FORM 10-K/A
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
For the fiscal year ended September 30, 1999
COMMISSION FILE NO: 1-9917
CATALINA LIGHTING, INC.
(Exact name of Registrant as specified in its charter)
FLORIDA 59-1548266
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
18191 N.W. 68TH AVENUE, MIAMI, FLORIDA 33015
(Address of principal executive offices including zip code)
(305) 558-4777
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, par value New York Stock Exchange
$.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
SECTIONS AMENDED
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [ ]
Page 1 of 14
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to the
Directors and Executive Officers of the Company as of January 4, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------------ --------------- --------------------------------------------------------------
<S> <C> <C>
Robert Hersh 53 Chairman, Chief Executive Officer, President, Director
Ryan Burrow 39 Director
Henry Latimer 62 Director
Jesse Luxton 57 Director
Roy Oppenheim 39 Director
Leonard Sokolow 43 Director
Howard Steinberg 69 Director
Brion Wise 54 Director
Dean Rappaport 48 Executive Vice President, Chief Operating Officer
Nathan Katz 44 Executive Vice President
David W. Sasnett 43 Senior Vice President, Chief Financial Officer
Thomas M. Bluth 42 Senior Vice President, Secretary, Treasurer
</TABLE>
None of the Company's officers has any family relationship with any
director or other officer. Family relationship for this purpose means any
relationship by blood, marriage, or adoption, not more remote than first cousin.
ROBERT HERSH is 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.
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 $3.4 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.
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,
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<PAGE>
was voted the most qualified Judge in that circuit by lawyers in that circuit.
Mr. Latimer presently serves as a director of Boca Resorts, Inc., formerly
Florida Panthers Holding, Inc., a company which owns luxury resort hotels with
shares traded on the New York Stock Exchange under the symbol "RST". 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.
JESSE LUXTON has been a Director of the Company since May 1999. He 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 million 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 serves on the marketing
advisory board of International Resources, Inc., a company that designs, sources
and markets Christmas collectibles to department and gift retailers and has
served 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.
ROY OPPENHEIM has been a Director of the Company since May 1999. He is
the co-founder of Oppenheim & Pilelsky, P.A., a South Florida law firm. Mr.
Oppenheim is also President and founder of Weston Title & Escrow, Inc., a title
company serving South Florida. Previously, Mr. Oppenheim was an associate with
the Wall Street firms of White & Case and Milbank Tweed Hadley & McCloy. Mr.
Oppenheim attended Princeton University graduating CUM LAUDE and Northwestern
University School of Law where he was a member of the Editorial Board of the Law
Review. In 1999 Mr. Oppenheim was appointed as Vice Chairman of the City of
Weston's Charter Review Commission. He serves as a co-founder and member of the
Board of Directors of the Weston Foundation where he serves as Chairman on the
Allocation Committee. Mr. Oppenheim is also a member of the Princeton University
School's Committee where he interviews candidates for admission.
LEONARD SOKOLOW has been a Director of the Company since March 1990. In
November 1999, Mr. Sokolow became Chief Executive Officer and Vice Chairman of
Peachtree Fiber Optics, Inc. d/b/a vFinance.com. Since September 1996, Mr.
Sokolow has been the President of Union Atlantic LLC, a private merchant banking
and strategic consulting firm specializing domestically and internationally in
technology industries, which merged into vFinance.com in November 1999. 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 Advanced Electronics Support Products, Inc.,
Peachtree Fiber Optics, Inc. and Ezcony Interamerica, Inc., a distributor of
major brand name consumer electronics to Latin America. The shares of Advanced
Electronics Support Products are traded on NASDAQ small cap and the shares of
Peachtree Fiber Optics and Ezcony Interamerica are traded over the counter.
HOWARD STEINBERG has been a Director of the Company since May 1999. He
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 PlyGem Industries, Inc. From
1964 until 1975, 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.
Page 3 of 14
<PAGE>
BRION WISE has been a Director of the Company since May 1999. He 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.
DEAN RAPPAPORT became an Executive Vice President of the Company in
January 1988 and was a Director of the Company from April 1988 until May 1999.
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.
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 became a Vice President of the Company in November
1994. In November 1997, Mr. Sasnett became a Senior Vice President of the
Company. In November 1996, Mr. Sasnett became the Chief Financial Officer of the
Company. Prior to that time, he was the Company's Controller. 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 became a Vice President of the Company in August 1994
and Secretary of the Company in November 1994. In January 2000, Mr. Bluth became
a Senior Vice President of the Company. 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.
Page 4 of 14
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
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, 1999, 1998
and 1997 for services in all capacities.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG TERM COMPENSATION AWARDS
NAME AND PRINCIPAL FISCAL --------------------------- ----------------------------- ALL OTHER
POSITION YEAR SALARY ($) BONUS ($)(2) SECURITIES UNDERLYING OPTIONS(3) COMPENSATION ($)(4)
------------------ ------ ---------- ------------ -------------------------------- -------------------
<S> <C> <C> <C> <C> <C>
Robert Hersh 1999 314,109 168,500 - 2,480
Chairman, CEO 1998 299,151 26,190 - 1,600
and President 1997 284,905 - - 1,500
Dean Rappaport 1999 282,697 168,500 212,500(6) 2,480
Executive Vice 1998 269,235 26,190 - 1,600
President, Chief 1997 256,414 - - 1,500
Operating Officer
William D.Stewart(5) 1999 282,697 168,500 212,500(6) 2,480
Executive Vice 1998 269,235 26,190 - 1,600
President 1997 256,414 - - 1,500
Nathan Katz 1999 282,697 168,500 162,500(6) 2,480
Executive Vice 1998 269,235 26,190 - 1,600
President 1997 256,414 - - 1,500
David W. Sasnett 1999 169,100 20,000 42,000(7) 2,480
Senior Vice 1998 151,068 15,000 - 1,549
President, Chief 1997 136,603 15,000 - 1,216
Financial Officer
</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 are equal to 1.67% of consolidated
pre-tax income 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.
(5) Pursuant to a reorganization of the Company's executive management
structure, Mr. Stewart left the employ of the Company in December 1999.
(6) Represents options granted in prior years which were repriced on December
11, 1998 - see separate section "Repricing of Stock Options."
(7) Includes 20,000 options granted in prior years which were repriced on
December 11, 1998 - see separate section "Repricing of Stock Options."
Page 5 of 14
<PAGE>
OPTIONS GRANTED
The following table shows all grants of options to the named Executive
Officers of the Company during the fiscal year ended September 30, 1999.
Pursuant to SEC rules, the table also shows the value of the options granted at
the end of the option terms (ten years) or the remaining option terms for
options repriced if the price of the Company's stock was to appreciate annually
by 5% and 10%, respectively. There is no assurance that such stock price will
appreciate at the rates shown in the table. The Company does not have a plan
whereby tandem stock appreciation rights ("SARS") are granted.
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------
% TOTAL POTENTIAL REALIZABLE VALUE
OPTIONS AT ASSUMED ANNUAL RATES OF
NUMBER OF GRANTED TO STOCK APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM ($)(3)
OPTIONS IN FISCAL EXERCISE PRICE --------------------------
NAME GRANTED(1) YEAR 1999 PER SHARE ($)(2) EXPIRATION DATE 5% 10%
---- ----------- ---------- ---------------- --------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert Hersh - - - - - -
Dean Rappaport 50,000 4.2% 2.4375 10/01/01 17,867 37,391
50,000 4.2% 2.4375 01/03/02 19,916 41,963
50,000 4.2% 2.4375 10/07/02 24,854 53,318
62,500 5.3% 2.4375 12/01/04 51,811 117,542
William D. Stewart 30,000 2.5% 2.4375 09/24/01 10,720 22,435
20,000 1.7% 2.4375 10/01/01 7,147 14,957
50,000 4.2% 2.4375 01/03/02 19,916 41,963
50,000 4.2% 2.4375 10/07/02 24,854 53,318
62,500 5.3% 2.4375 12/01/04 51,811 117,542
Nathan Katz 50,000 4.2% 2.4375 01/03/02 19,916 41,963
50,000 4.2% 2.4375 01/15/03 27,006 58,347
62,500 5.3% 2.4375 12/01/04 51,811 117,542
David W. Sasnett 12,500 1.1% 2.4375 12/01/04 10,362 23,508
7,500 0.6% 2.4375 10/27/05 7,320 17,020
15,000 1.3% 2.1250 01/12/09 20,081 50,681
7,000 0.6% 4.0000 06/07/09 17,640 44,520
</TABLE>
- ------------
(1) All options granted (excluding the 22,000 options granted to Mr. Sasnett at
$2.125 and $4.00) represent options granted in prior years which were
repriced on December 11, 1998 - see separate section "Repricing of Stock
Options." The 22,000 options granted to Mr. Sasnett vest annually in
increments of one-third of the amount of the grant.
(2) Represents the fair market value of the common stock on the date of grant
or repricing. For purposes of the option plan, fair market value is the
closing market price of the common stock as reported on the New York Stock
Exchange.
(3) The amounts disclosed in these columns, which reflect appreciation of the
Company's common stock price at the 5% and 10% rates dictated by the
Securities and Exchange Commission, are not intended to be a forecast of
the Company's common stock price and are not necessarily indicative of the
actual values which may be realized by the named Executive Officers or the
shareholders.
Page 6 of 14
<PAGE>
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, 1999 and the value of options held by such officers at September
30, 1999 in terms of the closing price of the Company's stock on September 30,
1999.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND FISCAL YEAR END 1999 OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF
ACQUIRED ON VALUE UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME EXERCISE REALIZED(1) SEPTEMBER 30, 1999 SEPTEMBER 30, 1999(2)
- ---- ----------- ----------- ------------------------------- -------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Hersh 59,600 $72,375 257,500 0 $144,125 0
Dean Rappaport 54,600 $173,313 262,500 0 $477,344 0
William D. Stewart 20,000 $67,500 212,500 0 $358,594 0
Nathan Katz 0 0 217,500 0 $404,844 0
David W. Sasnett 0 0 20,000 22,000 $33,750 $30,875
</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 option was exercised.
(2) Based on the closing price of the Company's stock on September 30, 1999 of
$4.125.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Company has entered into employment agreements with Robert Hersh,
Dean 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 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
given during fiscal years 1994, 1996, 1997, 1998 and 1999. The aforementioned
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 pre-tax 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 one-fourth of
the Pool. Bonuses were waived in 1990, no amounts were distributed in 1991 and
1997 due to
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<PAGE>
pre-tax losses and amounts earned under the Pool in fiscal 1993, 1994, 1995,
1996, 1998, and 1999 totaled approximately $356,000, $614,000, $60,000,
$175,000, $105,000 and $674,000, respectively. In October 1999, the Company
amended their employment agreements to eliminate the pool. The Company
anticipates establishing a new bonus arrangement with these individuals for
fiscal years 2000 and 2001.
Pursuant to a reorganization of the Company's executive management
structure, Mr. Stewart left the Company in December 1999. The Company agreed to
settle its contractual employment obligation to Mr. Stewart for a payment of
approximately $800,000. Mr. Stewart will continue to provide consulting services
under a three-year non-compete and consulting agreement for annual payments of
$250,000 through December 2002.
The employment agreements with Messrs. Hersh, Rappaport 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 has entered into Change in Control agreements with David W.
Sasnett and Thomas M. Bluth. The agreements expire in September 2001. Such
agreements provide that, in the event of a change in control of the Company, if
the Company terminates the employment of either individual within certain time
periods or the Company fails to negotiate an acceptable employment agreement
with the individual, the Company shall pay the individual two times his annual
base salary. In addition, the agreement provides that in the event Mr. Sasnett
or Mr. Bluth is terminated "without cause" where there has been no change in
control, he is entitled to a severance payment equal to his annual base salary.
The Company pays its proportional share of a reverse split-dollar life
insurance policy for Mr. Rappaport and Mr. Katz. In the event of the death of
Mr. Rappaport or Mr. Katz during the term of their employment agreements, the
Company would receive $1,000,000.
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 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. Directors also receive $1,000 per
Board meeting and Committee meeting attended. Messrs. Burrow, Luxton, Steinberg
and Wise are reimbursed for their travel expenses to Board and Committee
meetings.
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
Page 8 of 14
<PAGE>
certain circumstances, by delivery of shares of Common Stock or by a combination
of the foregoing. No non-qualified stock options were granted to directors or
named executive officers during fiscal 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee is composed of Messrs.
Burrow, Latimer and Sokolow. Mr. Latimer is a partner in the law firm of Eckert,
Seamans, Cherin & Mellott. During the fiscal year ended September 30, 1999, the
Company paid a total of approximately $8,500 in legal fees to Eckert, Seamans,
Cherin & Mellott.
REPRICING OF STOCK OPTIONS
The following table sets forth information about the repricing of stock
options held by the Company's CEO and each of the other most highly compensated
Executive Officers of the Company during the last ten fiscal years ended
September 30, 1999. Mr. Hersh, Chairman, Chief Executive Officer and President,
declined to have his options repriced on December 11, 1998.
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE
UNDERLYING OF STOCK AT EXERCISE LENGTH OF ORIGINAL OPTION
OPTIONS/SARS TIME OF PRICE AT TIME NEW TERM REMAINING AT DATE OF
DATE OF REPRICED OR REPRICING OR OF REPRICING EXERCISE REPRICING OR AMENDMENT
NAME REPRICING AMENDED AMENDMENT OR AMENDMENT PRICE (YEARS)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dean Rappaport 12/11/98 50,000 $2.4375 $3.375 $2.4375 2.8
Executive Vice 12/11/98 50,000 $2.4375 $4.875 $2.4375 3.1
President, Chief 12/11/98 50,000 $2.4375 $4.125 $2.4375 3.8
Operating Officer 12/11/98 62,500 $2.4375 $6.750 $2.4375 6.0
William D.Stewart 12/11/98 30,000 $2.4375 $2.500 $2.4375 2.8
Executive Vice 12/11/98 20,000 $2.4375 $3.375 $2.4375 2.8
President 12/11/98 50,000 $2.4375 $4.875 $2.4375 3.1
12/11/98 50,000 $2.4375 $4.125 $2.4375 3.8
12/11/98 62,500 $2.4375 $6.750 $2.4375 6.0
Nathan Katz 12/11/98 50,000 $2.4375 $4.875 $2.4375 3.1
Executive Vice 12/11/98 50,000 $2.4375 $5.250 $2.4375 4.1
President 12/11/98 62,500 $2.4375 $6.750 $2.4375 6.0
David W. Sasnett 12/11/98 12,500 $2.4375 $4.125 $2.4375 6.0
Senior Vice 12/11/98 7,500 $2.4375 $4.125 $2.4375 6.9
President, Chief
Financial Officer
</TABLE>
REPORT ON REPRICING OF STOCK OPTIONS
The Company's employee stock option plans are administered by the
Compensation Committee ("the Committee"). All options issued pursuant to the
Company's stock option plans were issued at the then market price. The market
price for the Company's stock, however, has declined, and as a result, a
majority of the employee stock options were substantially above the current
market price, thereby significantly undermining the incentives intended to be
created by the option grants. The Committee believed that such incentives are a
significant factor in the Company's ability to attract, retain and motivate
employees who are critical to the Company's long term success. The Committee
concluded that to allow the options to remain "out of the money" did not serve
the best interests of the Company and its shareholders. The Committee believed
that a repricing of these "out of the money" options would allow the options to
serve their intended purpose and enhance the Company's ability to retain
important employees. Consequently, on December 11, 1998, the Committee (which
consisted at the time of
Page 9 of 14
<PAGE>
Messrs. Burrow, Latimer, Sokolow and a former Director Jeffrey Silverman)
approved the repricing of 1,074,733 options issued to employees (including the
named Executive Officers) with exercise prices ranging from $2.50 to $6.75 to be
repriced to $2.4375, the market value on such date. Mr.Hersh, Chairman, Chief
Executive Officer and President, declined to have his options repriced.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
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 January 4, 2000 and, other than as provided by
community property and other such laws, consists of sole voting and investment
power.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENTAGE
- ------------------------------------ ----------------------------------- -------------------------------------------
<S> <C> <C>
Heartland Advisors, Inc............. 1,391,200(2) 20.2%
789 North Water Street
Milwaukee, WI 53202
Robert Hersh........................ 1,185,300(3) 16.6%
18191 N.W. 68th Avenue
Miami, Florida 33015
Dean Rappaport...................... 1,117,100(4) 15.6%
18191 N.W. 68th Avenue
Miami, Florida 33015
Nathan Katz......................... 630,742(5) 8.9%
55 Norfolk Avenue
Easton, MA
Wai Check Lau....................... 558,200(6) 8.1%
6/F, Kenning Industrial Bldg.
19 Wang Hoi Road
Kowloon, Hong Kong
Dimensional Fund Advisors, Inc...... 471,600(7) 6.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
David Moss.......................... 443,082(8) 6.4%
6073 N.W. 167th Street
Building C-5
Miami, FL 33015
</TABLE>
- ------------
(1) Includes shares which may be acquired pursuant to vested stock options and
options which become exercisable through March 4, 2000 or shares for which
the stockholder has the power to direct the vote. Percentage ownership based
upon 6,893,646 shares outstanding as of January 4, 2000.
(2) Heartland Advisors, Inc., a registered investment advisor, is deemed to have
beneficial ownership of 1,391,200 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.
Page 10 of 14
<PAGE>
(3) Includes 750,000 shares as to which voting power is shared (see note 6
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 6
below) and shares purchasable through the exercise of options as follows:
50,000 shares at $1.75 per share and 212,500 shares at $2.4375 per share.
(5) Includes 162,500 shares purchasable through the exercise of options at $
2.4375 per share.
(6) 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
Cheng. In July 1994, as part of Company's acquisition of Go-Gro Industries
Limited ("Go-Gro"), Wai Check Lau and Amy Yuen Ying Lau Cheng 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 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 and Rappaport, members of the Board of
Directors of Catalina Asia. Except as to such shared voting power, each of
Messrs. Hersh and Rappaport disclaims beneficial ownership of such shares.
(7) Based solely upon a Schedule 13G filed with the Securities and Exchange
Commission as of December 31, 1999, Dimensional Fund Advisors Inc.
("Dimensional"), an investment advisor registered under Section 203 of 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 471,600 shares of Catalina Lighting, Inc., stock. The Portfolios
own all securities reported in this statement, and Dimensional disclaims
beneficial ownership of such securities.
(8) Based solely on a Schedule 13D filed with the Securities and Exchange
Commission on April 30, 1999. This amount includes 34,600 shares held in
trust for the benefit of Mr. Moss' children and 14,000 shares are owned
directly by a Florida limited partnership whose general partner DMM
Investments, Inc. is wholly owned by Mr. Moss.
FILINGS UNDER SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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. The Company is not aware of any beneficial owner of more than ten percent
of its Common Stock except for Heartland Advisors, Inc.
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 and Directors
were complied with during the 1999 fiscal year.
Page 11 of 14
<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 January 4, 2000 by each
Director and Executive Officer and by all Directors and Executive Officers of
the Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENTAGE
---------------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Robert Hersh......................... 1,185,300(2,10) 16.6%
Dean Rappaport....................... 1,117,100(3,10) 15.6%
Ryan Burrow.......................... 22,478(4,11) *
Henry Latimer........................ 16,273(5,11) *
Jesse Luxton........................ 1,778 (11) *
Roy Oppenheim...................... 1,778 (11) *
Leonard Sokolow...................... 42,778(6,11) *
Howard Steinberg................... 21,778 (11) *
Brion Wise............................ 1,778 (11) *
Nathan Katz.......................... 630,742 (7) 8.9%
David W. Sasnett.................... 27,000 (8) *
Thomas M. Bluth...................... 24,500 (9) *
All Directors and Executive Officers
of the Company and its subsidiaries as
a group
(12 persons)......................... 2,343,283 (10) 30.5%
</TABLE>
- ------------
* less than 1%
(1) Includes shares which may be acquired pursuant to vested stock options and
options which become exercisable through March 4, 2000. Percentage
ownership based upon 6,893,646 shares outstanding as of January 4, 2000.
(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:
50,000 shares at $1.75 per share and 212,500 shares at $2.4375 per share.
Page 12 of 14
<PAGE>
(4) 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.
(5) 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.
(6) 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.
(7) Includes 162,500 shares purchasable upon the exercise of options at $2.4375
per share.
(8) Includes shares purchasable through the exercise of options as follows:
5,000 shares at $2.125 per share and 20,000 shares at $2.4375 per share.
(9) Includes 22,500 shares purchasable through the exercise of options at
$2.4375 per share.
(10) Includes 750,000 shares owned by previous shareholders of Go-Gro Industries
Limited which Messrs. Hersh and Rappaport jointly have a power to vote
pursuant to irrevocable proxies. Except as to such shared voting power,
Messrs. Hersh and Rappaport disclaim beneficial ownership of these shares.
(11) Includes 1,778 shares received on May 10, 1999 as annual retainer for
serving on the Company's Board of Directors. The shares are restricted and
vest after one year or on a pro rata basis if the Director ceases to serve
on the Board during the year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company leased a facility located in Massachusetts from an entity
in which an officer and a former officer had an ownership interest. The lease
expired in June 1999. Rent expense related to this lease was approximately
$99,000, $159,000, and $164,000 for the years ended September 30, 1999, 1998 and
1997, respectively.
The Company leases its Hong Kong office from a company owned by Wai
Check Lau, a shareholder 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
for the years ended September 30, 1999 and 1998 and $270,000 for the year ended
September 30, 1997.
During the years ended September 30, 1999, 1998 and 1997, Go-Gro, a
wholly-owned subsidiary of the Company, purchased $1.7 million, $1.0 million and
$2.1 million, respectively, in raw materials from an affiliate which is fifty
percent owned by the Company and which includes a shareholder of the Company as
one of its directors.
Notes and advances receivable from Dean Rappaport totaled approximately
$120,000 at December 31, 1999 and included a $100,000 note bearing interest at
LIBOR plus 250 basis points, collateralized by stock option agreements to
purchase 100,000 shares of the Company and maturing in December 2000.
Notes and advances receivable from Nathan Katz totaled approximately
$71,000 at December 31, 1999 and included a $70,000 note bearing interest at
LIBOR plus 250 basis points, collaterized by stock option agreements to purchase
50,000 shares of the Company and maturing in January 2001.
Page 13 of 14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CATALINA LIGHTING, INC.
By: /s/ ROBERT HERSH
-----------------------------
Robert Hersh
Chairman, President and
Chief Executive Officer
January 28, 2000
Page 14 of 14
