<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 June 30, 1999
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 [_]
State the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 20, 1999
----- ----------------------------
Common stock, $.001 par value 1,236,723
<PAGE>
TIVOLI INDUSTRIES, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet at June 30, 1999. . . . . . . 3
Consolidated Statements of Operations for the
Three Months Ended June 30, 1999 and 1998 . . . . . . . 4
Consolidated Statements of Operations for the
Nine Months Ended June 30, 1999 and 1998 . . . . . . . 5
Consolidated Statements of Cash Flows for the
Nine Months Ended June 30, 1999 and 1998 . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . 8
<CAPTION>
PART II - OTHER INFORMATION
<S> <C> <C>
Item 1. Legal Proceedings . . . . . . . . . . . . 12
Item 2. Changes in Securities. . . . . . . . . . . . 12
Item 3. Defaults upon Senior Securities . . . . . . . . . 12
Item 4 Submissions of Matters to a Vote of Security Holders. . . . 12
Item 5 Other Information . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . 12
Signatures. . . . . . . . . . . . . . . . . . . 13
</TABLE>
2
<PAGE>
TIVOLI INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30,1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $1,725,430
Accounts receivable, less allowance for doubtful accounts
of $57,466 1,709,419
Inventories 1,694,581
Prepaid expenses and other 471,231
----------
Total current assets 5,600,661
----------
Property and equipment:
Machinery and equipment 932,299
Furniture and fixtures 281,995
Tooling 356,878
----------
Total property and equipment 1,571,172
Less: accumulated depreciation (998,526)
----------
Net property and equipment 572,646
----------
Goodwill, net of accumulated amortization of $174,100 485,438
Patents, net of accumulated amortization of $193,791 98,351
Deferred tax asset 105,518
Deposits and other 152,803
----------
Total Assets $7,015,417
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,077,384
Accrued expenses 370,230
Current maturities of obligations under a capital lease 54,029
Accrued income taxes 53,786
----------
Total current liabilities 1,555,429
Bank line of credit 818,400
Obligations under a capital lease, net of current portion 76,201
Deferred tax liability 133,051
Minority Interest 173,908
----------
Total liabilities 2,756,989
----------
Shareholders' equity:
Preferred stock, $.001 par value; 1,000,000 shares authorized,
none outstanding -
Common stock, $.001 par value; 10,000,000 shares authorized,
1,236,723 shares outstanding 3,710
Additional paid-in capital 4,341,227
Retained earnings (86,509)
----------
Total shareholders' equity 4,258,428
----------
Total Liabilities and Shareholders Equity $7,015,417
==========
</TABLE>
3
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1999 1998
---------- ----------
<S> <C> <C>
Net sales $2,948,714 $2,138,021
Cost of sales 1,630,244 1,236,048
---------- ----------
Gross profit 1,318,470 901,973
Selling, general and administrative expenses 1,165,390 1,213,225
---------- ----------
Income (loss) from operations 153,080 (311,252)
Other income (expense)
Interest expense (23,420) (20,447)
Interest income 12,299 14,764
Foreign currency exchange gain 18,258
---------- ----------
Total other income (expense) 7,137 (5,683)
Minority interest in net (income) losses of
consolidated subsidiary (13,637) 29,358
Income (loss) before provision
for income taxes 146,580 (287,577)
Provision (benefit) for income taxes 52,318 (101,000)
---------- ----------
Net income (loss) $ 94,262 $ (186,577)
========== ==========
Basic earnings per share (Note 2):
Earnings per share $ 0.08 $(0.14)
Weighted average shares 1,236,724 1,312,624
Diluted earnings per share (Note 2):
Earnings per share $ 0.08 $(0.14)
Weighted average shares 1,238,774 1,312,624
</TABLE>
4
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Net sales $8,457,288 7,250,942
Cost of sales 4,653,343 4,236,230
---------- ----------
Gross profit 3,803,945 3,014,712
Selling, general and administrative expenses 3,286,734 3,101,588
---------- ----------
Income (loss) from operations 517,211 (86,876)
Other income (expense)
Interest expense (68,080) (58,958)
Interest income 35,562 46,154
Foreign currency exchange gain 59,836 5,791
---------- ----------
Total other income (expense) 27,318 (7,013)
Minority interest in net (income) losses of
consolidated subsidiary (54,377) 59,140
---------- ----------
Income (loss) before provision for
income taxes 490,152 (34,749)
Provision for income taxes 55,418
---------- ----------
Net income (loss) $ 434,734 $ (34,749)
========== ==========
Basic earnings per share (Note 2):
Earnings per share $ 0.35 $ (0.03)
Weighted average shares 1,255,887 1,308,856
Diluted earnings per share (Note 2):
Earnings per share $ 0.35 $ (0.03)
Weighted average shares 1,255,887 1,308.856
</TABLE>
5
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended June 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 434,734 $ (34,749)
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 188,275 223,512
Change in allowance for doubtful accounts 19,745 (3,588)
Minority Interest in net income / (losses)
of consolidated subsidiary 54,377 (59,140)
Warrants for the purchase of common stock
issued for services - 15,000
Changes in operating assets and liabilities:
Accounts receivable (284,136) 573,234
Inventories 163,284 (268,991)
Prepaid expenses and other 136,984 (304,733)
Accounts payable (298,871) (138,978)
Accrued expenses and other current liabilities 140,493 (25,207)
---------- ----------
Net cash (used in) provided by operating activities 554,885 (23,640)
---------- ----------
Cash flows from investing activities:
Deposits and other 8,777 (21,751)
Capital expenditures (39,560) (110,312)
Investment in minority interest 286,494
---------- ----------
Net cash (used in) provided by investing activities (30,783) 154,431
---------- ----------
Cash flows from financing activities:
Net borrowings under line of credit and notes
payable to bank (15,277) (943)
Stock repurchase (108,109)
Principal payments on capital lease obligations (37,924) (35,382)
---------- ----------
Net cash used in financing activities (161,310) (36,325)
---------- ----------
Net increase in cash and cash equivalents 362,791 94,466
Cash and cash equivalents, beginning of period 1,362,639 1,389,720
---------- ----------
Cash and cash equivalents, end of period $1,725,430 $1,484,186
========== ==========
</TABLE>
6
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED 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 June 30, 1999 and 1998. 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,
1998.
NOTE 2 - EARNINGS PER SHARE
- ---------------------------
Effective December 31, 1997, the Company adopted statement of Financial
Accounting Standards No. ("Statement") 128, "Earnings Per Share". In accordance
with Statement 128, primary earnings per share have been replaced with basic
earnings per share, and fully diluted earnings per share have been replaced with
diluted earnings per share which includes potentially dilutive securities such
as outstanding stock options and warrants. Prior periods have been restated to
conform to Statement 128.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
For the quarters ending June 30,
1999 1998
-------------------------------- ----------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
-------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to
Shareholders $94,262 1,236,724 $0.08 $(186,577) 1,312,624 $(0.14)
Effect of Dilutive Securities
Warrants
Stock Options 2,050
Diluted EPS
Income available to
Shareholders $94,262 1,238,774 $0.08 $(186,577) 1,312,624 $(0.14)
------- --------- ----- --------- --------- ------
</TABLE>
7
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - EARNINGS PER SHARE - CONT.
- -----------------------------------
<TABLE>
<CAPTION>
For the nine month period ending June 30,
1999 1998
-------------------------------- ----------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
-------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to
Shareholders $434,734 1,255,887 $0.35 $(34,749) 1,308,856 $(0.03)
Effect of Dilutive Securities
Warrants
Stock Options
Diluted EPS
Income available to
Shareholders $434,734 1,255,887 $0.35 $(34,749) 1,308,856 $(0.03)
-------- --------- ----- -------- --------- ------
</TABLE>
Options to purchase 350,667 shares of Common Stock at prices between $3.56 and
$11.25 per share were outstanding at June 30, 1999, but were not included in the
computation of diluted earnings per share. These options were excluded from the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares during the period, and therefore
the effect would be antidilutive. The effects of common stock equivalents were
not included in the per share calculations of net loss per common share for
fiscal 1998, as their effects would be antidilutive.
NOTE 3 - NOTES PAYABLE TO BANK
- -------------------------------
On May 10, 1999, the Company renewed its existing line of credit agreement with
Union Bank of California maintaining the borrowing base at $1,250,000. The
agreement has an expiration date of March 1, 2001. The renewal agreement
contains interest at the bank's Reference Rate (7.75% at June 30,1999) 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 June 30, 1999, the Company had
approximately $532,500 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 (7.75% at June 30, 1999) 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, 2000. The Company will then repay the balance by monthly
installments through March 1, 2004. At June 30, 1999, the Company had not
borrowed any amounts under this agreement.
8
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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,
1998.
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 Sankey
S.p.A. of Florence, Italy. In November 1997, the joint venture was expanded with
the formation of a jointly owned Company in the U.S., Targetti USA., LLC.
Through this joint venture, Targetti USA, LLC offers a wide range of product
families, developed by Targetti Sankey S.p.A., which broadens and complements
the Company's products.
Results of Operations - Three Months Ended June 30, 1999 as Compared to Three
Months Ended June 30, 1998
Net sales of $2,948,714 for the third quarter of fiscal year 1999 were 38%
higher than net sales of $2,138,021 in the same period of the prior year. This
increase was stimulated by new product introductions and increased market
penetration.
Gross profit for the third quarter of fiscal year 1999 was $1,318,470 or
44.7% of net sales compared to gross profit of $901,973 or 42.2% for the third
quarter of fiscal year 1998. This increase was due to cost-reduction programs
implemented during the three month period ending June 30, 1999.
Selling, general and administrative expenses for the third quarter of
fiscal 1999 were 39.5% of net sales or $1,165,390 as compared to 56.7% or
$1,213,225 in the same quarter of the prior year.
Operating profits for the third quarter of fiscal year 1999 were $153,080
or 5.2% of net sales compared to an operating loss of $311,252 or 14.6% of sales
in the same quarter of fiscal year 1998.
Other income (expense) for the third quarter of fiscal year 1999 was $7,137
and consisted of interest expense on the bank loan of $20,394 and capital lease
interest of $3,026. Interest income of $12,299 represents interest received on
bank deposits. Interest expense for the third quarter of fiscal year 1998 was
$20,447 and was derived from interest expense on the bank loan of $16,255 and
capital lease interest of $4,192. Interest income was $14,764 received on bank
deposits.
9
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS - continued
---------------------------------
An unrealized foreign currency exchange gain of $18,258 was generated during
the third quarter of fiscal 1999 on an account payable balance denominated in
Italian Lire.
The provision for income tax in the third quarter of fiscal year 1999 was
$52,318. The third quarter net income was fully taxed, whereas prior quarters in
the fiscal year benefited from the use of tax loss carry forwards. The benefit
for income tax in the third quarter of fiscal year 1998 was $101,000 and
resulted from a reduction to the tax accrual due to operating losses.
Minority interest in net income of the consolidated subsidiary was $13,637
in the third quarter of fiscal year 1999 compared to the minority interest in
net loss of the consolidating subsidiary of $29,358 in the third quarter of the
prior fiscal year. This minority interest represents 50% of the net income or
loss generated by Targetti USA, LLC.
As a result of the above factors, net income for the third quarter of
fiscal year 1999 was $94,262 or $0.08 per share as compared to net losses of
$186,577 or $0.14 per share in the third quarter of fiscal year 1998.
Results of Operations - Nine Months Ended June 30, 1999 as Compared to Nine
Months Ended June 30, 1998
Net sales of $8,457,288 for the first nine months of fiscal year 1999 were
17% higher than net sales of $7,250,942 in the same period of the prior year.
This increase was stimulated by continued strong demand for the Company's
products across all market segments.
The gross profit for the first nine months of fiscal year 1999 was
$3,803,945 or 45.0% of net sales compared to gross profit of $3,014,712 or 41.6%
for the same period of the prior fiscal year. This increase was due to product
cost reduction programs implemented during the nine month period ending June 30,
1999.
Selling, general and administrative expenses for the first nine months of
fiscal 1999 decreased to 38.9% of net sales or $3,286,734, as compared to 42.8%
or $3,101,588 in the same period of the prior year. Prior year SG & A included a
one-time payment to the Company of $250,000 for settlement of a trademark
dispute.
Operating profits for the first nine months of fiscal year 1999 of $517,211
or 6.1% of net sales improved from operating losses of $86,876 or 1.2% of net
sales in the same period of fiscal year 1998.
Interest expense for the first nine months of fiscal year 1999 was $68,080
and consisted of interest expense on the bank loan of $56,956 and capital lease
interest of $11,124. Interest income of $35,562 represents bank interest
received on investments. Interest expense for the same period of fiscal year
1998 was $58,958 and was derived from interest expense on the bank loan of
$46,660 and capital lease interest of $12,298. Interest income was $46,154 and
represents bank interest received on investments.
An unrealized foreign currency exchange gain of $ 59,836 was generated
during the first nine months of fiscal 1999 on an account payable balance
denominated in Italian Lire. This compares to an unrealized gain of $5,791 in
the same period of the prior fiscal year.
The provision for income tax in the first nine months of fiscal year 1999
was $55,418 and represented 1997 LLC fees and tax of $3,100, and a tax provision
of $ 52,318 on current years income. Net operating loss carry forwards have now
been fully utilized during the first nine months. There were no provisions for
income tax in the same period of fiscal year 1998.
10
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS - continued
---------------------------------
Minority interest in net income of the consolidated subsidiary was $54,377
in the first nine months of fiscal year 1999 compared to the minority interest
in net loss of the consolidating subsidiary of $59,140 in the same period of the
prior fiscal year. This minority interest represents 50% of the net income or
loss generated by Targetti USA LLC.
As a result of the above factors, net income for the first nine months of
fiscal year 1999 was $434,734 or $0.35 per share as compared to net losses of
$34,749 or $0.03 per share in the same period of fiscal year 1998.
Financial Position, Capital Resources and Liquidity
The Company's primary source of cash during the first nine months of fiscal
year 1999 were funds provided by operations of $554,885, which consisted of net
income of $434,734, depreciation and amortization of $188,275, and a decrease in
inventories of $163,284, offset by increased accounts receivables of $284,136
and decreased accounts payable of $298,871.
On August 6, 1998 the Company announced that its Board of Directors had
approved the repurchase of up to an aggregate of 250,000 shares of its Common
Stock. During the first nine months of fiscal 1999 the Company purchased 180,700
shares at a total cost of $108,109. The total shares purchased to date at June
30, 1999 is 227,700 at a total cost of $137,380.
The above factors contributed to a net increase in cash of $362,791 during
the first nine months of fiscal year 1999.
Working capital increased by $489,238 during the first nine months of
fiscal year 1999 to $4,045,232 at June 30, 1999, as compared to $3,555,994 at
September 30, 1998.
Accounts receivable as of June 30, 1999, increased to $1,709,419 from
$1,438,036 at September 30, 1998. The days sales outstanding in accounts
receivable decreased to 55 days at June 30, 1999, which compared to 57 days at
September 30, 1998. Additional resources have been applied to the cash
collection activity which has resulted in improved collections performance.
Inventories as of June 30, 1999, decreased to $1,694,581 as compared to
$1,857,865 at September 30, 1998. The number of months costs of sales in
inventory at June 30, 1999, decreased to 3.4 months as compared to 4.0 months at
September 30, 1998. The improvement is the result of inventory reduction
programs implemented in the latter quarters of the prior fiscal year.
Accounts payable as of June 30, 1999, decreased to $1,077,384 as compared
to $1,376,254 at September 30, 1998. The number of days in accounts payable
increased from 55 days at September 30, 1998, to 63 days at June 30,1999.
Capital expenditures in the first nine months of fiscal year 1999 totaled
$32,980 and consisted of new product tooling, and related machinery and
equipment.
11
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
"Year 2000" Requirements
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 has identified its' manufacturing and financial
planning software as being most critical. The manufacturing and financial
planning software was purchased and installed in fiscal year ending September
30, 1997. The Company has received information from the vendor of this software
indicating that the software will properly handle dates for the year 2000 and
beyond. In addition, the Company currently relies upon computer hardware and
software systems from various third party vendors to manage other 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. 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. The Company does not have more than 10% of
its revenue with any one customer. Therefore, the financial exposure to the
Company of the failure of any one customer to be Year 2000 compliant is limited.
Should a number of customers not be Year 2000 compliant , or should a number the
Company's customers be negatively impacted by Year 2000 problems, the negative
consequences to the Company's customers could have a material adverse effect on
the Company's business, financial position, and results of operation. The costs
to become Year 2000 compliant and to obtain certificates from third party
vendors is not material to the Company. When its internal reviews and external
surveys are complete, the Company will prepare contingency plans to prepare for
problems that may reasonably be expected to arise. However, there can be no
assurance that any such plans will prevent Year 2000 problems which may have a
material adverse impact on the Company's business, financial position and
results of operation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None
Item 3. Defaults upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
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, 1999.
10.31 Employment Agreement between the Company and Terrence C.
Walsh.
10.32 Employment Agreement between the Company and Charles Kimmel.
27 Financial Data Schedules
b) Reports on Form 8-K None
12
<PAGE>
TIVOLI INDUSTRIES, INC. AND SUBSIDIARY
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: August 11, 1999 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)
13
<PAGE>
EXHIBIT 10.31
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
April 1, 1999, by and between TIVOLI INDUSTRIES, INC., a California corporation
whose principal place of business is located in Santa Ana, California 92705
("Employer"), and TERRENCE C. WALSH, an individual residing in the State of
California ("Executive").
WHEREAS, Employer desires to retain the services of Executive on the terms
and conditions herein provided, and Executive is willing to provide such
services on such terms and conditions;
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants of the parties contained herein, the parties agree as follows:
1. Term. This Agreement shall continue in full force and effect for a
----
period which shall commence as of the date hereof and shall continue until
September 30, 2002 (the "Term"), unless sooner terminated as hereinafter
provided or extended by the mutual agreement of the parties.
2. Employment. Executive shall serve as the Chief Executive Officer of
----------
Employer, subject to the reasonable directions of Employer's Board of Directors,
and as such shall have day-to-day responsibility for the management of all of
Employer's affairs and operations, subject to the reasonable directions of
Employer's Board of Directors. In addition, Executive shall serve as a member
of Employer's Board of Directors, and on one or more committees thereof, but
without compensation other than as provided for in paragraph 3 below. Executive
shall devote his full executive time, energies and abilities to the proper and
efficient performance of his duties provided herein. Executive shall at all
times perform his duties and obligations faithfully and diligently and to the
best of Executive's ability.
3. Compensation.
------------
(a) As compensation for the services provided by Executive
hereunder, during the Term of this Agreement Employer shall pay Executive an
annual salary of not less that $155,000 per year. Executives' salary shall be
reviewed by Employer's Board of Directors from time to time at its discretion
but not less often than annually each November 1, and Executive shall receive
such salary increases as Employer's Board of Directors shall determine; provided
that Employee's annual salary payable for the ensuing twelve (12) month period
shall in all events be increased at the end of each succeeding twelve (12) month
period at a rate equal to the greater of 5% per annum or the increase, if any,
in the Consumer Price Index for Urban Wage Earners and Clerical Workers (Los
Angeles-Long Beach-Anaheim), as published by the Bureau of Labor Statistics of
the U.S. Department of Labor, during the preceding twelve (12) months. All such
salary shall be payable in equal installments in conformity with Employer's
normal payroll period.
(b) In addition to the minimum salary payable to Executive as
provided in subparagraph 3(a) above, Executive shall be entitled to receive, for
each full or partial calendar year during the Term hereof, a bonus, if any, as
determined by Employer's Compensation Committee.
(c) In addition to salary and bonus payment (if any), Executive
shall be entitled to receive stock options and/or warrants, if any, as
determined by the Employer's Compensation Committee. Such awards will be awarded
on an annual basis.
(d) In addition to the above, Executive shall be entitled to
receive an auto allowance of $1,250 per month, payable monthly.
4. Benefits and Vacations.
----------------------
(a) Executive and his dependents shall be entitled to
participate in or receive benefits under Employer's health insurance plans or
arrangements as in effect on the date hereof for such period of time as such
plans and arrangements shall remain in effect. In addition, Executive shall be
entitled to participate in or receive benefits under any pension plan, profit-
sharing plan, life insurance, health-and-accident plan or arrangement made
available in the future by Employer to its executives and key management
employees, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and arrangements. Nothing paid to Executive
under any such plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of any compensation payable to Executive
hereunder.
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(b) Executive shall be entitled to the number of paid vacations
days in each calendar year, and to compensation for earned but unused vacation
days, determined by Employer from time to time for its executives and key
management employees, but not less than four (4) weeks in each year of the Term
hereof. Executive shall also be entitled to all paid holidays given by Employer
to its executives and key management employees.
(C) Executive shall be entitled to receive reimbursement for
Health Club membership dues. Such membership dues are not to exceed $150 on a
monthly basis and should be fully supported by applicable receipts, documenting
the actual dues paid by the Executive.
5. Expenses. During the Term hereof, Executive shall be entitled to
--------
receive prompt reimbursement of all reasonable expenses incurred by Executive
(in accordance with the policies and procedures from time to time adopted by
Board of Directors of Employer for its senior executive officers) in performing
the services contemplated hereunder, provided that Executive properly accounts
therefore in accordance with Employer's policy.
6. Termination.
-----------
(a) Executive's employment hereunder shall terminate immediately
upon death.
(b) In the event that Executive shall be unable to perform the
services contemplated hereunder by reason of disability, illness or other
incapacity, such failure to so perform such duties shall not be grounds for
terminating the employment of Executive by Employer; provided, however, that
-------- -------
Employer may terminate Executive's employment hereunder should the period of
such incapacity exceed six (6) consecutive months. Any such termination shall
not be considered to be for "Cause" as defined in subparagraph (c) immediately
below.
(c) Executive's employment hereunder may be terminated by
Employer prior to the expiration of the Term with or without "Cause" (as defined
in subparagraph 6(e) below), immediately upon delivery by Employer of a written
notice of termination; provided, however, that if Employer shall not have Cause
to terminate Executive's employment hereunder, then upon any such termination,
and as a condition of the effectiveness thereof, Employer shall pay to Executive
as severance pay, in one lump sum in cash, an amount equal to (i) the amount of
the current annual salary and benefits listed in paragraph 3(a) and 4(a) that
would have been payable over the remainder of the term of this Agreement had
Executive not been terminated (subject to a minimum amount equal to 24 months
base salary, such 24 month period being a "Minimum Severance Period").
(d) In the event that Executive is terminated for Cause,
Employer shall pay Executive's salary through the date of termination, after
deducting any amounts lawfully owing from Executive to Employer, and shall
thereafter have no further obligation to Executive.
(e) For the purposes of this Agreement, "Cause" means (i) the
willful and continued failure by Executive to substantially perform Executive's
duties hereunder, other than any such failure resulting from Executive's
incapacity due to physical or mental illness, after a demand for substantial
performance is delivered to Executive by the Board of Directors of Employer (the
"Board") which specifically identifies the manner in which the Board believes
that Executive has not substantially performed such duties, or (ii) the willful
engaging by Executive in gross misconduct materially and demonstrably injurious
to Employer. For purposes of this subparagraph, no act, or failure to act, on
Executive's part shall be considered "willful" merely because it was the result
of bad judgment or negligence; rather, such act or failure to act must have been
done, or omitted to have been done, by Executive other than in good faith and
without reasonable belief that Executive's action or omission was in the best
interests of the Employer. Notwithstanding the foregoing, Executive's employment
shall not be deemed to have been terminated for "Cause" unless and until there
shall have been delivered to Executive a copy of a resolution duly adopted by
the affirmative vote of Employer's Board of Directors at a meeting of the Board
called and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive, together with Executive's counsel, to be heard before
the Board), finding that in the good faith opinion of the Board Executive was
guilty of conduct described above in clauses (i) or (ii) of this subparagraph
and specifying the particulars thereof in detail. In the event that Executive is
terminated for Cause, Employer shall pay Executive's salary through date of
termination, any bonuses which have been earned by Executive through the date of
termination after deducting any amounts lawfully owing from Executive to
Employer, and shall thereafter have not further obligation to Executive, expect
to the extent the Executive may be entitled to exercise any of the options
granted to Executive as contemplated in paragraph 3(c) above.
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<PAGE>
(f) Executive shall be entitled to terminate his employment with
Employer hereunder for "Good Reason." Within five (5) business days of such
termination, Employer shall pay Executive in one lump sum the Severance Amount
provided above. For purposes of this Agreement, any termination of employment
under any one or more of the following circumstances shall be for "Good Reason":
(i) Without Executive's express written consent, the
assignment to Executive of any duties inconsistent with Executive's positions,
duties, responsibilities and status with Employer, or an change in Executive's
reporting responsibilities, titles or offices as in effect upon the execution
hereof, or any removal of Executive from or any failure to re-elect Executive to
any such positions, except in connection with the termination of Executive's
employment for Cause, Disability, Retirement or as a result of death;
(ii) Without Executive's express written consent, the
Employer or Employer's ultimate parent corporation experiences a change of
control via merger, consolidation, sales of all or substantially all the shares
or the assets or other transaction (or series of related transactions) following
which the shareholders or Employer or Employer's ultimate parent immediately
prior to such transaction own less than 50% of the outstanding voting shares of
Employer or Employer's ultimate parent following such transaction.
(iii) The reduction by Employer in Executive's base
salary, as the same may be thereafter be increased from time to time, the
failure by Employer to increase such base salary each successive year, as
specified in subparagraph 3(a)hereof, or the failure by Employer to otherwise
pay Executive the base salary provided for herein;
(iv) The failure by Employer to continue Executive's
participation in the bonus and other compensation plans and incentive plans
specified in subparagraph 3(b) hereof;
(v) The failure by Employer to continue Executive's
participation in any benefit plan, pension plan, qualified retirement plan, life
insurance plan, vacation plan, holiday plan, car lease plan, medical expense,
health and accident plan or disability plan, or expense reimbursement
arrangement specified in paragraphs 4 and 5 hereof, or the taking of any action
by Employer (prompt notice of which shall be provided to Executive) which would
adversely affect Executive's participation in (including materially increasing
Executive's costs of such participation), or materially reduce Executive's
benefits under, any of such plans, or which would deprive Executive of any other
fringe or personal benefits under any of such plans; provided, however, that
-------- -------
notwithstanding the provisions of this subparagraph 6(f)(iv), Employer's
providing benefits of a type or amount different than as provided for
hereinabove shall not be deemed a violation of this subparagraph if required by
law;
(vi) Any action by Employer that would require
Executive to relocate his principal residence or office to a location more than
50 miles from Employer's current principal executive offices.
(g) Any termination of Executive's employment by Employer for
Disability, Retirement or Cause, or by Executive for Good Reason, shall be
communicated by Written Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provisions in this Agreement relied
upon, shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated, and shall set forth the date upon which such termination is to
become effective .
7. Proprietary Information. Executive acknowledges that certain
-----------------------
technological and other information may from time to time be disclosed to
Executive by Employer during the continuance hereof. Executive hereby
acknowledges that all such information and technology, whether currently
existing or hereafter developed by Employer through or involving the services
and efforts of Executive hereunder, shall at all times consist of and be
preserved by Executive as valuable trade secrets and confidential information
which is proprietary to and owned exclusively by Employer, and that Executive
does not have, and shall not have or hereafter acquire, any rights in or to any
such information and technology, including without limitation any patents,
inventions, discoveries, know-how, trademarks or tradenames used or adopted by
Employer in connection with the design, development, manufacture, marketing,
sale or installation of any products which at any time during the continuation
hereof may be offered or sold or licensed by Employer. Executive further
warrants and agrees that he shall not at any time, whether during the
continuance of this Agreement or after its expiration or earlier termination,
whether by Executive or by Employer, in any manner or form, directly or
indirectly, use, disclose, duplicate, license, sell, reveal, divulge,
3
<PAGE>
publish or communicate any portion of any such information or technology, nor
use, disclose, duplicate, license, sell, reveal, divulge, publish or communicate
any other confidential information concerning Employer, or any customers or
other products of Employer, to any person, firm or entity.
8. Agreement Not to Compete: Non-Solicitation
------------------------------------------
(a) Executive acknowledges that, by virtue of his position with
Employer, Executive will develop considerable expertise in the business
operations of Employer and will have access to extensive confidential
information with respect to Employer. Executive also acknowledges that this is
a personal services contract wherein Executive's services are of a special,
unique, unusual, extraordinary and intellectual character. Executive further
acknowledges that his services will have peculiar value, the loss of which
cannot be reasonably or adequately compensated in damages in an action at law.
Executive acknowledges that Employer would be irreparably damaged, and its
substantial investment materially impaired, if Executive were to enter into an
activity competing with Employer's business in violation of the terms of this
Agreement or if Executive were to make unauthorized use or disclosure of any
confidential information concerning the business Employer.
(b) In consideration of the terms and conditions of this
Agreement, including without limitation, this Section 8 and payment of the
Severance Amount, Executive hereby agrees that, during the period of his
employment with Employer and for the longer of (i) the remainder of the term of
this Agreement had Executive not been terminated, or (ii) a period of 24 months,
he will not, without Employer's express written consent, (i) engage in any
employment or business activity which is competitive with, or would otherwise
conflict with, the business of Employer as is currently conducted or presently
under development as of the date of Executive's termination; or (ii) solicit or
attempt to solicit, either directly or through others, (A) any employee,
consultant, or independent contractor of Employer to terminate his or her
relationship with any other person or business entity; or (B) the business of
any customer, vendor, or distributor of Employer. Executive further agrees to
notify Employer, in writing, before Executive obtains employment with, performs
work for, or engages in any professional activity on behalf of any company,
person or entity in the lighting industry.
(c) In the event that Executive engages in any such competitive
activity in breach of this Agreement, Executive hereby agrees that he shall
return to Employer the Severance Amount in full immediately following such
breach and that Employer shall be entitled to equitable relief (e.g.
injunctions) to prevent any such competitive activity by Executive. The rights
and remedies hereof shall be cumulative (and not alternative).
(d) Executive expressly acknowledges that he is voluntarily
entering into this Agreement, that the provisions in this Section 8 are a
material inducement to Employer in entering this Agreement, and that the terms
and conditions of this Agreement are fair and reasonable to Executive in all
respects.
9. General Provisions.
------------------
(a) Any notice, request, demand or other communication required
or permitted hereunder shall be deemed to be properly given when personally
served in writing, when deposited in the United States mail, postage prepaid, or
when communicated to a public telegraph company for transmittal, addressed to
Employer or Executive at their respective last known address. Either party may
change its address by written notice given in accordance with this subparagraph.
(b) This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective executors, administrators,
successors and assigns; provided, however, that Executive may not assign any or
-------- -------
all of Executive's rights or duties hereunder without the prior written consent
of Employer.
(c) This Agreement is made and entered into, is to be performed
primarily within, and shall be governed by and constructed in all respects in
accordance with the laws of the State of California.
(d) Captions and Paragraph headings used herein are for
convenience only and are not a part of this Agreement and shall be used in
construing it.
(e) Should any provision of this Agreement for any reason be
declared invalid, void, or unenforceable by a court of competent jurisdiction,
the validity and binding effect of any remaining portions shall not be affected,
and the remaining provisions of this Agreement shall remain in full force as if
this Agreement had been executed with said provision eliminated.
4
<PAGE>
(f) Employer shall indemnify Executive to the fullest extent
permitted by applicable law with respect to any claims arising from the
performance by Executive of his duties hereunder during the Term of this
Agreement.
(g) This Agreement contains the entire agreement of the parties,
and supersedes any and all other agreements, either oral or in writing, between
the parties hereto with respect to the employment of Executive by Employer. Each
party to this Agreement acknowledges that no representations, inducements,
promises or agreements, oral or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not embodied herein or therein,
and that no other agreement, statement or promise not contained herein or
therein shall be relied upon or be valid or binding. This Agreement may not be
modified or amended by oral agreements, but only by an agreement in writing
signed by Employer on the one hand, and by Executive on the other hand.
(h) In the event of any litigation between Executive and
Employer concerning the rights or obligations of any party under this Agreement,
the non-prevailing party shall pay the reasonable costs and expenses, including
attorneys' fees, of the prevailing party in connection therewith.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
APPROVED:
"Employer"
TIVOLI INDUSTRIES, INC. TIVOLI INDUSTRIES, INC.
By: /s/ Peter J Shaw By: /s/ Gordon Westerling
------------------------------- ----------------------------------
Peter J. Shaw Gordon Westerling
Director/Compensation Committee Director/Compensation Committee
"Executive"
/s/ Terrence C Walsh
--------------------
Terrence C. Walsh
5
<PAGE>
EXHIBIT 10.32
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
April 1, 1999, by and between TIVOLI INDUSTRIES, INC., a California corporation
whose principal place of business is located in Santa Ana, California 92705
("Employer"), and CHARLES KIMMEL, an individual residing in the State of
California ("Executive").
WHEREAS, Employer desires to retain the services of Executive on the terms
and conditions herein provided, and Executive is willing to provide such
services on such terms and conditions;
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants of the parties contained herein, the parties agree as follows:
1. Term. This Agreement shall continue in full force and effect for a
----
period which shall commence as of the date hereof and shall continue until
September 30, 2002 (the "Term"), unless sooner terminated as hereinafter
provided or extended by the mutual agreement of the parties.
2. Employment. Executive shall serve as the President, Chief Operating
----------
Officer and Chief Financial Officer of Employer, subject to the reasonable
directions of Employer's Board of Directors, and as such shall have day-to-day
responsibility for the management of all of Employer's affairs and operations,
subject to the reasonable directions of Employer's Board of Directors.
Executive shall devote his full executive time, energies and abilities to the
proper and efficient performance of his duties provided herein.
Executive shall at all times perform his duties and obligations faithfully and
diligently and to the best of Executive's ability.
3. Compensation.
------------
(a) As compensation for the services provided by Executive
hereunder, during the Term of this Agreement Employer shall pay Executive an
annual salary of not less that $127,000 per year. Executives' salary shall be
reviewed by Employer's Board of Directors from time to time at its discretion
but not less often than annually each November 1, and Executive shall receive
such salary increases as Employer's Board of Directors shall determine; provided
that Employee's annual salary payable for the ensuing twelve (12) month period
shall in all events be increased at the end of each succeeding twelve (12) month
period at a rate equal to the greater of 5% per annum or the increase, if any,
in the Consumer Price Index for Urban Wage Earners and Clerical Workers (Los
Angeles-Long Beach-Anaheim), as published by the Bureau of Labor Statistics of
the U.S. Department of Labor, during the preceding twelve (12) months. All such
salary shall be payable in equal installments in conformity with Employer's
normal payroll period.
(b) In addition to the minimum salary payable to Executive as
provided in subparagraph 3(a) above, Executive shall be entitled to receive, for
each full or partial calendar year during the Term hereof, a bonus, if any, as
determined by Employer's Compensation Committee.
(c) In addition to salary and bonus payment (if any), Executive
shall be entitled to receive stock options and/or warrants, if any, as
determined by the Employer's Compensation Committee. Such awards will be awarded
on an annual basis.
(d) In addition to the above, Executive shall also be entitled
to receive an auto allowance equal to $600 per month, payable monthly.
4. Benefits and Vacations.
----------------------
(a) Executive and his dependents shall be entitled to
participate in or receive benefits under Employer's health insurance plans or
arrangements as in effect on the date hereof for such period of time as such
plans and arrangements shall remain in effect. In addition, Executive shall be
entitled to participate in or receive benefits under any pension plan, profit-
sharing plan, life insurance, health-and-accident plan or arrangement made
available in the future by Employer to its executives and key management
employees, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and arrangements. Nothing paid to Executive
under any such plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of any compensation payable to Executive
hereunder.
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(b) Executive shall be entitled to the number of paid vacations
days in each calendar year, and to compensation for earned but unused vacation
days, determined by Employer from time to time for its executives and key
management employees, but not less than four (4) weeks in each year of the Term
hereof. Executive shall also be entitled to all paid holidays given by Employer
to its executives and key management employees.
5. Expenses. During the Term hereof, Executive shall be entitled to
--------
receive prompt reimbursement of all reasonable expenses incurred by Executive
(in accordance with the policies and procedures from time to time adopted by
Board of Directors of Employer for its senior executive officers) in performing
the services contemplated hereunder, provided that Executive properly accounts
therefore in accordance with Employer's policy.
6. Termination.
-----------
(a) Executive's employment hereunder shall terminate immediately upon
death.
(b) In the event that Executive shall be unable to perform the
services contemplated hereunder by reason of disability, illness or other
incapacity, such failure to so perform such duties shall not be grounds for
terminating the employment of Executive by Employer; provided, however, that
-------- -------
Employer may terminate Executive's employment hereunder should the period of
such incapacity exceed six (6) consecutive months. Any such termination shall
not be considered to be for "Cause" as defined in subparagraph (c) immediately
below.
(c) Executive's employment hereunder may be terminated by Employer
prior to the expiration of the Term with or without "Cause" (as defined in
subparagraph 6(e) below), immediately upon delivery by Employer of a written
notice of termination; provided, however, that if Employer shall not have Cause
to terminate Executive's employment hereunder, then upon any such termination,
and as a condition of the effectiveness thereof, Employer shall pay to Executive
as severance pay, in one lump sum in cash, an amount equal to (i) the amount of
the current annual salary and benefits listed in paragraphs 3(a) and 4(a) that
would have been payable over the remainder of the term of this Agreement had
Executive not been terminated (subject to a minimum amount equal to 24 months
base salary, such 24 month period being a "Minimum Severance Period").
(d) In the event that Executive is terminated for Cause, Employer
shall pay Executive's salary through the date of termination, after deducting
any amounts lawfully owing from Executive to Employer, and shall thereafter have
no further obligation to Executive.
(e) For the purposes of this Agreement, "Cause" means (i) the willful
and continued failure by Executive to substantially perform Executive's duties
hereunder, other than any such failure resulting from Executive's incapacity due
to physical or mental illness, after a demand for substantial performance is
delivered to Executive by the Board of Directors of Employer (the "Board") which
specifically identifies the manner in which the Board believes that Executive
has not substantially performed such duties, or (ii) the willful engaging by
Executive in gross misconduct materially and demonstrably injurious to Employer.
For purposes of this subparagraph, no act, or failure to act, on Executive's
part shall be considered "willful" merely because it was the result of bad
judgment or negligence; rather, such act or failure to act must have been done,
or omitted to have been done, by Executive other than in good faith and without
reasonable belief that Executive's action or omission was in the best interests
of the Employer. Notwithstanding the foregoing, Executive's employment shall not
be deemed to have been terminated for "Cause" unless and until there shall have
been delivered to Executive a copy of a resolution duly adopted by the
affirmative vote of Employer's Board of Directors at a meeting of the Board
called and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive, together with Executive's counsel, to be heard before
the Board), finding that in the good faith opinion of the Board Executive was
guilty of conduct described above in clauses (i) or (ii) of this subparagraph
and specifying the particulars thereof in detail. In the event that Executive is
terminated for Cause, Employer shall pay Executive's salary through date of
termination, any bonuses which have been earned by Executive through the date of
termination after deducting any amounts lawfully owing from Executive to
Employer, and shall thereafter have not further obligation to Executive, expect
to the extent the Executive may be entitled to exercise any of the options
granted to Executive as contemplated in paragraph 3(c) above.
(f) Executive shall be entitled to terminate his employment with
Employer hereunder for "Good Reason." Within five (5) business days of such
termination, Employer shall pay Executive in one lump sum the Severance Amount
provided above. For purposes of this Agreement, any termination of employment
under any one or more of the following circumstances shall be for "Good Reason":
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(i) Without Executive's express written consent, the
assignment to Executive of any duties inconsistent with Executive's positions,
duties, responsibilities and status with Employer, or an change in Executive's
reporting responsibilities, titles or offices as in effect upon the execution
hereof, or any removal of Executive from or any failure to re-elect Executive to
any such positions, except in connection with the termination of Executive's
employment for Cause, Disability, Retirement or as a result of death;
(ii) Without Executive's express written consent, the Employer
or Employer's ultimate parent corporation experiences a change of control via
merger, consolidation, sale of all or substantially all the shares or the assets
or other transaction (or series of related transactions) following which the
shareholders or Employer or Employer's ultimate parent immediately prior to such
transaction own less than 50% of the outstanding voting shares of Employer or
Employer's ultimate parent following such transaction.
(iii) The reduction by Employer in Executive's base salary, as
the same may be thereafter be increased from time to time, the failure by
Employer to increase such base salary each successive year, as specified in
subparagraph 3(a)hereof, or the failure by Employer to otherwise pay Executive
the base salary provided for herein;
(iv) The failure by Employer to continue Executive's
participation in the bonus and other compensation plans and incentive plans
specified in subparagraph 3(b) hereof;
(v) The failure by Employer to continue Executive's
participation in any benefit plan, pension plan, qualified retirement plan, life
insurance plan, vacation plan, holiday plan, car lease plan, medical expense,
health and accident plan or disability plan, or expense reimbursement
arrangement specified in paragraphs 4 and 5 hereof, or the taking of any action
by Employer (prompt notice of which shall be provided to Executive) which would
adversely affect Executive's participation in (including materially increasing
Executive's costs of such participation), or materially reduce Executive's
benefits under, any of such plans, or which would deprive Executive of any other
fringe or personal benefits under any of such plans; provided, however, that
-------- -------
notwithstanding the provisions of this subparagraph 6(f)(iv), Employer's
providing benefits of a type or amount different than as provided for
hereinabove shall not be deemed a violation of this subparagraph if required by
law;
(vi) Any action by Employer that would require Executive to
relocate his principal residence or office to a location more than 50 miles from
Employer's current principal executive offices.
(g) Any termination of Executive's employment by Employer for
Disability, Retirement or Cause, or by Executive for Good Reason, shall be
communicated by Written Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provisions in this Agreement relied
upon, shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated, and shall set forth the date upon which such termination is to
become effective.
7. Proprietary Information. Executive acknowledges that certain
-----------------------
technological and other information may from time to time be disclosed to
Executive by Employer during the continuance hereof. Executive hereby
acknowledges that all such information and technology, whether currently
existing or hereafter developed by Employer through or involving the services
and efforts of Executive hereunder, shall at all times consist of and be
preserved by Executive as valuable trade secrets and confidential information
which is proprietary to and owned exclusively by Employer, and that Executive
does not have, and shall not have or hereafter acquire, any rights in or to any
such information and technology, including without limitation any patents,
inventions, discoveries, know-how, trademarks or tradenames used or adopted by
Employer in connection with the design, development, manufacture, marketing,
sale or installation of any products which at any time during the continuation
hereof may be offered or sold or licensed by Employer. Executive further
warrants and agrees that he shall not at any time, whether during the
continuance of this Agreement or after its expiration or earlier termination,
whether by Executive or by Employer, in any manner or form, directly or
indirectly, use, disclose, duplicate, license, sell, reveal, divulge, publish or
communicate any portion of any such information or technology, nor use,
disclose, duplicate, license, sell, reveal, divulge, publish or communicate any
other confidential information concerning Employer, or any customers or other
products of Employer, to any person, firm or entity.
3
<PAGE>
8. Agreement Not to Compete; Non-Solicitation
------------------------------------------
(a) Executive acknowledges that, by virtue of his position with
Employer, Executive will develop considerable expertise in the business
operations of Employer and will have access to extensive confidential
information with respect to Employer. Executive also acknowledges that this is a
personal services contract wherein Executive's services are of a special,
unique, unusual, extraordinary and intellectual character. Executive further
acknowledges that his services will have peculiar value, the loss of which
cannot be reasonably or adequately compensated in damages in an action at law.
Executive acknowledges that Employer would be irreparably damaged, and its
substantial investment materially impaired, if Executive were to enter into an
activity competing with Employer's business in violation of the terms of this
Agreement or if Executive were to make unauthorized use or disclosure of any
confidential information concerning the business Employer.
(b) In consideration of the terms and conditions of this
Agreement, including without limitation, this Section 8 and payment of the
Severance Amount, Executive hereby agrees that, during the period of his
employment with Employer and for the longer of (i) the remainder of the term of
this Agreement had Executive not been terminated, or (ii) a period of 24 months,
he will not, without Employer's express written consent, (i) engage in any
employment or business activity which is competitive with, or would otherwise
conflict with, the business of Employer as is currently conducted or presently
under development as of the date of Executive's termination; or (ii) solicit or
attempt to solicit, either directly or through others, (A) any employee,
consultant, or independent contractor of Employer to terminate his or her
relationship with Employer in order to become an employee, consultant, or
independent contractor to or for any other person or business entity; or (B) the
business of any customer, vendor, or distributor of Employer. Executive further
agrees to notify Employer, in writing, before Executive obtains employment with,
performs work for, or engages in any professional activity on behalf of any
company, person or entity in the lighting industry.
(c) In the event that Executive engages in any such competitive
activity in breach of this Agreement, Executive hereby agrees that he shall
return to Employer the Severance Amount in full immediately following such
breach and that Employer shall be entitled to equitable relief (e.g.
injunctions) to prevent any such competitive activity by Executive. The rights
and remedies hereof shall be cumulative (and not alternative).
(d) Executive expressly acknowledges that he is voluntarily
entering into this Agreement, that the provisions in this Section 8 are a
material inducement to Employer in entering this Agreement, and that the terms
and conditions of this Agreement are fair and reasonable to Executive in all
respects.
9. General Provisions.
------------------
(a) Any notice, request, demand or other communication required
or permitted hereunder shall be deemed to be properly given when personally
served in writing, when deposited in the United States mail, postage prepaid, or
when communicated to a public telegraph company for transmittal, addressed to
Employer or Executive at their respective last known address. Either party may
change its address by written notice given in accordance with this subparagraph.
(b) This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective executors, administrators,
successors and assigns; provided, however, that Executive may not assign any or
-------- -------
all of Executive's rights or duties hereunder without the prior written consent
of Employer.
(c) This Agreement is made and entered into, is to be performed
primarily within, and shall be governed by and constructed in all respects in
accordance with the laws of the State of California.
(d) Captions and Paragraph headings used herein are for
convenience only and are not a part of this Agreement and shall be used in
construing it.
(e) Should any provision of this Agreement for any reason be
declared invalid, void, or unenforceable by a court of competent jurisdiction,
the validity and binding effect of any remaining portions shall not be affected,
and the remaining provisions of this Agreement shall remain in full force as if
this Agreement had been executed with said provision eliminated.
(f) Employer shall indemnify Executive to the fullest extent
permitted by applicable law with respect to any claims arising from the
performance by Executive of his duties hereunder during the Term of this
Agreement.
4
<PAGE>
(g) This Agreement contains the entire agreement of the parties,
and supersedes any and all other agreements, either oral or in writing, between
the parties hereto with respect to the employment of Executive by Employer. Each
party to this Agreement acknowledges that no representations, inducements,
promises or agreements, oral or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not embodied herein or therein,
and that no other agreement, statement or promise not contained herein or
therein shall be relied upon or be valid or binding. This Agreement may not be
modified or amended by oral agreements, but only by an agreement in writing
signed by Employer on the one hand, and by Executive on the other hand.
(h) In the event of any litigation between Executive and
Employer concerning the rights or obligations of any party under this Agreement,
the non-prevailing party shall pay the reasonable costs and expenses, including
attorneys' fees, of the prevailing party in connection therewith.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
APPROVED:
"Employer"
TIVOLI INDUSTRIES, INC. TIVOLI INDUSTRIES, INC.
By: /s/ Peter J Shaw By: /s/ Gordon Westerling
------------------------------ --------------------------
Peter Shaw Gordon Westerling
Director/Compensation Committee Director/Compensation Committee
"Executive"
/s/ Terrence C Walsh
---------------------------------
Terrence C. Walsh
5
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,725,430
<SECURITIES> 0
<RECEIVABLES> 1,709,419
<ALLOWANCES> 57,466
<INVENTORY> 1,694,581
<CURRENT-ASSETS> 5,600,661
<PP&E> 1,571,172
<DEPRECIATION> 998,526
<TOTAL-ASSETS> 7,015,417
<CURRENT-LIABILITIES> 1,555,429
<BONDS> 0
0
0
<COMMON> 3,710
<OTHER-SE> 4,254,718
<TOTAL-LIABILITY-AND-EQUITY> 7,195,033
<SALES> 2,948,714
<TOTAL-REVENUES> 2,948,714
<CGS> 1,630,244
<TOTAL-COSTS> 2,795,634
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 23,420
<INCOME-PRETAX> 146,580
<INCOME-TAX> 52,318
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,262
<EPS-BASIC> 0.08
<EPS-DILUTED> 0.08
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