SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [x]
Filed by party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to /section/240.14a-11(c) or
/section/240.14a-12
Catalina Lighting, Inc.
(Name of Registrant as Specified in Its Charter)
Janet P. Ailstock, Esq.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (check the appropriate box):
[x] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE>
CATALINA LIGHTING, INC.
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1998
----------------------
The Annual Meeting of Stockholders of Catalina Lighting, Inc., a
Florida corporation (the "Company"), will be held on June 10, 1998 at 10:00 a.m.
local time at the Company's corporate office located at 18191 N.W. 68th Avenue,
Miami, Florida 33015, for the following purposes:
1. To elect seven persons to the Company's Board of Directors to
hold office until their respective terms of office shall
expire and until their respective successors are duly elected
and qualified;
2. To ratify the appointment of Deloitte & Touche LLP,
independent certified public accountants, as the Company's
auditors for the year ended September 30, 1998; and
3. To transact such other business as may properly come before
the Annual Meeting of Stockholders and any and all
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 30,
1998 as the record date for determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting of Stockholders and at any adjournments or
postponements thereof.
By order of the Board of Directors
THOMAS M. BLUTH, Secretary
Miami, Florida
May 6, 1998
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. THOSE
STOCKHOLDERS WHO ARE UNABLE TO ATTEND IN PERSON ARE RESPECTFULLY URGED TO
EXECUTE AND RETURN THE ENCLOSED PROXY CARD AT THEIR EARLIEST CONVENIENCE.
STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY ATTEND THE MEETING, REVOKE THEIR
PROXY, AND VOTE THEIR SHARES IN PERSON.
<PAGE>
CATALINA LIGHTING, INC.
18191 N.W. 68TH AVENUE
MIAMI, FLORIDA 33015
----------
PROXY STATEMENT
----------
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1998
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Catalina Lighting, Inc., a Florida corporation (the
"Company") of Proxies for use at the 1998 Annual Meeting of Stockholders of the
Company (the "Annual Meeting") to be held at the Company's corporate office,
18191 N.W. 68th Avenue, Miami, Florida 33015, on June 10, 1998 at 10:00 a.m.
local time, and at any and all adjournments or postponements thereof.
The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers, nominees and fiduciaries for the out-of-pocket and clerical
expense of transmitting copies of the proxy material to the beneficial owners of
stock held in their names will be borne by the Company. Certain officers and
regular employees of the Company or its subsidiaries, without additional
expense, may use their personal efforts, by telephone or otherwise, to obtain
proxies.
The Annual Report of the Company for the fiscal year ended September
30, 1997 accompanies this Proxy Statement.
You are urged to date, sign and promptly mail the enclosed proxy in the
enclosed addressed envelope, which requires no postage in the United States.
OUTSTANDING STOCK AND VOTING RIGHTS
In accordance with the Bylaws of the Company, the Board of Directors of
the Company (the "Board") has fixed the close of business on April 30, 1998 as
the record date for determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting (the "Record Date"). Only stockholders of record on
that date will be entitled to vote. A stockholder who submits a proxy on the
accompanying form has the power to revoke it by notice of revocation directed to
the proxy-holders or the Company at any time before it is voted. Unless
authority is withheld, proxies which are properly executed will be voted for the
proposal set forth thereon. Although a stockholder may have given a proxy, such
stockholder may nevertheless attend the Annual Meeting, revoke the proxy before
it is exercised and vote in person.
2
<PAGE>
As of April 30, 1998, the Record Date, there were 7,109,069 issued and
outstanding shares of the common stock of the Company, $.01 par value (the
"Common Stock"). Each share of Common Stock entitles the holder to one vote on
all matters brought before the Annual Meeting. The quorum necessary to conduct
business at the Annual Meeting consists of one third of the shares entitled to
vote at any meeting of stockholders. If a quorum exists, the proposals covered
by this Proxy Statement will require an affirmative vote of the holders of a
majority of the shares of Common Stock represented and voting in person or by
proxy at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, to the best knowledge of the Company,
information with respect to the Company's Common Stock beneficially owned on
April 30, 1998 by those who were the beneficial owner of more than 5% of the
Company's stock.
NAME AND ADDRESS OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENTAGE
- ------------------- --------------------- ----------
Nathan Katz....................... 630,742(2) 8.6%
55 Norfolk Avenue
Easton, MA
Wai Check Lau..................... 588,200(3) 8.3%
6/F, Kenning Industrial Bldg.
19 Wang Hoi Road
Kowloon Bay, Hong Kong
Robert Hersh...................... 433,300(4)(7) 5.8%
18191 N.W. 68th Avenue
Miami, Florida 33015
Dean S. Rappaport................. 367,100(5)(7) 4.9%
18191 N.W. 68th Avenue
Miami, Florida 33015
William D. Stewart................ 265,500(6)(7) 3.6%
18191 N.W. 68th Avenue
Miami, Florida 33015
Heartland Advisors, Inc........... 1,198,400(8) 16.9%
790 North Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors, Inc.. 451,600(9) 6.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 9040
- ---------------------------------
(1) Includes shares which may be acquired pursuant to vested stock options and
options which become exercisable 60 days thereafter or shares for which the
stockholder has the power to direct the vote.
3
<PAGE>
(2) Includes shares purchasable through the exercise of options as follows:
55,000 shares at $1.75 per share, 50,000 shares at $4.875 per share, 50,000
shares at $5.25 per share and 62,500 shares at $6.75 per share.
(3) Includes 477,500 shares issued to Go-Gro Holdings Limited, which is owned
by Wai Check Lau and 7,500 shares issued to Amy Yuen Ying Lau Cheung, the
wife of Wai Check Lau. In July 1994, as part of the acquisition of Go-Gro
Industries Limited ("Go-Gro"), Wai Check Lau and Amy Yuen Ying Lau Cheung
each delivered an irrevocable proxy to Catalina Asia, an entity controlled
by the Company. Catalina Asia has a proxy to vote 558,200 shares
beneficially owned by Mr. Lau and an additional 80,400 shares of the
Company also issued to previous shareholders of Go-Gro upon the
acquisition. The 638,600 shares are voted at the direction of Messrs.
Hersh, Rappaport, and Stewart, members of the Board of Directors of
Catalina Asia.
(4) Includes shares purchasable through the exercise of options as follows:
109,200 shares at $1.75 per share, 50,000 shares at $3.375 per share,
50,000 shares at $4.875 per share, 50,000 shares at $4.125 per share and
62,500 shares at $6.75 per share.
(5) Includes shares purchasable through the exercise of options as follows:
106,600 shares at $1.75 per share, 50,000 shares at $3.375 per share,
50,000 shares at $4.875 per share, 50,000 shares at $4.125 per share and
62,500 shares at $6.75 per share.
(6) Includes shares purchasable through the exercise of options as follows:
20,000 shares at $1.75 per share, 30,000 shares at $2.50 per share, 20,000
shares at $3.375 per share, 50,000 shares at $4.875 per share, 50,000
shares at $4.125 per share and 62,500 shares at $6.75 per share.
(7) In addition, Messrs. Hersh, Rappaport and Stewart, jointly have a power to
vote 638,600 shares owned by previous shareholders of Go-Gro Industries
Limited pursuant to irrevocable proxies. These shares are not included in
their amounts of shares beneficially owned.
(8) Heartland Advisors, Inc., a registered investment advisor, is deemed to
have beneficial ownership of 1,198,400 shares of Catalina Lighting, Inc.
stock, all of which shares are held in investment advisory accounts. As a
result, various persons have the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, the
securities. The interest of one such account, Heartland Value Fund, a
series of Heartland Group, Inc., a registered investment company, relates
to more than 5% of the class.
(9) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 451,600 shares of
Catalina Lighting, Inc. stock as of March 30, 1998, all of which shares
are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in series of the DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
4
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth, to the best knowledge of the Company,
the shares of Common Stock beneficially owned at April 30, 1998 by each director
and executive officer and by all executive officers and directors of the Company
as a group. Mr. Wachs is not standing for re-election to the Board.
<TABLE>
<CAPTION>
COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENTAGE
- ------------------------ --------------------- ----------
<S> <C> <C>
Robert Hersh......................... 433,300(2)(14) 5.8%
Dean S. Rappaport.................... 367,100(3)(14) 4.9%
William D. Stewart................... 265,500(4)(14) 3.6%
Leonard Sokolow...................... 41,000(5) *
Ryan R. Burrow....................... 20,700(6) *
Henry Latimer........................ 14,495(7) *
Jeffrey S. Silverman................ 27,000(8) *
Robert Wachs......................... 109,250(9) 1.5%
Nathan Katz.......................... 630,742(10) 8.6%
Wai Check Lau........................ 588,200(11) 8.3%
Thomas Bluth......................... 22,833(12) *
David Sasnett........................ 18,400(13) *
All executive officers, former
executive officer and directors of
the Company and its subsidiaries as
a group (12 persons)................. 2,618,920(15) 31.2%
</TABLE>
* less than 1%
- ---------------------------
(1) Includes shares which may be acquired pursuant to vested stock options and
options which become exercisable 60 days thereafter.
(2) Includes shares purchasable through the exercise of options as follows:
109,200 shares at $1.75 per share, 50,000 shares at $3.375 per share,
50,000 shares at $4.875 per share, 50,000 shares at $4.125 per share and
62,500 shares at $6.75 per share.
(3) Includes shares purchasable through the exercise of options as follows:
106,600 shares at $1.75 per share, 50,000 shares at $3.375 per share,
50,000 shares at $4.875 per share, 50,000 shares at $4.125 per share and
62,500 shares at $6.75 per share.
5
<PAGE>
(4) Includes shares purchasable through the exercise of options as follows:
20,000 shares at $1.75 per share, 30,000 shares at $2.50 per share, 20,000
shares at $3.375 per share, 50,000 shares at $4.875 per share, 50,000
shares at $4.125 per share and 62,500 shares at $6.75 per share.
(5) Includes shares purchasable through the exercise of options as follows:
25,000 shares at $4.875 per share, 2,000 shares at $7.875 per share, 2,000
shares at $5.375 per share, 2,000 shares at $6.875 per share, 2,000 shares
at $10.75 per share, 2,000 shares at $6.625 per share, 2,000 shares at
$3.75 per share and 2,000 shares at $6.25 per share.
(6) Includes 500 shares owned by Mr. Burrow's wife and shares purchasable
through the exercise of options as follows: 2,000 shares at $6.625, 2,000
shares at $10.75, 2,000 shares at $6.25 and 12,000 shares at $3.75.
(7) Includes shares purchasable through the exercise of options as follows:
2,000 shares at $6.25 per share and 12,000 shares at $3.75.
(8) Includes 2,000 shares purchasable through the exercise of options at $3.75
per share.
(9) Includes shares purchasable through the exercise of options as follows:
50,000 shares at $1.75 per share, 25,000 shares at $4.875 per share, 2,000
shares at $12.125 per share, 2,000 shares at $3.75, 2,000 shares at $7.875
per share, 2,000 shares at $3.375 per share, 2,000 shares at $5.375 per
share, 2,000 shares at $6.875 per share, 2,000 shares at $10.75 per share,
2,000 shares at $6.625 per share and 2,000 shares at $6.25 per share. Also
includes 2,450 shares owned by members of Mr. Wach's immediate family.
(10) Includes shares purchasable through the exercise of options as follows:
55,000 shares at $1.75 per share, 50,000 shares at $4.875 per share,
50,000 shares at $5.25 per share and 62,500 shares at $6.75 per share.
(11) Includes 477,500 shares issued to Go-Gro Holdings Limited, which is owned
by Wai Check Lau and 7,500 shares issued to Amy Yuen Ying Lau Cheung, the
wife of Wai Check Lau. In July 1994, as part of the acquisition of Go-Gro
Industries Limited ("Go-Gro"), Wai Check Lau and Amy Yuen Ying Lau Cheung
each delivered an irrevocable proxy to Catalina Asia, an entity controlled
by the Company. Catalina Asia has a proxy to vote 558,200 shares
beneficially owned by Mr. Lau and an additional 80,400 shares of the
Company also issued to previous shareholders of Go-Gro upon the
acquisition. The 638,600 shares are voted at the direction of Messrs.
Hersh, Rappaport, and Stewart, members of the Board of Directors of
Catalina Asia.
(12) Includes 20,833 shares purchasable through the exercise of options at
$4.125 per share.
(13) Includes 17,500 shares purchasable through the exercise of options at
$4.125 per share.
(14) Messrs. Hersh, Rappaport and Stewart, jointly have a power to vote 638,600
shares owned by previous shareholders of Go-Gro Industries Limited
pursuant to irrevocable proxies. These shares are not included in the
amount of shares beneficially owned by these executive officers.
(15) Includes an additional 80,400 shares owned by previous shareholders of
Go-Gro Industries Limited. These shares are included in the 638,600 shares
which Messrs. Hersh, Rappaport and Stewart jointly have a power to vote
pursuant to irrevocable proxies.
6
<PAGE>
ELECTION OF DIRECTORS
The Bylaws of the Company provide that each director is to hold office
until the next Annual Meeting of Stockholders and until his successor is elected
and qualified or until his earlier death, resignation or removal. It is not
expected that any of the nominees will be unable to stand for election or be
unable to serve if elected. In the event that any nominee is unable to serve for
any reason, the proxies will be voted in the discretion of the proxy-holders.
The following table sets forth, as of April 30, 1998, certain
information with respect to the nominees for director.
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
- ---- --- ------------------------- --------
Robert Hersh 51 Chairman, Chief Executive Officer, 1988
President, Director
Dean Rappaport 46 Executive Vice President, 1988
Chief Operating Officer, Director
William D. Stewart 49 Executive Vice President, Director 1994
Ryan R. Burrow 37 Director 1994
Henry Latimer 60 Director 1996
Jeffrey S. Silverman 52 Director 1997
Leonard Sokolow 41 Director 1990
ROBERT HERSH has been the President and Chief Executive Officer of the
Company since April 1991, Chairman of the Board since June 1991 and a Director
of the Company since April 1988. Mr. Hersh served as the Executive Vice
President of the Company from 1985 to April 1991 and as Secretary from June 1989
until June 1991.
DEAN S. RAPPAPORT has been an Executive Vice President of the Company
since January 1988 and a Director of the Company since April 1988. From January
1988 to November 1996 Mr. Rappaport was Chief Financial Officer and Treasurer of
the Company. Mr. Rappaport was promoted to Chief Operating Officer of the
Company in November 1996. From 1984 until he joined the Company, Mr. Rappaport
was a partner with Wachsman & Rappaport, P.A., a public accounting firm located
in Margate, Florida.
WILLIAM D. STEWART has been an Executive Vice President of the Company
since 1989, and a Director of the Company since April 1994. From 1985 until he
joined the Company, Mr. Stewart was an Executive Vice President of Crest
Industries, Inc., a distributor of home improvement products.
RYAN R. BURROW has been a Director of the Company since April 1994. Mr.
Burrow has been the President of BPI Global Asset Management LLP since March
1997. Mr. Burrow was Managing Director for STI Capital Management from August
1993 to March 1997. Mr. Burrow served as a Senior Vice President of Sun Bank,
N.A. from February 1990 to August 1993 and from September 1987 to February 1990
was a Senior Vice President for the Bank of New York/Irving Trust Company.
7
<PAGE>
HENRY LATIMER has been a Director of the Company since February 1996.
Mr. Latimer is the Managing Partner, Fort Lauderdale office, of the law firm of
Eckert, Seamans, Cherin & Mellott. He was formerly a partner with the law firm
of Fine, Jacobson, Schwartz, Nash & Block from 1983 to 1994. Mr. Latimer
presently serves as a director of Florida Panthers Holdings, Inc.
JEFFREY S. SILVERMAN joined Ply Gem Industries, Inc. as a Director in
1981. He became Executive Vice President in 1982, President in 1984 and was
Chairman of the Board and Chief Executive Officer from 1985 through August 1997,
the date Ply Gem was acquired by Nortek Industries. Prior to joining Ply Gem
Industries he was managing general partner of an investment partnership. Mr.
Silverman was named Man of the Year by the Building Materials Industry in 1987,
and Entrepreneur of the Year by Inc. Magazine, Ernst & Young, and Merrill Lynch
in 1991. Mr. Silverman presently serves as a director of Realco, Inc. Mr.
Silverman was a member of the Board of Trustees of Long Island University, the
Board of Governors of the American Stock Exchange, the Howard Samuels Center at
CCNY and the American Business Conference.
LEONARD SOKOLOW has been a Director of the Company since March 1990.
Mr. Sokolow is the President of Union Atlantic LC. In August 1993 Mr. Sokolow
was appointed as President of Genesis Partners, Inc., and also became President
of Union Atlantic LC in September 1996. Mr. Sokolow was Executive Vice
President-Operations, Administration and Finance of Windmere Corporation from
March 1990 to July 1993, and Senior Vice President of Windmere from February
1989 to March 1990 and General Counsel of Windmere from December 1988 to July
1993. Prior to joining Windmere, Mr. Sokolow was a partner with the law firm of
Hornsby and Whisenand, P.A., practicing in the area of international and
domestic corporate, securities and tax law. Mr. Sokolow presently serves as a
director of Ezcony Interamerica, Inc. and as the Chairman and Chief Executive
Officer of The Americas Growth Fund, Inc. The shares of The America's Growth
Fund and Ezcony Interamerica are traded on NASDAQ.
MEETINGS AND COMMITTEES OF DIRECTORS
Four meetings of the Board of Directors were held during the past
fiscal year; in addition, the Directors did not act through any unanimous
written consents. The Company has a Compensation and Stock Option Committee,
consisting of Messrs. Burrow, Latimer and Sokolow, an Audit Committee composed
of Messrs. Sokolow and Burrow and a Nominating Committee consisting of Messrs.
Latimer, Silverman and Hersh. During fiscal 1997, no director attended fewer
than 75% of the aggregate of (1) the total number of meetings of the Board of
Directors held while he was a director and (2) the total number of meetings held
by all committees of the Board on which he served.
COMPENSATION AND STOCK OPTION COMMITTEE - The Compensation and Stock Option
Committee is responsible for developing the Company's executive compensation
strategy and for administering the policies and programs that implement this
strategy. The Committee is composed of Ryan R. Burrow, Henry Latimer and Leonard
Sokolow, all of whom are independent non-employee directors.
NOMINATING COMMITTEE - The Nominating Committee selects nominees to the Board of
Directors. The Board will consider nominees recommended by stockholders of the
Company if submitted to the Chairman of the Board not less than 150 days prior
to an Annual Meeting of Stockholders.
AUDIT COMMITTEE - The Audit Committee of the Board of Directors recommends a
firm to be selected as the independent auditors to audit Catalina's financial
statements and to perform other audit-related services. In addition, the Audit
Committee reviews the scope and results of the audits that are conducted by the
independent auditors, reviews interim and year-end results with management and
considers the adequacy of Catalina's internal accounting procedures. During
fiscal 1997, the Audit Committee met one time.
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information about the compensation of
the Company's CEO and each of the other four most highly compensated executive
officers of the Company during the fiscal years ended September 30, 1997, 1996
and 1995 for services in all capacities.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------- --------------------
SECURITIES
NAME AND FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS(3) COMPENSATION(4)
- ------------------ ------ ------ -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert Hersh 1997 $284,905 $ - - $ 1,500
Chairman, CEO 1996 271,338 43,787 - 1,500
and President 1995 258,418 14,917 62,500 794
Dean S. Rappaport
Executive Vice 1997 256,414 - - 6,059
President, Chief 1996 244,204 43,787 - 6,496
Operating Officer 1995 232,575 14,917 62,500 6,033
William D. Stewart 1997 256,414 - - 7,426
Executive Vice 1996 244,204 43,787 - 7,987
President 1995 232,575 14,917 62,500 7,802
Nathan Katz 1997 256,414 - - 1,500
Executive Vice 1996 244,204 43,787 - 1,500
President 1995 232,575 14,917 62,500 794
Wai Check Lau(5)
President - 1997 210,393 34,030 - -
Go-Gro Industries 1996 180,000 - - -
Limited 1995 180,000 - - -
</TABLE>
- -------------------------------
(1) Amounts for Messrs. Hersh, Rappaport, Stewart and Katz represent 1.67% of
consolidated pre-tax income for the respective fiscal years ended September
30.
(2) Perquisites and personal benefits furnished to the named executive officers
do not meet the disclosure thresholds established under SEC regulations.
(3) Stock options vest annually in increments of one-third of the options
granted.
(4) The amounts disclosed in this column represent:
(a) The portion of premiums paid by the Company for reverse split-dollar
life insurance of $4,559 in 1997, $4,996 in 1996 and $5,239 in 1995 for
Mr. Rappaport and $5,926 in 1997, $6,487 in 1996 and $7,008 in 1995 for
Mr. Stewart.
(b) The Company's matching contributions to the Company's 401(k) plan of
$1,500 in 1997, $1,500 in 1996 and $794 in 1995 for each of Mr. Hersh,
Mr. Rappaport, Mr. Stewart and Mr. Katz.
(5) Mr. Lau joined the Company on July 30, 1994, upon the Company's acquisition
of Go-Gro Industries Limited. On December 4, 1997, Mr. Lau submitted his
resignation from Go-Gro and the Company, effective January 23, 1998.
9
<PAGE>
OPTIONS GRANTED
No stock options were granted to the named executive officers of the
Company during the fiscal year ended September 30, 1997.
OPTION EXERCISES AND HOLDINGS
The following table provides information as to options exercised by
each of the named executive officers of the Company during the fiscal year ended
September 30, 1997 and the value of options held by such officers at September
30, 1997 in terms of the closing price of the Company's stock on September 30,
1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR END 1997 OPTION VALUES
VALUE OF
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT SEPTEMBER 30, 1997 SEPTEMBER 30, 1997(1)
ACQUIRED ON VALUE -------------------------------- ---------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Hersh 0 0 300,866 20,834 $ 696,000 0
Dean S. Rappaport 0 0 298,266 20,834 $ 685,438 0
William D. Stewart 0 0 211,666 20,834 $ 360,025 0
Nathan Katz 0 0 196,666 20,834 $ 298,188 0
Wai Check Lau 0 0 0 0 0 0
</TABLE>
- ---------------------------
(1) Based on the closing price of the Company's stock on September 30, 1997
of $5.8125.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into employment agreements with Robert Hersh,
Dean S. Rappaport, William D. Stewart and Nathan Katz for three year terms,
renewed each year on the Anniversary Date of each employment agreement.
Commencing October 1, 1993, Messrs. Hersh, Rappaport, Stewart and Katz's base
annual salaries were $246,112, $221,500, $221,500, and $221,500, respectively,
with annual increases of the greater of 5% or the percentage increases in the
consumer price index published by the U.S. Department of Labor ("U.S. Consumer
Price Index"). Each of the above Executive Officers may receive options under
their employment agreement and no options were granted during fiscal 1997.
In connection with the employment agreements of Messrs. Hersh,
Rappaport, Stewart and Katz, the Company agreed to fund a management bonus pool
(the "Pool") with 6.67 % of the Company's consolidated pretax profits, at the
end of each of the Company's fiscal years beginning with the year ending
September 30, 1990 (Mr. Katz was entitled to participate in the bonus pool
beginning October 1, 1993). Under the employment agreements described above,
Messrs. Hersh, Rappaport, Stewart and Katz were each entitled to not less than
one-fourth of the Pool. Bonuses were waived in 1990, no amounts were distributed
in 1991 and 1997 due to pretax losses and amounts earned under the Pool in
fiscal 1992, 1993, 1994, 1995 and 1996 totaled approximately $217,000, $356,000,
$614,000, $60,000 and $175,000, respectively.
10
<PAGE>
In connection with the Company's acquisition of Go-Gro Industries,
Limited ("Go-Gro") the Company entered into an employment agreement with the
previous majority stockholder of Go-Gro, Wai Check Lau, under which such
individual served as President of Go-Gro. On April 1, 1997, Mr. Lau and the
Company entered into a new employment agreement extending the term to March 31,
2002. In December 1997, this employment agreement was terminated as Mr. Lau
submitted his resignation from Go-Gro and the Company, effective January 23,
1998.
The employment agreements with Messrs. Hersh, Rappaport, Stewart and
Katz each provide that, if the employee terminates his employment without good
reason or is terminated for cause, such employee is subject to a non-competition
provision for a three year period. In the event of a change of control of the
Company preceded, accompanied or followed (within specified time limits) by a
reduction of the employee's compensation or a diminution of his status or
responsibilities, the employee is entitled to terminate his employment and
receive a lump sum distribution of compensation in an amount equal to three
times his then current effective yearly compensation, including, but not limited
to, salary and bonuses. If the employee elects to so terminate, he will have the
right to sell any shares of the Company's capital stock then owned to the
Company at their fair market value and the non-competitive provisions contained
in the employment agreements shall terminate. Payments under the agreements by
the Company after a change of control are, however, limited to the amount which
would be deductible by the Company under the Internal Revenue Code of 1986, as
amended. A "change of control" is deemed to occur upon (i) the acquisition of
21% of the Company's voting power, (ii) the election of three or more directors
without approval of the incumbent directors, as defined, within a twelve-month
period, or (iii) the incumbent directors becoming less than a majority of the
Board of Directors of the Company or its successor. The agreements also provide
for payments of three times annual compensation if the employment is terminated
without cause by the Company or for good reason by the employee.
The Company pays its proportionate share of a reverse split-dollar life
insurance policy on Mr. Rappaport's, Mr. Katz's and Mr. Stewart's life. In the
event of Mr. Rappaport's, Mr. Katz's or Mr. Stewart's death during the term of
their employment agreements, the Company would receive $1,000,000.
LEGAL PROCEEDINGS
On June 4, 1991, the Company was served with a copy of the Complaint in
a matter captioned JOHN H. BROWDER VS. CATALINA LIGHTING, INC., ROBERT HERSH,
DEAN S. RAPPAPORT AND HENRY GAYER, Case No. 91-23683, in the Circuit Court of
the 11th Judicial Circuit in and for Dade County, Florida. The Company agreed to
indemnify each of the individual directors and former director and the Company
for expenses paid for the legal costs for the defense of such proceeding. On
February 3, 1997, the plaintiff voluntarily dismissed the claim against the
directors.
On February 23, 1993, Dana Lighting (now Catalina Industries), a
subsidiary of the Company, was served with a copy of the Complaint in a matter
captioned HOLMES PRODUCTS CORPORATION VS. DANA LIGHTING, INC. AND NATHAN KATZ,
Case No. 93-0249 in the Superior Court of the Commonwealth of Massachusetts. The
Company and the directors believe that the Complaint is totally without merit
and are vigorously defending the same. The Company has agreed to indemnify Mr.
Katz against liabilities incurred in connection with such proceeding to the
extent permitted by Florida law and the Company may advance expenses to Mr. Katz
arising out of such proceeding.
COMPENSATION OF DIRECTORS
Salaried employees of the Company do not receive any additional
compensation for serving as a director or committee member. Non-employee
directors receive an annual retainer of $14,000, plus $1,000 per Board meeting
and Committee meeting attended. Mr. Silverman and Mr. Burrow are reimbursed for
their travel expenses to the meetings.
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Options were granted to purchase 10,000 shares of the Company's Common
Stock on a one time basis upon election and 2,000 shares for each year served.
Options were granted at the annual meeting which coincided with their election
or appointment. The exercise price was the fair market value of the Common Stock
on the date granted, and options were granted for a term of ten years. Options
may not be exercised before the next subsequent annual meeting of stockholders
following the date of the grant. Options are exercisable during the term only by
the non-employee Directors and are transferable only by will or the laws of
descent and distribution. No options are presently available under the Director
Plan.
NONQUALIFIED STOCK OPTIONS
The Company from time to time issues non-qualified stock options to
purchase shares of Common Stock to its officers. All such options are issued
pursuant to individual stock option agreements and bear an exercise price equal
to or in excess of the market value of the Common Stock on the date of grant.
The period during which such options may be exercised varies, depending on the
optionee and the circumstances under which the options have been granted. The
exercise price of such options may be paid in cash or, under certain
circumstances, by delivery of shares of Common Stock or by a combination of the
foregoing. Other than options issued under the Director Plan, no non-qualified
stock options were granted to directors or named executive officers during
fiscal 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of
Leonard Sokolow, Henry Latimer and Ryan R. Burrow. Messrs. Sokolow, Latimer and
Burrow are independent directors of the Company, and none are officers of the
Company.
DIRECTOR AND OFFICER SECURITIES REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of such securities with the Securities and
Exchange Commission and the New York Stock Exchange. Officers, directors and
greater than ten-percent beneficial owners are required by applicable
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons that no other
reports were required, the Company believes that, all filing requirements
applicable to its officers, directors and persons who hold more than 10% of the
Common Stock were complied with during the 1997 fiscal year, except Robert
Wachs, a former Director of the Company, who inadvertently filed a report late
on December 17, 1996 related to 4,950 shares purchased in October 1996.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee is responsible for
developing the Company's executive compensation strategy and for administering
the policies and programs that implement this strategy. The Committee is
composed of Ryan R. Burrow, Henry Latimer and Lenny Sokolow all of whom are
independent non-employee directors.
The executive compensation strategy reflects the Company's fundamental
philosophy of aligning the interests of management with the long-term
performance of the Company while providing competitive levels of compensation.
This strategy is designed to assist the Company in attracting and retaining
qualified management.
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The Committee is charged with reviewing and approving compensation of
the Company's executives each year. Recommendations of base salary are based
upon the performance of the individual and cash bonuses are based upon the level
of profitability of the Company. In its base salary determinations, the
Committee takes into account individual experience, performance issues specific
to a particular division or subsidiary, and salaries paid by comparable
companies. Bonuses are based upon the Company's profitability as measured by a
percentage of pretax earnings. Salary and bonus are also subject to terms of
employment agreements the Company has previously entered into with certain of
its Executive Officers. Four of the Company's Executive Officers, all named in
the compensation tables, are parties to Employment Agreements with the Company.
Reference is made to "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" above for a discussion of the Company's
employment and other agreements with its Executive Officers.
In addition, the Committee grants stock options and restricted stock as
a means of rewarding performance and encouraging stock ownership in the Company
by its executives and thus to strengthen their personal commitment to the
Company. The Committee's policy is to grant stock option awards annually, based
on individual performance and the potential for the executive officer to
contribute to the future success of the Company. No options were granted to
Executive Officers during fiscal 1997.
The Chairman of the Board and Chief Executive Officer of the Company is
Robert Hersh. Mr. Hersh's 1997 compensation was determined in accordance with
the provisions of his employment agreement entered into in August 1989, which
provided for a base salary and a cash bonus based upon the Company's
profitability as measured by 1.67% of pretax earnings. Mr. Hersh did not receive
a bonus in fiscal 1997 due to a pretax loss.
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POLICY WITH INTERNAL REVENUE CODE SECTION 162(M)
The Revenue Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code of 1986 (the "Code"). Code Section 162(m) provides that
compensation paid to a company's chief executive officer and the four other
highest paid executive officers employed by the company at year-end will not be
deductible by the Company for federal income tax purposes to the extent such
compensation individually exceeds $1 million. Code Section 162(m) excepts from
this limitation certain "performance-based compensation".
Although base salary and bonuses paid to the named Executive Officers
have traditionally been well under $1 million, compensation from the exercise of
stock options could potentially cause a named Executive Officer to have
compensation in excess of $1 million. However, all options granted to the named
Executive Officers prior to October 1993 are exempt from Code Section 162(m)
under a "grandfather" provision.
The Board of Directors has approved an amendment to the terms of the
1987 Stock Option and Stock Appreciation Rights Plan ("Plan") so that future
awards under the Plan may qualify as "performance-based compensation" as defined
by the Code. Said amendment provides that no participant may be awarded in any
given fiscal year stock options, stock appreciation rights or other awards under
the 1987 Stock Option and Stock Appreciation Rights Plan that, in the aggregate,
represent more than 10% of the total authorized shares that may be issued under
the Plan.
SUBMITTED BY THE COMPENSATION AND STOCK OPTION COMMITTEE
RYAN R. BURROW
HENRY LATIMER
LEONARD SOKOLOW
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PERFORMANCE GRAPHS
The following line graph compares the cumulative total return of the
Company's common stock to the total return index for the Standard & Poors 500
Index and a Peer Group Index of five stocks for the five year period from
September 30, 1992 through September 30, 1997. The graph assumes $100 invested
at the beginning of the period and reinvestment of dividends.
The Peer Group consists of Windmere-Durable Holding, Inc., Helen of
Troy Corporation, Thomas Industries, Inc., Genlyte Group, Inc. and Craftmade
International Inc. The companies included as part of the Peer Group Index were
selected on the basis of the similarity of such companies to the Company,
considering such factors as products sold, sourcing of products, distribution
channels and the industry within which such companies operate.
9/92 9/93 9/94 9/95 9/96 9/97
---- ---- ---- ---- ---- ----
CATALINA LIGHTING, INC. 100 171 271 120 86 131
PEER GROUP 100 118 148 156 230 357
S & P 500 100 113 117 152 183 257
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STOCK OPTION PLAN
EMPLOYEE PLAN. The Company's 1987 Stock Option and Stock Appreciation
Rights Plan, as amended (the "Employee Plan"), is administered by the Stock
Option Compensation Committee of the Board of Directors (the "Committee) and is
designed to provide officers and other key employees with substantial
responsibilities for the direction and management of the Company with additional
incentive to promote the success of the Company. The Employee Plan provides for
both incentive and non-statutory stock options and stock appreciation rights
("SAR's"). The Employee Plan authorizes the grant of SAR's either in tandem
with, or separately and apart from, stock options granted to participants. An
SAR is the right to receive the amount by which the fair market value per share
of Common Stock on the date on which the SAR is exercised exceeds the fair
market value of Common Stock on the date on which the SAR was granted.
Under the Employee Plan, options may be granted for up to 1,750,000
shares of Common Stock, at a price of 100% of the fair market value of the
Common Stock on the date of grant (110% in the case of holders of more than 10%
of the stock). No participant may be awarded in any given fiscal year stock
options, stock appreciation rights or other awards that, in the aggregate,
represent more than 10% of the total authorized shares that may be issued under
the Plan. No option granted as an incentive stock option may extend for a period
of more than 10 years (5 years for a holder of more than 10% of the stock) from
the date granted. Options forfeited by employees, whether through expiration or
by the grantee's departure from the Company, become once again available under
the Plan. The Employee Plan permits cancellation and reissuance of previously
granted stock options, with such reissuance to be at a price not less than the
market price on the date of reissuance. Presently, as of April 30, 1998 there
are 1,310,299 options outstanding, 1,241,235 options exercisable under the Plan
and 18,592 shares available for options that could be granted.
The exercise price may be paid in full by a participant in cash,
previously acquired Common Stock valued at the fair market value thereof on the
date of exercise of the stock option by the participant, or a combination of
cash and Common Stock so valued. All options granted under the Employee Plan
through the date of this Proxy Statement vest annually in increments of
one-third of the amount of the grant, except that the option will vest
immediately in full upon a "Change of Control".
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leased its two facilities located in Massachusetts from
entities in which an officer and a former officer had an ownership interest. One
of the leases expired in 1996 and the other one is on a month-to-month basis.
Rent expense related to these leases was approximately $148,000, $530,000 and
$521,000, for the years ended September 30, 1997, 1996 and 1995, respectively.
The Company leases its Hong Kong office from a company owned by the
former President and former majority stockholder of Go-Gro. The lease expires in
1999 but may be extended for an additional two years. Rent expense related to
this lease was $270,000, $258,000 and $237,000, for the years ended September
30, 1997, 1996 and 1995, respectively.
During the years ended September 30, 1997, 1996 and 1995, Go-Gro
purchased $2.1 million, $1.8 million and $1.1 million, respectively, in raw
materials from an affiliate which is fifty percent owned by the Company and
which includes the former President of Go-Gro as one of its directors.
On December 22, 1997 the Company advanced $100,000 to Dean S.
Rappaport, increasing his indebtedness to the Company to approximately $111,000.
The $100,000 advance bears interest at LIBOR plus 2.5%, is secured by stock
option agreements to purchase 100,000 shares of the Company, and matures
December 19, 1998.
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On January 6, 1998, the Company advanced $50,000 to William D. Stewart,
increasing his indebtedness to the Company to approximately $61,000. The advance
bears interest at LIBOR plus 2.5%, is secured by stock option agreements to
purchase 50,000 shares of the Company and matures January 5, 1999.
On January 9, 1998, the Company advanced $13,207 to Nathan Katz
increasing his indebtedness to the Company to $70,000. Such indebtedness bears
interest at LIBOR plus 2.5% , is secured by stock option agreements to purchase
45,000 shares of the Company and matures January 9, 1999.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends that the Stockholders ratify the
appointment of Deloitte & Touche LLP, independent certified public accountants,
as the Company's auditors for 1998. A representative of Deloitte & Touche LLP is
expected to appear at the Annual Meeting to make a statement if he so desires
and to be available to answer appropriate questions from stockholders.
OTHER MATTERS
Management is not aware of any other business that may come before the
Meeting. However, if additional matters properly come before the Meeting,
proxies will be voted at the discretion of the proxy-holders.
STOCKHOLDER PROPOSALS
Stockholder proposals which are requested to be included in the proxy
materials of the Company at its next Annual Meeting must be received by the
Company no later than January 10, 1999 to be eligible for consideration. Such a
proposal must comply with requirements as to form and substance established by
applicable laws and regulations in order to be included in the proxy statement.
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