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
_X_ Definitive proxy statement Commission only (as permitted
___ Definitive additional materials by Rule 14a-6(e)(2)).
___ 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 10, 2000
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 eleven 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 March 24, 2000 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
March 31, 2000
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 10, 2000
-----------------------------------
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 10, 2000 (the "Annual Meeting"). This proxy
statement and accompanying proxy card are being mailed to stockholders
commencing on or about March 31, 2000. The Annual Report to Stockholders for
the year ended December 31, 1999 (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 eleven 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 March 24, 2000 (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 8,410,658
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
Eleven directors are to be elected at the Annual Meeting, each to serve
for a one year term ending at the time of the 2001 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 eleven 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., Charles W. Sahlman, Jacob
Saliba and Glenn W. Turcotte. All of the nominees are currently directors of
the Company. Lutz R. Raettig, currently a director, has chosen to stand down
and not seek reelection to the Board of Directors. In accordance with the
Company's By-laws, the number of directors will be reduced to eleven effective
as of the Annual Meeting. 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 ELEVEN 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 ELEVEN
PERSONS NOMINATED BY THE BOARD OF DIRECTORS.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met six times during 1999. 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 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, all of whom are independent of the Company's management as defined by
the Securities and Exchange Commission ("SEC") and the New York Stock Exchange
("NYSE"). This Committee met three times during 1999, met informally throughout
the year, and held numerous telephone conferences during 1999. 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 related financial issues with management and the
independent auditors, 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 for 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 1999. 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 2000 Annual Meeting.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of March 24, 2000 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 68 1998 to present: Johnson 1991 to
Chairman of Controls present
Northwestern Steel Navistar
& Wire Co. a Northwestern
manufacturer of Steel & Wire Co.
steel rods and Black Box Corp.
beams Dayton Superior
1995 to present: Corp.
Chairman of Scovill Prison Realty
Fasteners, a Trust
manufacturer of Trex Corp.
apparel and
industrial fasteners
Amelia M. Carroll 57 1991 to present: 1996 to
Investor present
Daniel B. Carroll 63 1998 to present: 1994 to
Member and Manager of present
Newgrange LLC, a
components supplier to the
global footwear industry
1994 to present:
Partner of
Newgrange LP
1985 to present:
Vice President of ATP
Manufacturing, LLC,
a manufacturer
of molded poly-
urethane components
Wallace E. Carroll, Jr. 62 1992 to present: 1991 to
Chairman of CRL, present
Inc., a diversified
holding company
1987 to present:
Investor
Arthur R. Miller 49 1998 to Present: Schoen & Cie, AG 1988 to
Executive Vice present
President, Corporate
Development, Secretary
and General Counsel
of Katy
1988 to 1998:
Partner with Holleb
& Coff, attorneys
at law
Lester I. Miller 68 1999 to present: 1999 to
Retired present
1964 to 1999:
Chairman of the
Board of Contico
International, Inc.
William H. Murphy 68 1992 to present: 1979 to
Retired present
John R. Prann, Jr. 49 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
Lutz R. Raettig 57 1995 to present: Schoen & Cie, AG 1991 to
Chairman, Management present
Board, Morgan Stanley
Bank AG, Frankfurt,
Germany
Charles W. Sahlman 73 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 86 1997 to present: Schoen & Cie, AG 1968 to
Chairman of the RCM Dresdner present
Board of Katy Global Funds
1993 to present:
Retired
Glenn W. Turcotte 59 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 70 1999 to present:
Senior Vice President of Katy
1995 to 1999:
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 53 1999 to present:
Chairman, Contico
International, LLC
1998 to present:
Vice President,
of Katy
1996 to 1998:
President of Woods
Industries, Inc.,
Waldom Electronics,
Inc. and GC Thorsen, Inc.
subsidiaries of Katy
1990 to 1996:
President of Waldom
Electronics, Inc. a
subsidiary
of Katy
Larry D. Hudson 52 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 62 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 47 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 of Total
Petroleum (N.A.) Ltd.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 24, 2000, 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 of Percent
Beneficial of
Name Ownership Class
- ---- ---------- -------
William F. Andrews 14,500 (1) *
Amelia M. Carroll 3,201,610 (1)(2)(3) 38.1%
Daniel B. Carroll 16,500 (1) *
Wallace E. Carroll, Jr. 3,175,610 (1)(2)(3) 37.8%
Arthur R. Miller 3,356,152 (2)(4) 39.9%
Lester I. Miller 4,500 (5)
William H. Murphy 16,135 (1) *
John R. Prann, Jr. 164,074 (6) 2.0%
Lutz R. Raettig 14,535 (1) *
Charles W. Sahlman 17,591 (1) *
Jacob Saliba 20,532 (1) *
Glenn W. Turcotte 73,986 (6) *
Robert M. Baratta 46,321 (6) *
Roger G. Engle 18,345 (6) *
Larry D. Hudson 12,584 (6) *
Peter S. More 27,981 (6) *
Stephen P. Nicholson 31,367 (6) *
All directors and
executive officers of
Katy as a group (17
persons) 4,140,981 (1)(2) 49.2%
* Indicates 1% or less
(1) Includes currently exercisable nonqualified stock options to acquire
shares granted to each nonemployee director pursuant to the Katy
Industries, Inc. Nonemployee Director Stock Option Plan. Options held
include 8,000 for Amelia M. Carroll, 4,000 for Lester I. Miller and
10,000 for other directors.
(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 42,837 shares directly and options to acquire
36,375 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 806,526 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 a co-trustee of The Holden Foundation which 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 owns a majority 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., 79,000; Glenn W.
Turcotte, 42,375; Robert M. Baratta, 27,375; Roger G. Engle, 12,725;
Larry D. Hudson, 8,625; Peter S. More, 14,313; Stephen P. Nicholson,
8,563.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table and notes set forth as of March 24, 2000, 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 3,175,610 (1)(2) 37.8%
Amelia M. Carroll and the
WEC Jr. Trusts
c/o CRL, Inc.
6300 S. Syracuse Way, Suite 300
Englewood, CO 80111 3,201,610 (1)(3) 38.1%
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 572,500 (5) 6.8%
Gabelli Funds, Inc.
One Corporate Center
Rye, NY 10580-1434 1,655,700 (6) 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 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 234,474 shares and options to
acquire 10,000 shares. Wallace E. Carroll, Jr. is a trustee of trusts
for his benefit and his descendants (the "WEC Jr. Trusts") which
collectively hold 806,526 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
10,264 shares and options to acquire 8,000 shares directly owned by Mr.
Carroll's wife, Amelia M. Carroll.
(3) Amelia M. Carroll directly holds 10,264 shares and options to acquire
8,000 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 234,474 shares and options to acquire
10,000 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 dated February 11, 2000 filed by
Dimensional Fund Advisors, Inc. for the calendar year 1999.
(6) Information obtained from Schedule 13D dated January 14, 2000 filed by
the Gabelli Asset Management, Inc. and related parties for the
calendar year 1999.
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. Two such reports, which were inadvertently not filed by their
respective due dates, were filed in March 2000. Daniel B. Carroll, a director
of the Company, reported an August 1999 purchase of 2,000 shares of Katy Common
Stock, and Lester I. Miller, a director of the Company, reported a May 1999
grant form the Company of 500 common shares and 2,000 options. Aside from
these exceptions, and based solely upon its review of copies of the Section 16
reports, the Company believes that during its fiscal year ended December 31,
1999, 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, 1999, 1998
and 1997, 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").
0 Other Restricted Securities
Name and Annual Stock Underlying
Principal Position Year Salary Bonus(a) Compensation(b) Award(c) Options
John R. Prann, Jr. 1999 $525,000 $ - $51,411 $87,594 36,000
President and Chief 1998 450,000 337,500 67,973 71,203 -
Executive Officer 1997 360,000 231,300 57,680 51,188 -
Glenn W. Turcotte 1999 360,000 - 33,313 50,289 20,000
Executive Vice 1998 325,000 195,000 53,607 38,145 -
President and Chief 1997 290,000 149,060 44,789 27,422 -
Operating Officer
Arthur R. Miller 1999 360,000 - 35,497 50,289 20,000
Executive Vice 1998 325,000 195,000 49,759 38,145 -
President, Corporate
Development,
Secretary and
General Counsel
Roger G. Engle 1999 285,000 - 21,969 22,925 10,000
Vice President 1998 245,000 110,250 36,852 - -
1997 142,500 54,934 26,793 - -
Stephen P. Nicholson 1999 230,000 - 25,085 22,925 10,000
Vice President, 1998 200,000 105,000 31,088 16,539 -
Finance and Chief 1997 160,000 71,960 28,724 11,876 -
Financial Officer
(a) Bonuses for 1998 and 1997 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 on
February 19, 1999 ($17.1875), and February 17, 1998 ($18.50).
Under this arrangement, the following shares of Common Stock
were granted in lieu of cash for 1998 and 1997: John R. Prann,
Jr., 4,909 and 3,125 shares, respectively; Glenn W. Turcotte,
2,836 and 2,014 shares, respectively; Arthur R. Miller, 2,836
and 0 shares, respectively; Roger G. Engle, 1,603 and 0 shares
respectively; Stephen P. Nicholson, 1,527 and 972 shares,
respectively.
(b) Included in 1999, 1998 and 1997 is the dollar value set aside
for the Katy Industries, Inc. Supplemental Retirement and
Deferral Plan, contributions to the individuals' 401(k)
retirement accounts, and non-cash compensation consisting of
personal use of corporate automobiles and group term life
insurance. To the extent used, such benefits are treated as
additional wages for withholding and income tax purposes. For
Roger G. Engle, the year 1998 includes compensation for moving
expenses.
(c) Included in 1999, 1998 and 1997 is the value of restricted
stock grants that vested during the particular year, calculated
as the number of shares vested times the Company stock price at
the particular date of grant. The number and value of
aggregate restricted stock holdings at the end of the fiscal
year, priced at the Company's closing stock price at December
31, 1999, were: John Prann, 26,000 shares (14,000 non-vested)
valued at $225,875, Glenn Turcotte, 15,500 shares (8,875
non-vested) valued at $134,656, Arthur Miller 15,500 shares
(8,875 non-vested) valued at $134,656, Roger Engle 4,000 shares
(3,500 non-vested) valued at $34,750, and Stephen Nicholson
7,250 shares (4,313 non-vested) valued at $62,984.
OPTION GRANTS TABLE
The following table sets forth information concerning individual grants
of stock options during 1999 to the Named Executive Officers.
Potential Realized
Number of Value at Assumed
Securities % of Total Annual Rates
Underlying Options Exercise of Stock
Options Granted to Or Base Expiration Price Appreciation
Name (1) Granted(1) Employees Price Date 5% 10%
John R. Prann 18,000 18.1% $17.000 01/08/09 $40,211 $84,540
18,000 17.2 9.875 12/10/09 23,359 49,109
Glenn W. Turcotte 10,000 10.0 17.000 01/08/09 22,339 46,967
10,000 9.6 9.875 12/10/09 12,977 27,283
Arthur R. Miller 10,000 10.0 17.000 01/08/09 22,339 46,967
10,000 9.6 9.875 12/10/09 12,977 27,283
Roger G. Engle 5,000 5.0 17.000 01/08/09 11,170 23,483
5,000 4.8 9.875 12/10/09 6,489 13,641
Stephen P. Nicholson 5,000 5.0 17.000 01/08/09 11,170 23,483
5,000 4.8 9.875 12/10/09 6,489 13,641
(1) Options granted vest 25% per year commencing on the first anniversary
of the grant date.
RESTRICTED STOCK GRANT TABLE
The following table sets forth information concerning individual grants
of restricted stock during 1999 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 3, 2003 (2)
- ---- ----------- -------------- ---------------------------
5% 10%
-- ---
John R. Prann, Jr. 6,000 13.3% $55,763 $60,043
Glenn W. Turcotte 4,000 8.9 37,175 40,029
Arthur R. Miller 4,000 8.9 37,175 40,029
Roger G. Engle 2,000 4.4 18,588 20,014
Stephen P. Nicholson 2,000 4.4 18,588 20,014
(1) Restricted shares granted vest 25% per year commencing on
January 3, 2000.
(2) Stock that vested on January 3, 2000 is valued at $8.625 per
share. Stock which vests January 3, 2001, January 3, 2002 and
January 3, 2003 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 1999.
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. 74,500 46,500 $2,813 $0
Glenn W. Turcotte 39,875 25,625 1,500 0
Arthur R. Miller 33,875 25,625 1,125 0
Roger G. Engle 11,475 12,725 375 0
Stephen P. Nicholson 7,313 12,437 0 0
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, 1999 are as follows: John R.
Prann, Jr., $276,910; Glenn W. Turcotte, $704,133; Arthur R. Miller, $256,219;
Roger G. Engle $103,009; and Stephen Nicholson, $57,707.
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 1999, Directors who were not employees of Katy or its subsidiaries
received an annual retainer of $9,000, options to acquire 2,000 shares of Katy
Common Stock (see below), and a stock grant of 500 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 2000, Directors will receive
the same compensation. Directors who are officers are not separately
compensated as directors.
Under the Katy Industries, Inc. Nonemployee Director Stock Option Plan
(the "Directors' Stock Option Plan"), each nonemployee director receives an
annual grant of options 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.
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.
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"). The performance goals for 2000 are based on two financial
measures for each division and for corporate: operating income and working
capital management.
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 2000 are based on two financial measures for each
division and for corporate: operating income and working capital management.
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. The allocation
for 1999 amounted to 1.84% of adjusted pre-tax income. Voluntary deferrals and
profit sharing allocations are invested at the election of the employee in
several 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 on December 9, 2007,
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 believes
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 for 1999 was based upon his experience and
qualifications, responsibilities, individual effort and performance and the
Company's performance.
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 1999, 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.
Jacob Saliba was the Chief Executive Officer of Katy from 1988 to 1993.
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, 1994 through
1999. The graph below assumes $100 invested, including reinvestment of
dividends, on December 31, 1994.
Comparison Of Five Year Cumulative Total Return
1994 1995 1996 1997 1998 1999
Katy Industries, Inc. 100 112 179 256 225 114
Russell 2000 100 127 155 204 191 188
S&P Manufacturing Diversified 100 141 194 231 268 329
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lester I. Miller, a Director of the Company, is the beneficiary of a
trust which owns a majority 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).
In connection with the Contico acquisition on January 8, 1999, Katy
entered into building leases with Newcastle. Also, several additional
properties utilized by Contico are leased directly from Lester I. Miller.
Aggregate rental expense of approximately $5,500,000 was recorded in 1999
relating to these leases. Rental expense for these properties approximates
market rates. In October 1999, certain of the aforementioned properties were
sold by Newcastle to an unrelated third party. Accordingly, related party
rental expense is expected to be reduced to approximately $1,600,000 in 2000.
During 1999, 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.
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. Such loan was fully repaid during 1999.
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 report on the consolidated financial statements
for the Company's fiscal year ended December 31, 1997 did not contain an
adverse opinion or a disclaimer of opinion, and was 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 1999 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 2000 Annual
Meeting.
PROPOSALS OF STOCKHOLDERS FOR 2000 ANNUAL MEETING
Proposals that stockholders intend to present for inclusion in the
Proxy Statement for the 2001 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 2001 Annual Meeting to be considered for inclusion in the
proxy materials for the 2001 Annual Meeting.
By Order of the Board of Directors
KATY INDUSTRIES, INC.
/S/ Arthur R. Miller
--------------------
Arthur R. Miller
Secretary
March 31, 2000
