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 [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for use of the Commission only (as permitted
by rule 14a-6(e)(2)).
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KATY INDUSTRIES, INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) 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 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(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 STOCKHOLDERS
To Be Held
On May 19, 1999
To the Stockholders:
The Annual Meeting of Stockholders of Katy Industries, Inc. will be held
at The Metropolitan Club, 7800 E. Orchard Road, Greenwood Village, Colorado at
10:00 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 Arthur Andersen 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 2, 1999 as the record date for
determining stockholders 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
/S/ Arthur R. Miller
----------------------------
Arthur R. Miller
Secretary
April 12, 1999
THIS PAGE
INTENTIONALLY
LEFT BLANK
KATY INDUSTRIES, INC.
6300 S. Syracuse Way, Suite 300, Englewood, Colorado 80111
(303) 290-9300
_________________________________________
PROXY STATEMENT RELATING TO
ANNUAL MEETING OF STOCKHOLDERS
To Be Held
On May 19, 1999
_________________________________________
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 Stockholders to be
held on May 19, 1999 (the "Annual Meeting"). This proxy statement and
accompanying proxy card are being mailed to stockholders commencing on or
about April 12, 1999. The Annual Report to Stockholders for the year ended
December 31, 1998 (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
Stockholders 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
Stockholders also will be asked to consider and ratify the selection of
the firm of Arthur Andersen LLP as the Company's independent auditors for the
current year. See "Ratification of Independent Auditors."
OTHER BUSINESS
Stockholders 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
Stockholders of record at the close of business on April 2, 1999 (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 8,363,008
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 that are to be voted upon by
stockholders 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 stockholder 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 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. A stockholder
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 2000 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., Arthur R. Miller, Lester
I. 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. Lester I. Miller was appointed to the
Board of Directors on January 8, 1999. 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 1998. Each director, then in
office, other than Lutz R. Raettig, 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 once during 1998, but met informally through 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, 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, William F. Andrews and Daniel B. Carroll. This Committee met five
times during 1998, met informally throughout the year, and held numerous
telephone conferences during 1998. 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, Jacob Saliba and
Daniel B. Carroll. 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 1998. 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 stockholder
nominations of directors to be received by the Company not less than 50 days
nor more than 90 days prior to the annual meeting. The Company received no
such stockholder nominations for the 1999 Annual Meeting.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of April 2, 1999 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 Stockholders:
Principal Occupation Period of
and Business Service
Experience During Other as Katy
Name Age the Past Five Years Directorships Director
William F. Andrews 67 1998 to present: Johnson Controls 1991 to
Chairman of Northwestern Navistar present
Steel & Wire Co. a Northwestern
manufacturer of Steel & Wire Co.
steel rods and Black Box Corp.
beams Dayton Superior
1995 to present: Corporation
Chairman of Scovill Prison Realty
Fasteners, a Trust
manufacturer of
apparel and
industrial fasteners
1993 to 1995:
Chairman and CEO of
Amdura Corp. and
Utica Corp.,
manufacturers of
metal shears, waste
balers, compactors,
and lifting equipment
Amelia M. Carroll 56 1991 to present: 1996 to
Investor present
Daniel B. Carroll 63 1998 to present: 1994 to
Partner of present
Newgrange LLC
1994 to present:
Partner of
Newgrange LP
1985 to present:
Partner of ATP
Manufacturing, LLC,
a manufacturer
of molded poly-
urethane components
Wallace E. Carroll, Jr. 61 1992 to present: 1991 to
Chairman of CRL, present
Inc., a diversified
holding company
1987 to present:
Investor
Arthur R. Miller 48 1998 to Present: Schoen & Cie, AG 1988 to
Executive Vice present
President,
Corporate Development
and General Counsel of
Katy
1988 to 1998:
Partner with Holleb
& Coff, attorneys
at law
Lester I. Miller 66 1999 to present: 1999 to
Retired present
1964 to 1999:
Chairman of the
Board of Contico
International, Inc.
William H. Murphy 67 1992 to present: 1979 to
Retired present
John R. Prann, Jr. 48 1998 to present: 1994 to
President, Chief present
Executive Officer
of Katy
1993 to 1998:
President, Chief
Executive Officer
and Chief Operating
Officer of Katy
1992 to 1994:
President of CRL,
Inc., a diversified
holding company
Lutz R. Raettig 56 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 72 1987 to present: 1972 to
President, Bee Gee present
Holding Company, Inc.,
a holding company for
subsidiaries engaged
in the harvesting of
seafood
Jacob Saliba 85 1997 to present: Schoen & Cie, AG 1968 to
Chairman of the RCM Dresdner present
Board of Katy Global Funds
1993 to present:
Retired
1988 to 1993:
Chairman of the
Board and Chief
Executive Officer of
Katy
Glenn W. Turcotte 58 1998 to present: 1995 to
Executive Vice present
President and Chief
Operating Officer
of Katy
1993 to 1998:
Executive Vice
President of Katy;
President of Glit
Division of Hallmark
Holdings, Inc., a
subsidiary of Katy
OTHER EXECUTIVE OFFICERS:
Robert M. Baratta 69 1995 to present:
Executive Vice
President of Katy
1993 to 1995:
Vice President of Katy
1990 to present:
President of Katy
Seghers, Inc., a
subsidiary of Katy
Roger G. Engle 52 1998 to present:
Group Vice President,
Electrical/Electronics
of Katy
1996 to 1998:
President of Woods
Industries, Inc.,
Waldom Electronics,
Inc. and GC Thorsen,
subsidiaries of Katy
1990 to 1996:
President of Waldom
Electronics, Inc. a
subsidiary of Katy
Larry D. Hudson 51 1998 to present:
Vice President,
Operations of Katy
1997 to 1998:
President of Hamilton
Precision Metals, a
subsidiary of Katy
1993 to 1997:
President of Beehive, Inc.,
a subsidiary of Katy
Peter S. More 61 1996 to present:
Group Vice President,
Finance of Katy
1989 to 1996:
Vice President of Glit
Division of Hallmark
Holdings, Inc., a
subsidiary of Katy
Stephen P. Nicholson 46 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.
1993 to 1994:
Vice President and
Treasurer Total
Petroleum (N.A.) Ltd.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 2, 1999, 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 under the heading Executive Compensation 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 Percent
of Beneficial of
Ownership Notes Class
William F. Andrews 12,000(1) *
Amelia M. Carroll 3,100,695(1)(2)(3) 37.1%
Daniel B. Carroll 12,000(1) *
Wallace E. Carroll, Jr. 3,074,695(1)(2)(3) 36.8%
Arthur R. Miller 3,237,913(2)(4) 38.7%
Lester I. Miller 0(5) *
William H. Murphy 13,617(1) *
John R. Prann, Jr. 116,003(6) 1.4%
Lutz R. Raettig 12,017(1) *
Charles W. Sahlman 13,521(1) *
Jacob Saliba 16,429(1) *
Glenn W. Turcotte 46,630(6) *
Robert M. Baratta 35,252(6) *
Roger G. Engle 12,028(6) *
Larry D. Hudson 7,824(6) *
Peter S. More 21,880(6) *
Stephen P. Nicholson 18,992(6) *
All directors and
executive officers of
Katy as a group (17
persons) 3,892,718(1)(2) 46.5%
*Indicates 1% or less
(1) Includes currently exercisable nonqualified stock options to acquire
8,000 (6,000 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, 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 Note 4 below and "Security Ownership of Certain
Beneficial Owners".) Amounts shown for Amelia M. Carroll, Wallace E.
Carroll, Jr., 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) Arthur R. Miller holds 31,352 shares directly and options to acquire
25,500 shares exercisable within 60 days. Arthur R. Miller is a trustee
of trusts for the benefit of Wallace E. Carroll, Jr. and his descendants
holding 650,647 shares in the aggregate. Certain of such trusts are
stockholders of CRL, Inc. and may be deemed to beneficially own 2,073,436
shares held by CRL, Inc. Arthur R. Miller is also a trustee of trusts
for the benefit of Denis H. Carroll and his descendants holding 394,921
shares in the aggregate. Arthur R. Miller is also a trustee of trusts
for the benefit of Lelia Carroll and her descendants holding 60,000
shares in the aggregate. Arthur R. Miller is a co-trustee of The Holden
Foundation that holds 2,057 shares. Arthur R. Miller disclaims beneficial
ownership of all shares beneficially owned by the trusts and foundation
described above.
(5) Lester I. Miller, a Director of the Company, is the beneficiary of a
trust which own 53.926% of Newcastle Industries, Inc. ("Newcastle").
Newcastle owns all of the preferred interest in Contico International,
L.L.C., of which the Company owns all of the common interest. Certain
family members of Lester I. Miller beneficially own the remaining
interest in Newcastle through the Lester Miller Revocable Trust, the Bill
Miller Revocable Trust and the Lester Miller Investment Trusts. Subject
to the terms and conditions of a Members Agreement dated as of January 8,
1999 (the "Members Agreement"), by and between Katy and Newcastle,
Newcastle's interest in Contico is exchangeable for 1,566,667 shares of
the Company's common stock at $21 per share on the earlier to occur of
(i) January 8, 2001 or (ii) a change in control of Katy or Contico (as
defined in the Members Agreement).
(6) Includes, for each individual, options to acquire the following number
of shares within 60 days: John R. Prann, Jr., 57,000; Glenn W. Turcotte,
19,125; Robert M. Baratta, 20,500; Roger G. Engle, 8,425; Larry D.
Hudson, 5,375; Peter S. More, 9,750; Stephen P. Nicholson, 4,875.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table and notes set forth as of April 2, 1999, 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 3,074,695 (1)(2) 36.8%
Amelia M. Carroll and the
WEC Jr. Trusts
c/o CRL, Inc.
6300 S. Syracuse Way, Suite 300
Englewood, CO 80111 3,100,695 (1)(3) 37.1%
Denis H. Carroll and
the DHC Trusts
c/o CRL Industries, Inc.
2345 Waukegan Road,
Suite S-200
Bannockburn, IL 60015 425,952 (1)(4) 5.1%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401 521,600 (5) 6.2%
Gabelli Funds, Inc.
One Corporate Center
Rye, NY 10580-1434 1,550,200 (6) 18.5%
(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 a
Director of Katy and 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 233,956 shares and options to
acquire 8,000 shares. 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 9,746 shares
and options to acquire 6,000 shares directly owned by Mr. Carroll's wife,
Amelia M. Carroll.
(3) Amelia M. Carroll directly holds 9,746 shares and options to acquire 6,000
shares. Amelia M. Carroll is a trustee under the WEC Jr. Trusts and the
Wallace Foundation. 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 233,956 shares and options to acquire 8,000 shares 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 394,921 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 that holds 2,057 shares.
(5) Information obtained from Schedule 13G filed by Dimensional Fund Advisors,
Inc. for the calendar year 1998. All shares are held in portfolios of DFA
Investment Dimensions Group, Inc., a registered open-end investment
company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors Inc. serves as investment manager.
(6) Beneficial ownership is as reported on Schedule 13D dated June 24, 1997
filed by the Gabelli Funds, Inc. and related parties.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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,
1998, all of its directors, executive officers and greater than 10% beneficial
owners were in compliance with their Section 16 filing requirements.
<TABLE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the years ending December 31, 1998, 1997 and
1996, 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 (the "Named Executive Officers").
<CAPTION>
Other Restricted Securities
Name and Annual Stock Underlying
Principal Position Year Salary Bonus(a) Compensation(b) Award Options
<S> <C> <C> <C> <C> <C> <C>
John R. Prann, Jr. 1998 $450,000 $337,500 $63,973 $71,203 -
President and Chief 1997 360,000 231,300 53,680 51,188 -
Executive Officer 1996 315,000 274,050 38,887 - 42,000
Glenn W. Turcotte 1998 325,000 195,000 49,607 38,145 -
Executive Vice 1997 290,000 149,060 40,789 27,422 -
President and Chief 1996 240,000 167,040 32,159 - 22,500
Operating Officer
Arthur R. Miller 1998 325,000 195,000 45,759 38,145 -
Executive Vice
President, Corporate
Development and
General Counsel
Roger G. Engle 1998 245,000 110,250 32,852 - -
Group Vice 1997 142,500 54,934 22,793 - -
President, 1996 112,000 58,464 37,958 - 9,750
Electrical/
Electronics
Stephen P. Nicholson 1998 200,000 105,000 27,088 16,539 -
Vice President, 1997 160,000 71,960 24,724 11,876 -
Finance and Chief 1996 118,820 72,361 25,908 - 9,750
Financial Officer
<FN>
(a) Bonuses for 1998, 1997 and 1996 for the Named Executive Officers were
paid 75% in cash and 25% in Common Stock. The Common Stock portion of
the bonuses was based on the average stock price ($17.1875) on February
19, 1999, ($18.50) on February 17, 1998 and ($13.6875) on February 20,
1997, respectively. Under this arrangement, the following shares of
Common Stock were granted in lieu of cash for 1998, 1997 and 1996: John
R. Prann, Jr., 4,909, 3,125 and 5,005 shares, respectively; Glenn W.
Turcotte, 2,836, 2,014 and 3,050 shares, respectively; Arthur R. Miller,
2,836, 0 and 0 shares, respectively; Roger G. Engle, 1,603, 0 and 0
shares respectively; Stephen P. Nicholson, 1,527, 972 and 1,321 shares,
respectively.
(b) Included in 1998, 1997 and 1996 is the dollar value set aside for the
Katy Industries, Inc. Supplemental Retirement and Deferral Plan. For
Roger G. Engle, the year 1998 also includes compensation for moving
expenses. For Stephen P. Nicholson, 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. Also included in 1998, 1997 and 1996 is
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.
</TABLE>
OPTION GRANTS TABLE
There were no individual grants of stock options during 1998 to the Named
Executive Officers.
RESTRICTED STOCK GRANT TABLE
The following table sets forth information concerning individual grants of
restricted stock during 1998 to the Named Executive Officers.
% of Total Potential Realized
Securities Value at assumed
Number of Granted to Annual Rates of Stock
Securities Employees Price Appreciation
Name Granted(1) in Fiscal Year Through January 8, 2002(2)
5% 10%
John R. Prann, Jr. 6,000 15.9% $110,717 $119,216
Glenn W. Turcotte 4,000 10.6 73,811 79,477
Arthur R. Miller 4,000 10.6 73,811 79,477
Roger G. Engle 2,000 5.3 36,906 39,739
Stephen P. Nicholson 2,000 5.3 36,906 39,739
(1) Restricted shares granted vest 25% per year commencing on January 8, 1999.
(2) Stock that vested on January 8, 1999 is valued at $17.125 per share.
Stock which vests January 8, 2000, January 8, 2001 and January 8, 2002 is
valued at assumed annual rates of stock price appreciation of 5% and 10%.
The following table sets forth the value of in-the-money options at year
end. No options were exercised during 1998.
Aggregate Fiscal Year-End Option Values
Number of
Securities Value of
Underlying In-the-Money
Options at Options at
Year End Year End
Name Exercisable Unexercisable Exercisable Unexercisable
John R. Prann, Jr. 53,250 31,750 $368,338 $183,994
Glenn W. Turcotte 28,500 17,000 197,081 98,488
Arthur R. Miller 24,000 15,500 158,550 85,644
Roger G. Engle 7,925 6,275 52,030 33,230
Stephen P. Nicholson 4,875 4,875 21,316 21,316
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 a $2,500,000 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. In addition to the
above, the Supplemental Plan includes profit sharing, bonus and salary
deferrals. The balances 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 included in the
Supplemental Plan for each of the Named Executive Officers as of December 31,
1998 are as follows: John R. Prann, Jr., $322,662; Glenn W. Turcotte,
$651,911; Arthur R. Miller, $281,414; Roger G. Engle $57,010; and Stephen
Nicholson, $56,702.
SEVERANCE AGREEMENTS
On January 17, 1996, the Board of Directors adopted and approved a
compensation and benefits assurance program for eight 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
stockholders 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 of base
salary in the case of Tier I participants (John R. Prann, Jr., Glenn W.
Turcotte, Arthur R. Miller, and Robert M. Baratta) or two years of base
salary in the case of Tier II participants (Roger G. Engle, Larry D. Hudson,
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 of 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 1998, Directors who were not employees of Katy or its subsidiaries
received 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 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 1999, 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.
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 20, 1998, received an option to purchase 2,000 shares of the
Company's Common Stock at a price of $18.13 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, Jacob Saliba and Daniel B. Carroll. 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 stockholders, 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 1999 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 Supplemental 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.
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 1997 Long-Term Incentive Plan (the "Incentive Plan") became effective
as of December 9, 1997, after approval by shareholders at the 1998 Annual
Meeting. The Incentive Plan, which will terminate ten years after its
effective date, allows the Board of Directors to provide compensation in the
form of incentive stock options, non-qualified stock options, stock
appreciation rights, restricted stock, performance units or shares, and other
incentive awards including cash bonuses, contingent upon the share price of
the Company reaching certain goals set forth in the Incentive Plan. The
Board of Directors believe that the purpose of the Incentive Plan is to
optimize the growth and profitability of the Company through incentives to
employees which are consistent with the Company's goals and which link the
personal interests of the employees to those of the Company's stockholders.
The Incentive Plan is also intended to provide flexibility to the Company
in its ability to attract, motivate, and retain the services of employees and
other individuals who contribute to the Company's success.
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 1998 were based upon his experience
and qualifications, responsibilities, individual effort and performance and
the Company's performance. Mr. Prann's 1998 bonus was paid pursuant to the
terms of the Annual Bonus Plan as described above.
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
stockholder 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
Jacob Saliba
Daniel B. Carroll
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,
Jacob Saliba and Daniel B. Carroll.
During 1998, Charles W. Sahlman served as President of Bee Gee Holdings,
Inc. ("Bee Gee") (43% owned by Katy and 57% owned by Sahlman Seafoods, Inc.,
a corporation owned by Mr. Sahlman, his family members and various employees
of Sahlman Seafoods, Inc.) Mr. Sahlman is also a former Executive Vice
President of Katy. The Company and Bee Gee sold their interests in C.E.G.F.
(USA), Inc. in June 1998. Bee Gee owned 5% of CEGF and realized a pre-tax
gain of approximately $475,000 on the sale of CEGF.
Jacob Saliba was the Chief Executive Officer of Katy from 1988 to 1993.
John R. Prann, Jr., Katy's President and CEO, 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. John R. Prann, Jr. 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
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 Russell 2000 and the cumulative total return of the S&P
Manufacturing Diversified for the fiscal years ending December 31, 1993
through 1998. The graph below assumes $100 invested, including reinvestment
of dividends, on December 31, 1993.
Comparison Of Five Year Cumulative Total Return
[STOCK PRICE PERFORMANCE GRAPH INSERTED HERE]
1993 1994 1995 1996 1997 1998
Katy Industries, Inc. 100 77 86 138 197 173
Russell 2000 100 98 126 147 180 179
S&P Manufacturing Diversified 100 104 146 201 239 277
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lester I. Miller, a Director of the Company, is the beneficiary of a trust
which own 53.926% of Newcastle Industries, Inc. ("Newcastle"). Newcastle
owns all of the preferred interest in Contico International, L.L.C., of which
the Company owns all of the common interest. Certain family members of
Lester I. Miller beneficially own the remaining interest in Newcastle through
the Lester Miller Revocable Trust, the Bill Miller Revocable Trust and the
Lester Miller Investment Trusts. Subject to the terms and conditions of a
Members Agreement dated as of January 8, 1999 (the "Members Agreement"), by
and between Katy and Newcastle, Newcastle's interest in Contico is
exchangeable for 1,566,667 shares of the Company's common stock at $21 per
share on the earlier to occur of (i) January 8, 2001 or (ii) a change in
control of Katy or Contico (as defined in the Members Agreement).
Lester I. Miller and Newcastle are parties to several lease contracts with
Contico for use in the business of Contico. The leases are for various terms
for up to twelve years. Total annual payments for leases with Lester I.
Miller and Newcastle are approximately $1,500,000 and $4,700,000
respectively.
During 1998, Charles W. Sahlman served as President of Bee Gee Holdings,
Inc. ("Bee Gee") (43% owned by Katy and 57% owned by Sahlman Seafoods, Inc.,
a corporation owned by Mr. Sahlman, his family members and various employees
of Sahlman Seafoods, Inc.) Mr. Sahlman is also a former Executive Vice
President of Katy. The Company and Bee Gee sold their interests in C.E.G.F.
(USA), Inc. in June 1998. Bee Gee owned 5% of CEGF and realized a pre-tax
gain of approximately $475,000 on the sale of CEGF.
John R. Prann, Jr., the Company's President and CEO 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
On March 30, 1998, the Company dismissed Deloitte & Touche LLP as
Independent Public Accountants. The decision was approved by the Audit
Committee of the Company's Board of Directors.
Deloitte & Touche LLP's reports on the consolidated financial statements
for the Company's fiscal years ended December 31, 1997 and December 31, 1996
did not contain an adverse opinion or a disclaimer of opinion, and were not
modified as to uncertainty, audit scope or accounting principles.
Deloitte & Touche LLP has advised the Company that a disagreement occurred
between the Company's management and Deloitte & Touche LLP in connection with
the 1997 audit. The disagreement concerned the accounting for and
presentation of the results of operations for those subsidiaries and
divisions of Katy that are a part of the reorganization plan that was
approved by the Company's Board of Directors on December 31, 1997 and
announced on January 5, 1998. The disagreement was resolved to the
satisfaction of Deloitte & Touche LLP during the December 31, 1997 audit of
the consolidated financial statements. The Audit Committee of the Board of
Directors discussed the disagreement and the subject matter of the
disagreement with Deloitte & Touche LLP. The Company has authorized Deloitte
& Touche LLP to respond fully to any inquiries concerning the disagreement
and the subject matter of the disagreement by the successor public
accountant.
The Board of Directors has selected Arthur Andersen LLP to audit the
accounts of the Company for the current fiscal year. Arthur Andersen LLP was
the firm of independent auditors selected by the Board of Directors to audit
the accounts of the Company for the 1998 fiscal year. It is intended that the
shares represented by proxies will be voted FOR the ratification of the
selection of Arthur Andersen LLP unless otherwise specified in the space
provided in the proxy. In the event that the shareholders fail to ratify the
selection of Arthur Andersen LLP as independent auditors of the Company for
the current year, the Board of Directors would reconsider such selection.
A representative of Arthur Andersen 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. 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
stockholder 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 stockholder proposals were received for the 1999 Annual
Meeting.
PROPOSALS OF STOCKHOLDERS FOR 2000 ANNUAL MEETING
Proposals that stockholders intend to present for inclusion in the Proxy
Statement for the 2000 Annual Meeting of Stockholders 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 2000 Annual Meeting to be considered for inclusion in the
proxy materials for the 2000 Annual Meeting.
By Order of the Board of Directors
KATY INDUSTRIES, INC.
/S/ Arthur R. Miller
Arthur R. Miller
Secretary
April 12, 1999
