SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
CATALINA LIGHTING, INC.
(Name of Registrant as Specified in Its Charter)
CATALINA LIGHTING, INC.
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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)(1) 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:
[ ] 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 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 1999
----------
The Annual Meeting of Stockholders of Catalina Lighting, Inc., a
Florida corporation (the "Company"), will be held on May 10, 1999 at 8:00 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, 1999; 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 1, 1999
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
April 23, 1999
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 GOLD 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
----------
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 1999
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 1999 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 May 10, 1999 at 8:00 a.m.
local time, and at any and all adjournments or postponements thereof.
The purpose of the Annual Meeting is to elect seven persons to the
Board of Directors, to ratify the appointment of auditors and to transact such
other business as may properly come before the meeting. The Company's nominees
for election to the Board of Directors include three new independent
director-candidates.
According to materials delivered to the Company on behalf of David M.
Moss, Moss may propose as nominees and solicit proxies for up to two director
candidates at the 1999 Annual Meeting, himself and Mr. Richard Dubal, the
president of a competitor of the Company.
Management and all members of the Board of Directors believe that
election of Moss' nominees to serve on the Board of Directors would be contrary
to the interests of the Company and its stockholders.
You are urged to date, sign and promptly mail the enclosed gold proxy
in the enclosed addressed envelope, which requires no postage in the United
States. The Board of Directors recommends that you discard and not vote any
proxy card sent to you by Moss.
The Annual Report of the Company for the fiscal year ended September
30, 1998 accompanies this Proxy Statement. This Proxy Statement is first being
mailed to stockholders on April 23, 1999.
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 1, 1999 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 has the
power to revoke it by notice of revocation
2
<PAGE>
directed to the proxy-holders or the Company at any time before it is voted.
Proxies which are properly executed will be voted in accordance with the
instructions contained therein. If instructions are not given therein, unless
authority is withheld, properly executed proxies will be voted FOR the election
of the directors nominated by the Board of Directors of the Company and FOR
ratification of the appointment of auditors. 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.
Each share of the common stock of the Company, $.01 par value (the
"Common Stock"), outstanding on the Record Date will be entitled to one vote on
all matters. The seven candidates for election as directors at the Annual
Meeting who receive the highest number of affirmative votes will be elected. The
ratification of the independent auditors for the Company for the current year
will require the affirmative vote of a majority of the shares of the Company's
Common Stock present or represented and entitled to vote at the Annual Meeting.
Because abstentions with respect to any matter other than the election of
directors are treated as shares present or represented and entitled to vote for
the purposes of determining whether that matter has been approved by the
stockholders, abstentions have the same effect as negative votes for each
proposal other than the election of directors. Broker non-votes are not deemed
to be present or represented for purposes of determining whether stockholder
approval of that matter has been obtained, but they are counted as present for
purposes of determining the existence of a quorum at the Annual Meeting.
As of April 1, 1999, the Record Date, there were 7,078,369 issued and
outstanding shares of the Common Stock. Each share of Common Stock entitles the
holder to one vote on all matters brought before the Annual Meeting. The holders
of a majority of the shares of stock entitled to vote at any meeting of
stockholders must be present in person or represented by proxy to constitute a
quorum for the transaction of any business at the Annual Meeting.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the
Company's Common Stock beneficially owned by those who were the beneficial
owners of more than 5% of the Company's stock. Except as otherwise noted,
beneficial ownership is as of April 1, 1999 and, other than as provided by
community property and other such laws, consists of sole voting and investment
power.
NAME AND ADDRESS OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENTAGE(1)
- -------------------- --------------------- -------------
Heartland Advisors, Inc....... 1,442,700(2) 20.4%
790 North Milwaukee Street
Milwaukee, WI 53202
Robert Hersh.................. 1,185,300(3) 16.2%
18191 N.W. 68th Avenue
Miami, Florida 33015
Dean Rappaport................ 1,117,100(4) 15.1%
18191 N.W. 68th Avenue
Miami, Florida 33015
William D. Stewart............ 1,015,500(5) 13.9%
18191 N.W. 68th Avenue
Miami, Florida 33015
Nathan Katz................... 630,742(6) 8.6%
55 Norfolk Avenue
Easton, MA
Wai Check Lau................. 558,200(7) 7.9%
6/F, Kenning Industrial Bldg.
19 Wang Hoi Road
Kowloon, Hong Kong
Dimensional Fund Advisors, Inc. 450,900(8) 6.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 9040
David M. Moss................. 429,082(9) 6.1%
6073 N.W. 167th Street
Building C-5
Miami, FL 33015
4
<PAGE>
- ---------------------------------
1 Includes shares which may be acquired pursuant to vested stock options and
options which become exercisable through May 31, 1999. Percentage ownership
based upon 7,078,369 shares outstanding as of April 1, 1999.
2 Based solely upon a Schedule 13G filed with the Securities and Exchange
Commission, Heartland Advisors, Inc., a registered investment advisor, is
deemed to have beneficial ownership of 1,442,700 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 stock.
3 Includes 750,000 shares as to which voting power is shared (see note 7
below) and shares purchasable through the exercise of options as follows:
45,000 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.
4 Includes 750,000 shares as to which voting power is shared (see note 7
below) and shares purchasable through the exercise of options as follows:
100,000 shares at $1.75 per share and 212,500 shares at $2.4375 per share.
5 Includes 750,000 shares as to which voting power is shared (see note 7
below) and shares purchasable through the exercise of options as follows:
20,000 shares at $1.75 per share and 212,500 shares at $2.4375 per share.
6 Includes shares purchasable through the exercise of options as follows:
55,000 shares at $1.75 per share and 162,500 shares at $2.4375 per share.
7 Of the number of shares beneficially owned by Wai Check Lau, 477,500
shares are owned by Go-Gro Holdings Limited, which is owned by Wai
Check Lau, 6,000 shares are owned by Amy Yuen Ying Lau Cheung, the wife
of Wai Check Lau and 21,500 shares are owned jointly by Wai Check Lau
and Amy Yuen Ying Lau Cheung. In July 1994, as part of the Company's
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 the 558,200 shares beneficially owned by Mr. Lau and an
additional 191,800 shares of the Company also issued to previous
stockholders of Go-Gro upon the acquisition. The 750,000 shares are
voted at the direction of Messrs. Hersh, Rappaport, and Stewart,
members of the Board of Directors of Catalina Asia. Except as to such
shared voting power, each of Messrs. Hersh, Rappaport and Stewart disclaims
beneficial ownership of such shares.
8 Based solely upon a Schedule 13G filed with the Securities and Exchange
Commission, Dimensional Fund Advisors, Inc. ("Dimensional"), an investment
advisor registered under the Investment Advisors Act of 1940, furnishes
investment advice to four investment companies registered under the
Investment Company Act of 1940, and serves as investment manager to certain
other investment vehicles, including commingled group trusts. (These
investment companies and investment vehicles are the "Portfolios"). In its
role as investment advisor and investment manager, Dimensional possesses
both voting and investment power over all the securities of the Issuer that
are owned by the Portfolios. All securities reported are owned by the
Portfolios, and Dimensional disclaims beneficial ownership of such
securities.
9 Based solely on a Schedule 13D filed with the Securities and Exchange
Commission on February 10, 1999. This amount includes 34,600 shares held in
trust for the benefit of Mr. Moss' children, the beneficial ownership of
which shares Mr. Moss disclaims.
5
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS, DIRECTOR NOMINEES AND MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned at April 1, 1999 by each director, director nominee and
executive officer and by all directors and executive officers of the Company as
a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1) PERCENTAGE(1)
- ------------------------------------- -------------- ---------------
<S> <C> <C>
Robert Hersh......................... 1,185,300(2),(13) 16.2%
Dean Rappaport....................... 1,117,100(3),(13) 15.1%
William D. Stewart................... 1,015,500(4),(13) 13.9%
Ryan Burrow.......................... 20,700(5) *
Henry Latimer........................ 14,495(6) *
Jesse Luxton......................... 0 *
Jeffrey Silverman..................... 27,000(7) *
Leonard Sokolow...................... 41,000(8) *
Howard Steinberg..................... 20,000(9) *
Brion Wise........................... 0 *
Nathan Katz.......................... 630,742(10) 8.6%
David W. Sasnett..................... 22,000(11) *
Thomas M. Bluth...................... 24,500(12) *
All directors and executive officers
of the Company and its subsidiaries as
a group (10 persons)................ 2,598,337(13) 31.6%
* less than 1%
</TABLE>
- ---------------------------
1 Includes shares which may be acquired pursuant to vested stock options and
options which become exercisable through May 31, 1999. Percentage ownership
based upon 7,078,369 shares outstanding as of April 1, 1999.
6
<PAGE>
2 Includes shares purchasable through the exercise of options as follows:
45,000 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:
100,000 shares at $1.75 per share and 212,500 shares at $2.4375 per share.
4 Includes shares purchasable through the exercise of options as follows:
20,000 shares at $1.75 per share and 212,500 shares at $2.4375 per share.
5 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 per
share, 2,000 shares at $10.75 per share, 2,000 shares at $6.25 per share
and 12,000 shares at $3.75 per share.
6 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 per share.
7 Includes 2,000 shares purchasable through the exercise of options at $3.75
per share.
8 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
$6.25 per share and 2,000 shares at $3.75 per share.
9 Includes 5,000 shares owned by Mr. Steinberg's wife over which shares Mr.
Steinberg has the sole power to vote but as to which Mr. Steinberg
disclaims beneficial ownership.
10 Includes shares purchasable upon the exercise of options as follows: 55,000
shares at $1.75 per share and 162,500 shares at $2.4375 per share.
11 Includes 20,000 shares purchasable through the exercise of options at
$2.4375 per share.
12 Includes 22,500 shares purchasable through the exercise of options at
$2.4375 per share.
13 Includes 750,000 shares owned by previous stockholders of Go-Gro Industries
Limited which Messrs. Hersh, Rappaport and Stewart jointly have a power to
vote pursuant to irrevocable proxies. Except as to such shared voting
power, Messrs. Hersh, Rappaport and Stewart disclaim beneficial ownership
of these shares.
7
<PAGE>
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
Pursuant to its authority under the Company's Certificate of
Incorporation and Bylaws, the Board of Directors has set the number of directors
on the Board at seven. The Nominating Committee of the Board has recommended,
and the Board of Directors has nominated, the seven persons named below for
election as directors at the Annual Meeting. Three of the Company's nominees,
Messrs. Luxton, Steinberg and Wise, are being nominated for the first time. Each
of these three nominees are "independent" of the Company, as that term is used
by the Council of Institutional Investors. The Council of Institutional
Investors (an organization of over 100 public, Taft-Hartley and corporate
pension funds which seeks to address investment issues that affect its members
as shareholders of public companies) defines an independent director as someone
whose only nontrivial connection to the corporation is that person's
directorship and who does not have certain types of relationships with a
corporation. For example, under the Council's definition, a director will not
generally be considered independent if he or she has been employed by the
corporation or an affiliate in an executive capacity or has in the past two
years had a personal services contract with the corporation or one of its
affiliates. The other four nominees currently serve as directors and include
Messrs. Burrow and Sokolow as independent directors. Mr. Jeffrey Silverman, one
of the Company's current directors, declined to be considered for renomination
in order to have greater time for other business commitments.
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. Each of the
Company's nominees has consented to being named as such in this proxy statement
and to serve as a director if elected. It is not expected that any of the
following 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 certain information with respect to the
Company's nominees for director.
NOMINEES OF THE COMPANY
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
- ---------------- --- ------------------------- ----------
Robert Hersh 52 Chairman, Chief Executive
Officer, President, Director 1988
Ryan Burrow 38 Director 1994
Henry Latimer 61 Director 1996
Leonard Sokolow 42 Director 1990
Jesse Luxton 56 Director Nominee -
Howard Steinberg 68 Director Nominee -
Brion Wise 53 Director Nominee -
ROBERT HERSH, a co-founder of the Company, 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. From 1969 until 1985 Mr. Hersh was the
President and sole shareholder of Panel-Rama of Miami, Inc., a chain of retail
home improvement centers. Mr. Hersh sold his interest in Panel-Rama of Miami,
Inc. in 1985.
RYAN BURROW has been a Director of the Company since April 1994. Since
March 1997, Mr. Burrow has been the President of BPI Global Asset Management
LLP, an investment management company managing over $1.6 billion in assets. Mr.
Burrow was Managing Director for STI Capital Management, a wholly-owned
investment management subsidiary of SunTrust Banks, Inc., 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.
8
<PAGE>
HENRY LATIMER has been a Director of the Company since February 1996.
Mr. Latimer has since 1994 been a partner with the law firm of Eckert, Seamans,
Cherin & Mellott, a national law firm employing over 200 attorneys in nine
cities. He is the Managing Partner of the Fort Lauderdale office and serves
on the National Executive Committee and Compensation Committee of Eckert Seamans
Cherin & Mellott. Mr. Latimer was formerly a partner with the law firm of Fine,
Jacobson, Schwartz, Nash & Block from 1983 to 1994, served as a Circuit Court
Judge in and for the Seventeenth Circuit, Broward County, Florida, from 1979 to
1983 and each year, was voted the most qualified Judge in that circuit by
lawyers in that circuit. Mr. Latimer presently serves as a director of Florida
Panthers Holdings, Inc, an entertainment company with shares traded on the New
York Stock Exchange (PAW). Mr. Latimer also serves on the Orange Bowl Committee,
the Board of Trustees of the University of Miami, the Broward Workshop and the
Broward Partnership for the Homeless.
LEONARD SOKOLOW has been a Director of the Company since March 1990.
Since September 1996, Mr. Sokolow has been the President of Union Atlantic LC, a
private merchant, banking and strategic consulting firm specializing
domestically and internationally in technology industries. Since August 1993 Mr.
Sokolow has been President of Genesis Partners, Inc., a private financial
business consulting firm. Mr. Sokolow was Chairman and Chief Executive Officer
of the Americas Growth Fund, Inc., a closed-end management investment company,
from August 1994 to December 1998. Mr. Sokolow was Executive Vice
President-Operations, Administration and Finance of Windmere Corporation, a
manufacturer and distributor of branded and private label small household
appliances and personal care products, from March 1990 to July 1993. Mr. Sokolow
was 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 is also a Certified Public Accountant. Mr. Sokolow
presently serves as a director of Ezcony Interamerica, Inc., a distributor of
major brand name consumer electronics to Latin America. The shares of Ezcony
Interamerica are traded over the counter.
JESSE LUXTON has since 1997 served as a consultant to manufacturers and
distributors of houseware consumer products on issues raised in exporting from
Asia and importing and selling products in the U.S. From 1987 to 1997, Mr.
Luxton served as a Director, the President and Chief Executive Officer of
National Picture and Frame Company, a manufacturer of picture frames with annual
sales of $73,000,000 in 1997, whose shares were traded on the NASDAQ from 1993
until 1997 under the symbol "NPAF." Mr. Luxton serves on the Board of Directors
of Glass Master Group, LLC, a company involved in automotive and commercial
replacement glass, is a facilitator for the National Housewares Manufacturing
Association and has extensive experience in sales to retailers such as mass
merchants, home centers, hardware and specialty and warehouse clubs. Mr. Luxton
also serves on the Board of the National Housewares Manufacturing Association
and Southwest Texas State University Development Foundation. Mr. Luxton was also
honored as a Distinguished Alumnus in 1998 from Southwest Texas State
University.
HOWARD STEINBERG has since August 1997 served as Chief Executive
Officer and Director of PGM Products, LLC., a supplier of wood products and
ceramic tile to the country's major home centers. PGM Products is the successor
to Ply*Gem Manufacturing, a division of PlyGem Industries, Inc., which was
acquired by Nortek Industries in August 1997. From 1975 until 1997, Mr.
Steinberg served as Chief Executive Officer of the Ply*Gem Manufacturing
division of Ply*Gem Industries, Inc. From 1964 until 1995, he served as
President and Chief Operating Officer of Ply*Gem Paneling Centers, a paneling
retail division of Ply*Gem Industries, Inc. Mr. Steinberg is also the President
and a Director of Acorn USA Holding LLC., a holding company owning a majority
interest in PGM Products, and is also a member of the Board of Directors of the
International Wood Products Association, which represents the wood industry on
legislative and regulatory matters affecting imported wood products.
BRION WISE is a founder and since 1967 has served as Chief Executive
Officer and Chairman of the Board of Western Gas Resources ("WGR"). WGR is an
independent gas gathering, processor, energy marketer, and oil and gas producer.
Its shares are traded on the New York Stock Exchange under the symbol WGR. Mr.
Wise is also a Chemical Engineer. Prior to founding WGR, Mr. Wise worked as a
gas processing engineer for Shell Oil Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE COMPANY'S
NOMINEES. UNLESS A CONTRARY CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD
OF DIRECTORS WILL BE VOTED IN FAVOR OF EACH OF THE COMPANY'S NOMINEES.
9
<PAGE>
POSSIBLE THIRD-PARTY NOMINATIONS
Mr. David M. Moss has indicated in materials delivered to the Company
by his attorney that he may propose as nominees and solicit proxies for up to
two director candidates at the 1999 Annual Meeting: himself and Mr. Richard
Dubal, the president of a competitor of the Company. Moss has also disclosed in
a report filed on February 10, 1999 with the U.S. Securities and Exchange
Commission that he had sole voting and investment power over 429,082 shares of
the Company's Common Stock, or 6.1% of the Company's outstanding stock (which
amount includes 34,600 shares held in a trust for the benefit of Moss' children,
as to which shares Moss disclaims ownership).
Management and all members of the Board of Directors believe that the
election of Moss' nominees to serve on the Board of Directors would be contrary
to the interests of the Company and its stockholders for the following reasons:
--> Richard Dubal is the president of a competitor of the Company. The
Company believes that Dubal's membership on the Board of Directors
could provide a competitive benefit to Mr. Dubal in running his
company, while having significant adverse consequences to the Company
and all other stockholders such as, for example: (1) having a
competitor gain access to confidential Company information which could
seriously undermine the Company's position with its customers, or (2)
causing possible violations of antitrust laws because suppliers who
compete with one another are not permitted to agree on certain business
transactions which may adversely affect competition.
--> Mr. Moss has no experience with the management or oversight of a
business of the size and complexity of the Company. In August 1989, Mr.
Moss' employment with the Company terminated after the Company's Board
of Directors voted to remove him from all management positions and as
Chairman of the Board. At that time, the Company was a small scale
domestic wholesaler/distributor without internal manufacturing
capabilities, and with a sales volume of approximately $54.6 million
derived from a customer base of mostly small and medium-sized
companies. Under present management, the Company has evolved to become
an international manufacturer and distributor of lighting products with
operations in the U.S., Canada, Mexico, Europe, China and Hong Kong;
annual sales of as much as $197 million; ISO 9002 certified
manufacturing capabilities; and a customer base comprising some of the
world's largest retailers of these products. The Company believes that
the sophistication and business acumen required to run the Company's
business have increased dramatically since Moss' employment with the
Company. Based upon its experience with Moss when he previously was an
executive of the Company, the Company believes that some of the
business practices Moss has employed in the past are inappropriate for
the Company and could adversely impact the business, resulting in a
loss of sales or profits.
The Company has undertaken recent strategic initiatives that the
Company believes demonstrate management's commitment to improving profitability
and enhancing stockholder value, as well as its ability to adapt and position
the Company for future success. These initiatives include:
/bullet/ Initiation of stock repurchase plan under which the Board of
Directors has authorized the Company to purchase up to $2,000,000
of the Company's Common Stock.
/bullet/ Nomination of three new independent and experienced executives
from diverse industries as candidates for election to the
Company's Board of Directors.
10
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/bullet/ Construction of the Company's new 300,000 square foot ISO 9002
certified manufacturing complex located in Shenzhen, China. This
factory completed its first full year of production in 1998 and
significantly expands the Company's production capabilities in
terms of quantity and quality. Management strongly believes these
manufacturing capabilities provide the Company with a major
competitive advantage for continued partnerships with major global
retailers.
/bullet/ The consolidation of inventories previously held in a public
facility in California into the Mississippi distribution center,
which eliminates significant annual warehousing costs formerly
associated with the California facility while simultaneously
improving overall inventory management and customer service.
/bullet/ Relocation of Catalina Canada's offices to Toronto from Montreal.
This move simplifies Canadian operations and brings the Company
closer to most of its important Canadian customers.
/bullet/ A major upgrade of the computer systems and automated business
applications for domestic operations. This new enterprise system
replaces the former business applications supporting sales,
purchasing, distribution, inventory management, product
development and finance and greatly expands the functionality and
efficiency of the Company's business processes.
/bullet/ The introduction of a wide variety of exciting new products (such
as flashlights, GE brand fluorescent torchieres, worklights,
ENERGY STAR energy efficient lighting, and fashion portable
lighting) and the aggressive expansion of product development
capabilities through a substantial commitment of resources,
including the hiring of separate industry - recognized designers
for the U.S. and European markets.
The Company returned to profitability and reported other financial
measures of success for the recently completed 1998 fiscal year, such as:
-> Gross profit as a percentage of sales increased to 19.2%, the highest
rate in the Company's history.
-> Cash generated from operations reached $16 million.
-> Outstanding debt fell to its lowest level in five years.
Management believes these initiatives will also positively impact
future results. The strategic initiatives and resulting improvements are the
direct result of the ideas and contributions of key members of senior
management. Based on statements from many of the Company's vice presidents,
management believes that Moss' presence at the Company could lead to the
departure of several of these key contributors, which would severely disrupt the
positive momentum established over the past year and the Company's initiatives
for the future.
The Company has notified Moss that it believes he has not complied with
the requirements imposed by the Company's advance notice bylaw provision
regarding the nomination of director candidates for election at an Annual
Meeting, and has requested that Moss arrange for the appropriate person(s) to
provide the Company the notice required under the Company's bylaws. Counsel to
Moss has disputed the Company's position as to whether Moss has satisfied the
Company's bylaw requirements. As of the date of this Proxy Statement, the
Company has not determined whether to waive its objections to Moss' nominations.
If Moss seeks to nominate himself and/or Mr. Dubal at the Annual
Meeting, the Company will permit votes in favor of those nominees to be
submitted, but the Company reserves its right to challenge the validity of Mr.
Moss' nominations in appropriate Florida court proceedings unless (i) the
Company otherwise determines that Mr. Moss has satisfied the bylaw provisions or
waives compliance with the bylaw provisions, or (ii) a court determines that Mr.
Moss' notice was sufficient or that the Company's advance notice bylaw
provisions are otherwise not operative.
It is not certain that Moss will in fact seek to nominate himself and
Mr. Dubal for election as directors or, if he does, whether he will solicit
proxies from stockholders. IF MOSS SOLICITS STOCKHOLDERS TO VOTE FOR HIS
NOMINEES, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU NOT SIGN ANY PROXY CARD
SOLICITED BY MOSS.
11
<PAGE>
PROPOSAL NUMBER TWO
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 1999. 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR
THE CURRENT YEAR. UNLESS A CONTRARY CHOICE IS SPECIFIED, PROXIES SOLICITED BY
THE BOARD OF DIRECTORS WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT.
MEETINGS AND COMMITTEES OF DIRECTORS
Four meetings of the Board of Directors were held during the past
fiscal year; in addition, the Directors acted through unanimous written consent
on one occasion. During fiscal 1998, each director attended at least 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 Messrs. Burrow, Latimer, Silverman and
Sokolow, all of whom are independent non-employee directors. During fiscal 1998,
the Compensation and Stock Option Committee met two times.
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 in writing a sufficient time
in advance of the Annual Meeting of Stockholders. The Nominating Committee is
composed of Messrs. Latimer, Silverman and Hersh. During fiscal 1998, the
Nominating Committee met one time.
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. The
Committee is composed of Messrs. Sokolow and Burrow. During fiscal 1998, the
Audit Committee met two times.
COMPENSATION OF DIRECTORS
Salaried employees of the Company do not receive any additional
compensation for serving as a director or committee member. Commencing with this
year's Annual Meeting of Stockholders, non-employee directors will receive an
annual retainer of $14,000 payable $7,000 in cash and in the number of shares
equal to $7,000 calculated on the basis of the fair market value of the common
stock on the date of the Annual Meeting. The stock is restricted and vests after
one year or on a pro rata basis if the director ceases to serve on the Board
during the year. For 1998, non-employee directors received an annual retainer of
$14,000 per year in cash. Directors also have and will continue to receive
$1,000 per Board meeting and Committee meeting attended. Mr. Burrow is
reimbursed for his travel expenses to the meetings.
12
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Company's executive officers. Mr. Hersh's biography is set forth above under
"Election of Directors."
NAME AGE POSITION WITH THE COMPANY
- --------------- --- -----------------------------------------
Robert Hersh 52 Chief Executive Officer, President
Dean Rappaport 47 Executive Vice President, Chief Operating Officer
William D. Stewart 50 Executive Vice President
Nathan Katz 43 Executive Vice President
David W. Sasnett 42 Senior Vice President, Chief Financial Officer
Thomas M. Bluth 41 Vice President, Secretary, Treasurer
DEAN 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.
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.
NATHAN KATZ has been an Executive Vice President of the Company since
October 1, 1993 and Chief Executive Officer of Catalina Industries (formerly
known as Dana Lighting), a wholly-owned subsidiary of the Company since August
1989. From October 1983 to August 1989, Mr. Katz was the Chief Executive Officer
of Dana Imports, Inc., an importer of lamps located in Boston, Massachusetts.
DAVID W. SASNETT has been Vice President of the Company since November
1994. In November 1996, Mr. Sasnett was promoted to Chief Financial Officer of
the Company. Prior to that time, he was the Company's Controller. In November
1997, Mr. Sasnett became a Senior Vice President of the Company. From 1993 until
he joined the Company, Mr. Sasnett was the Vice President - Finance and
Controller of Hamilton Bank, N.A. and from 1980 to 1993 was employed by the
international accounting firm of Deloitte & Touche.
THOMAS M. BLUTH has been Vice President since August 1994 and Secretary
of the Company since November 1994. Mr. Bluth became Treasurer of the Company in
November 1996. From 1989 until he joined the Company, Mr. Bluth was Vice
President and General Counsel for Ellis Diversified, Inc. From 1987 to 1989, Mr.
Bluth was the Assistant Tax Director for Southwestern Bell Corporation.
13
<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, 1998, 1997
and 1996 for services in all capacities.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
----------------------- -------------
SECURITIES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS(3) COMPENSATION(4)
- --------------------- ------ --------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Robert Hersh 1998 $ 299,151 $26,190 - $ 1,600
Chairman, CEO 1997 284,905 - - 1,500
and President 1996 271,338 43,787 - 1,500
Dean Rappaport
Executive Vice 1998 269,235 26,190 - 1,600
President, Chief 1997 256,414 - - 1,500
Operating Officer 1996 244,204 43,787 - 1,500
William D. Stewart 1998 269,235 26,190 - 1,600
Executive Vice 1997 256,414 - - 1,500
President 1996 244,204 43,787 - 1,500
Nathan Katz 1998 269,235 26,190 - 1,600
Executive Vice 1997 256,414 - - 1,500
President 1996 244,204 43,787 - 1,500
David W. Sasnett
Senior Vice 1998 151,068 15,000 - 1,549
President, Chief 1997 136,603 15,000 - 1,216
Financial Officer 1996 103,740 10,000 7,500 655
</TABLE>
- -------------------------------
1 Perquisites and personal benefits furnished to the named executive officers
do not meet the disclosure thresholds established under SEC regulations.
2 In accordance with their employment agreements, amounts for each of Messrs.
Hersh, Rappaport, Stewart and Katz represent 1.67% of consolidated pretax
income (prior to bonus accruals) for the respective fiscal years ended
September 30.
3 Stock options vest annually in increments of one-third of the options
granted.
4 The amounts disclosed in this column represent the Company's matching
contributions to the Company's 401(k) plan.
14
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
No stock options were granted to the named executive officers of the
Company during the fiscal year ended September 30, 1998.
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, 1998 and the value of options held by such officers at September
30, 1998 based on the closing price of the Company's stock on that date.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND FISCAL YEAR END 1998 OPTION VALUES
<TABLE>
<CAPTION>
SHARES VALUE OF
ACQUIRED ON VALUE NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY OPTIONS AT
NAME EXERCISE REALIZED(1) OPTIONS AT SEPTEMBER 30, 1998 SEPTEMBER 30, 1998(2)
- ----------------- ------------- ------------ ------------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Hersh 4,600 $11,788 317,100 0 $ 52,300 0
Dean Rappaport 2,000 $ 4,375 317,100 0 $ 52,300 0
William D. Stewart 0 0 232,500 0 $ 10,000 0
Nathan Katz 0 0 217,500 0 $ 27,500 0
David W. Sasnett 0 0 17,500 2,500 $ 0 0
</TABLE>
- ---------------------------
1 The value realized is computed by multiplying the difference between the
exercise price of the stock option and the market price of the Common Stock
on the date of exercise by the number of shares of Common Stock with
respect to which the options was exercised.
2 Based on the closing price of the Common Stock on September 30, 1998 of
$2.25.
EMPLOYMENT CONTRACTS; 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 which expire on September
30, 2001. 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"). Messrs. Hersh, Rappaport and Stewart each
received options to purchase 50,000 shares of Common Stock during each of the
fiscal years 1990 through 1993 under the terms of their respective contracts.
Mr. Katz received options to purchase 50,000 shares of Common Stock in both
fiscal years 1992 and 1993. Messrs. Hersh, Rappaport, Stewart and Katz each
received options to purchase 62,500 shares of Common Stock during fiscal year
1995. No options were awarded during fiscal years 1994, 1996, 1997 and 1998. The
15
<PAGE>
aforementioned options were issued under the Company's 1987 Stock Option and
Stock Appreciation Rights Plan.
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
(calculated prior to accrual of the bonus amounts) 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 aggregate amounts earned by all participating
executives under the Pool in fiscal 1993, 1994, 1995, 1996 and 1998 totaled
approximately $356,000, $614,000, $60,000, $175,000 and $105,000, respectively.
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 annual 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-competition 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.
On May 7, 1998, the Company entered into Change in Control Agreements
with David W. Sasnett and Thomas M. Bluth. The Agreements expire in March 2001.
Such Agreements provide that, in the event of a change in control of the
Company, if the Company terminates the employment of either employee within
certain time periods or the Company fails to negotiate an acceptable employment
agreement with the employee, the Company shall pay the employee two times his
annual base salary. In addition, the agreements with Messrs. Bluth and Sasnett,
respectively, provide that in the event they are terminated "without cause"
where there has been no change in control, Messrs. Bluth and Sasnett,
respectively, are entitled to a severance payment equal to their annual base
salary.
The Company advances a portion of the costs of a reverse split-dollar
life insurance policy for Mr. Rappaport, Mr. Stewart and Mr. Katz. In the event
of the death of Mr. Rappaport, Mr. Stewart or Mr. Katz during the term of their
employment agreements, the Company would receive $1,000,000.
16
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% 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, 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
1998 fiscal year.
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 Burrow, Henry Latimer, Jeffrey Silverman and Leonard Sokolow.
The Committee is charged with reviewing and approving compensation of
the Company's executives each year. The Company's four most senior executive
officers, including the Chief Executive Officer, are parties to employment
agreements with the Company. Reference is made to "Employment Contracts;
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 reviewing these executives' compensation for 1998, the Committee
subjectively determined that corporate and individual performance was adequately
compensated under the terms of the executives' employment agreements.
Accordingly, the executives' salaries and bonuses were established at the
minimum level prescribed under such agreements, with bonuses being based upon
the Company's profitability as measured by a percentage of pretax earnings and
in certain cases the Company advancing amounts toward the cost of reverse
split-dollar life insurance policies. The executives also participated in the
Company-wide 401(k) plan, under which the Company, subject to the statutory
limits, matches 25% of an employee's contributions up to 1% of the employee's
salary. For the Company's other executive officers, the Compensation Committee's
determinations regarding base salary and cash bonuses are based upon the
Committee's determinations regarding individual experience and capabilities,
performance issues specific to the executive's particular responsibilities, and
salaries paid by other companies for comparable positions. Consistent with its
policies for the executive officers with whom the Company has employment
agreements and in order to assist in retaining key executives, in 1998 the
Compensation Committee authorized the execution of change-in-control agreements
with executives who are not parties to employment agreements.
The Compensation Committee did not grant any stock options or
restricted stock to executive officers during fiscal 1998, in light of the
limited number of shares available for new grants under the Company's 1987 Stock
Option and Stock Appreciation Rights Plan.
The Chairman of the Board and Chief Executive Officer of the Company is
Robert Hersh. Mr. Hersh's 1998 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 (calculated prior to any
bonus accruals). Mr. Hersh's bonus was $26,190 in fiscal 1998. Mr. Hersh is not
a beneficiary under Company sponsored reverse split-dollar life insurance
policies such as those that cover certain other executive officers.
17
<PAGE>
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. The Compensation Committee has not adopted
a policy requiring that all compensation arrangements qualify for deductibility
under Code Section 162(m), meaning that options granted after April 10, 1997 may
not be deductible if and to the extent their value ever causes one of the
Company's executives to receive more than $1 million in compensation during any
one year. However, all options granted to the named executive officers prior to
April 10, 1997, the date of the Company's 1997 Annual Meeting, are exempt from
Code Section 162(m) under a "grandfather" provision.
SUBMITTED BY THE COMPENSATION AND STOCK
OPTION COMMITTEE
RYAN BURROW
HENRY LATIMER
JEFFREY SILVERMAN
LEONARD SOKOLOW
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee is composed of Messrs.
Burrow, Latimer, Silverman and Sokolow. Mr. Latimer is a partner in the law firm
of Eckert, Seamans, Cherin & Mellott. During the fiscal year ended September 30,
1998, the Company paid a total of approximately $18,000 in legal fees to Eckert,
Seamans, Cherin & Mellott.
18
<PAGE>
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, 1993 through September 30, 1998. 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.
(PERFORMANCE GRAPH APPEARS HERE)
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------
9/93 9/94 9/95 9/96 9/97 9/98
<S> <C> <C> <C> <C> <C> <C>
CATALINA LIGHTING, INC. 100 158 70 50 77 30
PEER GROUP 100 125 133 195 303 257
S&P 500 100 104 135 162 227 248
</TABLE>
19
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases a facility located in Massachusetts from a trust in
which Nathan Katz holds a 50% interest. The lease expires in June 1999. Rent
expense related to this lease was approximately $159,000, $164,000 and $540,000
for years ended September 30, 1998, 1997 and 1996, respectively.
The Company leases its Hong Kong office from a company owned by Wai
Check Lau, a stockholder of the Company. The lease expires in 2001 but may be
extended for an additional year. Rent expense related to this lease was
$257,000, $270,000 and $258,000, for the years ended September 30, 1998, 1997
and 1996, respectively.
The Company has extended personal loans to Messrs. Rappaport, Stewart
and Katz in the amount of $100,000, $50,000 and $70,000 respectively. Each of
the loans is represented by a promissory note, bears interest at a floating rate
equal to LIBOR plus 250 basis points, adjusted monthly (which since October 1997
has varied from 8.22% to 7.47%), and is collateralized by stock option
agreements. Mr. Rappaport's note matures in December 1999 and Messrs. Stewart's
and Katz's notes mature in January 2000. Since the beginning of the 1998 fiscal
year, the highest amounts outstanding on these notes has been $100,000 for
Mr. Rappaport (as of March 31, 1999), $50,000 for Mr. Stewart (as of March 31,
1999) and $76,888 for Mr. Katz (as of March 31, 1999).
The Company also advances the premium payment on the whole life
portion of reverse split-dollar life insurance policies that cover certain
executives. The Company does not charge the executives interest on these
advances, and the covered executives have generally repaid such amounts within
approximately one year after they were advanced. Amounts advanced under this
program since the beginning of the 1998 fiscal year were $9,507 for Mr.
Rappaport in each of January 1998 and January 1999, $9,516 for Mr. Stewart in
each of January 1998 and January 1999 and $9,050 for Mr. Katz in each of March
1998 and February 1999. These amounts remain outstanding as of March 31, 1999,
except with respect to Mr. Katz, whose balance as of March 31, 1999 is $7,542.
PARTICIPANTS IN THE SOLICITATION
Under applicable regulations of the Commission, each of the directors,
director nominees and executive officers of the Company may be deemed to be a
"participant" in the Company's solicitation of proxies, as well as the Company.
Information about the principal occupations of directors, director nominees and
executive officers is set forth under the sections entitled "Election of
Directors" and "Executive Officers." Information about the present ownership of
the Company's Common Stock, including the right to acquire shares of Common
Stock, by directors, director nominees and executive officers is provided in the
sections entitled "Security Ownership of Certain Beneficial Owners," "Security
Ownership of Directors, Director Nominees and Management," "Compensation of
Executive Officers" and "Compensation of Directors." Information about
employment arrangements with executive officers is provided in the section
entitled "Compensation of Executive Officers - Employment Contracts; Termination
of Employment and Change-in-Control Arrangements." Information about other
transactions between the Company and each of the directors and director nominees
is provided in the section entitled "Certain Relationships and Related
Transactions." The business address for each participant is c/o Catalina
Lighting, Inc., 18191 N.W. 68th Avenue, Miami, Florida 33015. The following sets
forth certain additional information regarding the Company's directors, director
nominees and executive officers.
20
<PAGE>
TRANSACTIONS IN THE COMPANY'S SECURITIES IN THE LAST TWO YEARS
Listed below are the only purchases and sales of Common Stock within
the last two years by the Company, the Company's directors, director nominees
and executive officers and certain information regarding such transactions. This
table does not include information with respect to stock option grants made
under the Company's Employee Stock Option Plan.
PURCHASES AND SALES OF COMMON STOCK
NUMBER OF SHARES
NAME PURCHASED (SOLD) DATE OF TRANSACTION(S)
- -------------------- ------------------ --------------------------
Robert Hersh 5,000 December 30, 1997
4,600 May 12, 1998
2,000 June 17, 1998
4,600 November 11, 1998
50,000 March 10, 1999
5,000 March 19, 1999
Dean Rappaport (1,000) October 6, 1997
2,000 May 28, 1998
4,600 November 11, 1998
William D. Stewart 15,000 January 8, 1998
Ryan Burrow - -
Henry Latimer - -
Jeffrey Silverman 25,000 January 2, 1998
Leonard Sokolow - -
David W. Sasnett 300 July 2, 1997
300 January 6, 1998
400 May 18, 1998
700 February 16, 1999
Jesse Luxton - -
Howard Steinberg 15,000 February 11, 1998
5,000 February 16, 1998
Brion Wise - -
Catalina Lighting, Inc. 5,600 December 8, 1998
3,500 December 9, 1998
5,600 December 11, 1998
5,000 December 14, 1998
5,600 December 15, 1998
5,600 December 16, 1998
5,000 December 17, 1998
2,400 December 18, 1998
5,100 December 28, 1998
5,100 December 29, 1998
5,100 December 30, 1998
5,100 December 31, 1998
4,000 January 4, 1999
2,000 January 6, 1999
4,000 January 8, 1999
4,200 January 11, 1999
4,200 January 13, 1999
4,200 January 14, 1999
4,200 January 15, 1999
4,100 January 19, 1999
4,100 January 20, 1999
4,100 January 21, 1999
600 January 22, 1999
4,100 January 25, 1999
4,100 January 26, 1999
3,200 January 28, 1999
2,600 January 29, 1999
2,500 February 1, 1999
2,300 February 2, 1999
200 February 10, 1999
6,800 February 11, 1999
6,800 February 12, 1999
7,500 February 16, 1999
2,200 February 17, 1999
4,000 February 18, 1999
8,200 February 24, 1999
1,000 February 25, 1999
1,000 February 26, 1999
6,000 March 3, 1999
2,200 March 4, 1999
3,500 March 8, 1999
2,500 March 15, 1999
1,500 March 18, 1999
1,500 March 19, 1999
1,500 March 22, 1999
1,500 March 23, 1999
1,200 March 29, 1999
1,200 March 30, 1999
20,000 April 5, 1999
2,000 April 7, 1999
2,000 April 8, 1999
2,000 April 13, 1999
21
<PAGE>
CERTAIN INFORMATION
Except as disclosed elsewhere in this Proxy Statement, none of the
Company's directors, director nominees or executive officers: (i) owns of record
any securities of the Company that are not also beneficially owned by them; (ii)
is, or was within the past year, a party to any contract, arrangement or
understanding with any person with respect to the securities of the Company,
including, but not limited to, joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of loses or
profits, or the giving or withholding of proxies; (iii) has any substantial
interest, direct or indirect, by security holdings or otherwise, in any matter
to be acted upon at the Annual Meeting, (iv) beneficially owns any securities of
any parent or subsidiary of the Company, or (v) borrowed any funds to purchase
any securities set forth under "Participants in the Solicitation." Except as
disclosed elsewhere in this Proxy Statement, none of the Company's directors,
director nominees or executive officers nor any of their associates has any
arrangement or understanding with any person with respect to future employment
by the Company or its affiliates or with respect to any future transactions to
which the Company or any of its affiliates will or may be a party, nor any
material interest, direct or indirect, in any transaction which has occurred
since the beginning of the Company's last fiscal year or any currently proposed
transaction, or series of similar transactions, to which the Company or any of
its affiliates was or is to be a party and in which the amount involved exceeds
$60,000.
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, pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934, in the proxy materials of
the Company at its next Annual Meeting must be received by the Company no later
than December 25, 1999 to be eligible for consideration. Such a proposal must
comply with requirements as to form and substance established by Rule 14a-8 and
other applicable laws and regulations in order to be included in the proxy
statement.
Alternatively, under the Company's Bylaws, a proposal or nomination
that the stockholder does not seek to include the Company's proxy materials for
the next Annual Meeting pursuant to Rule 14a-8 must be submitted in writing to
the Secretary of the Company by January 11, 2000, unless the date of the next
Annual Meeting changes by more than 40 days from the date of the 1999 Annual
Meeting. If the date of the next Annual Meeting changes by more than 40 days
from the date of the 1999 Annual Meeting, such proposal or nomination must be
delivered not later than the close of business on the later of 120 days
preceding the next Annual Meeting or 10 days after the public announcement of
the date for the next Annual Meeting. The stockholder's submission must include
certain specified information concerning the proposal or nominee, as the case
may be, and information as to the stockholder's ownership of the Common Stock of
the Company. Proposals or nominations not meeting these requirements will not be
entertained at the next Annual Meeting. If the stockholder does not also comply
with the requirements of Rule 14a-4 under the Securities Exchange Act of 1934,
the Company may exercise discretionary voting authority under proxies it
solicits to vote in accordance with its best judgment on any such proposal or
nomination submitted by a stockholder.
22
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EXPENSE OF SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited by officers and
directors of the Company personally or by telephone or facsimile for no
additional compensation. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries to forward solicitation materials to
beneficial owners of the Common Stock held of record by such person, and the
Company will reimburse such persons for reasonable out-of-pocket expenses
incurred by them in so doing.
The Company has retained MacKenzie Partners, Inc. ("MacKenzie") to
assist in the solicitation of proxies. Pursuant to the Company's agreement with
MacKenzie, MacKenzie will provide various proxy advisory and solicitation
services for the Company at a cost of approximately $50,000 plus reasonable
out-of-pocket expenses and indemnification against certain liabilities. It is
expected that MacKenzie will use up to approximately 30 persons in such
solicitation.
Although no precise estimate can be made at this time the Company
anticipates that the aggregate amount to be spent by the Company in connection
with the solicitation of proxies by the Company will be approximately $80,000 of
which approximately $30,000 has been incurred to date. This amount includes
legal fees, printing costs and the fees payable to MacKenzie, but excludes (i)
the salaries and fees of officers, directors, and employees of the Company and
(ii) the normal expenses of an uncontested election. The aggregate amount to be
spent will vary depending on, among other things, any developments that may
occur in the election contest discussed herein.
23
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IMPORTANT
Your vote is important. Regardless of the number of shares of
stock you own, please support your Board of Directors by promptly taking these
few easy steps:
1. Please sign, date and mail promptly the enclosed Gold Proxy Card in the
post-paid envelope provided.
2. Your Board of Directors recommends that you NOT sign any proxy card sent to
you by Moss, not even as a vote of protest.
3. If your shares are held in the name of a brokerage firm or bank nominee,
only it can sign a Gold Proxy Card with respect to your shares and only
after receiving your specific instructions. Accordingly, please provide
your instructions by signing, dating and mailing the enclosed Gold Proxy
Card in the postage-paid envelope provided. Please do so for each account
you maintain. To ensure that your shares are voted, you should also contact
the person responsible for your account and give instructions for a Gold
Proxy Card to be issued representing your shares.
4. AFTER signing the enclosed Gold proxy card, the Board of Directors
recommends that you not sign any other cards. If you wish to vote for the
Company's nominees as directors, do not vote "against" on the Moss proxy
card; rather, discard any proxy cards sent to you by Moss.
IF YOU HAVE RECEIVED AND VOTED A PROXY CARD FROM MOSS BEFORE RECEIVING YOUR
CATALINA LIGHTING GOLD PROXY CARD, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE
SIMPLY BY SIGNING, DATING AND MAILING THE ENCLOSED GOLD PROXY CARD. THIS WILL
CANCEL YOUR EARLIER VOTE SINCE ONLY YOUR LATEST DATED PROXY CARD WILL COUNT.
If you have any questions or require assistance, please call:
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NY 10010
(212) 929-5500 (COLLECT)
OR
(800) 322-2885 (TOLL FREE)
24
<PAGE>
CATALINA LIGHTING, INC.
18191 N.W. 68TH AVENUE
MIAMI, FL 33015
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all other proxies previously given, hereby appoints
Robert Hersh and Thomas M. Bluth, and each of them, as Proxies, each with the
power to appoint his substitute, and hereby authorizes each of them to represent
and to vote all the shares of common stock of CATALINA LIGHTING, INC. held of
record by the undersigned on April 1, 1999, at the Annual Meeting of
Stockholders to be held on May 10, 1999 at 8:00 a.m. local time at 18191 N.W.
68th Avenue, Miami, Florida 33015, or any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2. IF ANY OTHER MATTERS ARE PROPERLY BROUGHT BEFORE
THE ANNUAL MEETING, PROXIES WILL BE VOTED ON THESE MATTERS AS THE PROXIES NAMED
HEREIN MAY DETERMINE IN THEIR SOLE DISCRETION.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL AGENDA ITEMS. Please mark /X/
your vote as
indicated. See
example.
1. ELECTION OF DIRECTORS: Robert Hersh, Ryan Burrow, Henry Latimer,
Jesse Luxton, Leonard Sokolow, Howard Steinberg,
Brion Wise.
/ / FOR ALL / / WITHHOLD AUTHORITY FOR ALL
/ / FOR ALL EXCEPT THE FOLLOWING NOMINEE(S): INSTRUCTION: To withhold
authority to vote for any
individual nominee(s), check
the box at left and write that
nominee's name in the space
---------------------------------------- provided.
2. Proposal to ratify the appointment of Deloitte & Touche LLP as the
independent certified public accountant of the Company for the current year.
FOR AGAINST ABSTAIN
/ / / / / /
Where shares are held by joint benefiaries,
both should sign. When signing as
attorney, executor, adminsitrator,
trustee or guardian, please sign full
title as such, If a corporation, please
sign in full corporate name by President
or other authoirzed officer. If a
partnership, please sign in partnership
name by authorized person.
SIGNATURE(S) SIGNATURE(S) DATE , 1999
-------------- --------------------- -------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
