Document:

Execution
      Copy

     

    
CONFIDENTIAL
      TREATMENT REQUESTED.  CONFIDENTIAL

    PORTIONS
      OF THIS DOCUMENT HAVE BEEN REDACTED

    AND
      HAVE BEEN SEPARATELY FILED WITH THE COMMISSION

    

    EQUIPMENT
      PURCHASE AND PRODUCT SUPPLY AGREEMENT

    

    

    1. PARTIES

    

    This
      Equipment Purchase and Product Supply Agreement (“Agreement”) is entered into by
Venture
      Lighting International, Inc.
      (“VLI”),
      an Ohio corporation with its principal place of business at 32000 Aurora Road,
      Solon, OH 44139, and Fiberstars,
      Inc.,
      an Ohio
      corporation (“FIBERSTARS”) with its principal place of business at 32000 Aurora
      Road, Solon, OH 44139.

    

    2. RECITALS

    

    2.1 FIBERSTARS.
      FIBERSTARS is in the business of supplying fiber optic lighting systems to
      industry and end users. FIBERSTARS is engaged in developing and marketing fiber
      optic lighting systems which utilize metal halide arc tubes as a light
      source.

    

    2.2 VLI.
      VLI has
      experience in and is in the business of manufacturing metal halide lamps, arc
      tubes and related lighting products.

    

    2.3 Purpose.
      FIBERSTARS and VLI desire to enter into a mutually beneficial commercial
      relationship through the purchase of the MACHINE by FIBERSTARS and the
      engagement of VLI to produce and supply Products to FIBERSTARS using the
      MACHINE.

    

    3. DEFINITIONS

    

    3.1 Equipment.
      The
      various items of component equipment supplied by third party vendors which
      VLI
      has incorporated into the MACHINE and which may hereafter be added to or
      incorporated into the MACHINE will be collectively referred to as the
      "EQUIPMENT." The term MACHINE will be inclusive of all EQUIPMENT.

    

    3.2 Formed
      Body.
“Formed
      Body” shall mean a quartz tube which has an arc chamber formed in it that is
      compatible with the MACHINE. At the time of this Agreement, only Formed Bodies
      with “necked” tubes are compatible with the MACHINE.

    

    3.3 License
      Agreement.
      Shall
      mean the License Agreement the form of which is attached hereto in Exhibit
      A. 

    

    3.4 Machine.
      “MACHINE shall mean VLI’s used Tipless Low Watt Arc Tube Pinch & Exhaust
      Machine, as more particularly described in Exhibit
      B.
      

    

    3.5 Products.
      “Product” or “Products” shall mean the metal halide arc tube(s) without an
      exhaust tip on the arc chamber(s), for use solely in the “Fiberoptic Field of
      Use”, as such are specified and described on the attached Exhibit
      C. For
      purposes of this section, “Fiberoptic Field of Use” means lighting applications
      or systems (and components of such systems) which include both (A) a remote
      light source, and (B) either (i) fiberoptics, or (ii) light pipes, or (iii)
      other light guides, for conveying light from the remote source, but excluding
      applications in Civilian Transportation (described below), television, and
      projection. Modifications or additions to such description shall require the
      mutual agreement of the parties as reflected in an amendment to this Agreement.
      Civilian
      Transportation
      shall
      mean all passenger automobiles, commercial (non-military) aircrafts, trucks,
      motorcycles, and off road vehicles, but excludes ships, RVs (recreation
      vehicles), limousines and mining equipment and other industrial or military
      vehicles or equipment.

    

    
      
        
        

      

      
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    3.6 Product
      Specifications.
      “Product Specifications” shall mean the specifications set forth on the attached
Exhibit
      C.
      

     

    3.7 Technical
      Documentation.
      Current
      engineering drawings, technical manuals and other technical documents describing
      the operation, maintenance and process of the MACHINE, sufficient for reasonably
      trained and qualified FIBERSTARS’ personnel to properly and effectively operate
      and maintain the MACHINE without the assistance of VLI, will be collectively
      referred to as the "TECHNICAL DOCUMENTATION.”

    

    3.8 Technical
      Training.
      Training on the use of the MACHINE to produce Products will be referred to
      as
      the “TECHNICAL TRAINING.” 

    

    3.9 Technical
      Services.
      Technical guidance available to FIBERSTARS from VLI during the installation,
      trial operations and testing of the MACHINE at a FIBERSTARS facility, as well
      as
      other engineering services, will be collectively referred to as the "TECHNICAL
      SERVICES.”

    

    3.10 Term.
“Term”
      shall have the meaning set forth in Paragraph 9.1 of this
      Agreement.

    

    3.11 VLI
      Technology.
“VLI
      Technology” shall mean all tangible and intangible know-how, trade secrets,
      inventions (patented and unpatented), data, and other information relating
      to
      the design, fabrication, assembly, and operation of the MACHINE and the
      processes employed on the MACHINE by VLI to manufacture Products.

    

    

    4. PURCHASE
      AND SALE OF THE MACHINE

    

    4.1 Machine.
      VLI
      hereby agrees to sell, and, subject to acceptance as provided in Section 5.1,
      FIBERSTARS hereby agrees to purchase the MACHINE, subject to the terms and
      conditions of this Agreement. The MACHINE is being sold in an “as is” condition,
      without any warranty, express or implied, except as provided in Paragraph
      7.

    

    (a) Technical
      Documentation.
      At the
      time the MACHINE is delivered to FIBERSTARS’ facility, and FIBERSTARS has paid
      VLI the license fee if required by Paragraph 9.4, if any, FIBERSTARS may order
      the current TECHNICAL DOCUMENTATION from VLI, and VLI will provide it, at VLI’s
      then prevailing hourly rates and reimbursable expense policies, with the total
      price thereof not to exceed Ten Thousand Dollars ($10,000.00). FIBERSTARS shall
      treat the TECHNICAL DOCUMENTATION as “VLI Confidential Information”, as such
      term is defined in Paragraph 10, and shall restrict its disclosure to third
      parties in the manner required by Paragraph 10.

    

    
      
        
        

      

      
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    The
      TECHNICAL DOCUMENTATION shall be prepared in the English language and shall
      refer to the English measurement system normally used by VLI. Delivery of
      TECHNICAL DOCUMENTATION shall require VLI to provide FIBERSTARS with: two (2)
      written (paper) sets and one (1) electronic copy (using Microsoft Word or other
      mutually agreed upon software)

    

    VLI
      shall
      deliver to FIBERSTARS the TECHNICAL DOCUMENTATION at least fifteen (15) days
      prior to delivery of MACHINE under this Agreement. FIBERSTARS shall inspect
      the
      TECHNICAL DOCUMENTATION for completeness within fifty (50) days after the date
      of its receipt, and promptly will advise VLI if FIBERSTARS discovers that it
      is
      not complete. Notwithstanding the foregoing, if errors, in the TECHNICAL
      DOCUMENTATION are discovered, VLI promptly will correct them, and VLI also
      will
      provide up to twenty (20) hours of TECHNICAL SERVICES to FIBERSTARS via
      telephone, without charge and designed to overcome any such inaccuracy so that
      the period during which FIBERSTARS’ use of the MACHINE is adversely affected by
      any such inaccuracy is a short as possible. 

    

    At
      VLI’s
      sole discretion, VLI may track the number of hours spent preparing the TECHNICAL
      DOCUMENTATION. If VLI has provided the original version of the TECHNICAL
      DOCUMENTATION, two (2) rounds of revisions based on FIBERSTARS’ concerns, and
      logged at least one hundred forty (140) hours of time preparing the TECHNICAL
      DOCUMENTATION, then the TECHNICAL DOCUMENTATION will be deemed complete upon
      delivery, even
      if incomplete
      and VLI
      shall have no further obligations regarding the preparation or revision of
      the
      TECHNICAL DOCUMENTATION.

    

    (b) Technical
      Training.
      At the
      time the MACHINE is delivered to a FIBERSTARS’ facility, and FIBERSTARS has paid
      VLI the applicable license fee if required by Paragraph 9.4, below, VLI will
      provide, without additional charge, up to sixty (60) hours of TECHNICAL TRAINING
      to FIBERSTARS’ personnel. 

    

    (c) Technical
      Services.
      Upon
      FIBERSTARS request, VLI shall provide up to one hundred sixty (160) hours of
      on-site TECHNICAL SERVICES to make the MACHINE operational at VLI’s standard
      hourly rates, plus actual, reasonable travel and living expenses.

    

    4.2 Site
      Preparation.
      The
      proper and timely construction of the installation site for the MACHINE at
      FIBERSTARS’ facility and the process support services (infrastructure for water,
      power, etc.) shall be the responsibility of FIBERSTARS and shall conform to
      the
      written infrastructure requirements provided by VLI. Within thirty (30) days
      following its receipt of Fiberstars’ written notice to VLI of FIBERSTARS’
election to terminate the bailment and take possession of the MACHINE, VLI
      will
      deliver to FIBERSTARS, in writing, the infrastructure requirements which shall
      be limited to the following: Pipe drawings, list of utilities, list of
      electrical requirements and physical layout.

    

    
      
        
        

      

      
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    4.3 Modification
      of Terms.
      No
      addition to or modification of the terms and conditions of the purchase and
      sale
      of the MACHINE, whether contained in a purchase order or otherwise, shall be
      binding upon either party unless specifically agreed to by both parties, in
      writing. 

    

    4.4 Purchase
      Price.
      The
      purchase price for the MACHINE and a schedule of payments of the purchase price
      are set forth in Exhibit
      D.
      

    

    4.5 Form
      of Payment.
      All
      payments to be made by FIBERSTARS to VLI for the purchase of the MACHINE shall
      be made by wire transfer in U.S. Dollars through VLI’s bank, as described in
      written instructions provided by VLI. 

    

    4.6 Sale
      of the Machine by FIBERSTARS.
      During
      the first seven (7) years following the Effective Date of this Agreement, (the
      “Restricted Sale Period”) if FIBERSTARS receives a bonafide third party offer to
      purchase the MACHINE from any third party, then FIBERSTARS shall have the right,
      subject to a written assignment and assumption of the License Agreement (and
      all
      of FIBERSTARS’ obligations therunder) approved in writing by VLI, to sell the
      MACHINE to such third party only upon compliance with the
      following:

    

    (i) FIBERSTARS
      will provide a written notice of the proposed transaction to VLI, including
      identifying the proposed purchaser and the agreed price;

    

    (ii) The
      proposed sale must provide for the delivery of the MACHINE to such third party
      on a date not less than ten (10) months from the date a copy of such offer
      is
      delivered to VLI;

    

    (iii) VLI
      will
      provide a written notice to FIBERSTARS, either exercising or rejecting this
      right of first refusal, not less than forty-five (45) days after the notice
      of
      the foregoing third party purchase offer is delivered to VLI; and

    

    (iv) If
      VLI
      exercises this right of first refusal, VLI shall purchase the MACHINE from
      FIBERSTARS, at a price equal to the lesser of: (A) the price offered by such
      third party, or (B) the sum of the net book value of the MACHINE and the License
      Agreement, as reflected in FIBERSTARS’ accounting records, determined and
      payable as of the date of the proposed sale.

    

    (v)
       If
      VLI
      does not exercise the right of first refusal, their written approval is required
      to sell the Machine to the third party.

    

    Except
      as
      otherwise provided within the provisions of the License Agreement, upon the
      expiration of the Restricted Sale Period, FIBERSTARS may sell the MACHINE and
      transfer the License, without restriction. 

     

    
      
        
        

      

      
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    5 BAILMENT
      OF THE MACHINE

    

    5.1 Bailment.
      

    

    
      	 	
              a)

            	
              The
                MACHINE is being sold “AS IS” condition. However, certain requirements and
                criteria for performance acceptance tests as described in Exhibit
                E will
                be performed. Once the acceptable level of performance has been achieved,
                a “Certificate of Acceptance” in the form described on Exhibit
                F
                shall be signed by both parties. The passage of title passes from
                VLI to
                FIBERSTARS at the time/date that the “Certificate of Acceptance” is
                executed.

            

    

    

    
      	 	
              b)

            	
              On
                and after the sale date of the MACHINE to FIBERSTARS, VLI agrees
                to retain
                possession of the MACHINE at a facility owned or operated by VLI,
                or one
                of its subsidiaries or affiliates, and use the MACHINE for the purpose
                of
                manufacturing Products for and on behalf of FIBERSTARS for the Term
                of
                this Agreement, or until the bailment is terminated by FIBERSTARS,
                whichever first occurs. Title to the MACHINE shall remain vested
                in
                FIBERSTARS during the period of this bailment. FIBERSTARS shall have
                the
                right to inspect the MACHINE during VLI’s normal business hours upon
                delivery of reasonable prior notice. VLI shall not acquire by this
                Agreement any right, title or interest, legal or equitable, in the
                MACHINE
                except for what is granted under the terms of this
                Agreement.

            

    

    

    5.2 Operational
      Costs.
      During
      the period of bailment, VLI shall pay all costs associated with the use,
      maintenance and repair of the MACHINE, including but not limited the replacement
      of parts, components and equipment as required, however, all such costs shall
      be
      included in the definition of “Full Cost” as set forth in Paragraph 6.2(a). VLI
      shall maintain the MACHINE in good condition and in accordance with VLI’s
      standard practices and shall deliver the MACHINE to FIBERSTARS at FIBERSTARS’
expense at the termination of the bailment in such condition, normal wear and
      tear excepted.

    

    5.3 Other
      Uses of the MACHINE by VLI.
      In
      exchange for the payment of One Hundred Twenty Thousand Dollars ($120,000.00)
      from VLI to FIBERSTARS payable in twenty four (24) monthly installments of
      Five
      Thousand Dollars ($5,000.00) each, VLI shall have the right, during the first
      twenty four (24) months after the Effective Date, to use the MACHINE for its
      own
      account and for the account of VLI’s other customers, in its sole discretion
      (the “VLI Use”) so long as, and to the extent that, such VLI Use does not hinder
      or delay the fulfillment of, or the delivery of Products pursuant to, Purchase
      Orders issued by FIBERSTARS pursuant to the forecast(s) provided by FIBERSTARS
      to VLI pursuant to Paragraph 6.10. Notwithstanding the foregoing, in the event
      this Agreement is terminated for any reason, on a date prior to twenty four
      (24)
      months after the Effective Date, then VLI shall have no further obligation
      to
      make payments hereunder.

     

    5.4 Damage
      to the MACHINE.
      FIBERSTARS shall procure and maintain insurance to insure the MACHINE at its
      purchase price for loss or damage occasioned by fire, theft, negligence or
      vandalism while the MACHINE is in possession of VLI. VLI shall use the proceeds
      of such insurance if delivered to VLI by FIBERSTARS to repair, renovate or
      replace the MACHINE, as directed by FIBERSTARS. Any deficiency in the amount
      of
      insurance proceeds to accomplish any such action shall be paid by FIBERSTARS.
      Notwithstanding the foregoing, if the Machine is damaged or destroyed in whole
      or in part as a result of the negligence or intentional misconduct of VLI,
      its
      employees, invitees, agents or contractors, VLI shall be liable to FIBERSTARS
      in
      an amount equal to the cost of repairing or replacing such damage or
      destruction.

    

    
      
        
        

      

      
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    5.5 Termination
      of Bailment.
      Within
      thirty (30) days after the expiration or earlier termination of the Term of
      this
      Agreement, VLI shall ship the MACHINE, at FIBERSTARS’ cost, to a location
      designated by FIBERSTARS, and shall provide the TECHNICAL TRAINING as set forth
      in Paragraph 4.1 and, to the extent purchased by FIBERSTARS, the TECHNICAL
      DOCUMENTATION and the TECHNICAL SERVICES pursuant to the provisions of Paragraph
      4.1. Notwithstanding the foregoing, and without limitation on VLI’s rights under
      Paragraph 4.6, during the first five (5) years following the expiration or
      earlier termination of the Term of this Agreement, VLI shall have the following
      rights to purchase the MACHINE: 

    

    (i)
      a
      right of first refusal to purchase the MACHINE at the price set forth in a
      bona
      fide, arms length purchase offer from a third party, which offer must provide
      for the delivery of the MACHINE to such third party on a date not less than
      ten
      (10) months from the date a copy of such offer is delivered to VLI. In
      connection with the foregoing right of first refusal, VLI will provide a written
      notice to FIBERSTARS, either exercising or rejecting such right of first
      refusal, not less than 45 days after the notice of the foregoing third party
      purchase offer is delivered to VLI; or 

    

    (ii)
      upon
      receipt of notification from FIBERSTARS that the MACHINE is no longer needed
      by
      FIBERSTARS for the manufacture of Products, VLI shall have the right to purchase
      the MACHINE at its then depreciated book value as reflected in FIBERSTARS’
accounting records. 

    

    6. PURCHASE
      OF PRODUCTS

    

    6.1 Purchase
      and Sale.
      FIBERSTARS agrees to purchase one hundred percent (100%) of the FIBERSTARS’
Products requirements exclusively from VLI pursuant to the terms and conditions
      of this Agreement; provided, however, that if: (a) VLI is unable to produce
      Product(s) which meet the Product Specifications; or (b) VLI acknowledges its
      inability to produce a particular Product, or (c) VLI is unable to meet the
      agreed upon delivery dates for a particular Purchase Order, then FIBERSTARS
      may
      purchase such specific Product from another source until such time as VLI
      advises FIBERSTARS of its ability to produce and deliver such Product in
      accordance with the terms and conditions of this Agreement. 

    

    6.2 Unit
      Prices.
      The
      unit price(s) for Products effective from the Effective Date until June 30,
      2007
      are set forth in Exhibit
      G.
      All
      unit prices are and shall be exclusive of taxes, duties, tariffs, freight
      charges, and in transit insurance, the payment of which shall be the
      responsibility of FIBERSTARS.  Annually,
      beginning July 1, 2007, the unit prices for Products on Exhibit
      G
      shall be
      amended annually (to be effective on July 1 of the applicable year through
      June
      30 of the following year) based on the following: 

    
      
        
        

      

      
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            	a)	
              The
                annual revised Product prices shall be determined on or before July
                1st
                of
                each year, based on VLI’s current “Full Cost” to manufacture and sell each
                Product to FIBERSTARS (excluding the depreciation expense for the
                MACHINE,
                which MACHINE shall be owned by FIBERSTARS and used in the production
                of
                the Products)
                plus
                Thirty-Three
                percent (33%)
                of
                such full cost of such Product. For purposes of this Agreement, “Full
                Cost” shall have the meaning set forth on Exhibit
                H attached
                hereto. 

            

    

    

    
      	 	
              b)

            	
              On
                or before July 1, of each year, VLI shall establish its “Full Cost”. VLI
                will review the annual “Full Cost” calculation with FIBERSTARS’ financial
                management. 

            

    

    

    
      	 	
              c)

            	
              The
                annual revised Product prices shall not be increased during the year
                unless VLI’s material costs have increased by more than five percent (5%)
                during the year. In the event VLI’s material costs increase by more than
                five percent (5%) during the year, VLI may unilaterally increase
                the
                Product prices to recoup any material costs above the five percent
                (5%)
                increase, provided however, that prior to any price increase VLI
                shall
                first deliver to FIBERSTARS reasonable documentary evidence..
                

            

    

    

    Other
      products that may be required by FIBERSTARS during the Term may be added by
      an
      amendment to this Agreement.    

    

    6.3 Purchase
      Orders.
      FIBERSTARS shall initiate each order for Products by the delivery to VLI of
      a
      written purchase order (the “Purchase Order”), setting forth the quantity to be
      ordered, the applicable unit price, and requested delivery date(s). Acceptable
      delivery dates are a function of order quantities and shall be by mutual
      agreement, negotiated in good faith between the parties; provided, however:
      (i)
      VLI shall commence delivery of Products ordered by FIBERSTARS pursuant to the
      “firm” Purchase Order(s) (first four weeks) under the forecast(s) required under
      Paragraph 6.10 within thirty (30) days after receipt of each such Purchase
      Order; (ii) with regard to any Purchase Order in excess of the forecasted
      amounts provided under Paragraph 6.10, VLI shall use its best efforts to
      commence delivery of the Products within the requested delivery time, however,
      VLI shall have no obligation to deliver such Products earlier than ninety (90)
      days after its acceptance of each such Purchase Order.

    

    6.4 Acceptance
      of Orders.
      Each
      Purchase Order shall be deemed to be an offer by FIBERSTARS to purchase Products
      from VLI pursuant to the terms of this Agreement, to the exclusion of any
      additional or contrary terms set forth in the form of Purchase Order or any
      other document submitted by FIBERSTARS. Any Purchase Order submitted by
      FIBERSTARS to VLI shall be subject to written acceptance by VLI within seven
      (7)
      business days after receipt of the Purchase Order by VLI. In the event VLI
      fails
      to respond or reject such Purchase Order within seven (7) business days after
      receipt of the Purchase Order by VLI, then such Purchase Order shall be deemed
      to be accepted by VLI, however, if any such Purchase Order is in excess of
      the
      most current forecast provided by FIBERSTARS pursuant to Paragraph 6.10, then
      such Purchase Order shall be deemed rejected unless accepted pursuant to a
      written notice delivered from VLI to FIBERSTARS.

    

    
      
        
        

      

      
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    6.5 Delivery.
      Unless
      otherwise agreed upon in a writing executed by both VLI and FIBERSTARS, all
      deliveries of the Products shall be in VLI’s original packaging and shall be FOB
      VLI’s shipping dock. “Delivery” shall occur and
      title
      to
      the Products and all risk of damage to or loss of the Products shall pass to
      FIBERSTARS upon receipt and/or pick up of the Products at VLI’s shipping dock by
      FIBERSTARS or a carrier designated by FIBERSTARS. All in-transit insurance
      premiums, freight charges and other expenses of delivery shall be at FIBERSTARS’
expense. The failure of FIBERSTARS to inspect and reject nonconforming items
      via
      a written notice to VLI within thirty (30) days after delivery shall be deemed
      acceptance of such items by FIBERSTARS with full responsibility for
      payment.

    

    6.6 Payment.
      VLI
      will issue to FIBERSTARS an invoice for the Products on the date of delivery.
      FIBERSTARS will pay invoices prepared and delivered in accordance with this
      Agreement within forty-five (45) days following date of invoice. If FIBERSTARS
      has a good faith dispute concerning any portion of an invoice from VLI,
      FIBERSTARS will, within such forty-five (45) day period, pay the undisputed
      portion, deliver a written notice to VLI describing in reasonable detail the
      reasons why the invoice is disputed, and may withhold the disputed portion
      pending resolution of the dispute in accordance with the provisions of Paragraph
      11.9, below. If undisputed amounts are paid when due, VLI agrees that it may
      not
      withhold performance of any of its obligations under this Agreement. If an
      undisputed amount or
      any
      disputed amount that is later determined to have been payable is
      not
      paid when due, VLI will provide a written notice thereof to FIBERSTARS, and
      FIBERSTARS will pay such amount within thirty (30) additional days following
      receipt of such notice. Any such amounts that are not paid within the foregoing
      timeframe shall be “Delinquent”. If any amount is Delinquent, that shall be
      deemed a material breach of this Agreement.

    

    6.7 Manufacturing
      Process.
      The
      Products shall be manufactured in conformity with the Product Specifications.
      All process changes for manufacturing the Products may be made at the discretion
      of VLI without the consent of FIBERSTARS. The aforementioned Products shall
      meet
      the internal quality standard of Products adopted by VLI. Should FIBERSTARS
      decide to fund research and development for improvements to such process, the
      details of such funding, the scope of the research and development, the
      procedures by which any modifications are to be incorporated into the process
      utilized for the manufacture of Products under this Agreement, and the ownership
      of such improvements shall all be documented in a separate agreement between
      FIBERSTARS and VLI.  

    

    6.8 Quality
      Assurance.
      VLI
      shall perform quality assurance tests and inspections as it deems reasonably
      necessary to screen Products prior to shipment. Records of relevant
      manufacturing parameters and quality assurance data on a run-by-run basis will
      be made available to FIBERSTARS upon request.

    

    6.9 Specification
      Changes.
      FIBERSTARS and VLI anticipate that it may be desirable during the term of this
      Agreement to amend the Product Specifications. Such amendments to the Product
      Specifications shall be made by mutual agreement of VLI and FIBERSTARS. If
      such
      Product Specification changes require or allow a change in pricing, such pricing
      changes shall be by mutual agreement and shall be reflected in a revision to
      Exhibit
      C
      pursuant
      to an amendment to this Agreement.

    

    
      
        
        

      

      
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    6.10 Forecasts.
      FIBERSTARS is obligated to continually provide a six (6) month rolling forecast
      of Product requirements (by type and quantity) to VLI, such forecast to be
      updated monthly. All Product requirements forecasted for the first four (4)
      weeks of the six (6) month forecast are considered a firm, non-cancelable
      Purchase Order. 

    

    7. REPRESENTATIONS
      AND WARRANTIES

    

    7.1 Intellectual
      Property Representation.
      Each of
      the parties represents and warrants to the other that: (i) it owns all right,
      title and interest in its own technology; (ii) its technology does not infringe
      or constitute a misappropriation of any intellectual property rights of any
      third party; and (iii) it has not entered into any agreement inconsistent with
      this Agreement or has not otherwise granted to any third party any rights
      inconsistent with the rights granted to the other party under this Agreement.
      No
      rights to technology or proprietary data are created or transferred by this
      Agreement. VLI’s current technology, processes, equipment (other than the
      EQUIPMENT), procedures and technology it may develop during the term of this
      Agreement that is not the result of a joint development effort with FIBERSTARS,
      is and shall remain the exclusive property of VLI. 

    

    7.2 VLI
      Warranties.
      

    

    (a) VLI
      represents and warrants that it will be the owner of the MACHINE on the day
      of
      transfer and the related TECHNICAL DOCUMENTATION free and clear of any and
      all
      liens, claims and encumbrances of any kind. 

    

    (b) With
      regard to Products for which product designs have been approved in writing
      and
      released for production by VLI, VLI warrants to FIBERSTARS for a period of
      six
      (6) months from the date of shipment that such Products supplied by VLI under
      this Agreement shall conform to their applicable specifications and shall be
      free of all defects in materials and workmanship and shall be free of all liens,
      security interests and other claims of third parties. VLI makes no warranty
      whatsoever with regard to Products for which product designs have not been
      approved in writing and released for production by VLI. 

    

    EXCEPT
      AS
      EXPRESSLY SET FORTH IN THE FOREGOING WARRANTIES, VLI MAKES NO OTHER EXPRESS
      OR
      IMPLIED WARRANTIES. VLI SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF
      MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL VLI
      BE
      LIABLE FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL DAMAGES ARISING
      OUT OF OR IN CONNECTION WITH THE USE OR PERFORMANCE OF THE MACHINE OR THE
      PRODUCTS DELIVERED HEREUNDER. WITH RESPECT TO ANY PRODUCT PURCHASED UNDER THIS
      ORDER AND ALLEGED TO BE THE CAUSE OF ANY LOSS OR DAMAGE TO FIBERSTARS, THE
      SUM
      EQUAL TO THE INVOICED PRICE OF SUCH PRODUCT (OR IF NOT SEPARATELY PRICED, VLI'S
      ESTABLISHED SELLING PRICE FOR SUCH ITEM) SHALL BE THE MAXIMUM CEILING LIMIT
      ON
      VLI'S LIABILITY, WHETHER SUCH CLAIM IS FOUNDED IN CONTRACT OR TORT (INCLUDING
      NEGLIGENCE, STRICT TORT LIABILITY OR BREACH OF WARRANTY), ARISING OUT OF OR
      RESULTING FROM: (I) THIS ORDER OR THE PERFORMANCE OR BREACH THEREOF, OR (II)
      THE
      DESIGN, MANUFACTURE, DELIVERY, SALE, REPAIR, REPLACEMENT, USE OR FURNISHING
      OF
      ANY SUCH PRODUCT(S). 

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (c) All
      Products which FIBERSTARS considers defective shall be
      returned to VLI’s plant, transportation costs prepaid by FIBERSTARS. The risk of
      loss of the Products shipped to VLI on a warranty claim will be borne by
      FIBERSTARS. If Products have been returned without cause and are still
      serviceable, FIBERSTARS will be notified and the Products returned at
      FIBERSTARS’ expense. VLI shall bear the cost of testing and examination, if any,
      with respect to Products so returned. VLI’s sole and exclusive liability and
      FIBERSTARS’ sole and exclusive remedy with respect to warranty claims for
      defective Products under this Agreement shall be, at VLI’s election, the repair
      or replacement of any nonconforming Products, or a credit to FIBERSTARS’ account
      at the purchase price plus all applicable freight charges, taxes, duties,
      tariffs and in-transit insurance. These remedies are available only if VLI
      is
      notified in writing by FIBERSTARS within the warranty period of the discovery
      of
      nonconformities, and such nonconformities actually exist and persons not
      authorized by VLI have not (a) repaired, worked on, or altered the Products
      in a
      manner that degrades or damages the stability, reliability, or proper operation
      of such Products or (b) misused or negligently handled such
      Products.

     

    7.3 Indemnification.
      Each
      party shall indemnify and hold harmless the other party, and its officers,
      directors, shareholders, employees and agents, from and against all claims,
      damages, losses, liabilities, suits and expenses (including reasonable
      attorneys’ fees) arising out of or by reason of any breach by such party of any
      of the intellectual property representations made by it in Paragraph 7.1 or
      any
      violation of the License Agreement.

    

    8. RIGHTS
      TO INTELLECTUAL PROPERTY

    

    8.1 Existing
      Intellectual Property.
      Patents
      of any country assigned or issued to either party, which patents claim
      inventions developed prior to the Effective Date, and inventions, patentable
      and
      unpatentable, that were developed by either party prior to the Effective Date,
      the subjects of which are necessary for the manufacture of Products, shall
      remain the property of the originating party.

    

    8.2 New
      Intellectual Property.
      Unless
      otherwise expressly set forth in this Agreement, all intellectual property
      and
      all patents throughout the world resulting from the work performed by VLI during
      the course of manufacturing the Products pursuant to the provisions of this
      Agreement (including, but not limited to, any patents on the Product(s)
      themselves) shall be owned exclusively by VLI, excepting ownership of patents
      on
      lighting system(s) designed for the Fiber Optic Field of Use, which system(s)
      may or may not utilize Product(s) as component(s) thereof. However, ownership
      of
      intellectual property resulting from research and development separately funded
      by FIBERSTARS pursuant to Paragraph 6.7 shall be determined in accordance with
      the provisions of the separate agreement for such work entered into after the
      Effective Date. 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    9. TERM
      AND TERMINATION

    

    9.1 Term.
      Notwithstanding any other provision of this Agreement, the term of this
      Agreement (the “Term”) shall commence, if at all, upon May 1, 2006, between
      FIBERSTARS and ADLT (the “Effective Date”) and shall remain in effect for seven
      (7) years unless
      earlier
      terminated pursuant to the terms of this Paragraph 9.2 or 9.3
      below.

     

    9.2 Termination
      without Cause.
      Upon
      completion of the first fifteen (15) months of the Term, FIBERSTARS shall
      thereafter have the right to unilaterally terminate this Agreement, without
      cause, by the delivery of a minimum of nine (9) months’ prior written notice to
      VLI. At any time after the Effective Date, VLI shall thereafter have the right
      to unilaterally terminate this Agreement, without cause, by the delivery of
      a
      minimum of twenty-four (24) months’ prior written notice to FIBERSTARS. In
      either case, such written notice shall specifically set forth that the
      terminating party is exercising its right of termination without cause pursuant
      to this Paragraph 9.2. 

     

    9.3 Termination
      for Cause.
      This
      Agreement may be earlier terminated in accordance with the following
      provisions:

     

    (a) Either
      party may terminate this Agreement at any time by the delivery of a written
      notice to the other party, which notice shall be effective upon receipt, if
      the
      other party files a petition for any type of bankruptcy, becomes insolvent,
      makes an assignment for the benefit of creditors, goes into liquidation, or
      becomes the subject of a receivership.

     

    (b) Either
      party may terminate this Agreement by the delivery of written notice to the
      other party, which notice shall be effective upon receipt, in the event the
      other party is in breach of a material provision of this Agreement and has
      failed to cure such breach within sixty (60) days after the date such notice
      of
      breach is received; provided, however, that if the nature of the breach is
      such
      that it cannot reasonably be cured within such sixty (60) day period, the
      breaching Party shall not be deemed in breach if it commences the cure within
      such sixty (60) day period and thereafter diligently prosecutes the cure to
      completion. The breach of a material provision of this Agreement shall include,
      but not be limited to: (i) late or nonpayment of amounts due under a VLI invoice
      not subject to a timely dispute; and (ii) a breach of the confidentiality
      provisions of Paragraph 10.

     

    (c) In
      the
      event that VLI becomes a business outside of ADLT, through sale, divestment,
      restructuring or any other means, then FIBERSTARS may terminate this Agreement
      by the delivery of written notice to VLI.

    

    9.4 Consequences
      of Termination.
      

    

    (a) Upon
      the
      expiration or earlier termination of this Agreement, all Purchase Orders then
      accepted by VLI shall be completed through the delivery of the ordered Products
      and the payment of VLI’s invoices. All technical information, including but not
      limited to know-how, provided by one party to the other during the term of
      this
      Agreement shall be returned at the request of the party who provided such
      information.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (b) In
      the
      event of the termination of this Agreement by: (i) VLI pursuant to the
      provisions of Paragraph 9.2, or (ii) FIBERSTARS pursuant to the provisions
      of
      Paragraph 9.3(a) or 9.3(b), and
      upon
      receipt by VLI from FIBERSTARS of a license fee in the amount of one thousand
      dollars ($1,000.00), then
      VLI
      shall: (A) grant to FIBERSTARS a limited license to use the VLI Technology
      , as
      set forth in Exhibit
      A of
      this
      Agreement (the “License Agreement”), (B) transfer the MACHINE to a facility
      specified by FIBERSTARS at FIBERSTARS’ expense, (C) supply FIBERSTARS with a
      price quote for the delivery and installation (within one month) at a location
      designated by FIBERSTARS, of one (1) Krypton cabinet appropriate for use with
      the MACHINE, such quote not to exceed One Thousand Dollars ($1,000.00); (D)
      VLI
      shall supply Formed Bodies pursuant to the terms set forth on Exhibit
      I
      to VLI
      for the longer of: (1) nine (9) months following termination of this Agreement;
      or (2) completion of delivery and installation of a “Bulb Former” machine (at
      location designated by FIBERSTARS, pursuant to Subsection 9.4(b)(E); below;
      and
      (E) deliver and install a “Bulb Former” machine, for the manufacture of Formed
      Bodies, (which machine shall include bulb
      former jaws and burners for each size arc tube, chucks and seals for each size
      tubing, loading trays for each size tube) at a location designated by
      FIBERSTARS, for the price of Fifty Thousand Dollars ($50,000.00) to be paid
      by
      FIBERSTARS to VLI in advance of installation. Upon completion of delivery and
      installation of the “Bulb Power” machine, VLI shall have no further obligation
      to supply formed bodies to FIBERSTARS. Further, in this event, VLI shall forfeit
      its rights to purchase the MACHINE as detailed in Sections 4.6 and 5.5, however
      all of VLI’s approval rights regarding the sale and transfer of the MACHINE to a
      third party shall remain in effect.

     

    (c) In
      the
      event of the termination of this Agreement by: (i) FIBERSTARS pursuant to the
      provisions of Paragraph 9.2, or 9.3(c) or (ii) VLI pursuant to the provisions
      of
      Paragraph 9.3(a) or 9.3(b), and
      upon
      receipt by VLI from FIBERSTARS of both, a license fee in the amount of three
      thousand dollars ($3,000.00), and full payment for VLI’s entire remaining
      inventory of “finished” Products which were manufactured by VLI pursuant to the
      forecasts provided by FIBERSTARS pursuant to Paragraph 6.10, then
      VLI
      shall: (A) grant to FIBERSTARS a limited license to use the VLI Technology
      , as
      set forth in Exhibit
      A of
      this
      Agreement (the License Agreement), (B) transfer the MACHINE to a facility
      specified by FIBERSTARS at FIBERSTARS’ expense, and (C) supply FIBERSTARS with a
      price quote for the delivery and installation (within one month) at a location
      designated by FIBERSTARS, of one (1) Krypton cabinet appropriate for use with
      the MACHINE, such quote not to exceed Fifteen Thousand Dollars ($15,000.00).
      Upon completion of the foregoing, VLI shall have no further obligations
      hereunder.

     

    (d) The
      parties hereto acknowledge and agree that the grant of a limited license from
      VLI to FIBERSTARS in conjunction with the transfer of the MACHINE pursuant
      to
      any of the above paragraphs, will not require payment of any additional “license
      fee” or royalty. 

    

    10. CONFIDENTIALITY

    

    During
      the term of this Agreement it is anticipated that each party will be exposed
      to
      proprietary information and intellectual property concerning the other party’s
      business, products, technology, customers, marketing and sales plans, and
      related information that is of substantial value to the party owning it, which
      value would be impaired if such information were disclosed to others. This
      information is referred to as “Confidential Information.” “Confidential
      Information of FIBERSTARS” includes, but is not limited to, marketing plans for
      Products. “Confidential Information of VLI” includes, but is not limited to,
      information concerning the MACHINE and the Products as set forth in Exhibits
      B, C, E, G, and
      H,
      marketing and sales plans, Product designs, machine designs, and technology,
      processes and tooling for the manufacture of Products.

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    For
      a
      period of five (5) years following the termination of this Agreement, each
      party
      agrees not to disclose or otherwise make the other party’s Confidential
      Information available to third parties or to make any use of such Confidential
      Information except as contemplated in this Agreement. Each party further agrees
      to restrict access to the other party’s Confidential Information to employees
      who have a need to know in order to fulfill the provisions of this Agreement
      and
      who have signed confidentiality agreements with their employer. Each party
      shall
      give notice to the other party of information disclosed to such other party
      which the disclosing party deems Confidential Information as follows: all
      written confidential information shall be labeled as such; all verbal
      Confidential Information shall be reduced to writing and sent to the receiving
      party within thirty (30) days after the verbal disclosure. If either party
      is in
      doubt as to whether or not certain information is confidential, it shall request
      and receive written clarification from the other party before disclosing such
      information. 

    

    Each
      party will treat and safeguard the Confidential Information received from the
      other party, whether verbally or in writing (provided that it is properly
      identified as such as provided above), in the same manner as the receiving
      party
      safeguards its own Confidential Information but in no event using less than
      reasonable efforts to safeguard such Confidential Information from disclosure.
      The restrictions against disclosure or unauthorized use of Confidential
      Information shall not apply to:

    

    (a) Information
      which, through no breach of the receiving party’s obligations hereunder, is in
      the public domain, revealed in published technical articles or other printed
      publications, or inherently revealed by products on the market, the sale of
      which is not a violation of the terms of this Agreement or subsequent production
      contracts or purchase orders;

     

    (b) Information
      already known to the receiving party prior to the date of this Agreement and
      not
      subject to any similar obligation of the receiving party in any other agreement
      with the disclosing party, as shown by documentary materials;

     

    (c) Information
      which is or becomes rightfully available to the receiving party from a source
      other than the disclosing party, which has no confidentiality obligation to
      the
      disclosing party in respect thereto;

     

    (d) Information
      the receiving party is obligated to produce as a result of a court order;
      and

     

    (e) Information
      which, by prior agreement, the disclosing party agrees may be
      disclosed.

    

    If
      the
      receiving party intends to rely upon any of the foregoing exceptions in order
      to
      disclose or use Confidential Information for purposes other than those
      identified in this Agreement, the receiving party agrees to discuss the basis
      for such reliance with the disclosing party prior to any disclosure or use.
      

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    At
      the
      request of the disclosing party, the receiving party shall return to the
      disclosing party all writing and documents containing Confidential Information
      that are in the possession of the receiving party, except for one copy retained
      for archival purposes. At such time, the receiving party also will make
      reasonable efforts to locate and destroy electronic copies of such Confidential
      Information, except that one electronic copy also may be retained for archival
      purposes.

    

    11. MISCELLANEOUS

    

    11.1 Force
      Majeure.
      If the
      performance of this Agreement by either party should be prevented, delayed,
      restricted, or interfered with by any man-made or natural catastrophe, including
      but not limited to strikes or other labor disturbances (not including strikes
      or
      labor disturbances involving the employees of the party seeking to rely on
      this
      provision to excuse non-performance), embargoes, fire, explosion, acts of war,
      unforeseeable government action or inaction, the unavailability of materials
      supplied by third parties, or any other circumstance outside the control of
      the
      parties, then the party so affected shall, upon giving prompt notice of the
      same, be excused from such performance to the extent of such prevention, delay,
      restriction, or interference provided that the party so affected shall use
      its
      best efforts to avoid or remove such causes of nonperformance and promptly
      resume performance hereunder when such causes have been removed. Upon such
      circumstances arising, the parties shall promptly consult as to what (if any)
      modifications to the terms of the Agreement may be required to arrive at an
      equitable solution; and, if such nonperformance appears likely to continue
      for
      an extended period of time and the affected party’s nonperformance appears
      likely to cause serious hardship to the other party, such party may terminate
      this Agreement by giving thirty (30) days written notice to the other
      party.

     

    11.2 Assignment.
      Neither
      Party shall have the right to assign or otherwise transfer its rights and
      obligations under this Agreement except with the prior written consent of the
      other Party; provided, however, that a successor in interest by merger, by
      operation of law, assignment, purchase or otherwise of the entire business
      of
      either Party shall acquire all rights and obligations of such Party. Any
      prohibited assignment shall be null and void. Provided that VLI provides
      FIBERSTARS with a minimum of ninety (90) days prior written notice (the
“Relocation Notice”),
      VLI
      shall
      have the right to: (i) assign this Agreement and to relocate the MACHINE to
      an
      entity in India formed under the laws of India that is owned and controlled
      by
      VLI and/or ADLT; and/or (ii) assign this Agreement and to relocate the MACHINE
      to an entity in India formed under the laws of India that is a joint venture
      among VLI and/or ADLT and a third party. In either case, this Agreement will
      not
      be terminated, VLI shall remain fully liable to FIBERSTARS for the timely and
      proper performance of the Agreement by such assignee.

     

    NOTE:
      The parties hereto acknowledge and agree that, in the event VLI relocates the
      MACHINE to a facility in India (as described above), then VLI shall be obligated
      to build up to a six (6) month supply of Products in VLI’s inventory to supply
      FIBERSTARS during the transition. Such inventory build up shall be based on
      a
      special written forecast to be delivered to VLI from FIBERSTARS (“Relocation
      Forecast”) within ten (10) days after receipt by FIBERSTARS of VLI’s Relocation
      Notice (as set forth above). The Relocation Forecast shall be a firm,
      non-cancelable Purchase Order from FIBERSTARS.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    11.3 Applicable
      law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Ohio, excluding its laws relating to the conflict of laws and the
      choice of laws.

     

    11.4 Notice.
      Any
      notice required to be given under this Agreement shall be in writing and may
      be
      served either by personal delivery, telex, facsimile transmission, telegram,
      certified or registered air mail (return receipt requested and postage prepaid)
      or express delivery service addressed to the parties respectively at the
      following addresses.

    

    VLI
      or
      ADLT:

    

    Venture
      Lighting International, Inc

    32000
      Aurora Road

    Solon,
      OH
      44139

    Attention:
      Sabu Krishnan, President

    Fax:
      440-836-7045

    

    FIBERSTARS:

    

    Fiberstars,
      Inc.

    32000
      Aurora Road

    Solon,
      OH
      44139

    Attention:
      Roger Buelow, Chief Technology Officer

    Fax:
      (440) 519-1038

    

    or
      such
      other address, facsimile, or telex number as the parties may later designate
      by
      written notice to each other. All notices delivered in accordance with this
      Paragraph 8.4 shall be effective as of the date of receipt by the notified
      party.

    

    11.5 Modifications.
      This
      Agreement may not be amended, supplemented, released, discharged, abandoned,
      changed, or modified in any manner, orally or otherwise, except by an instrument
      in writing of concurrent or subsequent date signed by a duly authorized
      representative of each of the parties.

     

    11.6 Entire
      Agreement.
      The
      terms and provisions set forth in this Agreement constitute the entire and
      only
      agreement between FIBERSTARS and VLI with respect to this subject matter, and
      cancel all preexisting agreements, contracts or understandings between them
      in
      respect to the same. Headings used in this Agreement are only for convenience
      and are not to be used in the interpretation of this Agreement. The parties
      expressly acknowledge and agree that the Master Services Agreement, the ADLT
      Development Agreement, the Fiberstars Development Agreement, the Cross-License
      Agreement and the Mutual Supply Agreement, each by and between FIBERSTARS and
      Advanced Lighting Technologies, Inc. and each dated September 19, 2005 shall
      not
      apply to and shall not govern the matters agreed upon hereunder. 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    11.7 Severability.
      If any
      provision of this Agreement, or the application thereof to any person or
      circumstance should, for any reason and to any extent, be invalid, unenforceable
      or illegal, the remainder of this Agreement and the application of such
      provisions to other persons or circumstances shall not be effected thereby,
      but
      rather shall be enforced to the greatest extent permitted by law, and a rapid
      remedy sought for the provision found to be at fault.

     

    11.8
      No
      Partnership.
      This
      Agreement does not create a relationship of joint venture, employment,
      partnership, or agency between FIBERSTARS and VLI.

     

    11.9 Dispute
      Resolution.
      In the
      event a dispute, claim or controversy arises between the parties relating to
      the
      validity, interpretation, performance, termination or breach of this Agreement
      (collectively, the “Dispute”) the parties agree to hold a meeting, attended by
      individuals with decision-making authority regarding the Dispute, to attempt
      in
      good faith to negotiate a resolution of the Dispute prior to pursuing other
      available remedies. If within thirty (30) days after such meeting, the parties
      have not succeeded in negotiating a resolution of the Dispute, the Dispute
      shall
      be resolved through final and binding arbitration at the request of either
      party.

    

    The
      arbitration shall be conducted by a single arbitrator in the City of Solon,
      Ohio, in accordance with the laws of the State of Ohio, and the then-current
      commercial arbitration rules and supplementary procedures for commercial
      arbitration of the American Arbitration Association (“AAA”). The arbitrator
      shall be selected by the mutual agreement of the parties, or failing such
      agreement, shall be selected according to the relevant AAA rules. The parties
      shall bear the costs of such arbitrator equally.

    

    The
      prevailing party in any such arbitration or in any judicial enforcement or
      review proceeding shall be entitled to its reasonable attorneys fees and costs
      in addition to any other amount of recovery ordered by such arbitrator or court.
      Either party may cause judgment to be entered upon such award in any court
      of
      competent jurisdiction. The duty of the parties to arbitrate any Dispute
      relating to the interpretation or performance of this Agreement or the grounds
      for any termination thereof shall survive expiration of this Agreement for
      any
      reason.

    

    11.10
      Counterparts.
      This
      Agreement may be executed in two or more counterparts in the English language,
      and each such counterpart shall be deemed an original.

     

    11.11 Waiver.
      No
      failure by either Party to take any action or assert any right under this
      Agreement shall be deemed to be a waiver of such right in the event of the
      continuation or repetition of the circumstances giving rise to such
      right.

     

    11.12 Attorneys’
      Fees.
      In the
      event that any action or proceeding is brought to enforce or interpret any
      term,
      covenant or condition of this Agreement or to collect damages due to a breach
      of
      this Agreement, the prevailing Party in such action or proceeding (whether
      after
      trial or appeal) shall be entitled to recover from the Party not prevailing
      its
      expenses incurred in such action or proceeding, including reasonable attorneys'
      fees and all allowable costs.

     

    11.13 Headings.
      The
      section and paragraph headings used in this Agreement are for convenience only.
      They shall not be used to define, limit or interpret this
      Agreement.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    
      	FIBERSTARS,
              INC. 	 	 	VENTURE LIGHTING INTERNATIONAL,
              INC. 
	 	 	 	 
	 	 	 	 
	By 	 	 	By 
	
              
                

              

            	 	 	
              
                

              

            
	Title	 	 	Title
	
              
                
  

            	 	 	
              
                
  

            
	Date: May ___, 2006 	 	 	Date: May __,
              2006 

    

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    LICENSE
      AGREEMENT

    
 

    This
      License Agreement (the “License Agreement”) is made and entered into as of this
      ______ day of ___________, 2006 (the “Effective Date”), by and between
FIBERSTARS,
      INC.,
      an Ohio
      corporation with its principal place of business at 32000 Aurora Road, Solon,
      Ohio 44139 (the "Licensee") and VENTURE
      LIGHTING INTERNATIONAL, INC.,
      an Ohio
      corporation with its principal place of business at 32000 Aurora Road, Solon,
      Ohio 44139 (“VLI”).

    

    1. DEFINITIONS

    

    1.1 VLI
      Process.
      The
      proprietary process for use of the MACHINE for manufacturing LICENSED PRODUCTS,
      utilizing inventions (patentable and unpatentable), designs, specifications,
      manuals, techniques, procedures, know-how and trade secrets, that are documented
      in written, electronic or graphic form and provided to Licensee in the
TECHNICAL
      DOCUMENTATION,
      as
      defined in the SUPPLY CONTRACT (see Section 1.4, below), or otherwise provided
      to Licensee in written, electronic or graphic form and labeled as
“confidential”, all of which are necessary for the manufacture or processing of
      metal halide arc tubes, will be referred to as the “VLI PROCESS.” 

    

    1.2 Licensed
      Product.
      “LICENSED PRODUCT(S) shall mean metal halide arc tubes without an exhaust tip
      on
      the arc chamber(s), manufactured by means of the VLI PROCESS for use(s) solely
      and exclusively within the “Fiberoptic Field of Use” (defined
      below).

     

    1.3 Machine.
      The VLI
      Tipless Low Watt Arc Tube Pinch & Exhaust machine as sold by VLI to Licensee
      under the SUPPLY CONTRACT will be referred to as the “MACHINE”.

    

    1.4 Supply
      Contract.
      The
      Equipment Purchase and Product Supply Agreement, dated______________, 2006,
      between VLI and Licensee shall be referred to as the “SUPPLY
      CONTRACT.”

    

    1.5 Technical
      Documentation.
      TECHNICAL DOCUMENTATION shall have the meaning ascribed to it in the SUPPLY
      CONTRACT. 

    

    1.6
       Fiberoptic
      Field of Use.
      Lighting applications or systems (and components of such systems) which include
      both: (A) a remote light source, and (B) either (i) fiberoptics, or (ii) light
      pipes, or (iii) other light guides, for conveying light from the remote source,
      but excluding applications in Civilian Transportation, television, and
      projection. 

    

    1.7 Civilian
      Transportation.
      Civilian Transportation shall mean all passenger automobiles, commercial
      (non-military) aircrafts, trucks, motorcycles, and off-road vehicles, but
      excludes ships, RV’s (recreation vehicles), limousines and mining equipment and
      other industrial or military vehicles or equipment. 

    

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

    2. LICENSE

    

    VLI
      hereby grants to Licensee a royalty-free, nonexclusive, worldwide, transferable
      (subject to the limitations provided below), irrevocable (except as expressly
      provided herein) limited license, with the right (subject to the limitations
      provided below) to use the VLI PROCESS to make LICENSED PRODUCTS. Licensee
      acknowledges and agrees that any and all LICENSED PRODUCTS made or manufactured
      hereunder, shall be made or manufactured solely and exclusively for use in
      the
      Fiberoptic Field of Use. Notwithstanding the foregoing, the following
      limitations shall apply to proposed assignment of this License Agreement (which
      may only occur in conjunction with an approved sale of the MACHINE) by
      Licensee:

     

    (a) During
      the period ending five (5) years from the date of this License Agreement, the
      assignment of the license granted in this License Agreement shall be subject
      to
      the provisions of Paragraph 4.6 of the SUPPLY CONTRACT.

     

    (b) During
      the period ending five (5) years from the date of this License Agreement, if
      Licensee proposes to purchase any one or more additional “Tipless
      Low Watt Arc Tube Pinch & Exhaust” machines
      that are the same as, or substantially the same as the MACHINE, Licensee shall
      purchase such machine(s) exclusively from VLI or from a person, firm or
      corporation authorized by VLI to do so. 

     

    (c) In
      any
      event and at any time after the date of this License Agreement, if Licensee
      proposes to purchase a “Tipless
      Low Watt Arc Tube Pinch & Exhaust” machine
      from a third party, Licensee may not disclose to such third party any portion
      of
      the VLI PROCESS or the TECHNICAL DOCUMENTATION that is VLI’s Confidential
      Information, and Licensee will not allow such third party to examine
      MACHINE.

     

    (d) In
      any
      event and at any time after the date of this License Agreement, Licensee is
      prohibited from building or manufacturing, or having any third party build
      or
      manufacture (whether as a “work for hire” or otherwise) any “Tipless
      Low Watt Arc Tube Pinch & Exhaust” machine(s)
      that are the same as, or substantially the same as the MACHINE, without first
      obtaining the prior written approval of VLI. Notwithstanding any written
      approval granted by VLI for the building or manufacture of such a machine,
      Licensee shall have no right and shall not under any circumstances, provide
      to
      any third party any portion of the VLI PROCESS or the TECHNICAL
      DOCUMENTATION.

    

    

    
      	
              3.

            	
              LICENSE
                FEE

            

    

    

    As
      full
      and complete consideration for all rights granted by VLI and for all
      representations, warranties and covenants of VLI under this License Agreement,
      Licensee shall pay to VLI the applicable license fee as specified in the SUPPLY
      CONTRACT, if any. The parties acknowledge that there are circumstances where
      the
      license fee may be zero dollars, and other circumstances where the amount of
      the
      license fee will vary, all as more particularly set forth in the SUPPLY
      CONTRACT. VLI acknowledges that, where the license fee is zero, the amounts
      paid
      to purchase MACHINE under the SUPPLY CONTRACT shall constitute complete
      consideration for this License Agreement.

     

    
      
         

      

      
        A-2

        
          

        

      

      
         

      

    

     

    
      	
              4.

            	
              CONFIDENTIALITY

            

    

    

    The
      VLI
      PROCESS shall be deemed to be “Confidential Information”, as that term is
      defined in the SUPPLY CONTRACT. The provisions of Section 10 of the SUPPLY
      CONTRACT shall apply to Confidential Information of the VLI and Licensee, and
      their successors and assigns.

     

    5. TERM
      AND TERMINATION

    

    5.1 Term.
      This
      License Agreement will be effective on the Effective Date and its term shall
      be
      perpetual, unless earlier terminated pursuant to the other provisions of this
      Section 5.

     

    5.2 Termination
      for Cause.
      The
      grounds for termination of this License Agreement for “cause” shall be as
      follows: A party may terminate this License Agreement in accordance with the
      following procedures in the event the other party fails to cure a material
      breach of this License Agreement. Material breaches of this License Agreement
      by
      a party shall include, but not be limited to: (i) a material failure of a party
      to comply with the confidentiality obligations in Section 4, (ii) the use of
      the
      MACHINE by Licensee (or any successor or assign of Licensee) to manufacture,
      make or otherwise produce any goods or products for use outside of the
      Fiberoptic Field of Use. In the event a material breach occurs, the
      non-breaching party shall give the breaching party a written notice thereof,
      which notice shall contain a reasonably detailed description of the conduct
      alleged to give rise to the breach. The party asserting the breach may terminate
      this License Agreement, effective upon delivery of a written notice of
      termination to the breaching party, in the event the breach is not cured within
      thirty (30) days from the date the initial notice of breach is delivered. If,
      however, the nature of the breach is such that it cannot reasonably be cured
      within such thirty (30) day period, the breaching party shall not be deemed
      in
      breach if it commences the cure within such period and thereafter diligently
      prosecutes the same to completion.

     

    5.3 Consequences
      Of Termination for Cause .
      Within
      ten (10) days after the date of termination for cause by VLI, Licensee shall
      deliver to VLI all copies of TECHNICAL DOCUMENTATION and all other information
      about the VLI PROCESS provided by VLI to Licensee in connection with this
      License Agreement. A termination of this License Agreement for cause shall
      not
      relieve either party from its obligations of confidentiality under Section
      4 for
      the period set forth therein. A termination of this License Agreement for cause
      shall not prejudice the right of either party to recover any sums due or accrued
      at the time of such termination, nor shall it prejudice any cause of action
      or
      claim of such party arising out of any breach or default by the other party.
      The
      provisions of Sections 4, 5, 6, 7 and 8 shall survive the termination of this
      License Agreement.

    

    6.
       DISPUTE
      RESOLUTION

     

    In
      the
      event a dispute, claim or controversy arises between the parties relating to
      the
      validity, interpretation, performance, termination or breach of this License
      Agreement (collectively, the “Dispute”) the parties agree to hold a meeting,
      attended by individuals with decision-making authority regarding the Dispute,
      to
      attempt in good faith to negotiate a resolution of the Dispute prior to pursuing
      other available remedies. If within thirty (30) days after such meeting, the
      parties have not succeeded in negotiating a resolution of the Dispute, the
      Dispute shall be resolved through final and binding arbitration at the request
      of either party.

    

    
      
        
        

      

      
        A-3

        
          

        

      

      
        
        

      

    

    The
      arbitration shall be conducted by a single arbitrator in the City of Solon,
      Ohio, in accordance with the laws of the State of Ohio, and the then-current
      commercial arbitration rules and supplementary procedures for commercial
      arbitration of the American Arbitration Association (“AAA”). The arbitrator
      shall be selected by the mutual agreement of the parties, or failing such
      agreement, shall be selected according to the relevant AAA rules. The parties
      shall bear the costs of such arbitrator equally.

     

    The
      prevailing party in any such arbitration or in any judicial enforcement or
      review proceeding shall be entitled to its reasonable attorneys fees and costs
      in addition to any other amount of recovery ordered by such arbitrator or court.
      Either party may cause judgment to be entered upon such award in any court
      of
      competent jurisdiction. The duty of the parties to arbitrate any Dispute
      relating to the interpretation or performance of this License Agreement or
      the
      grounds for any termination thereof shall survive expiration of this License
      Agreement for any reason.

    

    7. REPRESENTATIONS
      AND WARRANTIES

    

    7.1 Intellectual
      Property Representation.
      VLI
      represents and warrants to Licensee that: (i) it owns all right, title and
      interest in the VLI PROCESS;
      (ii)
      its technology does not infringe or constitute a misappropriation of any
      intellectual property rights of any third party; and (iii) it has not entered
      into any agreement inconsistent with this License Agreement or has not otherwise
      granted to any third party any rights inconsistent with the rights granted
      to
      the other party under this License Agreement.

    

    7.2 Patent
      Indemnification.
      In the
      event a claim is brought by a third party alleging the infringement of its
      United States patent by the VLI PROCESS, VLI will defend Licensee against any
      and all claims, suits, or proceedings alleging such infringement and will hold
      harmless and indemnify Licensee against any costs incurred and any sums paid
      or
      awarded with respect thereto as royalties, penalties or otherwise fixed by
      settlement or set by final and non-appealable court judgment or order. Licensee
      shall, at its own cost and expense, have the right to participate in any
      proceedings or negotiations; provided, however, that in such event VLI shall
      have sole control of the defense of any such action in all negotiations for
      its
      settlement or compromise. If VLI, at any time, fails to fulfill its defense
      and
      indemnity obligations described above, then upon written notice to VLI from
      Licensee, Licensee may, at its option, defend such claims, suits or proceedings,
      including taking control thereof, and VLI promptly shall reimburse Licensee
      for
      all reasonable expenditures and costs incurred by Licensee in connection with
      such defense, no less often than monthly, as such expenditures and costs are
      incurred. Licensee shall reimburse VLI in the amount of all costs and expenses
      recovered in such claims, suits or proceedings.

    

    The
      foregoing indemnity obligation excludes claims for infringement that relate
      to
      or arise from: (i) processes and equipment not included within the definition
      of, or not falling within the scope of, the VLI PROCESS that is employed by
      Licensee in its use of the MACHINE, and (ii) the goods or products made or
      processed by Licensee.

    

    
      
         

      

      
        A-4

        
          

        

      

      
         

      

    

    In
      the
      event a final injunction is obtained against the use of the infringing VLI
      PROCESS, VLI will, at its option and expense: (i) secure for Licensee the right
      to continue to use the VLI PROCESS, or (ii) replace or modify the same so it
      meets the agreed technical specifications but becomes non-infringing, or (iii)
      refund to Licensee all sums paid by Licensee for the License Fee, as well as
      the
      net book value of MACHINE, as reflected on the books and records of Licensee
      on
      the date of the entry of such injunction; and VLI will reimburse Licensee for
      all costs and expenses of replacement or modification of the VLI PROCESS. If
      VLI
      elects to refund to Licensee all sums paid for the License Fee (if any) and
      for
      then-depreciated book value of MACHINE, the Licensee shall promptly return
      and
      surrender to VLI the TECHNICAL DOCUMENTATION, and all other information about
      the VLI PROCESS provided from VLI to Licensee in connection with this License
      Agreement.

     

    8. MISCELLANEOUS

    

    8.1 Assignment.
      The
      rights and obligations of the parties under this License Agreement are personal
      and may not be assigned or otherwise transferred by either party without the
      prior written consent of the other party. Any attempted assignment or transfer
      without such consent shall be null and void. Notwithstanding any other provision
      of this License Agreement or of the Supply Contract, any third party purchaser
      of the MACHINE must
      assume
      all of Licensee’s obligations and liabilities to VLI under this License
      Agreement pursuant to a written assignment and assumption agreement approved
      in
      writing by VLI, or such sale shall be null and void. In the event Licensee
      sells
      the Machine to a third party in connection with a VLI-approved sale in
      accordance with the provisions of the Supply Contract, then, in conjunction
      therewith, Licensee’s rights and obligations under this License Agreement shall
      be assigned by Licensee to such third party purchaser (and all of Licensee’s
      obligations and liabilities hereunder shall be assumed by such third party
      purchaser) in a writing acceptable to VLI, except
      that
      Licensee
      shall not transfer the indemnity obligations of VLI (reflected in Section 7.2,
      above) to any subsequent purchaser of MACHINE. The parties hereto acknowledge
      and agree that in the event of a sale of VLI, or substantially all of VLI’s
      assets, to an unrelated third party, this License Agreement and the rights
      and
      obligations of VLI hereunder, may be transferred to such party without the
      prior
      consent of Licensee, to the extent the third party assumes all obligations
      and
      liabilities of VLI hereunder.

     

    8.2 Applicable
      Law.
      This
      License Agreement shall be governed by and construed in accordance with the
      laws
      of the State of Ohio. 

     

    8.3 Notice.
      Any
      notice required to be given under this License Agreement shall be in writing
      and
      may be served either by personal delivery, e-mail (return receipt requested),
      telefax, telegram, certified or registered air mail (return receipt requested)
      postage prepaid or reputable
      air
      courier addressed to the parties respectively at the following
      addresses:

    

    VLI

    Venture
      Lighting International, Inc.

    32000
      Aurora Road

    Solon,
      Ohio 44139

    Attention:
      Sabu Krishnan

    Fax:
      440
      836-7045

    

    LICENSEE

    

    Fiberstars,
      Inc.

    32000
      Aurora Road

    Solon,
      OH
      44139

    Attention:
      Roger Buelow, Chief Technology Officer

    Fax:
      440
      519-1038

    

    
      
         

      

      
        A-5

        
          

        

      

      
         

      

    

    or
      such
      other address, facsimile number, or e-mail address as Licensee or VLI may later
      designate by written notice to the other. All notices delivered in accordance
      with this Paragraph 8.3 shall be effective as of the date of receipt by the
      notified party.

    

    8.4 Modifications.
      This
      License Agreement may not be amended, supplemented, released, discharged,
      abandoned, changed or modified in any manner, orally or otherwise, except by
      an
      instrument in writing of concurrent or subsequent date signed by a duly
      authorized representative of each of the parties.

     

    8.5 Entire
      Agreement.
      The
      terms and provisions set forth in this License Agreement and in the SUPPLY
      CONTRACT constitute the entire and only agreement between the Licensee and
      VLI
      with respect to this subject matter, and cancel all preexisting agreements,
      contracts or understandings between them in respect to the same. Headings used
      in this License Agreement are only for convenience and are not to be used in
      the
      interpretation of this License Agreement.
      The
      parties expressly acknowledge and agree that the Master Services Agreement,
      the
      ADLT Development Agreement, the Fiberstars Development Agreement, the
      Cross-License Agreement and the Mutual Supply Agreement, each by and between
      FIBERSTARS and Advanced Lighting Technologies, Inc. and each dated September
      19,
      2005 shall not apply to and shall not govern the matters agreed upon
      hereunder.

     

    8.6 Severability.
      If any
      provision of this License Agreement, or the application thereof to any person
      or
      circumstance should, for any reason and to any extent, be invalid, unenforceable
      or illegal, the remainder of this License Agreement and the application of
      such
      provisions to other persons or circumstances shall not be effected thereby,
      but
      rather shall be enforced to the greatest extent permitted by law, and a rapid
      remedy sought for the provision found to be at fault.

     

    8.7 Relationship
      Of The Parties.
      This
      License Agreement in no way creates a relationship of joint venture, employment,
      partnership or agency between VLI and Licensee.

     

    8.8 Waiver.
      Failure
      of either party to insist upon the strict performance of any provision of this
      License Agreement or to exercise any right or remedy shall not be deemed a
      waiver of any right or remedy.

     

    8.9 Exhibits.
      Exhibits to this License Agreement form an integral and binding part of this
      License Agreement.

     

    
      
        
        

      

      
        A-6

        
          

        

      

      
        
        

      

    

    8.10 Disclaimer.
      Except
      as expressly provided in this License Agreement and in the SUPPLY CONTRACT,
      VLI
      makes no other representation, grants no warranty, express or implied, and
      assumes no responsibility of any kind to Licensee or to any third party
      respecting suitability for any purpose or use of any information, data, process,
      equipment, patented or unpatented inventions, or trade secrets, disclosed,
      furnished, or made available to Licensee.

     

    8.11 Force
      Majeure.
      The
      provisions of Section 11.1 of the SUPPLY CONTRACT are expressly incorporated
      herein by reference. 

    

    

    IN
      WITNESS WHEREOF, each of the parties hereto has caused this License Agreement
      to
      be executed in duplicate by its duly authorized representative.

     

    
      
        	VENTURE LIGHTING INTERNATIONAL,
                INC. 	 	 	FIBERSTARS,
                INC.
	 	 	 	 
	 	 	 	 
	By: 	 	 	By: 
	
                
                  

                

              	 	 	
                
                  

                

              
	Title:	 	 	Title:
	
                
                  
  

              	 	 	
                
                  
  

              
	Date:
                __________________________________________________________,
                2006 	 	 	Date:
                __________________________________________________________,
                2006 

      

      

      
        
          
          

        

        
          A-7

          
            

          

        

        
          
          

        

      

    

    EXHIBIT
      B

    

    (Machine)

    

    

    General
      Description: One (1) USED Tipless
      Low Watt Arc Tube Pinch & Exhaust Machine built by Venture Lighting
      International, Inc.

     

    ***

     

     

    ___________________________

    ***
      CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE
      COMMISSION.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     EXHIBIT
      C

    

    (PRODUCTS
      & PRODUCT SPECIFICATIONS)

     

     

    
      	PRODUCT
              DESCRIPTION 	 	 	SPECIFICATIONS 
	 	 	 	 
	***	 	 	
            
	 	 	 	 

    

        

    ___________________________

    ***
      CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE
      COMMISSION.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      D

    

    MACHINE
      SALE PRICE AND PAYMENT TERMS

    

    ***

     

     

    ___________________________

    ***
      CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE
      COMMISSION.

     

    
      
        
        

      

      
        D-1

        
          

        

      

      
        
        
EXHIBIT
        E

    

    MACHINE
      PERFORMANCE/ACCEPTANCE CRITERIA

    

     

    Milestones:
      ***

     

     

    ___________________________

    ***
      CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE
      COMMISSION.

     

    
      
        
        

      

      
        E-1

        
          

        

      

      
        
        

      

    

    Addendum
      to EXHIBIT E

    Low
      Watt Tipless Pinch-Exhaust Machine Process Capability

    

    ***

     

     

    ___________________________

    ***
      CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE
      COMMISSION.

     

    
      
        
        

      

      
        E-2

        
          

        

      

      
        
        

      

    

    EXHIBIT
      F

     Certificate
      of Acceptance

    

    

    
      	 	 	 	 
	DATE:
              	 	 	 
	
              
                

              

            	 	 	
            
	 	 	 	 

    

    

    SELLER:
      VENTURE
      LIGHTING INTERNATIONAL, INC. (VLI)

    

    BUYER:             
      FIBERSTARS,
      INC. (FIBERSTARS)

    

    

     

    CONTRACT
      -   EQUIPMENT
      PURCHASE AND PRODUCT SUPPLY AGREEMENT

    DATED
      _________________________

    

    DESCRIPTION
      OF MACHINE

    
      	 	
              (I)

            	
              USED
                TIPLESS LOW WATT ARC TUBE PINCH & EXHAUST
                MACHINE 

            

    

     

    

    WE
      HEREBY
      CERTIFY THE ACCEPTANCE OF THE ABOVE-REFERENCED MACHINE. 

    

    

    SIGNED
      BY
      AUTHORIZED REPRESENTATIVES OF:

    

    
      
        	 	 	 	 
	 	 	 	 
	
                
                  

                

                BUYER: FIBERSTARS, INC.

              	 	 	
              
	 	 	 	 

      

       

      
        

        
          
            	 	 	 	 
	 	 	 	 
	
                    
                      

                    

                    SELLER: VENTURE LIGHTING INTERNATIONAL,
                      INC.

                  	 	 	
                  
	 	 	 	 

          

           

          
            
              
              

            

            
              F-1

              
                

              

            

            
              
              

            

          

        

      

    

    EXHIBIT
      G

    UNIT
      PRICES FOR PRODUCTS

    

    Price:

    ***

     

     

    

    

    Discounts:

    

    ***

     

     

    
      ___________________________

    

    ***
      CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE
      COMMISSION.

     

    

    
      
        
        

      

      
        G-1

        
          

        

      

      
        
        

      

    

    EXHIBIT
      H

    ***

     

     

    
      ___________________________

    

    ***
      CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE
      COMMISSION.

     

     

    
      
        
        

      

      
        H-1

        
          

        

      

      
        
        

      

    

    EXHIBIT
      I

     

     

    ***

     

     

    
      ___________________________

    

    ***
      CONFIDENTIAL MATERIAL REDACTED AND SEPARATELY FILED WITH THE
      COMMISSION.

     

     

    
      
        
        

      

      
        I-1MODIFICATION
      TO SUBLEASE

    

    THIS
      MODIFICATION TO SUBLEASE (“Modification”)
      is
      made and entered into as of April ___, 2006 by and between KEYSTONE RUBY LLC,
      an
      Ohio limited liability company (the “Landlord”),
      and
      FIBERSTARS, INC., a California corporation (the “Tenant”).

    

    WITNESSETH

    

    WHEREAS,
      the Landlord, as the purchaser pursuant to a certain Agreement of Purchase
      and
      Sale dated as of April 19, 2006 is purchasing from ADLT Realty Corp. I,
      Inc. (“ADLT”),
      improved real property having an address of 32000 Aurora Road in Solon, Ohio
      44139 (the “Property”);
      and

    

    WHEREAS,
      pursuant to the terms of that certain Master Lease dated as of March 11, 1998
      (the “Master
      Lease”)
      by and
      between ADLT and Venture Lighting International, Inc. (“Venture”),
      ADLT
      master leased the Property to Venture; and 

    

    WHEREAS,
      pursuant to the terms of that certain Sublease Agreement dated as of September
      6, 2005 by and between Venture and Tenant (the “Sublease”),
      Venture subleased a portion of the building (the “Building”)
      situated upon the Property to Tenant (the “Leased
      Premises”);
      and

    

    WHEREAS,
      pursuant to the terms of the Sublease, the Leased Premises is currently
      comprised of 59,000 square feet, but effective as of May 1, 2006, the parties
      wish to increase the Leased Premises to 79,424 square feet; and

    

    WHEREAS,
      pursuant to the terms of that certain Assignment of Sublease made and entered
      into by Venture and Landlord as of the date hereof, Venture has assigned to
      the
      Landlord all of Venture’s right, title and interest in the Sublease to the
      Landlord; and

    

    WHEREAS,
      the Tenant desires to remain an occupant in the Building, from and after the
      purchase of the Property by the Landlord and Landlord desires to assume the
      rights and obligations of Venture under the Sublease with regard to
      Tenant;

    

    WHEREAS,
      Tenant desires to sublease to Venture, and Venture desires to sublease from
      Tenant, 10,000 square feet of Tenant’s Leased Premises at the Building, and
      Landlord is willing to reasonably consent to such sublease; and

    

    WHEREAS,
      the Landlord and the Tenant understand and agree that upon the assignment of
      the
      Sublease to Landlord and the execution of this Modification, the terms of the
      Master Lease and the Sublease (as modified hereby) shall remain in effect but
      as
      a master lease and hereafter, Landlord and Tenant shall have the relationship
      to
      one another of landlord and tenant, and not that of landlord and
      subtenant.

    

    NOW
      THEREFORE, in consideration of the mutual covenants contained herein and other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereto agree that the Sublease shall be modified
      as
      follows:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 	
              1.

            	
              Leased
                Premises.
                The Tenant currently leases 59,000 square feet of the first floor
                of the
                Building. Effective as of May 1, 2006, the Leased Premises shall
                be
                expanded to include an additional 20,424 square feet, with the result
                that
                the Leased Premises shall be comprised of 79,424 square feet, as
                identified on the “Lease
                Plan,”
                attached hereto and made a part hereof as Exhibit A.
                Notwithstanding anything to the contrary in the Sublease, all references
                in the Sublease to the “Subleased Premises” shall mean 79,424 square feet
                in the location depicted on Exhibit
                A.
                Landlord hereby consents to Tenant’s subleasing to Venture approximately
                10,000 square feet in the location depicted at
                Exhibit A-1
                hereto, on such terms as Tenant and Venture may
                agree.

            

    

    

    
      	 	
              2.

            	
              Base
                Rent.
                Notwithstanding anything to the contrary contained in the Sublease,
                Base
                Rent for the Leased Premises shall be payable in the following
                amounts:

            

    

     

    

      
        	
                Period

              	
                Base
                  Rent per square foot per month

              	
                Monthly
                  Base Rent*

              
	 	 	 
	
                5/1/06
                  -

              	
                $.57

              	
                $45,271.68

              
	
                6/30/06

              	 	 
	 	 	 
	
                7/1/06
                  - 

              	
                $.57

              	
                $45,271.68

              
	
                4/30/07

              	 	 
	 	 	 
	
                5/1/07
                  - 

              	
                $.60

              	
                $47,654.40

              
	
                4/30/08

              	 	 
	 	 	 
	
                5/1/08
                  - 

              	
                $.615

              	
                $48,845.76

              
	
                4/30/09

              	 	 
	 	 	 
	
                5/1/09
                  - 

              	
                $.615

              	
                $48,845.76

              
	
                4/30/10

              	 	 
	 	 	 
	
                5/1/10
                  - 

              	
                $.615

              	
                $48,845.76

              
	
                4/30/11

              	 	 

      

    *To
      be increased on a pro rata basis if the Leased Premises are increased pursuant
      to Section
      4,
      Section
      8
      or
      otherwise.

    

    
      	 	
              3.

            	
              Computer
                Room.
                Landlord and Tenant acknowledge that Tenant is currently occupying
                a
                computer room in the Building that does not lie within the Leased
                Premises
                (the “Computer
                Room”).
                Subject to the provisions and requirements of Article 8 of the Sublease,
                Tenant agrees that it shall, within sixty (60) days, relocate the
                Computer
                Room to a location within the Leased Premises. Landlord agrees to
                contribute up to $40,000 toward Tenant’s actual, out of pocket costs in
                connection with such relocation.

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	 	
              4.

            	
              Expansion.
                The Tenant has advised the Landlord that it anticipates the possibility
                of
                expanding the size of the Leased Premises by approximately 30,000
                square
                feet as a result of the consolidation of Tenant’s operations. On or before
                July 1, 2006, Tenant shall notify the Landlord whether it shall
                expand the size of the Leased Premises. If the Tenant elects to expand
                the
                size of the Leased Premises in accordance with this Section
                4,
                the Leased Premises shall be expanded in the manner as depicted upon
                Exhibit B
                (the “Expansion
                Space”)
                attached hereto on the same terms as the current Leased Premises,
                and
                Landlord shall separate at its sole expenses without material disruption
                of Tenant’s operations, by erection of a demising wall, the Leased
                Premises from the premises of other tenants in the Building in accordance
                with the specifications set forth on Exhibit
                C-1
                attached hereto (the “Expanded
                Leased Premises Wall Specifications”).
                In the event that Tenant does not elect to expand the Leased Premises,
                Landlord shall separate at its sole expenses without material disruption
                of Tenant’s operations, by erection of a demising wall, the Leased
                Premises from the premises of other tenants in the Building in accordance
                with the specifications set forth on Exhibit
                C-2
                attached hereto (the “Leased
                Premises Wall Specifications”).
                Notwithstanding anything to the contrary in the Sublease, the expansion
                option set forth in this Section
                4
                and the right of first offer set forth in Section
                8
                below shall be the only expansion options available to Tenant under
                the
                Sublease.

            

    

    

    
      	 	
              5.

            	
              Restroom(s).
                Landlord will construct at Landlord’s sole expense without material
                disruption of Tenant’s operations restroom(s) for Tenant’s use in the
                location depicted upon Exhibit D.
                The construction specifications for the restroom(s) are attached
                hereto
                and made a part hereof as Exhibit D.

            

    

    

    
      	 	
              6.

            	
              Term.
                Notwithstanding Section 1.4 of the Sublease, Tenant shall have and
                hold
                the Premises for a period of four (4) years and eight (8) months,
                commencing on May 1, 2006 (the “Commencement
                Date”)
                and expiring on December 31, 2010 (the “Expiration
                Date”).
                All references in the Sublease to the Commencement Date and the Expiration
                Date shall be deemed to refer to May 1, 2006 and December 31, 2010,
                respectively. 

            

    

    

    
      	 	
              7.

            	
              Utilities.
                Landlord shall reconfigure the utility facilities in the Building
                in order
                to separately meter or submeter the Leased Premises. As of the
                Commencement Date, Tenant’s obligations to pay (or reimburse Landlord) for
                utilities as set forth in Article 7 of the Sublease shall be
                unmodified. However, Landlord reserves the right to elect to propose
                further amendments to the terms of the Sublease such that the Tenant
                shall
                thereafter become responsible for paying (or reimbursing Landlord)
                for the
                utilities it does consume, and other costs and expenses that are
                the
                responsibility of a tenant leasing premises on a “net basis”, and Tenant
                agrees to use good faith efforts to enter into such a modification;
                provided, however, Tenant shall have no obligation to enter into
                any such
                “net basis” amendment should it result, or, in Tenant’s reasonable
                estimation be likely to result in, an increase in aggregate occupancy
                costs to Tenant. 

            

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	 	
              8.

            	
              Office
                Space Right of First Offer.
                During the Term, Landlord grants and gives to Tenant a right of first
                offer on the approximately 28,000 square feet of upstairs office
                space
                depicted upon Exhibit E
                attached hereto and made a part hereof in its “as is” condition (the
                “Office
                Space”).
                This right of first offer may be exercised at any time during the
                term of
                the Sublease. In the event that the Office Space becomes available,
                Landlord shall notify Tenant in writing and the date that the Office
                Space
                will be available, and Tenant shall have a period of fifteen (15)
                Business
                Days in which to notify Landlord whether it wishes to amend the Sublease
                to include the Office Space or not (the “Expansion
                Option Period”).
                In the event that that Tenant does not respond to Landlord within
                said
                Expansion Option Period, Tenant shall be deemed to have waived its
                right
                of first offer on the Office Space and Landlord shall be free to
                dispose
                of the Office Space as it deems appropriate. In the event that Tenant
                elects to accept the Office Space in question, Landlord and Tenant
                shall
                enter into a Sublease amendment including the Office Space in the
                Leased
                Premises. In the event that Tenant makes such election within twelve
                (12)
                months subsequent to the Commencement Date, the rental rate for the
                office
                space shall be negotiated based on which party pays for improvements
                per
                square foot, net. Thereafter, the rental rate shall be on market
                terms.

            

    

    

    
      	 	
              9.

            	
              Signage.
                Section
                19.3 of the Sublease is hereby deleted, and the parties agree instead
                that
                Tenant shall have the right to maintain the signage containing the
                name
                “Fiberstars” in the front of the Building where indicated on Exhibit F,
                and Tenant shall maintain said signage at its own cost and expense.
                The
                parties agree that such signage shall be the only signage centered
                on or
                over the building and fronting Aurora Road. Any signage facing Aurora
                Road
                of any other tenant shall be located at either end of the building
                or near
                a corner. The monument sign for the Building on Aurora Road shall
                list all
                tenants. Tenant shall also have the right, at Tenant’s sole cost and
                expense, and subject to Landlord’s reasonable approval, to install signage
                in the interior lobby and the shipping/receiving area of the Leased
                Premises, providing the name and of the Tenant and such directional
                information as Tenant may require.

            

    

    

    
      	 	
              10.

            	
              Termination
                Rights.
                The parties agree that the last sentence of Section 1.4 and the whole
                of
                Section 1.5 of the Sublease are hereby deleted. Tenant’s right to
                terminate, if any, arising pursuant to any section other than
                Section 1.4, as modified hereby, is waived, and otherwise rendered
                null and void.

            

    

    

    
      	 	
              11.

            	
              Entrance
                to Leased Premises.
                Tenant shall have the right to improve the entrance into the office
                area
                of the Leased Premises from the reception area with a new door system,
                all
                in accordance with the provisions and requirements of Article 8 of
                the
                Sublease.

            

    

    

    
      	 	
              12.

            	
              Parking.
                The parties acknowledge that once Venture, which is entering into
                a lease
                with Landlord for a portion of the Building as of the effective date
                of
                this Modification, and Tenant are both operating in the Building,
                the
                existing parking for the Building will be insufficient for both tenants’
                employees’ needs. Landlord agrees to provide a solution to this
                deficiency.

            

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
      	 	
              13.

            	
              Tenant’s
                Legal Fees.
                Landlord agrees to reimburse Tenant up to $5,000 for actual, out
                of pocket
                legal costs incurred by Tenant in connection with the negotiation
                and
                documentation of this Modification.

            

    

    

    
      	 	
              14.

            	
              No
                Unfulfilled Landlord Obligations.
                Tenant acknowledges and agrees that there are no existing, outstanding,
                overdue and/or unfilled obligations of Landlord arising from and
                pursuant
                to the terms of the Sublease, including, but not limited to, those
                set
                forth in Sections 8.3, 19.1, and 19.2, the performance of which was
                due prior to the date hereof.

            

    

    

    
      	 	
              15.

            	
              Renewals.
                Tenant agrees that the automatic renewal provision set forth in Section
                1.6 of the Sublease is hereby deleted and of no further force or
                effect.

            

    

    

    
      	 	
              16.

            	
              Terminology.
                All capitalized terms not otherwise defined herein shall have the
                meaning
                set forth in the Sublease. Any reference herein to a section is a
                reference to a Modification section, unless otherwise stated. As
                said
                terminology is incorporated herein, the Landlord and Tenant understand
                and
                agree that its incorporation shall take into account that the parties
                relationship with one another is now that of landlord and tenant,
                and that
                terms such as “Sublease”, “Subtenant” and “Sublandlord” shall be
                incorporated herein as if written “Lease”, “Tenant” and
                “Landlord.”

            

    

    

    
      	 	
              17.

            	
              Landlord
                and Tenant.
                Notwithstanding anything herein to the contrary, the parties hereto
                another shall have to one another the relationship of landlord and
                tenant.
                The terms of the Master Lease and the Sublease, as modified hereby,
                shall
                be merged and shall be deemed to be one single lease document. Section
                19.6 of the Sublease is hereby deleted, and the notice address for
                “Sublandlord” set forth in Section 15.1 of the Sublease is hereby amended
                to be: Keystone Ruby LLC, 29300 Aurora Road, 2nd
                Floor, Solon, Ohio 44139, Attn: General Counsel. For clarity, and
                as was
                the case under the Sublease prior to this Modification, the following
                provisions of the Master Lease shall continue to be deemed excluded
                as
                between Landlord and Tenant: Article One (Demised Premises and Term);
                Article Three (Annual Rent); Article Four (Additional Rent); Article
                Five
                (Taxes); Article Six (Insurance); Article Eight (Repairs and Maintenance);
                Article Nine (Public Utilities and Services); Article Ten (Alterations);
                Section 11.02 (Prohibitions); Article Twelve (Indemnity); Article
                Thirteen
                (Access for Inspection, Showing and Shoring); Article Fourteen (Damage
                and
                Destruction); Article Seventeen (Defaults); Article Eighteen (Additional
                Remedies of Lessor); and, except to the extent expressly provided
                otherwise by the Sublease or this Modification, Tenant shall have
                no
                obligation to perform or fund work, repairs, upgrades or maintenance
                (including any replacements), in, to or upon the Leased Premises
                or with
                respect to any equipment, system or fixture
                therein.

            

    

    

    
      	 	
              18.

            	
              Conflict.
                Any conflict between the terms and conditions of this Modification
                and the
                terms and condition of the Sublease shall be resolved in favor of
                the
                terms and conditions of the
                Modification.

            

    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      	 	
              19.

            	
              Incorporation;
                Successors and Assigns.
                Except as modified hereby, the terms and conditions of the Master
                Lease
                and the Sublease remain unmodified and in full force and effect.
                The
                Sublease as modified hereby shall be binding upon Landlord and Tenant
                and
                their respective successors and
                assigns.

            

    

    

    IN
      WITNESS WHEREOF, the parties have executed this Modification as of the date
      first above written.

     

    
      	 	 	 	LANDLORD: 
	 	 	 	 
	 	 	 	KEYSTONE RUBY LLC 
	 	 	 	an Ohio limited liability
              company 
	 	 	 	 
	 	 	 	 
	 	 	 	By: 
	
            	 	 	
              
                

              

            
	 	 	 	
              Its: 

            
	 	 	 	
              
                
 

            

    

     

    
      	 	 	 	 
	 	 	 	TENANT:
	 	 	 	 
	 	 	 	FIBERSTARS, INC. 
	 	 	 	a California corporation 
	 	 	 	 
	 	 	 	 
	 	 	 	By: 
	
            	 	 	
              
                

              

            
	 	 	 	
              Its: 

            
	 	 	 	
              
                
 

            

       

    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    
       

      
        	
                STATE
                  OF _____________

              	
                )

              
	 	
                )
                  SS:

              
	
                COUNTY
                  OF _________

              	
                )

              

      

      

      

      BEFORE
        ME, a Notary Public in and for said County and State, did personally appear
        FIBERSTARS, INC., a California corporation, by _______________________________
        ___________________________________________, its ___________________________,
        who acknowledged to me that he/she did sign the foregoing instrument as such
        officer and that the same is his/her free act and deed, both individually
        and as
        such officer of said corporation.

      

      IN
        TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
        _______________, __________, this _____ day of _______________,
        2006.

      

       

      
        	 	 	 	 
	 	 	 	 
	
              	 	 	
                
NOTARY
                PUBLIC
	 	 	 	 

      
        	
                STATE
                  OF OHIO

              	
                )

              
	 	
                )
                  SS:

              
	
                COUNTY
                  OF CUYAHOGA

              	
                )

              

      

      

      

      

      BEFORE
        ME, a Notary Public in and for said County and State, did personally appear
        KEYSTONE RUBY LLC, an Ohio limited liability company, by ___________________,
        its _____________________, who acknowledged to me that he did sign the foregoing
        instrument as such officer and that the same is his free act and deed, both
        individually and as such officer of said corporation.

      

      IN
        TESTIMONY WHEREOF, I have hereunto set my hand and official seal at Cleveland,
        Ohio, this _____ day of _______________, 2006.

      

      
         

        
          	 	 	 	 
	 	 	 	 
	
                	 	 	
                  
NOTARY
                  PUBLIC
	 	 	 	 

        
          
             

          

          
            7

            
              

            

          

          
             

          

        

      

      EXHIBIT
        A

    

    

    LEASE
      PLAN

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      B

    

    EXPANSION
      SPACE

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      C-1

    

    EXPANDED
      LEASED PREMISES WALL SPECIFICATIONS

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      C-2

    

    EXPANDED
      LEASED PREMISES WALL SPECIFICATIONS

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      D

    

    BATHROOM
      LOCATION AND SPECIFICATIONS

    

    

    

    Construct
      one men’s room, approximately 20’ by 20’

    

    Fixtures
      to include 2 toilets, 1 urinal, 2 sinks, toilet partitions

    

    ADA
      accessible

    

    VCT
      flooring

    

    Walls
      & ceiling to be drywall with paint

    

    Includes
      electrical, sprinkler and heat

    

    

    

    Construct
      one women’s room, approximately 15’ by 15’

    

    Fixtures
      to include 2 toilets, 2 sinks, toilet partitions

    

    ADA
      accessible

    

    VCT
      flooring

    

    Walls
      & ceiling to be drywall with paint

    

    Includes
      electrical, sprinkler and heat

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      E

    

    RIGHT
      OF FIRST OFFER SPACE

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      F

    

    SIGNAGE

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