While any person eligible under the Option Plan may be granted a
nonstatutory option, only employees may be granted incentive stock options.
Terms and Conditions of Options
Each option granted under the Option Plan is evidenced by a written
agreement between the Company and the optionee specifying the number of shares
subject to the option and the other terms and conditions of the option,
consistent with the requirements of the plan. The exercise price of each
incentive stock option granted under the Option Plan, as well as any
nonstatutory option granted to any of the Company's executive officers named in
the Summary Compensation Table (See "Executive Compensation and Other Matters"),
must equal at least the fair market value of a share of the Company's Common
Stock on the date of grant. The exercise price of any incentive stock option
granted to a person who at the time of grant owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or any
parent or subsidiary corporation of the Company (a "Ten Percent Shareholder")
must be at least 110% of the fair market value of a share of the Company's
Common Stock on the date of grant. On April 24, 1998, the closing price of a
share of the Company's Common Stock was $5.75 as reported on the Nasdaq National
Market.
The method of payment of option exercise price is determined by the
Board, and payment may be made in cash, by check, promissory note, other shares
of Common Stock that, in the case of shares acquired upon exercise of an option,
have been beneficially owned by the optionee for at least six months, with a
fair market value on the surrender date equal to the aggregate exercise price of
the shares as to which such option shall be exercised, or authorization from the
Company to retain from the total number of shares as to which the option is
exercised that number of shares having a fair market value on the date of
exercise equal to the exercise price for the total number of shares as to which
the option is exercised. The Company may also authorize as payment the delivery
of a properly executed notice and irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds required to
pay the exercise price and any applicable income or employment taxes or delivery
of an irrevocable subscription agreement for the shares that irrevocably
obligates the optionholder to take and pay
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for the shares not more than twelve months after the date of delivery of the
subscription agreement. The Board may also authorize payments by any combination
of the above methods or such other consideration and method of payment for the
issuance of shares to the extent permitted under applicable laws.
Option grants under the Option Plan become exercisable and vested at
such times and subject to such conditions as specified by the Board. Generally,
options granted under the Option Plan become exercisable in installments over a
period of time specified by the Board at the time of grant, subject to the
optionee's continued services with the Company. However, the Board also may
grant options that are exercisable immediately on and after the date of grant,
subject to the right of the Company to reacquire at the optionee's exercise
price any unvested shares held by the optionee under termination of service or
if the optionee attempts to transfer any unvested shares. Shares acquired under
such options generally vest in installments subject to the optionee's continued
service. The Option Plan provides that the maximum term of an incentive stock
option is ten years, unless granted to a Ten Percent Shareholder, in which case
the maximum term is five years. Consistent with the Internal Revenue Code of
1986, as amended (the "Code"), the Option Plan does not limit the term of a
nonstatutory stock option (except as described in the preceding sentence).
Options are nontransferable by the optionee other than by will or by the laws of
descent and distribution, and are exercisable during the optionee's lifetime
only by the optionee. However, under the Option Plan, a nonstatutory stock
option may be assignable or transferable to the extent permitted by the Board
and set forth in the option agreement.
Transfer of Control
The Option Plan provides that in the event of the proposed dissolution
or liquidation of the Company, options granted pursuant to the Option Plan will
terminate immediately prior to the consummation of the proposed action, unless
otherwise provided by the Board. The Board may, in its sole discretion, declare
that any such options will terminate as of a date fixed by the Board, and give
each optionee the right to exercise their option as to all or any part of the
shares subject to such options, including shares as to which the options would
not otherwise be exercisable. The Option Plan further provides that in the event
of a proposed (i) sale of all or substantially all of the assets of the Company,
or (ii) merger of the Company with or into another corporation, the Company's
outstanding options will be assumed or an equivalent option substituted by such
acquiring or successor corporation or its parent or subsidiary, unless the
Board, in its sole discretion, and in lieu of such assumption or substitution,
gives optionees the right to exercise their options as to some or all of the
shares subject to such options, including shares as to which the options would
not otherwise be exercisable.
Termination or Amendment
The Option Plan will continue in effect until the earlier of its
termination by the Board or the date on which all shares available for issuance
under the Option Plan have been issued and all restrictions on such shares under
the terms of the plan and the option agreements have lapsed, provided that all
incentive stock options must be granted within ten years of April 28, 1994, the
date on which the Board approved the Option Plan. The Board may terminate or
amend the Option Plan at any time. However, without shareholder approval, the
Board may not adopt any revision or amendment requiring shareholder approval in
order to preserve the qualification of the Plan under Rule 16b-3, or any change
in the limitation on grants to employees per fiscal year as other changes that
would require shareholder approval to qualify options granted under the Option
Plan as performance-based compensation under Section 162(m) of the Code,
including an increase in the total number of shares of Common Stock issuable
under the Option Plan. No amendment may adversely affect an outstanding option
without the consent of the optionee, unless the amendment is required to
preserve the option's status as an incentive stock option or is necessary to
comply with any applicable law.
Summary of United States Federal Income Tax Consequences of the Option Plan
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law of participation
in the Option Plan and does not attempt to describe all possible federal or
other tax consequences of such participation or tax consequences based on
particular circumstances.
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Incentive Stock Options
An optionee recognizes no taxable income for regular income tax
purposes as the result of the grant or exercise of an incentive stock option
qualifying under section 422 of the Code. Optionees who do not dispose of their
shares for two years following the date the option was granted nor within one
year following the exercise of the option normally will recognize a long-term
capital gain or loss equal to the difference, if any, between the sale price and
the purchase price of the shares. If an optionee satisfies such holding periods
upon a sale of the shares, the Company will not be entitled to any deduction for
federal income tax purposes. If an optionee disposes of shares within two years
after the date of grant or within one year from the date of exercise (a
"disqualifying disposition"), the difference between the fair market value of
the shares on the exercise date and the option exercise price (not to exceed the
gain realized on the sale if the disposition is a transaction with respect to
which a loss, if sustained, would be recognized) will be taxed as ordinary
income at the time of disposition. Any gain in excess of that amount will be a
capital gain. If a loss is recognized, there will be no ordinary income, and
such loss will be a capital loss. A capital gain or loss will be mid-term or
long-term if the optionee's holding period is more than 12 months. Any ordinary
income recognized by the optionee upon the disqualifying dispositions of the
shares generally should be deductible by the Company for federal income tax
purposes, except to the extent such deduction is limited by applicable
provisions of the Code or the regulations thereunder.
The difference between the option exercise price and the fair market
value of the shares on the exercise date of an incentive stock option is an
adjustment in computing the optionee's alternative minimum taxable income and
may be subject to an alternative minimum tax which is paid if such tax exceeds
the regular tax for the year. Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition, certain basis
adjustments for purposes of computing the alternative minimum taxable income on
a subsequent sale of the shares and certain tax credits which may arise with
respect to optionees subject to the alternative minimum tax.
Nonstatutory Stock Options
Options not designated or qualifying as incentive stock options will be
nonstatutory stock options. Nonstatutory stock options have no special tax
status. An optionee generally recognizes no taxable income as the result of the
grant of such an option. Upon exercise of a nonstatutory stock option, the
optionee normally recognizes ordinary income in the amount of the difference
between the option exercise price and the fair market value of the shares on the
exercise date. If the optionee is an employee, such ordinary income generally is
subject to withholding of income and employment taxes. Upon the sale of stock
acquired by the exercise of a nonstatutory stock option, any gain or loss, based
on the difference between the sale price and the fair market value on the
exercise date, will be taxed as capital gain or loss. A capital gain or loss
will be long-term if the optionee's holding period is more than 12 months. No
tax deduction is available to the Company with respect to the grant of a
nonstatutory stock option or the sale of the stock acquired pursuant to such
grant. The Company generally should be entitled to a deduction equal to the
amount of ordinary income recognized by the optionee as a result of the exercise
of a nonstatutory stock option, except to the extent such deduction is limited
by applicable provisions of the Code or the regulations thereunder.
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the votes cast at the Annual
Meeting of Shareholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present and voting, either
in person or by proxy, is required for approval of this proposal. Abstentions
and broker non-votes will each be counted as present for purposes of determining
the presence of a quorum. Abstentions will have the same effect as a negative
vote. Broker non-votes, on the other hand, will have no effect on the outcome of
the vote.
The Board of Directors believes that the increase in the share reserve
of the Option Plan is in the best interests of the Company and the shareholders.
THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THE INCREASE IN THE SHARE RESERVE OF THE OPTION PLAN.
8
<PAGE>
PROPOSAL NO. 3: APPROVAL OF AMENDMENT TO 1994 DIRECTORS' STOCK OPTION PLAN
General
The Company's 1994 Directors' Stock Option Plan was adopted by the
Board of Directors and approved by the shareholders in 1994 (the "Directors'
Plan"). The Directors' Plan provides for the automatic grant of nonstatutory
stock options to members of the Board of Directors who are not employees of the
Company. Currently, the Company has six (6) nonemployee directors. As of April
24, 1998, an aggregate of 40,000 shares were available for future grants under
the Directors' Plan.
The shareholders are being asked to approve the amendment to increase
the number of shares of Common Stock reserved for issuance under the Directors'
Plan by 50,000 shares from 150,000 to 200,000. The Board of Directors believes
that the approval of the amendment of the Directors' Plan is in the best
interests of the Company and its stockholders because the availability of stock
options is an important factor in attracting and retaining qualified nonemployee
directors essential to the success of the Company.
Summary of the Provisions of the Directors' Plan
The following summary of the Directors' Plan is qualified in its
entirety by the specific language of the Directors' Plan, a copy of which is
available to any shareholder upon request.
General. The Directors' Plan provides for the automatic grant of
nonstatutory stock options to nonemployee directors of the Company. As of April
24, 1998, none of the options to purchase Common Stock granted under the
Directors' Plan had been exercised, options to purchase an aggregate of
approximately 110,000 shares remained outstanding and approximately 40,000
shares remained available for future grant under the Directors' Plan.
Shares Subject to Plan. Currently, a maximum of 150,000 shares of the
authorized but unissued or reacquired shares of the Common Stock of the Company
may be issued upon the exercise of options granted pursuant to the Directors'
Plan. In the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or similar change in the
capital structure of the Company, appropriate adjustments will be made to the
shares subject to the Directors' Plan, to the terms of automatic option grants
under the plan, and to outstanding options. To the extent that any outstanding
option under the Directors' Plan expires or terminates prior to exercise in full
or if shares issued upon the exercise of an option are repurchased by the
Company, the shares of Common Stock for which such option is not exercised or
the repurchased shares are returned to the plan and become available for future
grants.
Administration. The Directors' Plan is administered by the Board of
Directors or a duly appointed committee of the Board (hereinafter referred to as
the "Board"). Although the Directors' Plan is designed to work automatically
without administration, to the extent administration is necessary, the Board is
authorized to interpret the Directors' Plan and options granted thereunder, and
all determinations of the Board will be final and binding on all persons having
an interest in the Directors' Plan or any option.
Eligibility. Only directors of the Company who are not at the time of
option grant employees of the Company or of any parent or subsidiary corporation
of the Company (the "Outside Directors") are eligible to participate in the
Directors' Plan. Currently, the Company has six (6) Outside Directors.
Automatic Grant of Options. The Directors' Plan provides that each
Outside Director who first serves on the Board after August 18, 1994 (the
"Effective Date") automatically will be granted an option to purchase 10,000
shares of Common Stock on the date of his or her initial election or
appointment. The Directors' Plan also provides for the annual automatic grant of
an additional option to purchase 5,000 shares of Common Stock on the date of
each Annual Meeting of the Company's shareholders at which each nonemployee
director is elected to the
9
<PAGE>
Board, provided that on such date, he or she shall have served on the Board for
at least three months prior to the date of such Annual Meeting.
Terms and Conditions of Options. Each option granted under the
Directors' Plan will be evidenced by a written agreement between the Company and
the Outside Director specifying the number of shares subject to the option and
the other terms and conditions of the option, consistent with the requirements
of the Directors' Plan. The per share exercise price of any option granted under
the Directors' Plan must equal the fair market value of a share of the Company's
Common Stock on the date of grant. Generally, the fair market value of the
Common Stock will be the closing price of the Company's Common Stock on the date
of grant as reported on the Nasdaq National Market. As of April 24, 1998, the
closing price of the Company's Common Stock, as reported on the Nasdaq National
Market, was $5.75 per share. No option granted under the Directors' Plan is
exercisable after the expiration of 10 years after the date such option is
granted, subject to earlier termination in the event the optionee's service as a
director of the Company ceases or in the event of an acquisition, dissolution or
liquidation of the Company, as discussed below (see "Transfer of Control").
Shares subject to options granted under the Directors' Plan will vest and become
exercisable in twelve (12) equal monthly installments following the date of
grant.
Generally, the exercise price may be paid in cash, by check, or in cash
equivalent. During the lifetime of the optionee, the option may be exercised
only by the optionee. An option may not be transferred or assigned, except by
will or the laws of descent and distribution.
Transfer of Control. The Directors' Plan provides that in the event of
the proposed dissolution or liquidation of the Company, options granted pursuant
to the Directors' Plan will terminate immediately prior to the consummation of
the proposed action, unless otherwise provided by the Board. The Board may, in
its sole discretion, declare that any such options will terminate as of a date
fixed by the Board, and give each optionee the right to exercise their option as
to all or any part of the shares subject to such options, including shares as to
which the options would not otherwise be exercisable. The Directors' Plan
further provides that in the event of a proposed (i) sale of all or
substantially all of the assets of the Company, or (ii) merger of the Company
with or into another corporation which results in the transfer of ownership of
more than fifty percent (50%) of the voting power of the Company, the Company's
outstanding options will be assumed or an equivalent option substituted by such
acquiring or successor corporation or its parent or subsidiary, unless the
Board, in its sole discretion, and in lieu of such assumption or substitution,
gives optionees the right to exercise their options as to some or all of the
shares subject to such options, including shares as to which the options would
not otherwise be exercisable.
Termination or Amendment. The Directors' Plan will continue until
February 2004, unless earlier terminated by the Board. The Board may terminate
or amend the Directors' Plan at any time, but, the Board may not adopt an
amendment to the Directors' Plan which would require shareholder approval under
any law or regulation, including an amendment increasing the total number of
shares of Common Stock reserved for issuance thereunder without the approval of
the shareholders. No termination or amendment of the Directors' Plan may
adversely affect an outstanding option without the consent of the optionee.
Summary of Federal Income Tax Consequences of the Directors' Plan
The federal income tax consequences of the options granted under the
Directors' Plan are the same as the federal income tax consequences described
for nonstatutory stock options granted pursuant to the Option Plan set forth
above.
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the votes cast at the Annual
Meeting of Shareholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present and voting, either
in person or by proxy, is required for approval of this proposal. Abstentions
and broker non-votes will each be counted as present for purposes of determining
the presence of a quorum. Abstentions will have the same effect as a negative
vote. Broker non-votes, on the other hand, will have no effect on the outcome of
the vote.
10
<PAGE>
The Board of Directors believes that the increase in the share reserve
of the Directors' Plan is in the best interests of the shareholders and the
Company for the reasons stated above. THEREFORE, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE INCREASE IN THE SHARE
RESERVE OF THE DIRECTORS PLAN.
PROPOSAL NO. 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Coopers & Lybrand
L.L.P., independent public accountants, to audit the financial statements of the
Company for the fiscal year ending December 31, 1998, and recommends that
shareholders vote for ratification of this appointment. In the event the
shareholders do not ratify such appointment, the Board of Directors will
reconsider its selection. Representatives of Coopers & Lybrand L.L.P. are
expected to be present at the Annual Meeting. They will have an opportunity to
make a statement if they desire to do so and will be able to respond to
appropriate questions from the stockholders.
The ratification of the appointment of Coopers & Lybrand L.L.P. as the
Company's independent auditors requires the affirmative vote of the holders of a
majority of the shares of Common Stock present at the Annual Meeting in person
or by proxy and entitled to vote.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND L.L.P., AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE YEAR ENDING DECEMBER 31, 1998.
11
<PAGE>
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of April 24, 1998 as to
(i) each person known by the Company to own beneficially more than five percent
of the outstanding shares of Common Stock, (ii) each director of the Company or
director nominee who beneficially owns shares, (iii) each of the executive
officers of the Company named in the Summary Compensation Table, and (iv) all
executive officers and directors of the Company as a group. Unless otherwise
specified, the address for each officer and director is 2883 Bayview Drive,
Fremont, California 94538
<CAPTION>
Shares Beneficially Owned
---------------------------
Percent
Name and Address (1) Number of Total
-------------------- ------ --------
<S> <C> <C>
Advanced Lighting Technologies, Inc. (2)
Wayne Hellman
2307 E. Aurora Rd., Suite 1
Twinsburg, OH 44087 ............................... 1,029,677 28.9
David N. Ruckert (3)* ............................. 221,573 6.1
Philip Wolfson (4)................................ 144,842 4.0
George K. Awai (5)................................. 121,823 3.4
Michael Feuer (6)
P.O. Box 1704
Palo Alto, CA 94302-1704........................... 106,401 3.0
John B. Stuppin (7)................................ 94,166 2.6
Barry R. Greenwald (8)............................. 56,987 1.6
J. Steven Keplinger (9)............................ 47,142 1.3
Theodore L. Eliot, Jr. (10)........................ 31,000 *
B. J. Garet (11)................................... 20,000 *
Frederick Martin (12).............................. 13,731 *
J. Arthur Hatley (13).............................. 5,000 *
All officers and directors as a group
(12 persons)(14)................................... 1,892,342 48.1
<FN>
- -----------------------------
* Less than one percent.
1) To the Company's knowledge, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this table.
2) Includes 1,023,011 shares held by Advanced Lighting Technologies, Inc., of
which Mr. Hellman is President and as to which Mr. Hellman disclaims
beneficial ownership. Also includes 6,666 shares subject to outstanding
stock options held by Mr. Hellman that are exercisable on or before June
23, 1998.
3) Includes 87,500 shares subject to outstanding stock options exercisable on
or before June 23, 1998.
12
<PAGE>
4) Includes 40,000 shares subject to outstanding stock options exercisable on
or before June 23, 1998 as well as 12,500 shares subject to a fully
exercisable warrant.
5) Includes 3,750 shares subject to outstanding stock options exercisable on
or before June 23, 1998.
6) Includes 33,802 shares subject to outstanding stock options exercisable on
or before June 23, 1998.
7) Includes 32,500 shares subject to outstanding stock options exercisable on
or before June 23, 1998.
8) Includes 53,800 shares subject to outstanding stock options exercisable on
or before June 23, 1998.
9) Includes 44,581 shares subject to outstanding stock options exercisable on
or before June 23, 1998.
10) Includes 1,000 owned by the Eliot Trust, of which Mr. Eliot is a
beneficiary. Also, includes 30,000 shares subject to outstanding stock
options exercisable on or before June 23, 1998.
11) Includes 20,000 shares subject to outstanding stock options exercisable on
or before June 23, 1998.
12) Includes 12,500 shares subject to outstanding stock options exercisable on
or before June 23, 1998.
13) Includes 5,000 shares subject to outstanding stock options exercisable on
or before June 23, 1998.
14) Includes 382,599 shares subject to outstanding stock options exercisable on
or before June 23, 1998.
</FN>
</TABLE>
13
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
Summary Compensation Table
<TABLE>
The following table sets forth all compensation paid to the Company's
Chief Executive Officer and certain other executive officers whose total annual
salary and bonus exceeded $100,000 during the year ended December 31, 1997
Summary Compensation Table
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Awards
--------------------------------------- ------------
Securities
Underlying All Other
Fiscal Options/ Compensation
Name and Principal Position Year Salary($) Bonus($) SARs(#) (1)
- ------------------------------------ ------ --------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C>
David N. Ruckert 1997 $171,000 -- 50,000 $4,741
President and Chief 1996 $156,000 -- 50,000 $4,188
Executive Officer 1995 $156,000 -- 50,000 $3,635
Barry Greenwald 1997 $80,000 $99,920 30,000 $831
Senior Vice President, Pool 1996 $70,000 $76,620 15,000 $690
& Spa Division 1995 $70,000 $97,247 -- $570
J. Steven Keplinger 1997 $115,000 -- 30,000 $408
Senior Vice President, 1996 $115,000 -- 33,000 $378
Operations & Retail Products 1995 $100,000 $10,000 12,000 $350
J. Arthur Hatley 1997 $76,000 $49,879 25,000 $186
Vice President and 1996 $69,000 $36,624 10,000 --
General Manager, 1995 -- -- -- --
Commercial Lighting
Fredrick Martin 1997 $111,304 -- 80,000 $17,138
Senior Vice President, Research 1996 -- -- -- --
Engineering and Communications 1995 -- -- -- --
<FN>
(1) Represents premiums paid on life insurance policies for the officer's
benefit.
</FN>
</TABLE>
14
<PAGE>
<TABLE>
The following table sets forth certain information for the year ended
December 31, 1997 with respect to stock options granted to the individuals named
in the Summary Compensation Table above.
Option/SAR Grants in Fiscal Year 1997
<CAPTION>
Individual Grants in Fiscal 1997
----------------------------------------------------------------------------------------
Number of Securities % of Total Options/SARs
Underlying Options/ Granted to Employees in Exercise or Base Expiration
Name SARs Granted (#)(1) Fiscal Year Price ($/Share)(2) Date(3)
- ------------------- -------------------- ------------------------- ------------------ ------------
<S> <C> <C> <C> <C>
David N. Ruckert 50,000 16.6% $5.50 12/5/02
Barry Greenwald 30,000 10% $5.50 12/5/02
J. Steven Keplinger 30,000 10% $5.50 12/5/02
J. Arthur Hatley 25,000 8.3% $5.50 12/5/02
Fredrick Martin 50,000 16.6% $4.75 2/14/02
Fredrick Martin 30,000 10% $5.50 12/5/02
<FN>
(1) Such stock options vest as to 25% of the shares covered by the respective
options on each anniversary of the grant date, becoming fully vested on the
fourth anniversary of the date of grant. Under the terms of the Company's
1994 Stock Option Plan, the Board of Directors or a duly appointed
committee of the Board retains the discretion, subject to certain
limitations within the Option Plan, to modify, extend, or renew outstanding
options and to reprice outstanding options, and to accelerate the vesting
of options in the event of any merger, consolidation, or reorganization in
which the Company is not the surviving corporation. Options may be repriced
by canceling outstanding options and reissuing new options with an exercise
price equal to the fair market value on the date of reissue which may be
lower than the original exercise price of such canceled options.
(2) The exercise price on the date of grant was equal to 100% of the fair
market value on the date of grant.
(3) Subject to earlier termination upon certain events related to termination
of employment.
</FN>
</TABLE>
Option Exercises and Fiscal 1997 Year End Value
<TABLE>
The following table provides certain information concerning exercises
of options to purchase the Company's Common Stock in the fiscal year ended
December 31, 1997, and unexercised options held as of December 31, 1997, by the
persons named in the Summary Compensation Table.
Aggregate Options/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at Fiscal In-the-Money Options/SARs at
Year End (#) Fiscal Year-End ($)(1)
Shares Acquired --------------------------- -----------------------------
Name on Exercise (#) Value Realized ($) Exercisable / Unexercisable Exercisable / Unexercisable
- ------------------ -------------- ----------------- --------------------------- -----------------------------
<S> <C> <C> <C> <C>
David N. Ruckert 44,000 94,425.20 75,000 / 125,000 $9,375 / $15,625
Barry Greenwald 0 0 53,580 / 51,750 $6,697.50 / $6,468.75
Steven Keplinger 0 0 41,581 / 63,750 $5,197.63 / $7,968.75
J. Arthur Hatley 0 0 5,000 / 35,000 $625 / $4,370
Fredrick Martin 0 0 0 / 80,000 $0 / $47,500
<FN>
(1) Based upon the closing price of the Company's Common Stock on the Nasdaq
National Market on the last trading day of fiscal 1997, which was $5.625.
</FN>
</TABLE>
15
<PAGE>
CHANGES TO BENEFIT PLANS
1994 Stock Option Plan. The Board of Directors of the Company has
adopted, subject to stockholder approval, an amendment to the 1994 Stock Option
Plan to increase the maximum number of shares that may be issued thereunder by
500,000 shares. See "PROPOSAL TO AMEND 1994 STOCK OPTION PLAN." As of April 24,
1998, no grant of options had been made to any person conditioned upon
stockholder approval of the increase in the share reserve of the 1994 Stock
Option Plan.
1994 Directors' Stock Option Plan. The Board of Directors of the
Company has adopted, subject to stockholder approval, an amendment to the 1994
Directors' Stock Option Plan to increase the maximum number of shares that may
be issued thereunder by 50,000 shares. See "PROPOSAL TO AMEND 1994 DIRECTORS
STOCK OPTION PLAN." As of April 24, 1998, no grant of options had been made to
any person conditioned upon stockholder approval of the increase in the share
reserve of the 1994 Directors' Stock Option Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1987, the Company loaned David N. Ruckert, an officer and director,
the amount of $75,000 in connection with the purchase of shares of Common Stock.
The loan, which bears interest at the rate of 9% per year, was due on December
9, 1997. The Board of Directors of the company and Mr. Ruckert are currently
discussing extending the term of and making other modifications to the structure
of this loan.
In 1996, the Company made certain loans to Barry R. Greenwald, an
officer, in the aggregate amount of $125,000, and bearing interest at the rate
of 8% per year in connection with his purchase of a permanent residence. On
March 25, 1997, the loans were restructured as one loan in the amount of
$125,000, which bore interest at 8% per year, compounded monthly, and was due
and payable in full on December 31, 1999. Because of principle and interest
repayment by Mr. Greenwald, this loan was restructured on March 15, 1998 as a
loan in the amount of $106,600, bearing interest at 8% per year, compounded
monthly, repayable in monthly installments of principle and accrued interest and
due in full on December 31, 1999, or upon any earlier termination of Mr.
Greenwald's employment with the Company. The loan is secured by all shares of
the Company's Common Stock owned by Mr. Greenwald acquired pursuant to the terms
of the Company's 1994 Employee Stock Purchase Plan, the Company's 1988 Stock
Option Plan and 1994 Stock Option Plan, and any shares issuable or potentially
issuable pursuant to the 1988 Stock Option Plan and the 1994 Stock Option Plan.
The outstanding balance of the loan as of April 24, 1998 was $107,536.54.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
ten percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) reports they file.
With the exception of the inadvertent failure to timely file a Form 3
with respect to Fredrick N. Martin, an officer of the Company, and Form 4's with
respect to Michael D. Ernst, Lawrence Yung and Belfield Services, Inc., a
Liberian corporation, who were a director and two greater than ten percent
beneficial owners, respectively, which failures were subsequently corrected, to
the Company's knowledge, based solely upon review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 1997, all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were timely met.
16
<PAGE>
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be
presented by such shareholders at the Company's 1999 Annual Meeting of
Shareholders must be received by the Company no later than December 31, 1998 to
be considered for inclusion in the proxy statement and form of proxy relating to
such meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
Annual Meeting. If any other matters properly come before the Annual Meeting,
then the persons named in the enclosed form of proxy will vote the shares they
represent in such manner as the Board may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ DAVID N. RUCKERT
DAVID N. RUCKERT
President, Chief Executive Officer, Chief Operating
Officer and Director
Dated: May 15, 1998
17
<PAGE>
APPENDIX A
FIBERSTARS, INC.
Proxy for Annual Meeting of Shareholders
-------------------------------------
<TABLE>
<CAPTION>
The undersigned hereby appoints David N. Ruckert, John B. Stuppin and Cindy Udermann, or any of
them, proxy and attorney-in-fact, with full power to designate a substitute representative, to represent
the undersigned and to vote all of the shares of stock in Fiberstars, Inc., a California corporation (the
"Company"), which the undersigned is entitled to vote at the Annual Meeting of the Shareholders of the
Company to be held at the Holiday Inn, San Jose North (Milpitas/Silicon Valley), 777 Bellew Drive,
Milpitas, California 95035, Wednesday, June 24, 1998 at 6:00 P.M. local time, and at any adjournment
thereof as hereinafter specified upon the proposals listed below and as more particularly described in
the Proxy Statement of the Company dated May 15, 1998 (the "Proxy Statement"), receipt of which is hereby
acknowledged.
1. A vote FOR the election of the following individuals is recommended
by the Board of Directors:
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE
NOMINEE'S NAME IN THE LIST BELOW.)
<S> <C> <C> <C>
Theodore L. Eliot, Jr. Michael Feuer, Ph.D. B.J. Garet Wayne R. Hellman
David N. Ruckert John B. Stuppin Philip Wolfson
[ ] FOR [ ] WITHHOLD AUTHORITY [ ] ABSTAIN
2. A vote FOR the approval of the proposal to amend the 1994 Stock Option Plan to increase the
number of shares of the Company's Common Stock reserved for issuance under the Plan is
recommended by the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. A vote FOR the approval of the proposal to amend the 1994 Directors Stock Option Plan (the
"Directors Plan") to increase the number of shares of the Company's Common Stock reserved for
issuance under the Directors Plan is recommended by the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. A vote FOR the ratification of the appointment of Coopers & Lybrand L.L.P. as the company's
independent auditors for the year ending December 31, 1998 is recommended by the Board of
Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Theshares represented hereby will be voted as specified. If no specification is made, such
shares will be voted FOR the above proposals 1, 2, 3 and 4.
Dated: ________ , 1998 Signature(s) _______________________________________
(Be sure to date Proxy) ____________________________________________________
____________________________________________________
Print or type shareholder's name
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT
THIS MEETING REGARDLESS OF THE NUMBER OF SHARES YOU
HOLD. PLEASE DATE, SIGN, AND RETURN THE PROXY
PROMPTLY IN THE ENCLOSED, STAMPED ENVELOPE.
I plan to attend the meeting.
Yes _____ No _____
(Please print address change (if any) on label below)
</TABLE>
