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
Filed by the registrant
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 or Rule 14a-12
KATY INDUSTRIES, INC.
(Name of Registrant as Specified in Its Charter)
KATY INDUSTRIES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
X No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
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:
KATY INDUSTRIES, INC.
6300 S. Syracuse Way, Suite 300, Englewood, Colorado 80111
(303) 290-9300
_________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held
On May 19, 1997
To the Shareholders:
The Annual Meeting of Shareholders of Katy Industries, Inc. will be held at
Cheyenne Mountain Conference Center, 3225 Broadmoor Valley Road, Colorado
Springs, Colorado at 11:00 a.m. local time to consider and act upon the
following matters:
1. The election of twelve members of the Board of Directors to serve
for a term of one year.
2. The ratification of the selection by the Board of Directors of the
firm of Deloitte & Touche LLP as independent auditors of Katy
Industries, Inc. for the current year.
3. The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed April 4, 1997 as the record date for
determining shareholders entitled to be notified of and to vote at the meeting.
Whether or not you expect to attend the meeting, you are urged to read the
proxy statement, sign and date the enclosed proxy card and return it promptly in
the enclosed envelope.
By Order of the Board of Directors
Arthur R. Miller
Secretary
April 15, 1997
KATY INDUSTRIES, INC.
6300 S. Syracuse Way, Suite 300, Englewood, Colorado 80111
(303) 290-9300
_________________________________________
PROXY STATEMENT RELATING TO
ANNUAL MEETING OF SHAREHOLDERS
To Be Held
On May 19, 1997
_________________________________________
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies in the accompanying form by the Board of Directors of Katy Industries,
Inc. ("Katy" or the "Company"), for the Annual Meeting of Shareholders to be
held on May 19, 1997 (the "Annual Meeting"). This proxy statement and
accompanying proxy card are being mailed to shareholders commencing on or
about April 15,1997. The Annual Report to Shareholders for the year ended
December 31, 1996 (the "Annual Report"), which includes audited financial
statements of Katy and its consolidated subsidiaries, accompanies this
proxy statement.
PURPOSES OF THE ANNUAL MEETING
Election of Directors
Shareholders entitled to vote will be asked to consider and vote on the
election of twelve members of the Board of Directors to serve for a one year
term. See "Solicitation and Voting Information" and "Election of Directors."
Ratification of Independent Auditors
Shareholders also will be asked to consider and ratify the selection of the
firm of Deloitte & Touche LLP as the Company's independent auditors for the
current year. See "Ratification of Independent Auditors."
Other Business
Shareholders may also be asked to consider and act upon such other matters as
may properly come before the meeting or any adjournment thereof. As of the date
of this proxy statement, the Board of Directors is not aware of any other
matters that will be presented for action at the Annual Meeting other than
those matters described above.
SOLICITATION AND VOTING INFORMATION
Record Date; Outstanding Shares
Shareholders of record at the close of business on April 4, 1997 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, there were outstanding and entitled to vote 8,257,912 shares of the
Company's Common Stock, $1.00 par value per share (the "Common Stock").
Quorum and Voting
The presence in person or by proxy of holders of a majority of the
outstanding shares of Common Stock will constitute a quorum for the Annual
Meeting. Abstentions and "broker non-votes" will be treated as present in
determining whether the quorum requirement is satisfied. A "broker non-vote"
occurs when a broker holding shares for a beneficial owner votes on one proposal
pursuant to discretionary authority or instructions from the beneficial owner,
but does not vote on another proposal because the broker has not received
instructions from the beneficial owner and does not have discretionary power.
Each share of Common Stock is entitled to one vote on each matter to come
before the Annual Meeting. With regard to the election of directors, votes may
be cast in favor or withheld. Directors will be elected by a plurality of the
shares present in person or by proxy and entitled to vote on the election of
directors. "Plurality" means that the individuals who receive the largest
number of votes cast are elected as directors up to the maximum number of
directors to be elected at the Annual Meeting. Consequently, any shares
not voted (whether by abstention, broker non-vote or withholding authority)
have no impact on the election of directors except to the extent the failure
to vote for an individual results in another individual receiving a larger
number of votes.
The other matters identified above which are to be voted upon by shareholders
at the Annual Meeting require for approval the affirmative vote of the holders
of a majority of the shares present and entitled to vote at the meeting,
provided a quorum is present. With respect to such other matters, a
shareholder may (i) vote "For" the matter, (ii) vote "Against" the matter
or (iii) "Abstain" from voting on the matter. A vote to abstain from
voting on such matter has the same effect as of a vote against such matter.
Broker non-votes will be treated as shares which are not present and
entitled to vote with respect to such matters, although they will be counted
for purposes of determining a quorum as described above. Accordingly,
broker non-votes will not be counted in determining the required number of
votes cast with respect to a particular proposal and will have no effect on
the outcome of the voting on such proposal.
Proxies
All shares represented by effective proxies will be voted as specified
therein, or if no direction is indicated, they will be voted "For" the election
of directors nominated by the Board of Directors and "For" the proposal to
ratify the selection of the independent auditors. A shareholder executing
and returning a proxy has the power to revoke it by notice to the Secretary
of the Company prior to the Annual Meeting, by executing and returning a
proxy bearing a later date or by attending the Annual Meeting and voting
in person.
Expenses of soliciting proxies will be borne by the Company. Solicitation
will be by mail except for any incidental solicitation by telephone, telegram
and personal calls by directors, officers and regular employees of the
Company. The Company will also reimburse brokers and certain other persons
for their charges and expenses in forwarding proxy materials to beneficial
owners.
ELECTION OF DIRECTORS
Twelve directors are to be elected at the Annual Meeting, each to serve for
a one year term ending at the time of the 1998 Annual Meeting or until their
successors shall be duly elected and qualified. The persons named in the
accompanying proxy intend to vote the shares represented by the proxy for the
election of the following twelve nominees: William F. Andrews, Amelia M.
Carroll, Daniel B. Carroll, Wallace E. Carroll, Jr., Philip E. Johnson,
Arthur R. Miller, William H. Murphy, John R. Prann, Jr., Lutz R. Raettig,
Charles W. Sahlman, Jacob Saliba and Glenn W. Turcotte. All of the
nominees are currently directors of the Company. For information concerning
these nominees for director, see "Information Concerning Directors and
Executive Officers", "Security Ownership of Management" and "Security
Ownership of Certain Beneficial Owners". All of the nominees have indicated
their willingness to serve as directors.
IT IS THE INTENTION OF THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY TO VOTE
"FOR" THE ELECTION OF THE TWELVE NOMINEES FOR DIRECTOR INDICATED ABOVE. IF ANY
NOMINEE BECOMES UNAVAILABLE TO SERVE FOR ANY REASON, THE PROXY WILL BE VOTED FOR
A PERSON OR PERSONS TO BE SELECTED BY THE BOARD OF DIRECTORS. PROXIES CANNOT BE
VOTED FOR A NUMBER OF NOMINEES GREATER THAN THE TWELVE PERSONS NOMINATED BY THE
BOARD OF DIRECTORS.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met ten times during 1996. Each director, other than
Lutz R. Raettig, then in office attended at least 75% of those meetings and of
the meetings of the committees of the Board of which he is a member. The
Company's By-laws provide for an Executive Committee to which the Board of
Directors has assigned all powers delegable by law. The Executive Committee met
two times during 1996, met informally throughout the year, held numerous
telephone conferences at intervals between meetings of the full Board of
Directors and acted by unanimous consent without formal meetings. The Executive
Committee presently consists of Wallace E. Carroll, Jr., Chairman, Philip E.
Johnson, Arthur R. Miller, William H. Murphy, John R. Prann, Jr., Charles W.
Sahlman and Jacob Saliba. The Board of Directors also has an Audit Committee
and a Compensation Committee. The Audit Committee presently consists of
William H. Murphy, Chairman, Charles W. Sahlman and William F. Andrews.
This Committee met three times during 1996, met informally throughout the
year and held numerous telephone conferences during 1996. The Audit
Committee reviews the results of the annual audit with the Company's
independent auditors, reviews the scope and adequacy of the Company's
internal auditing procedures and its system of internal controls, reviews
the Company's financial statements, and reports its findings and
recommendations to the Board of Directors. The Compensation Committee
presently consists of Charles W. Sahlman, Chairman, William F. Andrews and
William H. Murphy. This Committee, which reviews current and deferred
compensation of all officers of the Company and for certain officers and key
employees of its subsidiaries, held two meetings, met informally throughout the
year and held numerous telephone conferences during 1996. The entire Board of
Directors considers and selects nominees for director and does not maintain a
separate nominating committee. On January 17, 1996, Katy's Board of Directors
adopted an advance notice bylaw provision requiring shareholder nominations of
directors to be received by the Company not less than 50 days nor more than 90
days prior to the annual meeting. No such shareholder nominations were received
by the Company for the 1997 Annual Meeting.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of April 15, 1997 with respect
to those persons who are presently executive officers, directors or nominees for
director of Katy. Each officer holds office until the next Annual Meeting of
Shareholders:
<TABLE>
<CAPTION>
Principal Occupation Period of
and Business Service
Experience During Other as Katy
Name Age the Past Five Years Directorships Director
<S> <C> <C> <C> <C>
William F. Andrews 65 1995 to present: Johnson 1991 to
Chairman of Schrader Controls present
Inc., a manufacturer Navistar
of automotive and Southern New
industrial valves England Tele-
1995 to present: communications
Chairman of Sewell Corporation
Fasteners, a Corrections Corp.
manufacturer of of America
apparel and Northwestern
industrial fasteners Steel & Wire Co.
1993 to 1995: Black Box Corp.
Chairman and CEO of Process
Amdura Corp. and Technology
Utica Corp., Holding, Inc.
manufacturers of
metal shears, waste
balers, compactors,
and lifting equipment
1990 to 1993:
President and CEO of
UNR Industries, a
steel products firm
Amelia M. Carroll 55 1991 to present: 1996 to
Investor present
Daniel B. Carroll 61 1985 to present: ATP 1994 to
Vice President Sales Manufacturing, present
ATP Manufacturing, LLC
LLC, a manufacturer Newgrange, LLC
of molded poly-
urethane components
Wallace E. Carroll, Jr. 59 1992 to present: 1991 to
Chairman of CRL, present
Inc., a diversified
holding company
1987 to present:
Investor
Philip E. Johnson 49 1994 to present: OEA, Inc. 1990 to
Chairman of the present
Board of Katy
1993 to present:
Partner with
Bennington, Johnson,
and Reeve, PC,
attorneys at law
1980 to 1993:
Partner with Mosley,
Wells, Johnson and
Ruttum, PC,
attorneys at law
Arthur R. Miller 46 1988 to present: Schoen & Cie, AG 1988 to
Partner with Holleb CRL,Inc. present
& Coff, attorneys
at law
William H. Murphy 65 1992 to present: 1979 to
Retired present
1988 to 1992:
President of Katy
John R. Prann, Jr. 46 1993 to present: 1994 to
President, Chief present
Executive Officer
and Chief Operating
Officer of Katy
1992 to 1994:
President of CRL,
Inc., a diversified
holding company
Lutz R. Raettig 54 1995 to present: Schoen & Cie, AG 1991 to
Chairman, Management present
Board, Morgan Stanley
Bank AG, Frankfurt,
Germany
1988 to 1995:
Various executive
positions with
Commerzbank, AG,
Frankfurt, Germany
Charles W. Sahlman 70 1987 to present: 1972 to
President, Bee Gee present
Holding Company, Inc.,
a holding company for
subsidiaries engaged
in the harvesting and
processing of seafood
Jacob Saliba 83 1993 to present: Schoen & Cie, AG 1968 to
Retired Syratech Corp. present
1988 to 1993: Emerging Germany
Chairman of the Board Fund
and Chief Executive
Officer of Katy
Glenn W. Turcotte 56 1992 to present: 1995 to
Executive Vice present
President of Katy
1983 to present:
President of Glit
Division of Hallmark
Holdings, Inc., a
subsidiary of Katy
Robert M. Baratta 67 1995 to present:
Executive Vice
President of Katy
1993 to 1995:
Vice President of Katy
1990 to present:
President of Katy
Seghers, Inc. and
Savannah Energy
Systems Company,
subsidiaries of Katy
Michael G. Gordono, Jr. 57 1996 to present:
Group Vice President,
Finance of Katy
1993 to 1996:
Vice President of Katy
1987 to 1993:
President of Beehive, Inc.,
a subsidiary of Katy
Peter S. More 59 1996 to present:
Group Vice President,
Finance of Katy
1988 to 1996:
Vice President of Glit
Division of Hallmark
Holdings, Inc., a
subsidiary of Katy
Stephen P. Nicholson 44 1996 to present:
Vice President, Finance
and Chief Financial
Officer of Katy
1996:
Treasurer and Chief
Financial Officer of
Katy
1994 to 1995:
Vice President and
Chief Financial
Officer of Gerrity Oil
and Gas Corp.
1979 to 1994:
Various financial
positions of Total
Petroleum (N.A.) Ltd.,
most recently, Vice
President and Treasurer
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 4, 1997, the number of shares of
Common Stock of Katy beneficially owned by all directors individually, each of
the named executive officers listed in the "Summary of Cash and Certain Other
Compensation" table and by all directors and executive officers as a group.
Unless otherwise indicated, the nature of beneficial ownership is that of sole
voting power and sole investment power.
Amount and
Nature of Percent
Beneficial of
Name Ownership Class
William F. Andrews 7,000 (1) *
Amelia M. Carroll 3,219,977 (1)(2)(3) 39.0%
Daniel B. Carroll 7,000 (1) *
Wallace E. Carroll, Jr. 3,228,661 (1)(2)(3) 39.1%
Philip E. Johnson 82,389 (1)(2)(4) 1.0%
Arthur R. Miller 3,338,886 (2)(5) 40.5%
William H. Murphy 8,600 (1) *
John R. Prann, Jr. 49,285 *
Lutz R. Raettig 7,000 (1) *
Charles W. Sahlman 7,000 (1) *
Jacob Saliba 10,216 (1) *
Glenn W. Turcotte 26,300 *
Robert M. Baratta 17,852 *
Michael G. Gordono 12,923 *
Peter S. More 10,942 *
Stephen P. Nicholson 9,571 *
All directors and
executive officers of
Katy as a group (16
persons) 4,997,768 (1)(2) 48.2%
* Indicates 1% or less
(1) Includes currently exercisable nonqualified stock options to acquire 4,000
(2,000 for Amelia M. Carroll) shares granted to each nonemployee director
pursuant to the Katy Industries, Inc. Nonemployee Director Stock Option
Plan.
(2) Includes shares deemed beneficially owned by Wallace E. Carroll Jr., Amelia
M. Carroll, Philip E. Johnson, and Arthur R. Miller as a result of their
position as trustees of certain trusts for the benefit of members of the
Wallace E. Carroll family. (See Notes 4 and 5 below and "Security Ownership
of Certain Beneficial Owners".) Amounts shown for Amelia M. Carroll,
Wallace E. Carroll, Jr., Philip E. Johnson, and Arthur R. Miller reflect
multiple counting of shares where more than one of such persons is a trustee
of a particular trust and is required to report beneficial ownership of
shares held by such trust. Amounts shown for all directors and executive
officers as a group do not, however, reflect multiple counting of such
shares.
(3) See notes (2) and (3) under "Security Ownership of Certain Beneficial
Owners" for information concerning the beneficial ownership of shares by
Wallace E. Carroll, Jr. and Amelia M. Carroll, respectively.
(4) Philip E. Johnson holds 11,321 shares directly and options to acquire 4,000
shares exercisable within 60 days. Mr. Johnson is a trustee of trusts for
the benefit of his former wife, Lelia Carroll and their descendants holding
65,294 shares in the aggregate. Mr. Johnson is also a trustee of trusts for
the benefit of Wallace E. Carroll, Jr. and his descendants holding 1,774
shares in the aggregate.
(5) Arthur R. Miller holds 15,500 shares directly and options to acquire 5,750
shares exercisable within 60 days. Mr. Miller is a trustee of trusts for
the benefit of Wallace E. Carroll, Jr. and his descendants holding 710,647
shares in the aggregate. Certain of such trusts are shareholders of CRL,
Inc. and may be deemed to beneficially own 2,073,436 shares held by CRL,
Inc. Mr. Miller is also a trustee of trusts for the benefit of Denis H.
Carroll and his descendants holding 471,496 shares in the aggregate. Mr.
Miller is also a trustee of trusts for the benefit of Lelia Carroll and her
descendants holding 60,000 shares in the aggregate. Mr. Miller is a
co-trustee of The Holden Foundation which holds 2,057 shares. Mr. Miller
disclaims beneficial ownership of all shares beneficially owned by the
trusts and foundation described above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table and notes set forth as of April 4, 1997, certain
information regarding the beneficial ownership of those persons or entities,
including certain members of the family of Wallace E. Carroll, former Chairman
of the Board of Katy, since deceased (the "Carroll Family"), and related persons
and entities, who are known to be the beneficial owners of more than five
percent (5%) of the Common Stock of Katy. Reference should be made to the
notes below for a description of the nature of the beneficial ownership
reported in the table below.
Amount and Nature Percent
Name and Address of Beneficial of
Of Beneficial Owner Ownership Notes Class
Wallace E. Carroll, Jr. and
the WEC Jr. Trusts
c/o CRL, Inc.
6300 S. Syracuse Way, Suite 300
Englewood, CO 80111 3,228,661 (1)(2) 39.1%
Amelia M. Carroll and the
WEC Jr. Trusts
c/o CRL, Inc.
6300 S. Syracuse Way, Suite 300
Englewood, CO 80111 3,219,977 (1)(3) 39.0%
Denis H. Carroll and
the DHC Trusts
c/o CRL Industries, Inc.
2345 Waukegan Road,
Suite S-200
Bannockburn, IL 60015 581,246 (1)(4) 7.0%
Gabelli Funds, Inc.
One Corporate Center
Rye, NY 10580-1434 1,639,700 (5) 19.7%
(1) Wallace E. Carroll, Jr., Denis H. Carroll, Barry J. Carroll and Lelia
Carroll are the four children of Wallace E. Carroll and Lelia H. Carroll.
Wallace E. Carroll, Jr. is a director of Katy. Daniel B. Carroll, who is
also a director of Katy, is the first cousin of each of the four children
of Wallace E. Carroll and Lelia H. Carroll. Amelia M. Carroll is the spouse
of Wallace E. Carroll, Jr. In February 1996, members of the Carroll Family
completed a reorganization of their jointly held family assets. The
reorganization resulted in, among other things, the individual reallocation
of Katy shares formerly jointly held by members of the Carroll Family. The
amounts shown above for members of the Carroll Family give effect to the
reorganization. The amounts shown above, except for Wallace E. Carroll, Jr.
and Amelia M. Carroll who are spouses, do not reflect any multiple counting
of shares.
(2) Wallace E. Carroll, Jr. directly holds 396,939 shares and options to acquire
4,000 shares exercisable within 60 days. Wallace E. Carroll, Jr. is a
trustee of trusts for his benefit and his descendants (the "WEC Jr. Trusts")
which collectively hold 710,647 shares. Wallace E. Carroll, Jr. and certain
of the WEC Jr. Trusts own all of the outstanding shares of CRL, Inc. which
holds 2,073,436 Katy shares. Wallace E. Carroll, Jr. also is a trustee of
the Wallace Foundation which holds 32,910 shares. Shares reported as
beneficially owned by Wallace E. Carroll, Jr. also include 8,729 shares and
options to acquire 2,000 shares exercisable within 60 days directly owned
by Mr. Carroll's wife, Amelia M. Carroll.
(3) Amelia M. Carroll directly holds 8,729 shares and options to acquire 2,000
shares exercisable within 60 days. Amelia M. Carroll is a trustee for the
benefit of her spouse, Wallace E. Carroll, Jr., and his descendants (the
"WEC Jr. Trusts") which collectively hold 708,873 shares. Wallace E.
Carroll, Jr. and certain of the WEC Jr. Trusts own all of the outstanding
shares of CRL, Inc. which holds 2,073,436 shares. Amelia M. Carroll is also
trustee of trusts for the benefit of Lelia Carroll and her descendants
holding 26,000 shares in the aggregate. Shares reported as beneficially
owned by Amelia M. Carroll also include 396,939 shares and options to
acquire 4,000 shares exercisable within 60 days directly owned by Wallace
E. Carroll, Jr.
(4) Denis H. Carroll holds 7,898 shares directly. Denis H. Carroll is a trustee
of trusts for his benefit and his descendants (the "DHC Trusts") which
collectively hold 471,496 shares. Denis H. Carroll is also the general
partner of the DHC Partnership Ltd., which holds 21,076 shares and is a
trustee of The Holden Foundation which holds 2,057 shares.
(5) Beneficial ownership is as reported on Amendment No. 21 to Statement on
Schedule 13D dated April 2, 1997 filed by the Gabelli Funds, Inc. and
related parties.
Compliance with Section 16
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires Katy's directors, executive officers and persons who
beneficially own greater than 10% of Katy's Common Stock to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"), and copies of such reports with the New York
Stock Exchange and Katy. Based solely upon its review of copies of the
Section 16 reports, the Company believes that during its fiscal year ended
December 31, 1996, all of its directors, executive officers and greater than
10% beneficial owners were in compliance with their Section 16 filing
requirements.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table shows, for the years ending December 31, 1996, 1995 and
1994, the cash compensation paid by Katy and its subsidiaries, as well as
certain other compensation paid or accrued for those years, to Katy's
current Chief Executive Officer and the four other most highly compensated
executive officers ("Named Executive Officers").
<TABLE>
<CAPTION>
Other Securities All
Name and Annual Underlying Other
Principal Position Year Salary Bonus (a) Compensation(b) Options Compensation (c)
<S> <C> <C> <C> <C> <C> <C>
John R. Prann, Jr.(d) 1996 $315,000 $274,050 $30,192 42,000 $8,695
President, Chief 1995 275,400 165,000 22,600 43,000 8,412
Executive Officer 1994 159,786 35,000 49,200 - 8,768
and Chief Operating
Officer
Glenn W. Turcotte 1996 240,000 167,040 23,003 22,500 9,156
Executive Vice 1995 215,000 103,200 17,650 23,000 3,200
President 1994 195,000 104,000 26,240 - 2,663
Robert M. Baratta 1996 200,000 121,800 31,485 16,500 9,193
Executive Vice 1995 175,000 73,500 14,380 15,000 7,916
President 1994 175,000 16,000 16,400 - 9,981
Stephen P. Nicholson 1996 118,820 72,361 21,462 9,750 4,446
Vice President,
Finance and Chief
Financial Officer
Peter S. More 1996 112,000 58,464 32,510 9,750 5,448
Group Vice 1995 106,000 12,428 - 6,500 5,448
President, Finance 1994 85,000 16,000 - - 1,700
</Table)
(a) Bonuses for 1996 for the above executives were paid in 75% cash and 25%
Company common stock. The common stock portion of the bonuses was based
on the average stock price ($13.6875) on February 20, 1997. Under this
arrangement, the following shares of common stock was granted in lieu of
cash: John R. Prann, Jr., 5,005 shares; Glenn W. Turcotte, 3,050 shares;
Robert M. Baratta, 2,224 shares; Stephen P. Nicholson, 1,321 shares; and
Peter S. More, 1,067 shares.
(b) Included in 1996 and 1995 is the dollar value set aside for the Katy
Industries, Inc. Supplemental Retirement and Deferral Plan. For Robert M.
Baratta, Stephen P. Nicholson, and Peter S. More, the year 1996 also
includes the dollar value of the difference between the price paid for
shares of Common Stock pursuant to the Katy Industries, Inc. 1994 Key
Employee and Director Stock Purchase Plan and the fair market value of
such shares on the date of purchase. For John R. Prann, Jr., Glenn W.
Turcotte, and Robert M. Baratta, the year 1994 includes the dollar value
of the difference between the price paid for shares of Common Stock
pursuant to the Katy Industries, Inc. 1994 Key Employee and Director Stock
Purchase Plan and the fair market value of such shares on the date of
purchase.
(c) Includes non-cash compensation consisting of personal use of corporate
automobiles, club dues and medical expenses. To the extent used, such
benefits are treated as additional wages for withholding and income tax
purposes.
(d) John R. Prann, Jr. commenced employment on April 14, 1993. For 1994, John
R. Prann, Jr.'s salary and bonus were paid by CRL, Inc., a diversified
holding company owned by members of the Carroll Family, for which Mr.
Prann previously served as President until December 31, 1994. All such
amounts paid by CRL, Inc. to Mr. Prann for his services as an executive
officer of Katy were reimbursed to CRL, Inc. by Katy.
Option Grants Table
The following table sets forth information concerning individual grants of
stock options during 1996 to the Named Executive Officers.
</TABLE>
<TABLE>
<CAPTION>
Number of % of Total Potential Realized
Securities Options Value at assumed
Underlying Granted to Exercise Annual Rates of Stock
Options Employees or Base Expiration Price Appreciation
Name Granted (1) in Fiscal Year Price Date For Option Term
5% 10%
<S> <C> <C> <C> <C> <C> <C>
John R. Prann, Jr. 42,000 14.7% $13.19 12/09/06 348,395 882,901
Glenn W. Turcotte 22,500 7.9 13.19 12/09/06 186,640 472,983
Robert M. Baratta 16,500 5.8 13.19 12/09/06 136,869 346,854
Stephen P. Nicholson 9,750 3.4 13.19 12/09/06 80,877 204,959
Peter S. More 9,750 3.4 13.19 12/09/06 80,877 204,959
</TABLE>
(1) Options granted vest 25% per year commencing on the first anniversary of the
date of grant.
The following table sets forth the value of in-the-money options at year-end.
No options have been exercised as of December 31, 1996.
Aggregate Fiscal Year-End Option Values
Number of
Securities Value of
Underlying In-the-Money
Options at Options at
Year End Year End
Exercisable Unexercisable Exercisable Unexercisable
Name
John R. Prann, Jr. 10,750 74,250 $59,250 $232,770
Glenn W. Turcotte 5,750 39,750 31,688 124,538
Robert M. Baratta 3,750 27,750 20,438 82,928
Stephen P. Nicholson 0 9,750 0 12,773
Peter S. More 1,625 14,625 8,531 38,366
Supplemental Retirement and Deferral Plan
On April 21, 1995, the Board of Directors approved the Katy Industries, Inc.
Supplemental Retirement and Deferral Plan (the "Supplemental Plan"). Among
other things, the Supplemental Plan allocated among select participants a
portion of $2.5 million retirement accrual recorded on the books of the Company.
The allocation was completed considering past service, salary at December 31,
1994 and prior retirement benefits, with a stated minimum dollar amount
allocated to each participant. These prior service allocations earn interest at
a rate of 4% per year and will be paid out on the later of the participant's
retirement or upon reaching age sixty-two (62). At such time, the amount
allocated to a participant will be paid out in five (5) relatively equal annual
installments. The entire allocation is subject to a lump sum payout upon a
participant's death or permanent disability. Amounts allocated to each of the
named executive officers as of December 31, 1996 are as follows: John R. Prann,
Jr., $39,398; Glenn W. Turcotte, $448,159; Robert M. Baratta, $111,302;
Michael G. Gordono, Jr., $276,776; and Peter S. More, $88,400.
Severance Agreements
On January 17, 1996, the Board of Directors adopted and approved a
compensation and benefits assurance program for six of Katy's key officers. The
program became effective January 1, 1996 and generally provides for certain
severance benefits following an involuntary termination without cause that
occurs within two years following a "Change in Control" of the Company or
following a deemed constructive termination that occurs within two years
following a "Change in Control" of the Company. A "Change in Control" is
defined as follows: (i) if any person (other than those persons in control on
the effective date) becomes the beneficial owner of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding shares; (ii) if during any period of two consecutive years,
individuals who, at the beginning of such period constitute the Board, cease to
constitute a majority thereof; or (iii) if the shareholders of the Company
approve (a) a plan of liquidation of the Company, (b) an agreement for the sale
or disposition of substantially all of the Company's assets, or (c) a merger,
consolidation, or reorganization of the Company. Severance benefits payable
include either three years base salary in the case of Tier I participants
(John R. Prann, Jr., Glenn W. Turcotte, and Robert M. Baratta) or two years
base salary in the case of Tier II participants (Michael G. Gordono,
Peter S. More, and Stephen P. Nicholson). Severance benefits also include a
lump sum payment of annual bonuses, continuation of health care benefits,
three years matching contributions under the Company's 401(k) savings plan
(two years in the case of Tier II participants), advancement of legal fees
incurred in enforcing rights under the program, out-placement assistance and
a "gross-up" payment for any excise tax payments due by the officer as a
result of receipt of the forgoing severance benefits.
Compensation of Directors
For 1996, Directors who are not employees of Katy or its subsidiaries received
an annual retainer of $12,000 and an option to acquire 2,000 shares of Katy
common stock for service on the Board of Directors and up to $2,000 for
attendance at each meeting of the Board or a committee thereof. For 1997,
Directors will receive an annual retainer of $9,000, an option to acquire 2,000
shares of Katy common stock, and a stock grant of 500 shares of Katy common
stock per annum and up to $2,000 for attendance at each meeting. Directors who
are officers are not separately compensated as directors.
During 1996, Wallace E. Carroll, Jr., Philip E. Johnson and Arthur R. Miller
purchased shares of Katy common stock under the Katy Industries, Inc. 1994 Key
Employee and Director Stock Purchase Plan. In accordance with the plan, Mr.
Miller purchased 5,000 shares at a cost of 65% of the market value on the date
of grant and Mr. Johnson and Mr. Carroll each purchased 3,000 at a cost of 50%
of the market value on the date of grant. These individuals obtained loans from
the Company for the purchase of such shares.
During 1996, Jacob Saliba was paid $3,500 for appearing as a witness for a
legal matter relating to the Company. In accordance with a retirement
agreement, the Company provided medical insurance benefits in the amount of
$7,800 to William H. Murphy.
Philip E. Johnson, Chairman of the Board of Directors, receives annual
compensation of $100,000 for his services as Chairman. Mr. Johnson does not
receive an additional annual retainer or fees for attending meetings. Mr.
Johnson also receives an automobile allowance during his term as Chairman.
On April 21, 1995, the Board of Directors adopted the Directors' Deferred
Compensation Plan effective June 1, 1995 (the "Directors' Deferred Compensation
Plan"). Pursuant to the Directors' Deferred Compensation Plan all directors'
fees, retainers and other compensation paid for services as a director may be
deferred until the respective director's attainment of age 62 or termination of
service as a director for any reason, whichever is later. Deferred amounts may
be invested in one or more investment alternatives offered by the Company.
Distributions of deferred amounts may be made at the election of the director in
lump sum or in five annual installments. Each director is given a thirty (30)
day period prior to the beginning of a plan year during which an election must
be made to participate in the Directors' Deferred Compensation Plan.
Under the Katy Industries, Inc. Nonemployee Director Stock Option Plan (the
"Directors' Stock Option Plan"), each individual who was a nonemployee director
on May 17, 1996, other than Arthur R. Miller, received an option to purchase
2,000 shares of the Company's common stock at a price of $13.57 per share. Mr.
Miller is a designated participant in the Katy Industries, Inc. Long-Term
Incentive Plan and received an option on December 9, 1996 to acquire 22,500
shares at a price of $13.19 per share under such plan in 1996. Amelia M.
Carroll received an option on July 30, 1996 (corresponding to the date Mrs.
Carroll became a director) to purchase 2,000 shares at a price of $12.69 per
share. Under the terms of the Directors' Stock Option Plan, each nonemployee
director receives an annual grant of an option to acquire 2,000 shares on the
date immediately following the annual meeting. The exercise price is the fair
market value on the date of grant. These options are exercisable at any time
during a ten year period from the date of grant.
BOARD OF DIRECTORS' COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") presents the following report on executive compensation:
The Compensation Committee presently consists of Charles W. Sahlman, Chairman,
William F. Andrews and William H. Murphy. The Compensation Committee makes
decisions on executive officer compensation and reports its decisions to the
Board of Directors. The Compensation Committee also seeks approval of the Board
of Directors on all aspects of compensation for the Chief Executive Officer
("CEO").
Compensation Philosophy
The goals of the Company's compensation program are to align the economic
interest of executive officers with those of shareholders, including Company
financial objectives and market performance. The Compensation Committee seeks
to adjust compensation levels, through competitive base salaries and bonus
payments, based on individual and Company performance. The Compensation
Committee reviews the executive compensation program annually in view of the
Company's annual strategic and financial objectives and performance.
Compensation Program Components
Annual compensation for the Company's CEO and executive officers, including
the Named Executive Officers consists of two primary elements, base salary and
annual cash bonuses. Salary and bonus levels reflect job responsibility,
seniority, Compensation Committee judgments of individual effort and performance
and the Company's financial and market performance, in light of the competitive
environment in which the Company operates.
Annual cash compensation is also influenced by the compensation practices of
comparable companies so that the Company remains reasonably competitive in the
market. While competitive pay practices are viewed as important, the
Compensation Committee believes that the most important considerations in
setting annual compensation are individual merit and the Company's financial and
market performance. In considering the Company's financial and market
performance, the Compensation Committee reviews, among other things, net income,
cash flow, working capital and revenues of the Company and share price
performance relative to comparable companies and historical performance.
In late 1994, the Company engaged an independent consulting firm to advise the
Company on executive compensation issues. Based in part upon recommendations of
the consultant, in April 1995, the Compensation Committee approved, and the
Board of Directors thereafter approved and adopted, three new programs of
compensation for key management. These programs include an Annual Bonus Plan,
a Long-Term Incentive Plan and a Supplemental Retirement and Deferral Plan.
The Annual Bonus Plan, which was effective as of January 1, 1995, establishes
target bonus opportunities stated as a percentage of annual base salary for
recommended key employees each year, including the CEO and the Named Executive
Officers. If 100% of pre-established performance goals are met, the target
bonus opportunity will be achieved by the employee. A higher or lower bonus
can be earned if performance exceeds or falls short of targeted levels. The
performance goals for 1997 are based on two financial measures for each
division and for corporate: operating income (with a 60% weighting) and cash
flow (with a 40% weighting).
The Long-Term Incentive Plan allows the Compensation Committee to provide
equity-based compensation (including stock options, restricted stock awards and
stock appreciation rights) as a third element of the Company's annual
compensation program. The Compensation Committee believes the Long-Term
Incentive Plan enables the Company to more closely align management compensation
with stockholder interests.
The Supplemental Retirement and Deferral Plan, among other things, allows
participants to voluntarily defer up to 100% of their annual bonus and up to 50%
of their base salary until retirement or employment termination. The
Supplemental Plan allows the Company to make a profit sharing allocation to all
accounts of participants in an aggregate amount equal to two percent (2%) of
adjusted pre-tax income, as determined by the Compensation Committee. Voluntary
deferrals and profit sharing allocations are invested at the election of the
employee in four investment alternatives offered by the Company.
Chief Executive Officer Compensation
John R. Prann, Jr. became President in April 1993 and CEO in December 1993.
Mr. Prann's salary and bonus for 1996 were based upon his experience and
qualifications, responsibilities, individual effort and performance and the
Company's performance. Mr. Prann's 1996 bonus was paid pursuant to the terms of
the Annual Bonus Plan as described above. The Compensation Committee also
awarded Mr. Prann stock options described above during 1996 which the
Compensation Committee believes is commensurate with Mr. Prann's performance and
the Company's financial performance in 1996.
Summary
The Compensation Committee believes that the total compensation program for
executive officers of the Company is appropriately related to individual
performance and Katy's performance, including financial results of Katy and
shareholder value. The Compensation Committee monitors the executive
compensation of comparable companies and believes Katy's compensation program is
competitive and provides appropriate incentives for Katy's executive officers to
work towards continued improvement in Katy's overall performance.
Compensation Committee of the Board of Directors:
Charles W. Sahlman, Chairman
William F. Andrews
William H. Murphy
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following is a description of certain relationships that exist with regard
to certain members of the Compensation Committee and certain of Katy's executive
officers who also serve or served as executive officers of, or transacted
business with, Katy, its subsidiaries or certain related entities.
The current members of the Compensation Committee are Charles W. Sahlman,
William F. Andrews and William H. Murphy.
During 1996, Charles W. Sahlman served as President of Bee Gee Holdings, Inc.
("Bee Gee") (a 39% owned Katy subsidiary) and as President of C.E.G.F. (USA),
Inc. ("C.E.G.F.") which became a 95% owned Katy subsidiary in March 1994. Mr.
Sahlman resigned his position as President of C.E.G.F. in April 1996. Mr.
Sahlman is also a former Executive Vice President of Katy.
William H. Murphy was President, Chief Operating Officer and Chief Financial
Officer of Katy through the year ended December 31, 1992.
John R. Prann, Jr., Katy's President, Chief Executive Officer and Chief
Operating Officer, served as President of CRL, Inc., which is wholly owned by
Wallace E. Carroll, Jr. and the WEC Jr. Trusts, until December 31, 1994 and as
director of CRL until January 31, 1995. Wallace E. Carroll, Jr., a director of
Katy, also serves as Chairman and Vice President of CRL.
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the yearly percentage change in the cumulative total
stockholder return on the Company's Common Stock with the cumulative total
return of the Dow Jones Industrial Average and the cumulative total return of
the Dow Jones Conglomerates Index for the fiscal years ending December 31, 1991
through 1996. The graph below assumes $100 invested on December 31, 1991.
Comparison Of 5-Year Cumulative Total Return
1991 1992 1993 1994 1995 1996
Katy Industries, Inc. 100 115 146 112 126 201
Dow Jones Industrial Average 100 107 126 132 181 232
Russell 2000 100 119 141 139 178 207
Dow Jones Conglomerates 100 116 148 147 211 296
S&P Manufacturing Diversified 100 108 132 136 192 264
For the 1997 proxy statement, the Company has changed the broad market index
to the Russell 2000 and the peer index to the Standard and Poor's Manufacturing
(Diversified). The Company believes these indexes provide a more meaningful
comparison of the Company's stock performance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Arthur R. Miller, general counsel and a director of Katy, is a partner in the
Chicago law firm of Holleb & Coff which acted as counsel to Katy and its
subsidiaries during 1996 and continues to serve in such capacity. During 1996,
Katy paid $950,406 in legal fees to Holleb & Coff which included fees for Mr.
Miller's service as general counsel.
Philip E. Johnson, Chairman of the Board of Directors of Katy, is a partner
in the Denver law firm of Bennington, Johnson & Reeve, PC which acted as counsel
to Katy and its subsidiaries during 1996. During 1996, Katy paid $85,593 in
legal fees to Bennington, Johnson & Reeve, PC.
John R. Prann, Jr., the Company's President, Chief Executive Officer and Chief
Operating Officer is a participant in the Katy Industries, Inc.1994 Key Employee
and Director Stock Purchase Plan. Pursuant to the terms of such plan, Mr. Prann
obtained a loan from the Company in the amount of $97,050 in connection with his
purchase of shares of the Company's Common Stock under the plan in September
1994. Such loan bears interest at the applicable federal short-term rate,
payable semi-annually and adjusted semi-annually.
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP to audit the
accounts of the Company for the current fiscal year. Deloitte & Touche LLP was
the firm of independent auditors selected by the Board of Directors to audit the
accounts of the Company for the 1996 and 1995 fiscal years. Deloitte & Touche
LLP, which has no other relationship with the Company,also serves as independent
auditors for other corporations owned by Carroll Family interests. It is
intended that the shares represented by proxies will be voted FOR the
ratification of the selection of Deloitte & Touche LLP unless otherwise
specified in the space provided in the proxy. In the event that the
shareholders fail to ratify the selection of Deloitte & Touche LLP as
independent auditors of the Company for the current year, the Board of Directors
would reconsider such selection.
A representative of Deloitte & Touche LLP is expected to be present at the
Annual Meeting, with the opportunity to make a statement if so desired and to
answer appropriate questions from the floor.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors does not know
of any matters to be presented to the meeting other than the election of
directors and the ratification of independent auditors. However, if other
matters come before the meeting, it is the intention of the persons named on the
accompanying proxy to vote on such matters in accordance with their best
judgment. On January 17, 1996, Katy's Board of Directors adopted an advance
notice bylaw provision requiring that shareholder proposals to be made at any
annual meeting be received by the Company not less than 50 days nor more than 90
days prior to the Annual Meeting. No such shareholder proposals were received
for the 1997 Annual Meeting.
PROPOSALS OF SHAREHOLDERS FOR 1998 ANNUAL MEETING
Proposals which shareholders intend to present for inclusion in the Proxy
Statement for the 1998 Annual Meeting of Shareholders must be received by the
Secretary of the Company at its executive offices, 6300 S. Syracuse Way, Suite
300, Englewood, Colorado 80111,not less than 50 days nor more than 90 days prior
to the 1998 Annual Meeting to be considered for inclusion in the proxy materials
for the 1998 Annual Meeting.
By Order of the Board of Directors
KATY INDUSTRIES, INC.
Arthur R. Miller
Secretary
April 15, 1997<PAGE>
