THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
AND
AMENDED AND RESTATED INVENTORY RIDER
(REVOLVING ADVANCES)

This THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (ACCOUNTS AND INVENTORY) AND
AMENDED AND RESTATED INVENTORY RIDER (REVOLVING ADVANCES) (this “Amendment”) is
entered into as of April 2, 2004 by and between COMERICA BANK, successor by
merger to Comerica Bank-California (“Bank”), with its principal place of
business at 333 West Santa Clara Street, San Jose, California 95113 and
FIBERSTARS, INC., a California cor poration (“Borrower”), with its principal
place of business at 44259 Nobel Drive, Fremont, California 94538.

RECITALS

A.   Borrower and Bank have previously entered into that certain Loan and
Security Agreement (Accounts and Inventory) dated as of December 7, 2001, as
amended by that certain First Amendment to Loan and Security Agreement (Accounts
and Inventory) and Amended and Restated Inventory Rider (Revolving Advances)
dated as of January 9, 2003, and that certain Second Amendment to Loan and
Security Agreement (Accounts and Inventory) and Amended and Restated Inventory
Rider (Revolving Advances) dated as of June 23, 2003 (as otherwise amended, the
“Loan Agreement”), together with that certain LIBOR Addendum to Loan & Security
Agreement dated December 7, 2001 (as amended, th e “LIBOR Addendum”) thereto and
that certain Amended and Restated Inventory Rider (Revolving Advances) dated
December 7, 2001 (as amended, the “Inventory Rider”). The Loan Agreement, LIBOR
Addendum, Inventory Rider and the other documents executed in connection
therewith are collectively referred to as the “Loan Documents.”

B.   Pursuant to the Loan Agreement, Bank has made available to Borrower a line
of credit (the “Line of Credit”) in an aggregate principal amount not to exceed
Five Million and 00/100 Dollars ($5,000,000.00) at any one time, on the terms
and conditions set forth more completely in the Loan Agreement.

C.   Borrower and Bank have agreed to amend the Loan Documents on the terms and
conditions set forth below.

AGREEMENT

For good and valuable consideration, receipt of which is hereby acknowledged,
the parties agree as set forth below.

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1.   Incorporation by Reference; Definitions. The foregoing Loan Documents and
the Recitals are incorporated herein by this reference as though set forth in
full herein. Any terms not defined herein shall have the meanings given in the
Loan Agreement.

2.   Amendment to the Loan Agreement. The Loan Agreement is hereby amended as
set forth below.

2.1   Amendment to Section 1.17 of the Loan Agreement. Eligible Accounts shall
only include Accounts of Borrower and not of its subsidiaries or affiliates.

2.2   Amendment to Section 3.1 of the Loan Agreement. Section 3.1 of the Loan
Agreement is hereby amended by deleting the first it in its entirety and
replacing it with the following:

“3.1   This Agreement shall remain in full force and effect until June 1, 2005,
unless earlier terminated by notice by Borrower. Notice of such termination by
Borrower shall be effectuated by mailing of a registered or certified letter not
less than thirty (30) days prior to the effective date of such termination,
addressed to Bank at the address set forth herein and the termination shall be
effective as of the date so fixed in such notice.

Notwithstanding the foregoing, should Borrower be in default of one or more of
the provisions of this Agreement, Bank may terminate this Agreement at any time
without notice. Notwithstanding the foregoing, should either Bank or Borrower
become insolvent or unable to meet its debts as they mature, or fail, suspend,
or go out of business, the other party shall have the right to terminate this
Agreement at any time without notice. On the date of termination all
Indebtedness shall become immediately due and payable without notice or demand;
no notice of termination by Borrower shall be effective until Borrower shall
have paid all Indebtedness to Bank in full. Notwithstanding termination, until
all Indebtedness has been fully satisfied, Bank shall retain its security
interest in all existing Collateral and Collateral arising thereafter, and
Borrower shall continue t o perform all of its obligations.

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3.2   After termination and when Bank has received payment in full of Borrower's
Indebtedness to Bank, Bank shall reassign to Borrower all Collateral held by
Bank, and shall execute a termination of all security agreements and security
interests given by Borrower to Bank.”

2.3   Amendment to Section 6.16(c)(3) of the Loan Agreement. Section 6.16(c)(3)
of the Loan Agreement is hereby amended by deleting it in its entirety.

2.4   Amendment to Section 6.17(a) of the Loan Agreement. The reference to “Six
Million Five Hundred Thousand Dollars ($6,500,000)” in Section 6.17(a) of the
Loan Agreement is hereby replaced with “Nine Million Eight Hundred Thousand
Dollars ($9,800,000).”

2.5   Amendment to Section 6.17(b) of the Loan Agreement. The reference to
“Eight Million Five Hundred Thousand Dollars ($8,500,000)” in Section 6.17(b) of
the Loan Agreement is hereby replaced with “Thirteen Million Dollars
($13,000,000).”

2.6   Amendment to Section 6.17(e) of the Loan Agreement. The reference to
“.95:1.00” in Section 6.17(e) of the Loan Agreement is hereby replaced with
“0.75:1.00”.

2.7   Amendment to Section 6.17(f) of the Loan Agreement. The reference to
“.95:1.00” in Section 6.17(f) of the Loan Agreement is hereby replaced with
“0.75:1.00”.

2.8   Amendment to Section 6.17(h) of the Loan Agreement. Section 6.17(h) of the
Loan Agreement is hereby replaced with the following:

“h. Borrower shall have a pre-tax loss of no greater than (i) negative Nine
Hundred Thousand Dollars (-$900,000) at any time measured on a consolidated
year-to-date basis, and (ii) negative Three Hundred Thousand Dollars (-$300,000)
measured on a cumulative and consolidated basis for the period ending December
31, 2004.

 
3.   Amendment to the Inventory Rider. The Inventory Rider is hereby amended as
set forth below.

3.1   Amendment to Section 1 of the Inventory Rider. Section 1 of the Inventory
Rider is hereby amended by deleting the term “One Million and no/100 Dollars
($1,000,000.00)” and replacing it with the term “Seven Hundred Fifty Thousand
Dollars ($750,000.00).”

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3.2   Amendment to Section 1(a) of the Inventory Rider. Section 1(a) of the
Inventory Rider is hereby replaced in its entirety with the following:

“(a) zero percent (0.00%) prior (i) to Bank’s receipt of audited consolidated
financial statements of Borrower prepared in accordance with GAAP for the year
ended December 31, 2004, consistently applied, together with an unqualified
opinion on such financial statements of an independent certified public
accounting firm reasonably acceptable to Bank, and (ii) confirmation of
Borrower’s pre-tax profits on a consolidated basis of greater than One Hundred
Thousand Dollars ($100,000). Thereafter, provided no Event of Default has
occurred and is existing, “Inventory Borrowing Base” shall have the meaning set
forth in 1(b).”
 
4.   No Amendment of Other Indebtedness; No Effect on Collateral. Except as
amended herein or in any document executed in connection herewith, the Loan
Agreement and the Loan Documents are and shall remain unmodified and in full
force and effect. Borrower ratifies and reaffirms the Indebtedness, without
setoff, defense, or counterclaim, and agrees fully and faithfully to pay,
perform and discharge, as and when payment, performance and discharge are due,
all of the Indebtedness under the Loan Agreement, as amended hereby. Nothing
herein shall be deemed to affect in anyway the Collateral that secures the
obligations under the Loan Agreement (as modified by this Amendment) or under
any other agreement now or in the fu ture.

5.   Conflicts. If a conflict exists between the provisions of the Loan
Documents and the provisions of this Amendment, the provisions of this Amendment
shall control.

6.   Further Assurances. Borrower agrees to make and execute such other
documents and/or take such other action and/or provide such further assurances
as may be requested by Bank in connection with the Indebtedness or as may be
necessary or required to effectuate the terms and conditions of this Amendment
and any documents executed in connection herewith.

7.   Future Modifications. Neither this Amendment nor any document executed
herein entitles, or implies any consent or agreement to, any further or future
modification of, amendment to, waiver of, or consent with respect to any
provision of the Agreement. Any amendments hereto shall be in writing and signed
by the parties.

8.   Integration. This Amendment and any documents executed in connection
herewith are integrated agreements, and supersede all negotiations and
agreements regarding the subject matter hereof and thereof, and taken together
with the Loan Documents and any documents executed in connection herewith,
constitute the final agreement of the parties with respect to the subject matter
hereof and thereof.

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9.   Severability. In the event any one or more of the provisions contained in
this Amendment is held to be invalid, illegal or unenforceable in any respect,
then such provision shall be ineffective only to the extent of such prohibition
or invalidity, and the validity, legality, and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.

10.   Interpretation. This Amendment and all agreements relating to the subject
matter hereof are the product of negotiation and preparation by and among each
party and its respective attorneys, and shall be construed accordingly. The
parties waive the provisions of California Civil Code §1654.

11.   Counterparts. This Amendment may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if all signatures
were upon the same instrument. Delivery of an executed counterpart of the
signature page to this Amendment by telefacsimile shall be effective as delivery
of a manually executed counterpart of this Amendment, and any party delivering
such an executed counterpart of the signature page to this Amendment by
telefacsimile to any other party shall thereafter also promptly deliver a
manually executed counterpart of this Amendment to such other party, provided
that the failure to deliver such manually executed counterpart shall not affect
the validity, enforceability , or binding effect of this Amendment.

IN WITNESS WHEREOF, the parties have caused this THIRD AMENDMENT TO LOAN AND
SECURITY AGREEMENT (ACCOUNTS AND INVENTORY) AND AMENDED AND RESTATED INVENTORY
RIDER (REVOLVING ADVANCES) to be executed as of the day and year first written
above.

 
FIBERSTARS, INC.

 
By:  __________________________                   
 
Title: _________________________

By:  __________________________                   
 
Title: _________________________

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COMERICA BANK

               
_____________________________

By:   Beau L. Barnes
Its:   Assistant Vice President

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