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                                                                   EXHIBIT 10.35

                             Catalina Lighting, Inc.
                     MANAGEMENT SETTLEMENT STOCK OPTION PLAN

1. Purpose of the Plan.

      The purpose of the Catalina Lighting, Inc. Management Settlement Stock
Option Plan (the "Plan") is to promote the interests of Catalina Lighting, Inc.
(the "Company"), its subsidiaries and its shareholders by providing for the
grant of options to purchase the Company's common stock for the purposes of (i)
settling the Company's obligations to certain of the Company's former and
current management employees under employment agreements previously entered into
between the Company and such former and current management employees, and (ii)
obtaining the agreement of certain former and current management employees not
to compete or engage in other practices that may be harmful to the Company and
its subsidiaries.

2. Administration.

      (a) Subject to the following paragraphs, the Plan shall be administered by
the Company's Board of Directors (the "Board") or by a Compensation Committee of
the Board (the "Compensation Committee"). If the Board delegates to the
Compensation Committee the authority to administer the Plan, the Compensation
Committee shall be empowered to take all actions reserved to the Board under the
Plan. The Board is authorized to interpret the Plan, to prescribe, amend and
rescind rules and regulations to further the purposes of the Plan, and to make
all other determinations necessary for the administration of the Plan. All such
actions by the Board shall be conclusive, final and binding on all recipients of
grants hereunder ("participants").

      (b) For so long as the Company's common stock ("Common Stock") is
registered under Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), any Compensation Committee to which Plan administration is
delegated shall consist solely of Board members who qualify as (i) "Non-Employee
Directors" as defined under Rule 16b-3 under the Exchange Act and (ii) "outside
directors" as defined under Section 162(m) or any successor provision of the
Internal Revenue Code of 1986, as amended (the "Code") and applicable Treasury
regulations thereunder, if and to the extent such qualification is necessary so
that grants made under the Plan or the exercise of rights thereunder will
qualify for any tax or other material benefit to participants or the Company and
its subsidiaries under applicable law.

      (c) Notwithstanding the foregoing, the Board may, subject to any
limitations or restrictions the Board may impose from time to time, delegate to
the Chief Executive Officer the authority to administer the Plan, including the
authority to grant Nonqualified Options (as defined in Section 3) to former and
current employees (other than the Chief Executive Officer) of the Company and
its subsidiaries who are not subject, by reason of their position with the
Company or its subsidiaries, to the requirements of Section 16 of the Exchange
Act and who are not expected to be subject to the limitations of Code Section
162(m).

3. Grants.

      Grants under the Plan shall be in the form of "Nonqualified Options"
(options that do not qualify as "incentive stock options" within the meaning of
Code Section 422 or any successor provision). Each grant of a Nonqualified
Option shall be provided for through a "Grant Instrument" (as defined in Section
5).
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4. Shares Subject to the Plan.

      Subject to adjustment as provided in Section 8, the maximum aggregate
number of shares of Common Stock that may be subject to grants made under the
Plan is 1,569,229. The Common Stock to be offered under the Plan shall be
authorized and unissued Common Stock or issued Common Stock that shall have been
reacquired by the Company and held in its treasury. The Common Stock covered by
any unexercised portion of terminated stock options granted under the Plan may
again be subject to new grants under the Plan. In the event the purchase price
of a Nonqualified Option is paid in whole or in part through the delivery of
Common Stock, only the net number of shares of Common Stock issuable in
connection with the exercise of the Nonqualified Option shall be counted against
the number of shares remaining available for grant under the Plan. No
participant shall receive grants in respect of more than 750,000 shares of
Common Stock in any calendar year (subject to adjustment as provided in Section
8).

5. Participants.

            The Board shall determine and designate from time to time those
former and current employees of the Company or its subsidiaries who shall be
granted Nonqualified Options under the Plan and the number of shares of Common
Stock to be covered by each such Nonqualified Option grant; provided, that
grants made under the Plan to former and current employees shall not be in
connection with the offer or sale of securities in a capital-raising
transaction. In making its determinations, the Board shall take into account
such factors as the Board shall deem relevant in connection with accomplishing
the purposes of the Plan. Each grant shall be evidenced by a written
Nonqualified Option agreement or grant form ("Grant Instrument") as the Board
shall approve from time to time.

6. Fair Market Value.

      For all purposes under the Plan, the term "Fair Market Value" shall mean,
as of any applicable date, (i) if the principal securities market on which the
Common Stock is traded is a national securities exchange or The Nasdaq National
Market ("NNM"), the closing price of the Common Stock on such exchange or NNM,
as the case may be, or if no sale of the Common Stock shall have occurred on
such date, on the next preceding date on which there was a reported sale; (ii)
if the Common Stock is not traded on a national securities exchange or NNM, the
closing price on such date as reported by The Nasdaq SmallCap Market, or if no
sale of the Common Stock shall have occurred on such date, on the next preceding
date on which there was a reported sale; (iii) if the principal securities
market on which the Common Stock is traded is not a national securities
exchange, NNM or The Nasdaq SmallCap Market, the average of the bid and asked
prices reported by the National Quotation Bureau, Inc.; (iv) if not reported by
the National Quotation Board, the closing price of a share of Common Stock on
the date of grant as reported on the OTC Bulletin Board; (v) if the price of the
Common Stock is not so reported, the Fair Market Value of the Common Stock as
determined in good faith by the Board.

7. Grants of Options.

      (a) Exercise Price of Nonqualified Options. Nonqualified Options shall be
granted at an exercise price as determined in each case by the Board.


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      (b) Term and Termination of Nonqualified Options. The Board shall
determine the term within which each Nonqualified Option may be exercised, in
whole or in part, provided that such term shall not exceed 10 years from the
date of grant. Unless otherwise determined by the Board, all rights to exercise
Nonqualified Options shall terminate on the scheduled expiration date as set
forth in the applicable Grant Instrument.

      (c) Payment for Shares. Full payment for shares purchased upon exercise of
Nonqualified Options granted under the Plan shall be made at the time the
Nonqualified Options are exercised in whole or in part. Payment of the purchase
price shall be made in cash or in such other form as the Board may approve,
including, without limitation, (i) by the participant's delivery to the Company
of a promissory note containing such terms as the Board may determine, (ii) by
the participant's delivery to the Company of shares of Common Stock that have
been held by the participant for at least six months prior to exercise of the
Nonqualified Options, valued at the Fair Market Value of such shares on the date
of exercise, or (iii) if the Common Stock is publicly traded, pursuant to a
cashless exercise arrangement with a broker on such terms as the Board may
determine; provided, however, that if payment is made pursuant to clause (i),
the then par value of the purchased shares shall be paid in cash if required by
applicable law or otherwise deemed appropriate by the Board. No shares of Common
Stock shall be issued to the participant until such payment has been made, and a
participant shall have none of the rights of a shareholder with respect to
Nonqualified Options held by such participant.

      (d) Other Terms and Conditions. The Board shall have the discretion to
determine terms and conditions, consistent with the Plan, that will be
applicable to Nonqualified Options. Nonqualified Options granted to the same or
different participants, or at the same or different times, need not contain
similar provisions.

8. Adjustments to Reflect Capital Changes.

      The number and kind of shares subject to outstanding Option grants, the
exercise price applicable to Nonqualified Options previously granted, and the
number and kind of shares available subsequently to be granted under the Plan
shall be appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares or other change in capitalization with a
similar substantive effect upon the shares of capital stock subject to the Plan
or to Options granted under the Plan. The Board shall have the sole power and
discretion to determine the nature and amount of the adjustment to be made in
each case. The adjustment so made shall be final and binding on all
participants.

9. Definition of Change of Control.

      For purposes of this Plan, a "Change of Control" shall mean the occurrence
of any of the following events:

      (a) the acquisition, other than solely from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or Section
14(d)(2) of the Exchange Act), other than the Company or an employee benefit
plan of the Company, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 50% of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Voting Securities"); or

      (b) a reorganization, merger, consolidation or recapitalization of the
Company (a "Business Combination"), other than a Business Combination in which
more than 50% of the combined voting power of the outstanding voting securities
of the surviving or resulting entity immediately following the Business


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Combination is held by the persons who, immediately prior to the Business
Combination, were the holders of the Voting Securities; or

      (c) a complete liquidation or dissolution of the Company, or a sale of all
or substantially all of the Company's assets.

10. Consequences of a Change of Control.

      (a) Unless otherwise determined by the Board, immediately prior to a
Change of Control that is, in the Board's determination, primarily for cash, all
outstanding Nonqualified Options which have been granted under the Plan and
which are not exercisable as of the effective date of the Change of Control
shall automatically accelerate and become exercisable upon the effective date of
the Change of Control; provided, that any exercise of such accelerated Options
shall be contingent upon the actual consummation of the Change of Control.

      (b) Unless otherwise determined by the Board, upon a Change of Control
that the Board determines is not primarily for cash as described in subsection
(a) above, each outstanding Nonqualified Option shall be assumed by the
Acquiring Corporation (as defined below) or parent thereof or replaced with a
comparable option or right to purchase shares of the capital stock, or equity
equivalent instrument, of the Acquiring Corporation or parent thereof, or other
comparable rights (such assumed and comparable options and rights, together, the
"Replacement Options"); provided, however, that if the Acquiring Corporation or
parent thereof does not intend to grant Replacement Options, then unless
otherwise determined by the Board all outstanding Nonqualified Options which
have been granted under the Plan and which are not exercisable as of the
effective date of the Change of Control shall automatically accelerate and
become exercisable immediately prior to the effective date of the Change of
Control; provided, that any exercise of such accelerated Options shall be
contingent upon the actual consummation of the Change of Control. The term
"Acquiring Corporation" means the surviving, continuing, successor or purchasing
corporation, as the case may be. Notwithstanding anything in the Plan to the
contrary, the Board shall have discretion, in the applicable Grant Instrument or
an amendment thereof, to provide for the acceleration of Nonqualified Options
upon a Change of Control. The Board may determine in its discretion (but shall
not be obligated to do so) that in lieu of the issuance of Replacement Options,
all holders of outstanding Nonqualified Options which are exercisable
immediately prior to a Change of Control (including those that become
exercisable under Section 10(a) or this Section 10(b)) will be required to
surrender them in exchange for a payment, in cash or Common Stock as determined
by the Board, of an amount equal to the amount (if any) by which the then Fair
Market Value of Common Stock subject to unexercised Nonqualified Options exceeds
the exercise price of those Nonqualified Options, with such payment to take
place as of the date of the Change of Control or such other date as the Board
may prescribe.

      (c) Any Nonqualified Options that are not assumed or replaced by
Replacement Options, exercised or cashed out prior to or concurrent with a
Change of Control will terminate effective upon the Change of Control or at such
other time as the Board deems appropriate, unless otherwise expressly provided
in any applicable Grant Instrument.

      (d) Notwithstanding anything in the Plan to the contrary, in the event of
a Change of Control, no action described in the Plan shall be taken (including,
without limitation, actions described in subsections (a), (b) and (c) above) if
such actions would make the Change of Control ineligible for desired accounting
or tax treatment if, in the absence of such actions, the Change of Control would
qualify for such treatment and the Company intends to use such treatment with
respect to such Change of Control.


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11. Transferability of Options.

      Unless otherwise determined by the Board, Nonqualified Options granted
under the Plan shall not be transferable other than by will or the laws of
descent and distribution and are exercisable during a participant's lifetime
only by the participant.

12. Withholding.

      The Company shall have the right to deduct any taxes required by law to be
withheld in respect of grants under the Plan from amounts paid to a participant
in cash as salary, bonus or other compensation. In the Board's discretion, a
participant may be permitted to elect to have withheld from the shares otherwise
issuable to the participant, or to tender to the Company, a number of shares of
Common Stock the aggregate Fair Market Value of which does not exceed the
minimum required withholding rate for federal (including FICA), state and local
tax liabilities. Any such election must be in a form and manner prescribed by
the Board.

13. Construction of the Plan.

      The validity, construction, interpretation, administration and effect of
the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely by the Board. Any determination by the Board shall be
final and binding on all participants. The Plan shall be governed in accordance
with the laws of the State of Florida, without regard to the conflict of law
provisions of such laws.

14. No Right to Grant; No Right to Employment.

      No person shall have any claim of right to be granted a Nonqualified
Option under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any employee any right to be retained in the employ of the
Company or any of its subsidiaries or as giving any consultant, advisor or
director of the Company or any of its subsidiaries any right to continue to
serve in such capacity.

15. Grants Not Includable for Benefit Purposes.

      Income recognized by a participant pursuant to the provisions of the Plan
shall not be included in the determination of benefits under any employee
pension benefit plan (as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974) or group insurance or other benefit
plans applicable to the participant which are maintained by the Company or any
of its subsidiaries, except as may be provided under the terms of such plans or
determined by resolution of the Board.

16. No Strict Construction.

      No rule of strict construction shall be implied against the Company, the
Board or any other person in the interpretation of any of the terms of the Plan,
any grant made under the Plan or any rule or procedure established by the Board.

17. Captions.

      All Section headings used in the Plan are for convenience only, do not
constitute a part of the Plan, and shall not be deemed to limit, characterize or
affect in any way any provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions had been used in the Plan.


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18. Severability.

      Whenever possible, each provision in the Plan and every grant under the
Plan shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of the Plan or any grant under the Plan
shall be held to be prohibited by or invalid under applicable law, then such
provision shall be deemed amended to accomplish the objectives of the provision
as originally written to the fullest extent permitted by law, and all other
provisions of the Plan and every other grant under the Plan shall remain in full
force and effect.

19. Legends.

      All certificates for Common Stock delivered under the Plan shall be
subject to such transfer and other restrictions as the Board may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange or quotation system upon which the
Common Stock is then listed or quoted and any applicable federal or state
securities laws, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate references to such restrictions.

20. Amendment.

      The Board may, by resolution, amend or revise the Plan, except that such
action shall not be effective without shareholder approval if such shareholder
approval is required to maintain the compliance of the Plan and/or grants made
to directors, executive officers or other persons with Rule 16b-3 promulgated
under the Exchange Act or any successor rule. The Board may not modify any
Nonqualified Options previously granted under the Plan in a manner adverse to
the holders thereof without the consent of such holders, except in accordance
with the provisions of Sections 8, 10 or 21.

21. Modification for Grants Outside the U.S.

      The Board may, without amending the Plan, determine the terms and
conditions applicable to grants of Nonqualified Options to participants who are
foreign nationals or employed outside the United States in a manner otherwise
inconsistent with the Plan if the Board deems such terms and conditions
necessary in order to recognize differences in local law or regulations, tax
policies or customs.

22. Effective Date; Termination of Plan.

      Upon approval by the Company's shareholders, the Plan shall be effective
as of September 7, 2001, the date that the Plan was adopted by the Board. The
Plan shall terminate on September 6, 2011, unless it is earlier terminated by
the Board. Termination of the Plan shall not affect previous grants under the
Plan.


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