<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 1-13338
TIVOLI INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specifies in its charter)
California 95-2786709
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1513 East St. Gertrude Place, Santa Ana, California 92705
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(714) 957-6101
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MARCH 31, 1998
----- -----------------------------
Common stock, $.001 par value 3,937,871
<PAGE>
TIVOLI INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet March 31, 1998 . . . . . . . . 3
Statements of Operations
Three Months Ended March 31, 1998 and 1997 . . . 4
Statements of Operations
Six Months Ended March 31, 1998 and 1997 . . . 5
Statements of Cash Flows
Six Months Ended March 31, 1998 and 1997 . . . 6
Notes to Financial Statements . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . 14
Item 2. Changes in Securities . . . . . . . 14
Item 3. Defaults upon Senior Securities . . . . . 14
Item 4 Submissions of Matters to a Vote of
Security Holders. . . . . . . . . . 14
Item 5 Other Information . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
<PAGE>
BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,211,426
Accounts receivable, less allowance for doubtful accounts of $84,168 1,757,436
Other receivable 250,000
Inventories 1,851,430
Prepaid expenses and other 466,380
----------
Total current assets 5,536,672
----------
Property and equipment :
Machinery and equipment 255,830
Furniture and fixtures 343,032
Tooling 322,115
Computer equipment and software 601,712
----------
1,522,689
Less: accumulated depreciation (767,305)
----------
Net property and equipment 755,384
----------
Goodwill, net of accumulated amortization of $146,620 512,918
Patents, net of accumulated amortization of $195,160 211,391
Deferred tax asset 127,400
Deposits and other 108,465
----------
$7,252,230
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,001,484
Accrued expenses 238,119
Income taxes payable 50,953
Current maturities of obligations under a capital lease 48,758
Current portion of notes payable to bank
----------
Total current liabilities 1,339,314
Notes payable to bank, net of current portion 667,500
Obligations under a capital lease, net of current portion 143,747
Deferred tax liability 154,933
Minority Interest 278,322
----------
Total liabilities 2,583,816
----------
Stockholders' equity:
referred stock, $.001 par value; 1,000,000 shares authorized,
none outstanding -
Common stock, $.001 par value; 10,000,000 shares authorized,
3,937,871 shares outstanding 3,938
Additional paid-in capital 4,406,747
Retained earnings 257,729
----------
Total stockholders' equity 4,668,414
----------
$7,252,230
==========
</TABLE>
3
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Net sales $2,460,003 $2,564,005
Cost of sales 1,480,893 1,597,911
---------- ----------
Gross profit 979,110 966,094
Selling, general and administrative expenses 884,576 818,075
---------- ----------
Income from operations 94,534 148,019
Net interest (income) expense 3,587 (5,620)
Minority interest in net losses of consolidated subsidiary 20,806
---------- ----------
Income before provision for income taxes 111,753 153,639
Provision for income taxes 45,000
---------- ----------
Net income $ 66,753 $ 153,639
========== ==========
Basic earnings per share :
Earnings per share $ 0.02 $ 0.04
Weighted average shares 3,937,871 3,920,721
Diluted earnings per share :
Earnings per share $ 0.01 $ 0.04
Weighted average shares 4,546,371 4,199,221
</TABLE>
4
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Net sales $5,112,921 $4,460,097
Cost of sales 3,000,182 2,630,972
---------- ----------
Gross profit 2,112,739 1,829,125
Selling, general and administrative expenses 1,882,572 1,611,631
---------- ----------
Income from operations 230,167 217,494
Net interest (income) expense 7,121 (4,725)
Minority interest in net losses of consolidated subsidiary 29,782
---------- ----------
Income before provision for income taxes 252,828 222,219
Provision (benefit) for income taxes 101,000 (1,972)
---------- ----------
Net income $ 151,828 $ 224,191
========== ==========
Basic earnings per share :
Earnings per share $ 0.04 $ 0.06
Weighted average shares 3,937,871 3,920,721
Diluted earnings per share :
Earnings per share $ 0.03 $ 0.05
Weighted average shares 4,546,371 4,115,888
</TABLE>
5
<PAGE>
TIVOLI INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended March 31
-------------------------
1998 1997
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 151,828 $ 224,191
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 147,012 72,284
Change in allowance for doubtful accounts (2,832)
Minority Interest (29,782)
Deferred income taxes
Warrants for the purchase of common stock
issued for services 15,000
Changes in operating assets and liabilities:
Accounts receivable (139,043) (567,012)
Other receivable (250,000)
Inventories (137,877) (679,885)
Prepaid expenses and other (42,694) (170,226)
Accounts payable (127,921) 606,925
Accrued expenses and other current liabilities 71,026 44,157
------------ -------------
Net cash used in operating activities (345,283) (469,566)
------------ -------------
Cash flows from investing activities:
Deposits and other (27,979) 4,056
Capital expenditures (67,350) (130,979)
Patent expenditures 11,073
Investment by minority interest 286,494
------------ -------------
Net cash provided by (used in) provided by investing activities 191,165 (115,850)
------------ -------------
Cash flows from financing activities:
Net borrowings under line of credit and notes payable
to bank (943) 17,460
Principal payments on capital lease obligations (23,233) (16,000)
------------ -------------
Net cash (used in) provided by financing activities (24,176) 1,460
------------ -------------
Net decrease in cash and cash equivalents (178,294) (583,956)
Cash and cash equivalents, beginning of period 1,389,720 1,692,928
------------ -------------
Cash and cash equivalents, end of period $ 1,211,426 $ 1,108,972
============ =============
</TABLE>
6
<PAGE>
TIVOLI INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statement
presentation.
The Company, in its opinion, has included all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the results of
operations for the quarters ended March 31, 1998 and 1997. The financial
statements and notes thereto should be read in conjunction with the audited
financial statements and notes and form 10-KSB for the year ended September 30,
1997.
NOTE 2 - NEW ACCOUNTING STANDARD
- --------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share," which is required to be adopted for fiscal
periods ending after December 15, 1997 (fiscal 1998 for the Company).
The following tables represent the reconciliations of Basic EPS to Diluted EPS:
<TABLE>
<CAPTION>
For the quarters ending March 31,
1998 1997
------------------------------ ---------------------------------
Income Shares Per Share Income Shares Per Share
Amount Amount
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to
Shareholders $66,753 3,937,871 $0.02 $153,639 3,920,721 $0.04
EFFECT OF DILUTIVE SECURITIES
Warrants 185,000 185,000
Stock Options 423,500 93,500
-------- ---------
Diluted EPS
Income available to
Shareholders $66,753 4,546,371 $0.01 $153,639 4,199,221 $0.04
------- --------- ----- -------- --------- -----
</TABLE>
7
<PAGE>
TIVOLI INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - NEW ACCOUNTING STANDARD - CONT.
- ----------------------------------------
<TABLE>
<CAPTION>
For the six month period ending March 31,
1998 1997
--------------------------------- --------------------------------
Income Shares Per Share Income Shares Per Share
Amount Amount
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to
Shareholders $151,828 3,937,871 $0.04 $224,191 3,920,721 $0.06
EFFECT OF DILUTIVE SECURITIES
Warrants 185,000 101,667
Stock Options 423,500 93,500
--------- ---------
Diluted EPS
Income available to
Shareholders $151,828 4,546,371 $0.03 $224,191 4,115,888 $0.05
-------- --------- ----- -------- --------- -----
</TABLE>
Options to purchase 523,500 shares of Common Stock at prices between $2.185 and
$3.31 per share were outstanding during the six months ending March 31, 1998.
Options to purchase 486,000 shares of Common Stock at prices between $2.80 and
$3.31 per share were outstanding during the six months ending March 31, 1997.
These options were not included in the computation of diluted EPS because the
options' exercise price was greater than the average market price of the common
shares. These options which expire between May 10, 2004 and November 14, 2005
were still outstanding at March 31, 1998.
NOTE 3 - NOTES PAYABLE TO BANK
- ------------------------------
On March 31, 1998, the Company renewed its existing line of credit agreement
with Union Bank of California and increased the borrowing base from $750,000 to
$1,250,000. The agreement has an expiration date of March 1, 2000. The renewal
agreement contains interest at the bank's Reference Rate (8.5% at March 31,
1998) plus 1% per annum. The terms of the new agreement provide for borrowings
of up to the lessor of $1,250,000 or the aggregate of 80% of eligible accounts
receivable plus 50% of eligible inventory up to $400,000. At March 31, 1998, the
Company had approximately $582,500 available under this line of credit.
The renewal agreement also provides an additional line of credit of $250,000 to
be used for fixed asset purchases. This part of the agreement contains interest
at the bank's Reference Rate (8.5% at March 31, 1998) plus 1.0% per annum. The
Company may borrow, repay and re-borrow amounts up to $250,000, at any time
prior to March 3, 1999. The Company will then repay the balance by monthly
installments through February 3, 2002. At March 31, 1998, the Company had not
borrowed any amounts under this agreement.
8
<PAGE>
TIVOLI INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - SELLING, GENERAL & ADMINISTRATION EXPENSES
- ---------------------------------------------------
Selling, General & Administration "SG&A" expenses includes a payment of $250,000
for the settlement of a trademark dispute. On March 31, 1998 the Company entered
into an agreement with Tivoli Systems, Inc. settling a trade mark dispute
between the Company and Tivoli Systems, Inc. As part of this settlement, Tivoli
Systems, Inc. agreed to pay the sum of $250,000 to the Company. The Company has
agreed to terminate its opposition proceedings against Tivoli Systems, Inc.
concerning the use of certain trade marks. The payment of $250,000 is included
as a reduction to SG&A expenses in the quarter ending March 31, 1998.
9
<PAGE>
TIVOLI INDUSTRIES, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The following discussion contains forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from those discussed here. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this section, as
well as in the Company's Form 10-KSB for the fiscal year ended September 30,
1997.
OVERVIEW
The Company, since its founding in 1967, has established a reputation as an
innovator and supplier of miniature and low voltage lighting products. From
1991 onward, the Company expanded its product range and is now regarded as a
designer, developer, manufacturer and supplier of specialty lighting and related
products, both domestically and internationally. Applications of the Company's
products, globally, are movie theater aisle, step, marquee and concession
lighting, illuminated ceiling systems, architectural cove, miniature lighting in
cabinetry, decorative, accent, task and energy efficient lighting in casinos,
hotels, restaurants, gaming vessels, cruise ships, specialty retail, themed
venues, and high end residential.
In 1991, the Company was acquired by its present management who implemented
a strategy to revitalize and expand the Company's market position through
product line expansion and aggressive market penetration programs. The Company
completed a successful public offering in September of 1994, and continued to
focus, refine and implement its strategic business plan which encompassed new
product and patent development, market penetration, literature and catalog
development and an international reciprocal joint venture with Targetti of
Florence, Italy. The joint venture, announced in November 1994, consisted of a
reciprocal license and distribution agreement between the Company and Targetti
in the U.S. market and provided the Company's products to Targetti's global
network of 66 representatives, distributors and sales offices. In November 1997,
the scope of the joint venture was expanded with the formation of a jointly
owned Company in the U.S. - Targetti USA, LLC ("Targetti USA"), in which the
Company holds a 50% interest. Through this joint venture, Targetti offers a wide
range of product families developed by Targetti which broadens and complements
the Company's products.
In North America and Mexico, the Company's products are sold through 69
independent marketing representatives, and directly by the Company's personnel
to a large customer base consisting of electrical distributors, contractors,
owner representatives, hotels, showrooms, theater distributors and other end
users. The Company has an international subsidiary, Tivoli de Mexico, S.A. de
C.V., in Mexico City, Mexico, to support the Company's sales in Mexico and
Central America. The Company also has opened a sales support office and
demonstration center in Las Vegas, Nevada to support the growth of the
casino/gaming and hospitality markets in North America and internationally.
The Company currently holds eight U.S. patents on mechanical features and
three U.S. patents on design features. The Company's product families lines
include low voltage tube lighting, linear lighting systems, accent and task
lighting, chandelier and light curtains, decorative ceiling systems, specialized
vehicular, marine and aircraft lighting, long life, low voltage lamps, energy
efficient fluorescent cove, low voltage linear cove, illuminated surveillance
system, electronic transformers, dimmers and circuit protection devices, and
furniture, cabinet and kiosk lighting. The products offered through the
Targetti USA joint venture include low voltage track lighting, low voltage open
frame and open conductor systems, illuminated sky lights, low voltage recessed
lighting fixtures, precision adjustable projectors, energy efficient compact
fluorescent ("CF") down-lights, decorative wall sconces, and a variety of
lighting accessories and options.
Since the acquisition of the Company in 1991, annual sales have
consistently trended upward, with sales of $2,529,053 in fiscal 1992, $2,974,819
in fiscal 1993, $3,544,533 in fiscal year 1994, $4,518,502 in fiscal 1995,
$6,638,063 in fiscal 1996, $9,846,174 in fiscal 1997. Management believes that
its growth strategies and expenditures account for the strong annual growth rate
and provide an expanded foundation to support future Company growth.
10
<PAGE>
TIVOLI INDUSTRIES, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS - CONTINUED
---------------------------------
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998 AS COMPARED TO THREE
MONTHS ENDED MARCH 31, 1997
Net sales of $2,460,003 for the second quarter of fiscal year 1998 were 4%
lower than net sales of $2,564,005 in the same period of the prior year. Net
sales in the second quarter of 1997 included a shipment of $773,548, which was
part of a large project order for a national customer. Sales of products not
related to this large project order increased 38% from $1,790,457 in 1997, to
$2,460,003 in 1998 as a result of new product introductions and successful
implementation of market penetration programs in the core markets of theater,
retail and casino gaming. The gross profit margin for the second quarter of the
fiscal year 1998 was 39.8% of net sales which was higher than the gross profit
margin of 37.7% for the second quarter of fiscal year 1997.
Selling, general and administrative expenses for the second quarter of
fiscal 1998 increased to 36% of net sales or $884,576 as compared to 31.9% or
$818,075 in the same quarter of the prior year. Included in the $884,576 of SG&A
expenses is a payment of $250,000 to the Company for settlement of a trademark
dispute. (see Financial Statements Note 4) This increase in SG&A expenses is due
to incremental SG&A expenses of Targetti USA, increases in marketing,
engineering and sales staffs to support product lines expansion and sales
growth, the costs of the Las Vegas sales office which opened in March 1997, and
incremental costs associated with the Manufacturing Resource Planning "MRP"
system which was installed in October 1997.
Operating profit for the second quarter of fiscal year 1998 was $94,534 or
3.8% of net sales as compared to an operating profit of $148,019 or 5.8% of net
sales in the same quarter of fiscal year 1997.
Net interest expense for the second quarter of fiscal year 1998 was $3,587
and consisted of interest income of $15,874 on the investment of the proceeds of
IPO funds, less interest expense on the bank loan of $15,518 and capital lease
interest of $3,943. Net interest income for the second quarter of fiscal year
1997 was $5,620 and was derived from interest income of $21,127 on the
investment of IPO funds less interest expense on the bank loan of $15,507.
Minority interest in net losses of consolidated subsidiary was $20,806 in
the second quarter of fiscal year 1998, and represents 50% of the operating loss
generated by Targetti USA.
The provision for income tax in the second quarter of fiscal year 1998 was
$45,000 and represented both federal and state income tax requirements. In the
same quarter of the prior fiscal year net operating loss carry forwards were
sufficient to offset both the federal and state income tax provisions.
As a result of the above factors, net income for the second quarter of
fiscal year 1998 was $66,753 or $0.02 basic earnings per share as compared to
net income of $153,639 or $0.04 basic earnings per share in the second quarter
of fiscal year 1997.
11
<PAGE>
TIVOLI INDUSTRIES, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS - CONTINUED
---------------------------------
RESULTS OF OPERATIONS - SIX MONTHS ENDED MARCH 31, 1998 AS COMPARED TO SIX
MONTHS ENDED MARCH 31, 1997
Net sales of $5,112,921 for the first six months of fiscal year 1998 were
14% higher than net sales of $4,460,097 in the same period of the prior year.
This increase was stimulated by new product introductions and successful
implementation of market penetration programs in the core markets of theater,
retail and casino gaming. The gross profit margin for the first six months of
the fiscal year 1998 was 41.3% of net sales which was constant compared to the
gross profit margin of 41.0% for the first six months of fiscal year 1997.
Selling, general and administrative expenses for the first six months of
fiscal 1998 increased to 36.8% of net sales or $1,882,572 as compared to 36.1%
or $1,611,631 in the same period of the prior year. Included in the $1,882,327
of SG&A expenses is a payment of $250,000 to the Company for settlement of a
trademark dispute. (see Financial Statements Note 4) This increase in SG&A
expenses is due to incremental SG&A expenses of Targetti USA, increases in
marketing, engineering and sales staffs to support product lines expansion and
sales growth, the costs of the Las Vegas sales office which opened in March
1997, and incremental costs associated with the MRP system which was installed
in October 1997.
Operating income for the first six months of fiscal year 1998 was $230,167
or 4.5% of net sales as compared to an operating profit of $217,494 or 4.9% of
net sales in the same quarter of fiscal year 1997.
Net interest expense for the first six months of fiscal year 1998 was
$7,121 and consisted of interest income of $31,390 on the investment of the
proceeds of IPO funds, less interest expense on the bank loan of $30,404 and
capital lease interest of $8,107. Net interest income for the first six months
of fiscal year 1997 was $4,725 and was derived from interest income of $40,216
on the investment of IPO funds less interest expense on the bank loan of
$35,491.
Minority interest in net losses of consolidated subsidiary was $29,782 in
the first six months of fiscal year 1998, and represents 50% of the operating
loss generated by Targetti USA.
The provision for income tax in the first six months of fiscal year 1998
was $101,000 and represented both federal and state income tax requirements. In
the same quarter of the prior fiscal year net operating loss carry forwards were
sufficient to offset both the federal and state income tax provisions.
As a result of the above factors, net income for the first six months of
fiscal year 1998 was $151,828 or $0.04 basic earnings per share as compared to
net income of $224,191 or $0.06 basic earnings per share in the first six months
of fiscal year 1997.
12
<PAGE>
TIVOLI INDUSTRIES, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS - CONTINUED
---------------------------------
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
The Company's primary source of cash during the first six months of fiscal
year 1998 was cash of $286,494 contributed by Targetti Sankey S.P.A. to the
Targetti USA, LLC partnership. During the period operating activities used
$345,283 which consisted of net income of $151,828 and depreciation and
amortization of $147,012, which was offset by net changes in other operating
activities of $644,123.
Working capital increased to $4,197,358 at March 31, 1998, as compared to
$3,725,303 at September 30, 1997. A portion of this increase was due to the
cash contribution of $286,494 by Targetti Sankey S.P.A. referenced above.
Accounts receivable as of March 31, 1997, increased to $1,757,436 from
$1,615,561 at September 30, 1997. The days sales outstanding in accounts
receivable increased to 64 days at March 31, 1998, as compared to 59 days at
September 30, 1997. Other receivable includes the amount of $250,000 due from
Tivoli Systems, Inc. (Note 4).
Inventories as of March 31, 1997, increased to $1,851,430 as compared to
$1,691,943 at September 30, 1997. The number of months costs of sales in
inventory at March 31, 1998, increased to 3.7 months as compared to 3.6 months
at September 30, 1997.
Accounts payable as of March 31, 1998, decreased to $1,001,484 as compared
to $1,129,405 at September 30, 1997. The number of days in accounts payable at
March 31, 1998 decreased to 46 days compared to 56 days September 30, 1997.
Capital expenditures in the first six months of fiscal year 1998 totaled
$67,350 and consisted of new product tooling, and related machinery and
equipment.
The Company is currently assessing computer hardware and software
difficulties that may be experienced in connection with the so-called "Year
2000" problems. The Company currently relies upon computer hardware and software
systems from various third party vendors to manage critical functions of the
Company. Internally generated software systems do not comprise a material
element of the Company's information technology. The Company is in the process
of securing from third party software and hardware vendors, including providers
of telephone services, certificates of compliance with Year 2000 issues for
currently installed systems that are material to the Company's operations. At
this time, the Company expects that its key information technology vendors will
be compliant with Year 2000 requirements. A failure by a third party vendor to
adequately address the Year 2000 issue could have a material adverse effect on
the Company. In addition, the magnitude of certain risks, for example those
associated with embedded chips, are unknown at this point, and could
nevertheless have a material adverse impact on the Company and other companies
in its industry.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On March 31, 1998 the Company entered into an agreement with Tivoli Systems,
Inc. settling a trade mark dispute between the Company and Tivoli Systems, Inc.
As part of this settlement, Tivoli Systems, Inc. agreed to pay the sum of
$250,000 to the Company. The Company has agreed to terminate its opposition
proceedings against Tivoli Systems, Inc. concerning the use of certain trade
marks. (Item 1, Note 4)
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Shareholders (Annual Meeting) was held on
March 20, 1998. At the Annual Meeting, the shareholders of the registrant (i)
elected each of the persons listed below to serve as a director of the
Registrant until the 1999 Annual Meeting of Shareholders or until his successor
is elected; and (ii) ratified the selection of Corbin & Wertz as the
Registrant's Independent Auditors for the fiscal year ending September 30,1998.
The Company had 3,893,895 shares of Common Stock outstanding as of February
6, 1998, the record date for the Annual Meeting. At the Annual Meeting, holders
of a total of 3,765,744 shares of Common Stock were present in person or
represented by proxy. The following sets forth information regarding the results
of the voting at the Annual Meeting.
PROPOSAL 1 - ELECTION OF DIRECTORS
<TABLE>
<S> <C> <C>
Director - Terrence C. Walsh Director - Vincent F. Monte Director - Gerald E. Morris
Votes in Favor 3,759,987 Votes in Favor 3,759,044 Votes in Favor 3,748,487
Votes Against 0 Votes Against 0 Votes Against 0
Abstentions 5,757 Abstentions 6,700 Abstentions 17,257
</TABLE>
PROPOSAL 2 - RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
<TABLE>
<S> <C>
Votes in Favor 3,750,244
Votes Against 11,500
Abstentions 4,000
</TABLE>
ITEM 5. OTHER INFORMATION.
None
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits Index
Exhibit No Description
---------- -----------
10.1 Amended and restated Line of credit agreement with
Union Bank of California as at March 31, 1998
24 List of subsidiaries
27 Financial Data Schedules
b) Reports on Form 8-K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 1998 TIVOLI INDUSTRIES, INC.
/S/ Terrence C. Walsh
---------------------------
Terrence C. Walsh
Chairman, Chief Executive Officer and
Director
/S/ Charles Kimmel
-------- --------------------
Charles Kimmel
President, Chief Operation Officer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
16
<PAGE>
EXHIBIT 10.1
UNION BANK OF CALIFORNIA
BUSINESS LOAN AGREEMENT
This Business Loan Agreement (this "Agreement") is entered into as of the date
set forth below between Union Bank of California. N.A. ("Bank") and the
undersigned ("Borrower") with respect to each and every extension of credit
(whether one of more, collectively referred to as the "Loan") from Bank to
Borrower. In consideration of the Loan, Bank and Borrower agree to the
following terms and conditions.
1. THE LOAN
1.1 The Note. The Loan is evidenced by one or more promissory notes or
other evidences of indebtedness, including each amendment, extension,
renewal or replacement thereof, which are incorporated herein by this
reference (whether one or more, collectively referred to as the "Note").
1.2 REVOLVING LOAN CLEAN-UP PERIOD. For any portion of the Loan which is
a revolving loan, at least N/A consecutive days during each 12 month
------
period, the principal amount outstanding under such revolving loan must be
zero.
1.3 TERM LOAN AVAILABILITY PERIOD. For any portion of the Loan which is a
term loan, loan proceeds shall be available for disbursement from
N/A , 199__, through __________. 199_, only.
-------------
1.4 FEE. Borrower shall pay to Bank a fee of $ 0.00 .
---------------
1.5 COLLATERAL. The payment and performance of all obligations of
Borrower under the Loan Documents are and shall be during the term of the
Loan secured by a perfected security interest in such real or personal
property collateral as is required by Bank.
1.6 GUARANTY. The payment and performance of all obligations of Borrower
under the Loan Documents are and shall be during the term of the Loan
guaranteed by: N/A
----------
1.7 SUBORDINATION. Certain other obligations of Borrower are and shall be
during the term of the Loan subordinated to the repayment of the Loan and
all other obligations of Borrower to Bank, pursuant to one or more
subordination agreement(s) in favor of Bank executed and delivered by:
____________
________________________________________________________________________________
2. CONDITIONS TO AVAILABILITY OF THE LOAN. Before Bank is obligated to
disburse all or any portion of the Loan, Bank must have received (a) the Note
and every other document required by Bank in connection with the Loan, each of
which must be in form and substance satisfactory to Bank (together with this
Agreement, referred to as the "Loan Documents"), (b) confirmation of the
perfection of its security interest in any collateral for the Loan, and payment
of any fee required in connection with the Loan.
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants (and each
request for a disbursement of the proceeds of the Loan shall be deemed a
representation and warranty made on the date of such request) that:
3.1 Borrower is an individual or Borrower is duly organized and existing
under the laws of the state of its organization and is duly qualified to
conduct business in each jurisdiction in which its business is conducted;
<PAGE>
3.2 The execution, delivery and performance of the Loan Documents executed
by Borrower are within Borrower's power, have been duly authorized, are
legal, valid and binding obligations of Borrower, and are not in conflict
with the terms of any charter, bylaw or other organization papers of
Borrower or with any law, indenture, agreement or undertaking to which
Borrower is a party or by which Borrower is bound or affected:
3.3 All financial statements and other financial information submitted by
Borrower to Bank are true and correct in all material respects, and there
has been no material adverse change in Borrower's financial condition since
the date of the latest of such financial statements:
3.4 Borrower is properly licensed and in good standing in each state in
which Borrower is doing business. and Borrower has complied with all laws
and regulations affecting Borrower, including without limitation, each
applicable fictitious business name statute;
3.5 There is no event which is, or with notice or lapse of time or both
would be, and Event of Default (as defined in Article 5);
3.6 Borrower is not engaged in the business of extending credit for the
purpose of, and no part of the Loan will be used, directly or indirectly,
for purchasing or carrying margin stock within the meaning of Federal
Reserve Board Reg. U; and
3.7 Borrower is not aware of any fact, occurrence or circumstance which
Borrower has not disclosed to Bank in writing which has, or could
reasonably be expected to have, a material adverse effect on Borrower's
ability to repay the Loan or perform its obligations under the Loan
Documents.
4. COVENANTS. Borrower agrees, so long as the Loan or any commitment to make
any advance under the Loan is outstanding and until full and final payment of
all sums outstanding under any Loan Document, that Borrower will:
4.1 Maintain:
(a) Working Capital of at least $ N/A (As used herein, "Working
---------------
Capital" means the excess of current assets over current liabilities):
(b) A ratio of current assets to current liabilities of at least
N/A :1.00:
---------------
(c) A quick ratio of cash, accounts receivable and marketable securities to
current liabilities of at least N/A :1.00:
---------
(d) Tangible Net Worth of at least $ 3,000,000.00 (As used herein,
----------------------
"Tangible Net Worth" means net worth increased by indebtedness of Borrower
subordinated to Bank and decreased by patents, licenses, trademarks, trade
names, goodwill and other similar intangible assets, organizational
expenses, and monies due from affiliates (including officers, shareholders
and directors)):
(e) A ratio of total liabilities to Tangible Net Worth of not greater than
N/A : 1.00 (As used herein "Tangible Net Worth" means net worth
--------
increased by indebtedness of Borrower subordinated to Bank and decreased by
patents, licenses, trademarks, trade names, goodwill and other similar
intangible assets, organizational expenses, and monies due from affiliates
(including officers, shareholders and directors)):
<PAGE>
(f) A ratio of Cash Flow to Debt Service of at least N/A , to be
----------
measured as of the end of each fiscal __________ of Borrower for the
_____________ period immediately preceding the date of measurement:
(g) A ratio of Cash Flow to Debt Service of at least N/A :1:00.
------------
Compliance with this subsection to be measured as of the end of each fiscal
_____________ of Borrower. (As used herein, "Cash Flow" means net profit
after taxes, to which depreciation, amortization and other non-cash
expenses are added for the ______________ month period immediately
preceding the date of calculation, and "Debt Service" means that portion of
long-term liabilities and capital leases coming due within _________ months
after the date of calculation): and
(h) N/A
------------------------------------------------------------------------
------------------------------------------------------------------------
All accounting terms used in this Agreement shall have the definitions
given them by generally accepted accounting principles, unless otherwise
defined herein.
4.2 Give written notice to Bank within 15 days of the following:
(a) Any litigation or arbitration proceeding affecting Borrower where the
amount in controversy is $ 100,000.00 or more:
---------------------
(b) Any material dispute which may exist between Borrower and any
government body or law enforcement body;
(c) Any Event of Default or any event which, upon notice, or lapse of time,
or both, would become an Event of Default;
(d) Any other matter which has resulted or is likely to result in a
material adverse change in Borrower's financial condition or operation; and
(e) Any change in Borrower's name or the location of Borrower's principal
place of business, or the location of any collateral for the Loan, or the
establishment of any new place of business or the discontinuance of any
existing place of business.
4.3 Furnish to Bank an income statement, balance sheet, and statement of
retained earnings, with supportive schedules ("Financial Statement") and
any other financial information requested by Bank, prepared in accordance
with generally accepted accounting principles and in a form satisfactory to
Bank as follows:
(a) Within 60 days after the close of each 6 Month Interim Fiscal
-------- -----------------------
Period , Borrower's Financial Statement as the close of such period:
----------
(b) Within 120 days after the close of each fiscal year, a copy of
---------
Borrower's annual Financial Statement prepared by an independent certified
------------------------
public accountant on an audited basis. Any independent certified public
----------------- -------
accountant who prepares Borrower's Financial Statement shall be selected by
Borrower and reasonably satisfactory to Bank;
(c) Annually, upon request, a copy of each guarantor's annual Financial
Statement:
(d) If a Borrowing Base Addendum is made part of this Agreement, within
20 days after each calendar month-end, in form required by Bank, a
------
copy of Borrower's monthly accounts receivable and accounts payable agings,
a report of Borrower's inventory, and a certificate of compliance with the
borrowing base described in said Borrowing Base Addendum, which certificate
shall accurately report the collateral in form required by Bank; and
(e) Promptly upon request, any other financial information requested by
Bank.
4.4 Furnish to Bank, on Bank's request, a copy of Borrower's and each
guarantor's most recently filed federal income tax return with all
accompanying schedules.
<PAGE>
4.5 Pay or reimburse Bank for all costs, expenses and fees incurred by
Bank in preparing and documenting this Agreement and the Loan, and all
amendments and modifications thereof, including but not limited to all
filing and recording fees, costs of appraisals, insurance and attorney's
fees, including the reasonable estimate of the allocated costs and expenses
of in-house legal counsel and staff.
4.6 Maintain and preserve Borrower's existence, present form of business
and all rights, privileges and franchises necessary or desirable in the
normal course of its business, and keep all of Borrower's properties in
good working order and condition.
4.7 Maintain and keep in force insurance with companies acceptable to Bank
and in such amounts and types, including without limitation fire and public
liability insurance, as is usual in the business carried on by Borrower, or
as Bank may reasonably request. Such insurance policies must be in form
and substance satisfactory to Bank.
4.8 Maintain adequate books, accounts and records and prepare all
financial statements required hereunder in accordance with generally
accepted accounting principles, and in compliance with the regulations of
any governmental regulatory body having jurisdiction over Borrower or
Borrower's business and permit employees or agents of Bank at any
reasonable time to inspect Borrower's assets and properties, and to examine
or audit Borrower's books, accountsa and records and make copies and
memoranda thereof.
4.9 At all times comply with, or cause to be complied with, all laws,
statutes, rules, regulations, orders and directions of any governmental
authority having jurisdiction over Borrower or Borrower's business, and all
material agreements to which Borrower is a party.
4.10 Except as provided in this Agreement, or in the ordinary course of
its business as currently conducted, not make any loans or advances, become
a guarantor or surety, pledge its credit or properties in any manner, or
extend credit.
4.11 Not purchase the debt or equity of another person or entity except
for savings accounts and certificates of deposit of Bank, direct U.S.
Government obligations and commercial paper issued by corporations with top
ratings of Moody's or Standard & Poor's, provided that all such permitted
investments shall mature within one year of purchase; *see Addendum 4.11(a)
4.12 Not create, assume or suffer to exist any mortgage, encumbrance,
security interest, pledge or lien ("Lien") on Borrower's real or personal
property, whether now owned or hereafter acquired, or upon the income or
profits thereof except the following: (a) Liens in favor of Bank, (b) Liens
for taxes or other items not delinquent or contested in good faith and (c)
other Liens which do not exceed in the aggregate $ N/A at any one
--------
time.
4.13 Not sell or discount any account receivable or evidence of
indebtedness, except to Bank: not borrow any money or become contingently
liable for money borrowed, except pursuant to agreements made with Bank.
4.14 Neither liquidate, dissolve, enter into any consolidation, merger,
partnership or other combination; nor convey, sell or lease all or the
greater part of its assets or business; nor purchase or lease all or the
greater part of the assets or business of another.
4.15 Not engage in any business activities or operations substantially
different from or unrelated to Borrower's present business activities and
operations.
4.16 Not, in any single fiscal year of Borrower, expend or incur
obligations of more than $ N/A for the acquisition of fixed or
----------
capital assets.
<PAGE>
4.17 Not, in any single fiscal year of Borrower, enter into any lease of
real or personal property which would cause Borrower's aggregate annual
obligations under all such real and personal property leases to exceed
$ N/A .
-------------
4.18 Borrower will promptly, upon demand by Bank, take such further action
and execute all such additional documents and instruments in connection
with this Agreement as Bank in its reasonable discretion deems necessary,
and promptly supply Bank with such other information concerning its affairs
as Bank may request from time to time.
5. EVENTS OF DEFAULT. The occurrence of any of the following events ("Events
of Default") shall terminate any obligation on the part of Bank to make or
continue the Loan and automatically, unless otherwise provided under the Loan
Documents, shall make all sums of interest and principal and any other amounts
owing under the Loan immediately due and payable, without notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor,
or any other notices or demands:
5.1 Borrower shall default in the due and punctual payment of the
principal of or the interest on the Note or any of the other Loan
Documents.
5.2 Any default shall occur under the Note or any of the other Loan
Documents:
5.3 Borrower shall default in the due performance or observance of any
covenant or condition of the Loan Documents:
5.4 Any guaranty or subordination agreement required hereunder shall be
breached or become ineffective, or any guarantor or subordinating creditor
shall die or disavow or attempt to revoke to terminate such guaranty or
subordination agreement:
or
5.5 There shall be a change in ownership or control of 10% or more of the
issued and outstanding stock of Borrower or any guarantor, or (if the
Borrower is a partnership) there shall be a change in ownership or control
of any general partner's interest.
6. MISCELLANEOUS PROVISIONS
6.1 The rights, powers and remedies given to Bank hereunder shall be
cumulative and not alternative and shall be in addition to all rights,
powers and remedies given to Bank by law against Borrower or any other
person, including but not limited to Bank's rights of setoff and banker's
lien.
6.2 Any forbearance or failure or delay by Bank in exercising any right,
power or remedy hereunder shall not be deemed a waiver thereof and any
single or partial exercise of any right, power or remedy shall not preclude
the further exercise thereof. No waiver shall be effective unless it is in
writing and signed by an officer of Bank.
6.3 The benefits of this Agreement shall inure to the successors and
assigns of Bank and the permitted successors and assigns of Borrower
without Bank's consent shall be null and void.
6.4 This Agreement and all other agreements and instruments required by
Bank in connection herewith shall be governed by and construed according to
the laws of the State of California.
<PAGE>
6.5 Should any one or more provisions of this Agreement be determined to
be illegal or unenforceable, all other provisions nevertheless shall be
effective.
6.6 Except for documents and instruments specifically referenced herein,
this Agreement constitutes the entire agreement between Bank and Borrower
regarding the Loan and all prior communications, verbal or written, between
Borrower and Bank shall be of no further effect or evidentiary value.
6.7 The section and subsection headings herein are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
6.8 This Agreement may be amended only in writing signed by all parties
hereto.
6.9 Borrower and Bank may execute one or more counterparts to this
Agreement, each of which shall be deemed an original, but taken together
shall be one and the same instrument.
6.10 Any notices or other communications provided for or allowed hereunder
shall be effective only when given by one of the following methods and
addressed to the respective party at its address given with the signatures
at the end of this Agreement and shall be considered to have been validly
given: (a) upon delivery, if delivered personnally; (b) upon receipt, if
mailed, first class postage prepaid, with the United States Postal Service;
(c) on the next business day if sent by overnight courier service of
recognized standing; and (d) upon telephoned confirmation of receipt, if
telecopied.
7. ADDITIONAL PROVISIONS
The following additional provisions, if any, are hereby made a part of this
Agreement:
THIS AGREEMENT is executed on behalf of the parties as of March 31 , 1998
---------------------
UNION BANK OF CALIFORNIA, N.A. TIVOLI INDUSTRIES, INC.
("BANK") ("BORROWER")
By: /s/ Kurt Ross By: /s/ Terrence C. Walsh
Title: Vice President Title: CEO
Printed Name: Kurt W. Ross Printed Name: Terrence C. Walsh
<TABLE>
<S> <C>
Address where notices to Bank are to be sent: Address where notices to Borrower are to be sent:
. UBOC - South Orange County BBC . Tivoli Industries, Inc.
. 23511 Paseo de Valencia . 1513 E. St. Gertrude
. Laguna Hills, CA 92653 . Santa Ana, CA 92705
Attn: Laura Pinkerton Attn: Terrence C. Walsh
Fax Number: (714)457-1148 Fax Number: (714)
Telephone No. (714457-1146 Telephone No. (714)957-6101
</TABLE>
<PAGE>
BORROWING BASE ADDENDUM
This Borrowing Base Addendum is hereby made a part of and incorporated into the
Business Loan Agreement dated as of March 31, 1998, as amended and supplemented
---------------
from time to time (the "Agreement") between Union Bank of California, N.A. and
the undersigned ("Borrower").
1.8 BORROWING BASE. An amount of the Loan equal to $1,250,000.00,
evidenced by the Note dated February 27, 1998, or any substitutions or
replacements thereof, is a revolving loan subject to a borrowing base
("Borrowing Base Loan"). Notwithstanding any other provision of the Agreement
or any other Loan Document, Bank shall not be obligated to advance any funds
under the Borrowing Base Loan if the principal amount of such Borrowing Base
Loan including such advance exceeds 80 % of Borrower's Eligible Accounts
------
plus 50% of Borrower's Eligible Inventory. However, extensions of credit
---------
under the Borrowing Base Loan which are based on availability under Borrower's
Eligible Inventory shall not at any time exceed $ 400,000.00 . If at any
----------------
time Borrower's obligations to Bank under the Borrowing Base Loan exceed the sum
so permitted, Borrower shall immediately repay to Bank such excess.
The term "Accounts" means all presently existing and hereafter arising accounts
receivable, contract rights, chattel paper, and all other forms of obligations
owing to Borrower, payable in U.S. Dollars, arising out of the sale or lease of
goods, or the rendition of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties and other security, as
well as all merchandise returned to or reclaimed by Borrower and Borrower's
books and records relating to any of the foregoing.
The term "Eligible Accounts" means those Accounts, net of finance charges, which
are due and payable within ninety (90) days,or less, from the date of
--------------
invoice, have been validly assigned to Bank and strictly comply with all of
Borrower's representations and warranties to Bank, but Eligible Accounts shall
not include the following:
(a) Any Account with respect to which the account debtor is an officer,
shareholder, director, employee or agent of Borrower:
(b) Any Account with respect to which the account debtor is a subsidiary
of, related to, or affiliated or has common officers or directors with Borrower:
(c) Any Account relating to goods placed on consignment, guaranteed sale or
other terms by reason of which the payment by the account debtor may be
conditional:
(d) Any Account with respect to which the account debtor is not a resident
of the United States:
(e) Any Account with respect to which the account debtor is the United
States or any department, agency or instrumentality of the United States:
(f) Any Account with respect to which Borrower is or may become liable to
the account debtor for goods sold or services rendered by the account debtor to
Borrower:
(g) Any Account with respect to which there is asserted a defense,
counterclaim, discount or setoff, whether well-founded or otherwise; except for
those discounts, allowances and returns arising in the ordinary course of
Borrower's business:
(h) Any Account with respect to which the account debtor becomes insolvent,
fails to pay its debts as they mature or goes out of business or which is owed
by an account debtor which has become the subject of a proceeding under any
provision of the United States Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency law, including, but not limited to, assignments for the
benefit of
<PAGE>
creditors, formal or informal moratoriums, compositions or extensions with all
or substantially all of its creditors:
(i) Any account owed by any account debtor with respect to which twenty-
five percent (25%) or more of the aggregate dollar amount is its Accounts is not
paid within ninety (90) days from the date of invoice:
(j) Any Account that is not paid by the account debtor within ninety (90)
days of the date of invoice:
(k) That portion of the Account owed by any single account debtor which
exceeds 25 % of all of the Accounts:
------
(l) Any Account which Bank deems not to be an Eligible Account: and
(m) N/A
----------------------------------------------------------------------
.
- -------------------------------------------------------------------------------
The term "Inventory" means all present and future inventory of Borrower
held by Borrower for sale or lease or to be furnished under a contract of
service and all of Borrower's present and future raw materials, work in process
used or consumed in Borrower's business.
The term "Eligible Inventory" means that portion of Borrower's Inventory of
raw materials and finished goods consisting of Borrower's main line(s) of
business products, which is (a) owned by Borrower, free and clear of all liens
and encumbrances except those in favor of Bank, (b) held for sale or lease by
Borrower and normally and currently saleable in the ordinary course of
Borrower's business, (c) of good and merchantable quality, free from defects (d)
located only at locations of which Bank is notified in writing, and (e) at all
times subject to a perfected first priority security interest in favor of Bank.
"Eligible Inventory" does not include any of the following: work in process,
spare parts, returned items, damaged, defective or recalled items, items unfit
for further processing, obsolete or unmerchantable items, items used as
salesperson's samples or demonstrators, inventory held in stock more than twelve
(12) months, or inventory which Bank otherwise deems not to be Eligible
Inventory.
Capitalized terms used herein which are not otherwise defined shall have the
meanings given to them in the Agreement.
UNION BANK OF CALIFORNIA, N.A. TIVOLI INDUSTRIES, INC.
("BANK") ("BORROWER")
By: /s/ Kurt W. Ross By: /s/ Terrence C. Walsh
Title: Vice President Title: CEO
Printed Name: Kurt W. Ross Printed Name: Terrence C. Walsh
<PAGE>
UNION BANK OF CALIFORNIA
COMMERCIAL PROMISSORY NOTE
Borrower Name:
TIVOLI INDUSTRIES, INC.
Borrower Address: Office: Loan Number:
1513 E. ST. GERTRUDE PLACE 04402 9209823046 0002010001
SANTA ANA, CA 92705
Maturity Date: Amount:
MARCH 1, 2000 $1,250,000.00
- --------------------------------------------------------------------------------
DATE:
February 27, 1998 $1,250,000.00
FOR VALUE RECEIVED, on March 1, 2000 the
------------------------------------------------
undersigned ("Debtor") promises to pay to the order of UNION BANK OF CALIFORNIA,
N.A. ("Bank"), as indicated below, the principal sum of ONE MILLION TWO
----------------
HUNDRED FIFTY THOUSAND AND NO/100 Dollars
- ---------------------------------------------------------------
($1,250,000.00), or so much thereof as is disbursed, together with interest on
- --------------
the balance of such principal sum from time to time outstanding, at a per annum
rate equal to the Reference Rate plus one and no/100
----------------------------------
percent ( 1.000 %), such per annum rate to change as and when the Reference
-----------
Rate shall change.
As used herein, the term "Reference Rate" shall mean the rate announced by Bank
from time to time at its corporate headquarters as its "Reference Rate." The
Reference Rate is an index rate determined by Bank from time to time as a means
of pricing certain extensions of credit and is neither directly tied to any
external rate of interest or index nor necessarily the lowest rate of interest
charged by Bank at any given time. All computations of interest under this note
shall be made on the basis of a year of 360 days, for actual days elapsed.
1. INTEREST PAYMENTS. Debtor shall pay interest on the 1st day of each
----------
month commencing April 1, 1998 . Should interest not be so
-------------- -------------------------
paid, it shall become a part of the principal and thereafter bear interest as
herein provided.
At any time prior to the maturity of this note, the maker(s) may borrow, repay
and reborrow hereon so long as the total outstanding at any one time does not
exceed the principal amount of this note.
Debtor shall pay all amounts due under this note in lawful money of the United
States at Bank's South Orange County - BBC Office, or such other
-----------------------------------
office as may be designated by Bank, from time to time.
2. LATE PAYMENTS. If any installment payment required by the terms of this
note shall remain unpaid ten days after due, at the option of Bank, Debtor shall
pay a fee of $100 to Bank.
3. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option of
Bank, and, to the extend permitted by law, interest shall be payable on the
outstanding principal under this note at a par annum rate equal to five percent
(5%) in excess of the interest rate specified in the initial paragraph of this
note, calculated from the date of default until all amounts payable under this
note are paid in full.
4. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include , but
not be limited to, any of the following: (a) the failure of Debtor to make any
payment required under this note when due; (b) any breach, misrepresentation or
other default by Debtor, any guarantor, co-maker, endorser, or any person
<PAGE>
or other entity other than Debtor providing security for this note (hereinafter
individually and collectively referred to as the "Obligor") under any security
agreement, guaranty or other agreement between Bank and any Obligor; (c) the
insolvency of any Obligor or the failure of any Obligor generally to pay such
Obligor's debts as such debts become due; (d) the commencement as to any Obligor
of any voluntary or involtary proceeding under any laws relating to bankruptcy,
insolvency, reorganization, arrangement, debt adjustment or debtor relief; (e)
the assignment by any Obligor's creditors; (f) the appointment, or commencement
of any proceedings for the appointment, of a receiver, trustee, custodian or
similar official for all or substantially all of any Obligor's property; (g) the
commencement of any proceeding for the dissolution or liquidation of any
Obligor; (h) the termination of existence or death of any Obligor; (i) the
revocation of any guaranty or subordination agreement given in connection with
this note (j) the failure of any Obligor to comply with any order, judgment,
injunction, decree, writ or demand of any court or other public authority; (k)
the filing or recording against any Obligor, or the property of any authority;
(k) the filing or recording against any Obligor, or the property of any Obligor,
of any notice of levy, notice to withhold, or other legal process for taxes,
other than property taxes (l) the default by any Obligor personally liable for
amounts owed hereunder on any obligation concerning the borrowing of money; (m)
the issuance against any Obligor, or the property of any Obligor,of any writ of
attachment, execution, or other judicial lien; or (n) the deterioration of the
financial condition of any Obligor which results in Bank deeming itself, in good
faith, insecure. Upon the occurrence of any such default, Bank, in its
discretion, may cease to advance funds hereunder and may declare all obligations
under this note immediately due and payable; however, upon the occurrence of an
event of default under d, e, f, or g, all principal and interest shall
automatically become immediately due and payable.
5. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note are
not paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorney's fees, incurred by Bank in the collection of enforcement of
this note. Debtor and any endorsers of this note, for the maximum period of
time and the full extent permitted by law, (a) waive diligence, presentment,
demand, notice of nonpayment, protest, notice of protest, and notice of every
kind; (b) waive the right to assert the defense of any statute of limitations to
any debt or obligation hereunder; and (c) consent to renewals and extensions of
time for the payment of any amounts due under this note. If this note is signed
by more than one party, the term "Debtor" includes each of the undersigned and
any successors in interest thereof; all of whose liability shall be joint and
several. Any married person who signs this note agrees that recourse may be had
against the separate property of that person for any obligations hereunder. The
receipt of any check or other item of payment by Bank, at its option, shall not
be considered a payment on account until such a check or other item of payment
is honored when presented for payment at the drawee bank. Bank may delay the
credit of such payment based upon Bank's schedule of funds availability, and
interest under this note shall accrue until the funds are deemed collected. In
any action brought under or arising out of this note, Debtor and any endorser of
this note, including their successors and assigns, hereby consents to the
jurisdiction of any competent court within the State of California, as provided
in any alternative dispute resolution agreement executed between Debtor and
Bank, and consents to service of process by any means authorized by California
law. The term "Bank" includes, without limitation, any holder of this note.
This note shall be construed in accordance with and governed by the laws of the
State of California. This note hereby incorporates any alternative dispute
resolution agreement previously, concurrently or hereafter executed between
Debtor and Bank.
TIVOLI INDUSTRIES, INC.
By: /s/ Terrence C. Walsh
<PAGE>
UNION BANK OF CALIFORNIA
COMMERCIAL PROMISSORY NOTE
Borrower Name:
TIVOLI INDUSTRIES, INC.
Borrower Address: Office: Loan Number:
1513 E. ST. GERTRUDE PLACE 04402 9209823046 0003010001
SANTA ANA, CA 92705
Maturity Date: Amount:
FEBRUARY 3, 2003 $250,000.00
- --------------------------------------------------------------------------------
DATE:
February 27, 1998 $250,000.00
FOR VALUE RECEIVED, the undersigned ("Debtor") promises to pay to the order of
UNION BANK OF CALIFORNIA, N.A. ("Bank"), as indicated below, the principal sum
of TWO HUNDRED FIFTY THOUSAND AND NO/100 Dollars
--------------------------------------------------------------------
($250,000.00), or so much thereof as is disbursed, together with interest on the
-----------
balance of such principal sum from time to time outstanding, at a per annum rate
equal to the Reference Rate plus one and no/100 percent
----------------------------------
( 1.000 %), such per annum rate to change as and when the Reference Rate shall
- ------------
change.
As used herein, the term "Reference Rate" shall mean the rate announced by Bank
from time to time at its corporate headquarters as its "Reference Rate." The
Reference Rate is an index rate determined by Bank from time to time as a means
of pricing certain extensions of credit and is neither directly tied to any
external rate of interest or index nor necessarily the lowest rate of interest
charged by Bank at any given time. All computations of interest under this note
shall be made on the basis of a year of 360 days, for actual days elapsed.
AT ANY TIME PRIOR TO MARCH 3, 1999, THE MAKER(S) MAY BORROW, REPAY AND REBORROW
HEREON SO LONG AS THE TOTAL OUTSTANDING AT ANY ONE TIME DOES NOT EXCEED THE
PRINCIPAL AMOUNT OF THIS NOTE.
1. PAYMENTS. INTEREST PAYMENTS. Debtor shall pay interest on the
3rd day of each month commencing April 3, 1998 .
- ---------- -------------- -------------------------
PRINCIPAL PAYMENTS. PRINCIPAL PAYMENTS SHALL BE PAYABLE IN FORTY EIGHT (48)
--------------------------------------------------------
EQUAL CONSECUTIVE MONTHLY INSTALLMENTS, EACH INSTALLMENT IN AN AMOUNT SUFFICIENT
- --------------------------------------------------------------------------------
TO FULLY AMORTIZE THE PRINCIPAL BALANCE BY THE FINAL MATURITY DATE, BEGINNING
- -----------------------------------------------------------------------------
APRIL 3,1999, AND CONTINUING ON THE THIRD DAY OF EACH CONSECUTIVE MONTH.
- ------------------------------------------------------------------------
On FEBRUARY 3,2003 , All principal and interest then unpaid shall be due and
--------------------
payable.
Debtor shall pay all amounts due under this note in lawful money of the United
States at Bank's South Orange County - BBC Office, or such other
-----------------------------------
office as may be designated by Bank, from time to time.
2. LATE PAYMENTS. If any installment payment required by the terms of this
note shall remain unpaid ten days after due, at the option of Bank, Debtor shall
pay a fee of $100 to Bank.
3. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option of
Bank, and, to the extend permitted by law, interest shall be payable on the
outstanding principal under this note at a par annum rate equal to five percent
(5%) in excess of the interest rate specified in the initial paragraph of this
note, calculated from the date of default until all amounts payable under this
note are paid in full.
<PAGE>
4. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include , but
not be limited to, any of the following: (a) the failure of Debtor to make any
payment required under this note when due; (b) any breach, misrepresentation or
other default by Debtor, any guarantor, co-maker, endorser, or any person or
other entity other than Debtor providing security for this note (hereinafter
individually and collectively referred to as the "Obligor") under any security
agreement, guaranty or other agreement between Bank and any Obligor; (c) the
insolvency of any Obligor or the failure of any Obligor generally to pay such
Obligor's debts as such debts become due; (d) the commencement as to any Obligor
of any voluntary or involtary proceeding under any laws relating to bankruptcy,
insolvency, reorganization, arrangement, debt adjustment or debtor relief; (e)
the assignment by any Obligor's creditors; (f) the appointment, or commencement
of any proceedings for the appointment, of a receiver, trustee, custodian or
similar official for all or substantially all of any Obligor's property; (g) the
commencement of any proceeding for the dissolution or liquidation of any
Obligor; (h) the termination of existence or death of any Obligor; (i) the
revocation of any guaranty or subordination agreement given in connection with
this note (j) the failure of any Obligor to comply with any order, judgment,
injunction, decree, writ or demand of any court or other public authority; (k)
the filing or recording against any Obligor, or the property of any authority;
(k) the filing or recording against any Obligor, or the property of any Obligor,
of any notice of levy, notice to withhold, or other legal process for taxes,
other than property taxes (l) the default by any Obligor personally liable for
amounts owed hereunder on any obligation concerning the borrowing of money; (m)
the issuance against any Obligor, or the property of any Obligor,of any writ of
attachment, execution, or other judicial lien; or (n) the deterioration of the
financial condition of any Obligor which results in Bank deeming itself, in good
faith, insecure.
Upon the occurrence of any such default, Bank, in its discretion, may cease to
advance funds hereunder and may declare all obligations under this note
immediately due and payable; however, upon the occurrence of an event of default
under d, e, f, or g, all principal and interest shall automatically become
immediately due and payable.
5. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note are
not paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorney's fees, incurred by Bank in the collection of enforcement of
this note. Debtor and any endorsers of this note, for the maximum period of
time and the full extent permitted by law, (a) waive diligence, presentment,
demand, notice of nonpayment, protest, notice of protest, and notice of every
kind; (b) waive the right to assert the defense of any statute of limitations to
any debt or obligation hereunder; and (c) consent to renewals and extensions of
time for the payment of any amounts due under this note. If this note is signed
by more than one party, the term "Debtor" includes each of the undersigned and
any successors in interest thereof; all of whose liability shall be joint and
several. Any married person who signs this note agrees that recourse may be had
against the separate property of that person for any obligations hereunder. The
receipt of any check or other item of payment by Bank, at its option, shall not
be considered a payment on account until such a check or other item of payment
is honored when presented for payment at the drawee bank. Bank may delay the
credit of such payment based upon Bank's schedule of funds availability, and
interest under this note shall accrue until the funds are deemed collected. In
any action brought under or arising out of this note, Debtor and any endorser of
this note, including their successors and assigns, hereby consents to the
jurisdiction of any competent court within the State of California, as provided
in any alternative dispute resolution agreement executed between Debtor and
Bank, and consents to service of process by any means authorized by California
law. The term "Bank" includes, without limitation, any holder of this note.
This note shall be construed in accordance with and governed by the laws of the
State of California. This note hereby incorporates any alternative dispute
resolution agreement previously, concurrently or hereafter executed between
Debtor and Bank.
TIVOLI INDUSTRIES, INC.
By: /S/ Terrence C. Walsh
<PAGE>
UNION BANK OF CALIFORNIA
AGREEMENT TO FURNISH INSURANCE
Borrower Name
TIVOLI INDUSTRIES, INC.
Borrower address Office
4061 S. INDUSTRIAL RD. 04402
LAS VEGAS, NV 89103
Date: FEBRUARY 27, 1998
TO UNION BANK OF CALIFORNIA,N.A.:
I, the undersigned purchaser/borrower, agree to furnish the following insurance
coverage :
BUSINESS PERSONAL PROPERTY
Fire and extended coverage.
Lender's Loss Payable Endorsement.
Business Interruption Insurance.
Collateral Location:
4061 S. INDUSTRIAL RD., LAS VEGAS,
NEVADA, 89103
and any other location (s)
In connection with the credit extension by Union Bank of California, N.A. I
have, or will instruct the insurance agent for such insurance to provide Union
Bank of California, N.A. Commercial Loan Documentation Note Center at ATTN:
-----
BEYER - 04402, P.O.BOX 30115, LOS ANGELES, CA 90030-0115 with
- -----------------------------------------------------------------------
proof of insurance in the form of a policy or certificate of insurance,
including the endorsements set forth above.
I understand and agree that the proof of insurance must be delivered to Union
Bank of California, N.A. within 10 days from the date of this agreement.
INSURANCE AGENT:
JOHN BURNHAM & COMPANY
2 PARK PLAZA, STE 700
IRVINE, CA 92614
714 252 4512, 714 833 2462
Tel Fax
TIVOLI INDUSTRIES, INC.
By: /S/ Terrence C. Walsh
<PAGE>
UNION BANK OF CALIFORNIA
SECURITY AGREEMENT
This Agreement executed at Santa Ana, CA , on April 22,
----------------------------- ------------
1997 , by Tivoli Industries, Inc.
- ---------------- ---------------------------------------------------------
(herein called "Debtor"). As security for the payment and performance of all of
Debtor's obligations to Union Bank of California, N.A., (herein called "Bank"),
irrespective of the manner in which or the time at which such obligations arose
or shall arise, and whether direct or indirect, alone or with others, absolute
or contingent, Debtor does hereby grant a continuing security interest to Bank
in all personal property (herein called "Collateral"), whether now or hereafter
owned or in existence described as
A. Motor Vehicles:
<TABLE>
New or Number of
Year Trade Name Body Type Serial Number Used Cylinders
- ---- ---------- --------- ------------- ------ ----------
<S> <C> <C> <C> <C> <C>
</TABLE>
B. Other:
ALL ACCOUNTS, DEPOSIT ACCOUNTS, INSTRUMENTS, CHATTEL PAPER, DOCUMENTS, GENERAL
INTANGIBLES, INVENTORY, EQUIPMENT, FURNITURE, AND FIXTURES, NOW OR HEREAFTER
OWNED OR ACQUIRED BY DEBTOR, ALL PROCEEDS AND INSURANCE PROCEEDS OF THE
FOREGOING, ALL GUARANTEES AND OTHER SECURITY THEREFOR, AND ALL OF DEBTOR'S
PRESENT AND FUTURE BOOKS AND RECORDS RELATING THERETO (INCLUDING COMPUTER-STORED
INFORMATION AND ALL SOFTWARE RELATING THERETO) AND ALL CONTRACT RIGHTS WITH
THIRD PARTIES RELATING TO THE MAINTENANCE OF ANY SUCH BOOKS, RECORDS AND
INFORMATION.
The Collateral described above will be maintained 1513 E. St. Gertrude
--------------------
Place, Santa Ana, CA and any other locations .
- ----------------------------------------------
C. All personal property of any kind which is delivered to or in the possession
or control of bank or its agents;
D. Proceeds of any of the above-described property. The grant of a security
interest in proceeds does not imply the right of Debtor to sell or dispose of
any Collateral described herein without the express consent in writing by Bank.
The maximum amount of indebtedness to be secured at any one time is unlimited
unless an amount is inserted N/A
----------------------------------------------
- ------------------------------------------------ ($ N/A ).
To be completed only if an accommodation) N/A
----------------------------------
- -------------------------------------------------------------------------------
is executing this Agreement as an Accommodation Debtor only and his liability is
limited to the security interest created in Collateral described herein. The
Debtor being accommodated is N/A
-----------------
- --------------------------------------------------------------------------.
All terms and conditions on the reverse side hereof are incorporated herein as
though set forth in full.
TIVOLI INDUSTRIES, INC.
By: /S/ Terrence C. Walsh
<PAGE>
UNION BANK OF CALIFORNIA
SECURITY AGREEMENT
This Agreement executed at LAS VEGAS, NEVADA , on FEBRUARY 27,
-------------------------------- ---------------
1998 , by Tivoli Industries, Inc.
- ------ ---------------------------------------------------------------------
(herein called "Debtor"). As security for the payment and performance of all of
Debtor's obligations to UNION BANK OF CALIFORNIA, N.A., (herein called "Bank"),
irrespective of the manner in which or the time at which such obligations arose
or shall arise, and whether direct or indirect, alone or with others, absolute
or contingent, Debtor does hereby grant a continuing security interest to Bank
in all personal property (herein called "Collateral"), whether now or hereafter
owned or in existence described as
A. Motor Vehicles:
<TABLE>
New or Number of
Year Trade Name Body Type Serial Number Used Cylinders
- ---- ---------- --------- ------------- ------ ----------
<S> <C> <C> <C> <C> <C>
</TABLE>
B. Other:
ALL ACCOUNTS, DEPOSIT ACCOUNTS, INSTRUMENTS, CHATTEL PAPER, DOCUMENTS, GENERAL
INTANGIBLES, INVENTORY, EQUIPMENT, FURNITURE, AND FIXTURES, NOW OR HEREAFTER
OWNED OR ACQUIRED BY DEBTOR, ALL PROCEEDS AND INSURANCE PROCEEDS OF THE
FOREGOING, ALL GUARANTEES AND OTHER SECURITY THEREFOR, AND ALL OF DEBTOR'S
PRESENT AND FUTURE BOOKS AND RECORDS RELATING THERETO (INCLUDING COMPUTER-STORED
INFORMATION AND ALL SOFTWARE RELATING THERETO) AND ALL CONTRACT RIGHTS WITH
THIRD PARTIES RELATING TO THE MAINTENANCE OF ANY SUCH BOOKS, RECORDS AND
INFORMATION.
The Collateral described above will be maintained at 4061 S. INDUSTRIAL RD.,
LAS VEGAS, NEVADA, 89103 and any other location (s).
C. All personal property of any kind which is delivered to or in the possession
or control of bank or its agents;
D. Proceeds of any of the above-described property. The grant of a security
interest in proceeds does not imply the right of Debtor to sell or dispose of
any Collateral described herein without the express consent in writing by Bank.
The maximum amount of indebtedness to be secured at any one time is unlimited
unless an amount is inserted N/A
--------------------------------------------------
________________________________________ ($ N/A ).
To be completed only if an accommodation) N/A
-------------------------------------
- --------------------------------------------------------------------------------
is executing this Agreement as an Accommodation Debtor only and his liability is
limited to the security interest created in Collateral described herein. The
Debtor being accommodated is N/A
---------------------------------------------------
- --------------------------------------------------------------------------------
All terms and conditions on the reverse side hereof are incorporated herein as
though set forth in full.
TIVOLI INDUSTRIES, INC.
By: /S/ Terrence C. Walsh
<PAGE>
AGREEMENT
1. The term credit is used throughout this Agreement in its broadest and most
comprehensive sense. Credit may be granted at the request of any one Debtor
without further authorization or notice to any other Debtor, including an
Accommodation Debtor. Collateral shall be security for all obligations of
Debtor to Bank in accordance with the terms and conditions herein.
2. Debtor will: (a) execute such Financing Statement and other documents and do
such other acts and things, all as Bank may from time to time require, to
establish and maintain a valid security interest in Collateral, including
payment of all costs and fees in connection with any of the foregoing when
deemed necessary by Bank; (b) pay promptly when due all indebtedness to Bank;
(c) furnish Bank such information concerning Debtor and Collateral as Bank may
from time to time request, including but not limited to current financial
statements; (d) keep Collateral separate and identifiable and at the location
described herein and permit Bank and its representatives to inspect Collateral
and/or records pertaining thereto from time to time during normal business
hours; (e) not sell, assign or create or permit to exist any lien on or security
interest in Collateral in favor of anyone other than the Bank unless Bank
consents thereto in writing and at Debtor's expense upon Bank's request remove
any unauthorized lien or security interest and defend any claim affecting the
Collateral; (f) pay all charges against Collateral prior to delinquency
including but not limited to taxes, assessments, encumbrances, insurance and
diverse claims, and upon Debtor's failure to do so Bank may pay any such charge
as it deems necessary and add the amount paid to the indebtedness of Debtor
hereunder; (g) reimburse Bank for any expenses including but not limited to
reasonable attorneys' fees and legal expenses incurred by Bank in seeking to
protect, collect or enforce any rights in Collateral; (h) when required, provide
insurance in form and amounts and with companies acceptable to Bank and when
required assign the policies or the rights thereunder to Bank; (i) maintain
Collateral in good condition and not use Collateral for any unlawful purpose;
(j) at its own expense, upon request of Bank, notify any parties obligated to
Debtor on any Collateral to make payment to Bank and Debtor hereby irrevocably
grants Bank power of attorney to make said notifications and collections; (k)
and does hereby authorize Bank to perform any and all acts which Bank in good
faith deems necessary for the protection and preservation of Collateral or its
value or Bank's security interest therein, including transferring any Collateral
into its own name and receiving the income thereon as additional security
hereunder. Bank may not exercise any right under any corporate security which
might constitute the exercise of control by Bank so as to make any such
corporation an affiliate of Bank within the meaning of the banking laws until
after default.
3. The term default shall mean the occurrence of any of the following events:
(a) non-payment of any indebtedness when due or non-performance of any
obligation when due, whether required hereunder or otherwise; (b) deterioration
or impairment of the value of Collateral; (c) non-performance by Debtor under
this Agreement, default by Debtor of any other agreements with Bank dealing with
the extension of credit or with debt owing Bank or any misrepresentation of
Debtor or its representative to Bank whether or not contained herein; (d) a
change in the composition of any Debtor which is a business entity; or (e)
belief by Bank in good faith that there exists, or the actual existence of, any
deterioration or impairment in the ability of Debtor to meet its obligations to
Bank.
4. Whenever a default exists, Bank, at its option may: (a) without notice
accelerate the maturity of any part or all of the secured obligations and
terminate any agreement for the granting of further credit to Debtor; (b) sell,
lease or otherwise dispose of Collateral at public or private sale; unless
Collateral is perishable and threatens to decline speedily in value or is a type
customarily sold on a recognized market, Bank will give Debtor at least five (5)
days prior written notice of the time and place of any public sale or of the
time after which any private sale or any other intended disposition may be made;
(c) transfer any Collateral into its own name or that of its nominee; (d) retain
Collateral in satisfaction of obligations secured hereby, with notice of such
retention sent to Debtor as required by law; (e) notify any parties obligated on
any Collateral consisting of accounts, instruments, chattel paper, choses in
action or the like to
<PAGE>
make payment to Bank and enforce collection of any Collateral herein; (f)
require Debtor to assemble and deliver any Collateral to Bank at a reasonablr
convenient place designated by Bank; (g) apply all sums received or collected
from or on account of Collateral including the proceeds of any sales thereof to
the payment of the costs and expenses incurred in preserving and enforcing
rights of Bank including but not limited to reasonable attorneys' fees, and
indebtedness secured hereby in such order and manner as Bank in its sole
discretion determines; Bank shall account to Debtor for any surplus remaining
thereafter, and shall pay such surplus to the party entitled thereto, including
any second secured party who has made a proper demand upon Bank and has
furnished proof to Bank as requested in the manner provided by law; in like
manner, Debtor, unless an Accommodation Debtor only, agrees to pay to Bank
without demand any deficiency after any Collateral has been disposed of and
proceeds applied as aforesaid; and (h) exercise its banker's lien or right of
setoff in the same manner as though the credit were unsecured. Bank shall have
all the rights and remedies of a secured party under the Uniform Commercial Code
of California in any jurisdiction where enforcement is sought, whether in
California or elsewhere. All rights, powers and remedies of Bank hereunder shall
be cumulative and not alternative. No delay on the part of Bank in the exercise
of any right or remedy shall constitute a waiver thereof and no exercise by Bank
of any right or remedy shall preclude the exercise of any other right or remedy
or further exercise of the same remedy.
5. Debtor waives: (a) all right to require Bank to proceed against any other
person including any other Debtor hereunder or to apply any Collateral Bank may
hold at any time or to pursue any other remedy; Collateral, endorsers or
guarantors may be released, substituted or added without affecting the liability
of Debtor hereunder; (b) the defense of the Statute of Limitations in any action
upon any obligations of Debtor secured hereby; (c) if he is an Accommodation
Debtor, all rights under Uniform Commercial Code Section 9112; and (d) any right
of subrogation and any right to participate in Collateral until all obligations
hereby secured have been paid in full.
6. Debtor warrants: (a) that it is or will be the lawful owner of all
Collateral free of all claims, liens or encumbrances whatsoever, other than the
security interest granted pursuant hereto; (b) all information, including but
not limited to financial statements furnished by Debtor to Bank heretofore or
hereafter, whether oral or written, is and will be correct and true as of the
date given; and (c) if Debtor is a business entity, the execution, delivery and
performance hereof are within its powers and have been duly authorized.
7. The right of Bank to have recourse against Collateral shall not be affected
in any way by the fact that the credit is secured by a mortgage, deed or trust
or other lien upon real property.
8. Debtor may terminate this Agreement at any time upon written notice to Bank
of such termination; provided however, that such termination shall not affect
his obligations then outstanding, any extensions or renewals thereof, nor the
security interest granted herein which shall continue until such obligations are
satisfied in full. Such termination shall not affect the obligations of other
Debtors if more than one executes this Agreement.
9. If more than one Debtor executes this Agreement, the obligations hereunder
are joint and several. All words used herein in the singular shall be deemed to
have been used in the plural when the context and construction so require. Any
married persons who sign this Agreement expressly agree that recourse may be had
against his/her separate property for all of his/her obligations to Bank.
10. This Agreement shall inure to the benefit of and bind Bank, its successors
and assigns and each of the undersigned, their respective heirs, executors,
administrators and successors in interest. Upon transfer by Bank of any part of
the obligations secured hereby, Bank shall be fully discharged from all
liability with respect to Collateral transferred therewith.
11. Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but, if any
provision of this Agreement shall be prohibited or invalid under applicable law,
such provisions shall be ineffective to the extend of such prohibition or
invalidity without invalidating the remainder of such or the remaining
provisions of this Agreement.
<PAGE>
TIVOLI INDUSTRIES, INC
EXHIBIT 24
List of Subsidiaries
- --------------------
Targetti USA LLC - Incorporated in California, USA
Tivoli de Mexico, S. A. - Incorporated in Mexico
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,211,426
<SECURITIES> 0
<RECEIVABLES> 1,757,436
<ALLOWANCES> 84,168
<INVENTORY> 1,851,430
<CURRENT-ASSETS> 5,536,672
<PP&E> 1,522,689
<DEPRECIATION> 767,305
<TOTAL-ASSETS> 7,252,230
<CURRENT-LIABILITIES> 1,339,314
<BONDS> 0
0
0
<COMMON> 3,938
<OTHER-SE> 4,664,476
<TOTAL-LIABILITY-AND-EQUITY> 7,252,230
<SALES> 2,460,003
<TOTAL-REVENUES> 2,460,003
<CGS> 1,480,893
<TOTAL-COSTS> 2,365,469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,587
<INCOME-PRETAX> 111,753
<INCOME-TAX> 45,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,753
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.01
</TABLE>
