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                                                                   EXHIBIT 10.18

                        SEPARATION AGREEMENT AND RELEASE

      Catalina Lighting, Inc. ("Catalina") and Nathan Katz (the "Employee")
enter into this Separation Agreement and Release ("Agreement") on July 20, 2001,
in order to reach a mutually satisfactory compromise of any and all claims which
could be made arising out of or relating to the Employee's employment with
Catalina. The parties, in consideration of the premises and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
agree as follows:

      1. Separation. Effective on and as of July 20, 2001, (the "Separation
Date"), the Employee's employment with Catalina and with any and all other
affiliates of Catalina shall terminate.

      2. Payments. Catalina shall pay the Employee $8,333.33 on September 1,
2001. Thereafter Catalina shall pay the Employee an aggregate of $91,666.67 in
eleven consecutive quarterly payments of $8,333.33, on December 1, March 1, June
1, and September 1 of each year, beginning December 1, 2001 and ending June 1,
2004. To the extent Employee owes any sums to Catalina, pursuant to a promissory
note, or otherwise, the payments described in this Section 2 shall be retained
by Catalina to offset such amounts due. From and after the date of this
Agreement, Catalina and the Employee agree that (i) no additional interest shall
accrue on the Promissory Note dated as of January 9, 2000, between Catalina and
the Employee, and (ii) the Promissory Note is hereby amended to provide for
quarterly repayments in amounts and upon the dates provided in this Section 2
until the present balance of the Promissory Note shall have been paid in full.
To the extent that Catalina fails to make any payment under this Section 2, the
amount owing to Catalina under the Promissory Note, or otherwise, between the
Employee and Catalina shall be reduced by the amount of any such missed payment.

      3. Employee Release. In exchange for the payments provided in Section 2,
the Employee waives and releases unconditionally, for himself and his heirs, any
and all rights, claims, demands, causes of action, obligations and liabilities
known or unknown, arising from the beginning of time to the date of execution of
this Agreement, involving his relationship with Catalina and/or any of its
affiliates or associates (each, a "Released Party"), whether such claims arise
from common law, ordinance or statute, and particularly, but without limitation
of the foregoing terms, claims concerning or relating in any way to his
employment relationship with Catalina, such as claims which may arise from or
under discrimination laws or otherwise (specifically including but not limited
to, claims under discrimination laws, the Florida Civil Rights Act of 1992, the
Florida Private Whistleblowers Act of 1991, the Miami-Dade County Equal
Opportunity Ordinance, the Age Discrimination in Employment Act, Title VII of
the Civil Rights Act of 1964, the Civil Rights Act of 1991, or any other law,
rule, ordinance or regulation) and all claims for attorneys' fees and costs,
that they may have had, now have, or in the future
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may have against any Released Party or any of its officers, employees,
directors, stockholders or agents. Employee represents and warrants that he has
not made, or caused to be made, any assignment or transfer of any claim herein
being released.

      4. Company Release. In exchange for the Employee's agreement to the terms
of this Agreement, Catalina waives and releases unconditionally, for itself and
its subsidiaries and their respective successors and assigns, any and all
rights, claims, demands, causes of action, obligations and liabilities known or
unknown, arising from the beginning of time to the date of execution of this
Agreement, involving Catalina's relationship with the Employee, whether such
claims arise from common law, ordinance or statute, and particularly, but
without limitation of the foregoing, claims concerning or relating in any way to
his employment relationship with Catalina, and all claims for attorneys' fees
and costs, that they may have had, now have, or in the future may have against
the Employee. Catalina represents and warrants that it has not made, or caused
to be made, any assignment or transfer of any claim herein being released.

      5. No Admission. The Employee agrees that this Agreement is not and shall
not be construed to be an admission of any violation of any federal, state or
local statute, ordinance or regulation, or common law, or of any duty owed the
Employee by Catalina.

      6. Employee Acknowledgment.

            (a) The Employee acknowledges that the Employee (i) has read this
Agreement, (ii) has had the opportunity to consider this Agreement, (iii) has
been advised by this document to seek legal counsel if he chooses, (iv)
understands this Agreement and all of its terms, (v) signs this Agreement
voluntarily and without duress, and (vi) signs this Agreement in exchange for
payments described in Section 2, which the Employee acknowledges are adequate
and satisfactory.

            (b) The Employee acknowledges that he was given at least twenty-one
(21) days in which to consider whether to execute this Agreement before being
required to make a decision. The Employee further acknowledges that he may
revoke the Agreement for a period of seven (7) days from the date that he
executed the Agreement.

      7. Nondisparagement.

            (a) The Employee and Catalina further agree that each will not,
directly or indirectly, disparage, harass, defame or instigate, request,
encourage, suggest, support or assist any person in disparaging, harassing or
defaming the other or any of the other's products or services, or disparage the
terms and conditions of this Agreement or the Employee's separation from
Catalina. This obligation extends to all statements, written or oral, whether
intended to be public or private.

            (b) Each of the Employee and Catalina agree and acknowledge that the
covenants and promises of this paragraph constitute a material and significant
part of the consideration received by the other in exchange for its or his
obligations to the other


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under this Agreement and that any breach of this Section 7, in any material
respect, will constitute a material breach of this Agreement.

            (c) In the event the Employee violates Section 7(a) in any material
respect, all of the amounts paid to him in Section 2 shall be forfeited.
Catalina may, in its sole discretion, either withhold said amount from any
amounts owing and unpaid under this Agreement or demand that the Employee repay
said amount within thirty (30) days of demand. If the Employee fails to repay
the amount so demanded, Catalina may file suit against the Employee for that
amount, costs and fees to be borne by the losing party. This action for recovery
of amounts paid shall not preclude Catalina or any Released Party from filing
suit against the Employee for defamation or any other cause of action related to
the disparaging statements. The Employee and Catalina submit to personal
jurisdiction in the courts of the State of New York located in New York City in
connection with any such claims.

      8. Full Satisfaction. The Employee hereby agrees that this Agreement and
the Termination Agreement between the Employee and Catalina is in compromise and
final settlement among the parties of all disputed matters and constitutes full
satisfaction of all claims made or which could be made of whatsoever kind or
character which he has or had against all and any of the Released Parties from
the beginning of time until the date of this Agreement.

      9. No Admission of Liability. Execution of this Agreement and payment of
the amount specified in Section 2 of this Agreement does not constitute an
admission by any Released Party of any violation of any Civil Rights or other
employment discrimination statute, or any other legal statute, provision,
regulation, ordinance, order or action under common law or of any duty owed by
the Released Parties to the Employee. Rather, this Agreement expresses the
intention of the parties to resolve all issues and other claims related to or
arising out of the Employee's employment by Catalina without the time and
expense of additional contested litigation.

      10. Confidentiality.

            (a) To the extent that this Agreement is not disclosed to the public
as part of a securities filing, the Employee represents, agrees, covenants and
promises that he has not disclosed the terms of this Agreement between the
parties, including amounts, the terms and conditions of this Agreement and the
circumstances, events and records relating to this Agreement and its terms
("confidential information"). The Employee further agrees that such confidential
information shall not be disclosed or discussed by the Employee with any person
other than his immediate family, attorney, financial advisor, state, local and
federal tax authorities, or other persons as may be required by law, without the
prior written permission of Catalina unless required by law; provided, however,
that this Agreement may be used in any claim or litigation alleging breaches
thereof. Any immediate family member, attorney or other person designated above
to whom the Employee intends to disclose the confidential information shall be
instructed in advance by the Employee that this information is confidential and
such persons (other


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than state, local and federal tax authorities) shall be bound by this same
pledge of confidentiality for any disclosure of such information.

            (b) The Employee agrees and acknowledges that the covenants and
promises of this Section 10 constitute a material and significant part of the
consideration received by Catalina in exchange for the payments to the Employee
under this Agreement and that breach of this paragraph will constitute a
material breach of this Agreement.

            (c) In the event the Employee or anyone to whom the Employee
discloses the confidential information or otherwise violates Section 10(a) in
any material respect, all of the amounts paid to him in Section 2 shall be
forfeited. Catalina may, in its sole discretion, either withhold said amount
from any amounts owing and unpaid under this Agreement or demand that the
Employee repay said amount within thirty (30) days of demand. If the Employee
fails to repay the amount so demanded, Catalina may file suit against the
Employee for that amount, costs and fees to be borne by the losing party. The
Employee and Catalina submit to personal jurisdiction in the courts of the State
of New York located in New York City in connection with any such claims.

            (d) The Employee further agrees that if ordered by a court to
produce or testify concerning the confidential information, or if served with a
subpoena or order that would compel him to produce or testify concerning the
confidential information, he will telephonically notify and provide a copy of
the subpoena or order to the then President of Catalina immediately, but in no
event any later than three (3) business days after he has been so served, for
the purpose of providing Catalina with the opportunity to obtain a protective
order against such testimony or production of this Agreement or the confidential
information.

      11. Cooperation. The Employee agrees to cooperate with Catalina by making
himself reasonably available to testify on behalf of Catalina or its affiliates,
in any action, suit or proceeding, whether civil, criminal, administrative, or
investigative, and to assist Catalina or any of its affiliates in any such
action, suit, or proceeding by providing information and meeting and consulting
with its counsel and representatives. Catalina shall provide the Employee with
reasonable notice of Catalina's need for the Employee's cooperation and shall
make all commercially reasonable efforts to ensure that Catalina will not
interrupt the Employee's then current employment or other activities. The
Employee shall be fully reimbursed for any out-of-pocket expenses reasonably
incurred by the Employee in the course of such cooperation. This Section 11
shall not apply to any litigation in which Catalina or any of its affiliates and
the Employee are adverse parties.

      12. Entire Agreement; Binding Effect. This Agreement and the Termination
Agreement and Release between the Employee and Catalina set forth the entire
agreement between the Employee and Catalina related to the Employee's separation
from employment with Catalina and the termination of Employee's employment and
consulting agreements with Catalina. This Agreement supersedes all of the terms
of the Employee's Employment Agreement and Consulting Agreement with


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Catalina, including, without limitation, the covenants contained therein
relating to confidentiality, nonsolicitation and limitations on the Employee's
ability to compete with Catalina. The Employee and Catalina intend this
Agreement to be legally binding and inure to the benefit of themselves and their
respective heirs, administrators, executors, successors and assigns.

      13. Governing Law. This Agreement shall be governed by and construed in
accordance with, the laws of the State of Florida without regard to conflict or
choice of law provisions that would defer to the substantive laws of another
jurisdiction.

      14. Attorneys' Fees. In the event of litigation to enforce or interpret
this Agreement, all litigation expenses, including by way of illustration, but
not limitation, all reasonable attorneys' fees and paralegal fees, costs and
expenses through all trials, appeals and proceeding, mediation, arbitration, any
proceedings pursuant to the bankruptcy laws of the United States, shall be paid
to the prevailing party by the non-prevailing party.

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      IN WITNESS WHEREOF, the Employee and Catalina have executed this Agreement
on the date first written above.

                                        EMPLOYEE

                                        /s/ Nathan Katz
                                        ----------------------------------------
                                        Nathan Katz


                                        CATALINA LIGHTING, INC.

                                        By: /s/ Robert Hersh
                                            ------------------------------------

                                        Name: Robert Hersh

                                        Title: Chief Executive Officer


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