Prepared by MerrillDirect





	 	EXHIBIT 10.1
	LOAN
  AGREEMENT	WELLS FARGO BANK



   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 form 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.


   I.   
REPRESENTATIONS AND WARRENTIES. 
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
through make 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 are no pending, or to the best of
Borrower’s knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency 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 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.





 


     (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, for each business in which Borrower is
engaged, insurance of the types and in amounts customarily carried in similar
lines of business, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers’ compensation, carried with
companies an 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; Laws and Regulations. 
Preserve and maintain all licenses, permits, governmental approvals,
rights, privileges and franchises necessary for the conduct of Borrower’s
business; and comply with the provisions of all documents pursuant to which
Borrower is organized and/or which govern Borrower’s continued existence and
with the requirements of all laws, rules, regulations and orders of any
governmental authority applicable to Borrower and/or its business, including
without limitation, 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)      Other
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
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.





   (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 an independent certified public accountant acceptable to Bank, to
include a balance sheet, income statement and statement of cash flow, 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 independent certified public accountant 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 grater 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 
1.25
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 annual basis, determined as of each fiscal year end, and pre-tax profit not
less than $1.00
on a year-to-date basis, determined as of the end of each fiscal quarter of each year,
and as of the end of their fiscal quarter of each year.


             (iv)       EBITDA Coverage Ratio is 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.


             (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 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 o 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
of the Loan Documents 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 under any of the Loan Documents 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 any of the Loan Documents,
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 as any party may designate by written notice to each other party,
and shall be deemed 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), expended or incurred by Bank in connection with (I)
the negotiation and preparation of this Agreement and the other Loan Documents,
and Bank’s continued administrative of each Credit, (iii) 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 of declaratory relief, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any
of the foregoing incurred in connection with any bankruptcy proceeding
(including without limitation, any adversary proceeding, contested matter or
motion brought by Bank or any other person) relating to Borrower or any other
person or entity.





   (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 or any Credit or the business of any such
guarantor, or any collateral for any Credit.


   (e)      Controlling Agreement; Amendment. 
In the even 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 be 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)     Serverability 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. 
The Agreement cancels and supersedes all prior loan agreements between
Borrower and Bank relating to any Credit.





   VI.   ARBITRATION


   (a)      Arbitration.  The
parties hereto agree, upon demand by any party, to submit to binding
arbitration all claims, disputes and controversies between or among them (and
their respective employees, officers, directors, attorneys, and other agents),
whether in tort, contract or otherwise arising out of or relating to in any way
(i) the loan and related Loan Documents which are the subject of this Agreement
and its negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,  default or termination; or (ii) requests for
additional credit.


   (b)     Governing Rules.  Any
arbitration proceeding will (i) proceed in a location in California selected by
the American Arbitration Association (“AAA”); (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the documents between the
parties; and (iii) be conducted by the AAA, or such other administrator as the
parties shall mutually agree upon, in accordance with the AAA’s commercial
dispute resolution procedures, unless the claim or counterclaim is at least
$1,000,000.00 exclusive of claimed interest, arbitration fees and costs in
which case the arbitration shall be conducted in accordance with the AAA’s
optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to , as applicable, as the “Rules”).  If there is any inconsistency between the
terms hereof and the Rules, the terms and procedures set forth herein shall
control.  Any party who fails or refuses
to submit to arbitration following a demand by any other party shall bear all
costs and be deemed to be a waiver by any party that is a bank of the
protections afforded to it under 12 U.S.C. §91 or any similar applicable state
law.


   (c.)     No Waiver; Provisional Remedies, Self-Help and
Foreclosure.  The arbitration requirement does not limit
the right of any party to (i) foreclose against real or personal property
collateral; (ii) exercise self-help remedies relating to collateral or proceeds
of collateral such as setoff or repossession; or (iii) obtain provisional or
ancillary remedies such as replevin, injunctive relief, attachment or the
appointment of a receiver, before during or after the pendency of any
arbitration proceeding.  This exclusion
does not constitute a waiver of the right or obligation of any party to submit
any dispute to arbitration or reference hereunder, including those arising from
the exercise of the actions detailed in sections (i), (ii), and (iii) of this
paragraph.


   (d)     Arbitrator Qualifications and Powers; Awards. 
Any arbitration proceeding in which the amount in controversy is $5,000,000.00
or less will be decided by a single arbitrator selected according to the Rules,
and who shall not render an award of grater than $5,000,000.00.  Any dispute in which the amount in
controversy exceeds $5,000,000.00 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.  The arbitrator will be a neutral attorney
licensed in the State of California or a neutral retired judge of the state of
federal judiciary of California, in either case with a minimum of ten years
experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated.  The
arbitrator will determine whether or not an issue is arbitratable and will give
effect to the statues of limitation in determining any claim.  In any arbitration proceeding the arbitrator
will decide (by documents only or with a hearing at the arbitrator’s
discretion) any pre-hearing motions which are similar to motions to dismiss for
failure to state a claim or motions for summary adjudication.  The arbitrator shall resolve all disputes in
accordance with e substantive law of California and may grant any remedy or
relief that a court of such state could order or grant within the scope hereof
and such ancillary relief as is necessary to make effective any award.  The arbitrator shall also have the power to
award recovery of all costs and fees, to impose sanctions and to take such
other action as the arbitrator deems 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. 
Judgement upon the award rendered by the arbitrator may be entered in
any court having jurisdiction.  The institution
and maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration if
any other party contests such action for judicial relief.





   (e)        Discovery: 
In any arbitration proceeding discover will be permitted accordance with
the Rules.  All Discovery shall be
expressly limited to matters directly relevant to the dispute being arbitrated
and must be competed no later than 20 days before the hearing date and within
180 days of the filing of the dispute with the AAA.  Any requests for an extension of the discovery periods, or any
discovery disputes, will be subject to final determination by the arbitrator
upon a showing that the request for discover is essential for the party’s
presentation and that no alternative means for obtaining information is
available.


  
(f)         Class Proceedings and Consolidations. 
The resolution of any dispute arising pursuant to the terms of this
Agreement shall be determined by a separate arbitration proceeding and such
dispute shall not be consolidated with other disputees or include in any class
proceedings.


  
(g)        Payment of Arbitration Costs And Fees. 
The arbitrator shall award all costs and expenses of the arbitration
proceeding.


    (h)       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, b any real property unless (i) the holder
of the mortgage, lien or security interest specifically elects in writing to
proceed with the arbitration, or (iii) all parties to the arbitration waive any
rights or benefits that might accrue 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 interest securing such
indebtedness and obligations, shall remain fully valid and enforceable.  If any Dispute is not submitted to
arbitration, the Dispute shall be referred to a referee in accordance with
California Cod of 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. 
Judgement 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.


    (i)        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.


 



IN
WITNESS WHEREOF, Borrower and Bank have executed this Agreement as of March 23,
2001.



 



Fiberstars,
Inc.



 


By: 
/s/ Robert A. Connors      


Title: Chief Financial Officer    


Address:          44259
Nobel Drive


                           Fremont, CA  94538


 



WELLS
FARGO BANK,

NATIONAL ASSOCIATION




 




By:  /s/ Laura Zaragoza                          
     
            




Title:
Wells Fargo Assistant Vice President    




 



Address:          121
Park Center Plaza 3rd Flr


                           San Jose, CA  95113