Edgar Filing: KATY INDUSTRIES INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

-------------------

SCHEDULE 14A

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 ss. 240.14a-12

KATY INDUSTRIES, INC.

(Name of Registrant as Specified In Its Charter)

(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)(1) and
0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction 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:

5) Total fee paid:

|_| Fee paid previously with preliminary materials.

|_| 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.
765 Straits Turnpike
Middlebury, Connecticut 06762
(203) 598-0397

April 29, 2004

Dear Stockholders:

You are cordially invited to attend the 2004 annual meeting of
stockholders of Katy Industries, Inc. (the Company or Katy), which will be held
at 10:00 a.m. (local time) on Thursday, May 27, 2004, at The Heritage - A Dolce
Conference Resort, located at 522 Heritage Road, Southbury, Connecticut.

The principal business of the annual meeting will be (i) the election of
our Class I directors, and (ii) the ratification of the appointment by the
Company's Audit Committee of the Board of Directors of PricewaterhouseCoopers
LLP as independent auditors for the year ending December 31, 2004. We will also
review our results for the past fiscal year and report on significant aspects of
our operations during the first quarter of 2004.

It is important that your shares be represented at the annual meeting.
Whether or not you plan to attend the annual meeting, we encourage you to vote
by signing and returning the enclosed proxy card so that your shares will be
voted at the annual meeting. If you decide to attend the annual meeting, you may
revoke your proxy and personally cast your votes.

Thank you, and we look forward to seeing you at the annual meeting or
receiving your proxy vote.

Sincerely yours,

/s/ William F. Andrews

William F. Andrews
Chairman of the Board

KATY INDUSTRIES, INC.
765 Straits Turnpike
Middlebury, Connecticut 06762
(203) 598-0397

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders of Katy Industries, Inc.:

We are holding an annual meeting of stockholders of Katy Industries, Inc.
on May 27, 2004 at 10:00 a.m., local time. The meeting will be held at The
Heritage - A Dolce Conference Resort, located at 522 Heritage Road, Southbury,
Connecticut. At the meeting, you will be asked to vote on the following:

1. The election of four Class I members of the Board of Directors to serve
for a term of two years;

2. Ratification of the appointment of PricewaterhouseCoopers LLP as our
independent public auditors for the year ending December 31, 2004; and

3. The transaction of other business as may properly come before the annual
meeting or any adjournment thereof.

The Proxy Statement that we are delivering with this Notice contains
important information concerning the proposals to be considered at the annual
meeting. You will be entitled to vote at the annual meeting if you were a
stockholder of Katy at the close of business on April 19, 2004.

By Order of the Board of Directors

/s/ Amir Rosenthal

Amir Rosenthal
Secretary

Middlebury, Connecticut
April 29, 2004

YOUR VOTE AT THE ANNUAL MEETING IS IMPORTANT.

PLEASE INDICATE YOUR VOTE ON THE ENCLOSED PROXY CARD AND RETURN
IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE, EVEN IF YOU PLAN TO
ATTEND THE MEETING.

IF YOU ATTEND THE MEETING, YOU WILL BE ABLE TO REVOKE YOUR PROXY
AND VOTE IN PERSON.

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

THE ANNUAL MEETING

The annual meeting will be held on May 27, 2004 at The Heritage - A Dolce
Conference Resort, located at 522 Heritage Road, Southbury, Connecticut, at
10:00 a.m., local time.

THIS PROXY SOLICITATION

We are sending you this Proxy Statement because our Board of Directors is
seeking your proxy to vote your shares at the annual meeting. This Proxy
Statement includes information that we are required to provide to you under the
rules of the Securities and Exchange Commission and is intended to assist you in
voting your shares. On or about April 29, 2004, we will begin mailing
information to all people who, according to our stockholder records, owned
shares of our common stock at the close of business on April 19, 2004. As of
March 31, 2004, there were 7,880,877 shares of our common stock outstanding.

Katy will pay the cost of requesting these proxies. Katy's directors,
officers and employees may request proxies in person or by telephone, mail,
facsimile or letter.

VOTING YOUR SHARES

You are entitled to one vote at the annual meeting for each share of
Katy's common stock that you owned of record at the close of business on April
19, 2004. The number of shares you own (and may vote) is listed on the enclosed
proxy card.

You may vote your shares at the annual meeting in person or by proxy. To
vote in person, you must attend the annual meeting and obtain and submit a
ballot. We will give you a ballot at the annual meeting. To vote by proxy, you
must complete and return the enclosed proxy card. By completing and returning
the proxy card, you will be directing the persons designated on the proxy card
to vote your shares at the annual meeting in accordance with the instructions
you give on the proxy card.

Your proxy card will be valid only if you sign, date and return it before
the annual meeting. IF YOU COMPLETE THE PROXY CARD EXCEPT FOR THE VOTING
INSTRUCTIONS, THEN YOUR SHARES WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF
DIRECTORS RECOMMENDATIONS. You may revoke your proxy at any time before it is
voted by any of the following means:

- Notifying the Secretary of Katy in writing that you wish to revoke
your proxy.

- Submitting a proxy dated later than your original proxy.

- Attending the annual meeting and voting. Merely attending the annual
meeting will not by itself revoke a proxy; you must vote your shares
at the annual meeting to revoke the proxy.

The Board of Directors does not expect any matter other than the proposals
discussed in this Proxy Statement to be presented at the annual meeting.
However, if any other matter properly comes before the annual meeting, your
proxies will act on such matter in their discretion.

QUORUM AND VOTES REQUIRED FOR APPROVAL

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. For purposes of the quorum and the discussion below regarding the vote
necessary to take stockholder action, the stockholders who are present at the
annual meeting in person or by proxy and who abstain are considered stockholders
who are present and entitled to vote and they count toward the quorum.
Abstentions and shares of record held by a broker or its nominee that are voted
on any matter are included in determining whether a quorum is present. Broker
shares that are not voted on any matter will not be included in determining
whether a quorum is present.

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, you may
vote for a candidate or withhold your vote. If a quorum is present, directors
will be elected by a plurality of the votes cast for the election of directors.
"Plurality" means that the nominees who receive the largest number of votes cast
will be 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 or withholding authority) have no impact on the election of directors
except to the extent the failure to vote for one candidate results in another
candidate receiving a larger number of votes.

If a quorum is present, the approval of Proposal 2 requires the
affirmative vote of the holders of a majority of the common stock present, in
person or by proxy, at the annual meeting. With respect to this matter, 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 this
proposal has the same effect as a vote against such matter.

Under rules of self-regulatory organizations governing brokers, brokers
holding shares of record for customers generally are entitled to vote on routine
matters without voting instructions from their customers. The election of
directors and the ratification of the appointment of PricewaterhouseCoopers LLP
are considered routine matters. On non-routine matters, brokers must obtain
voting instructions from customers. If a broker does not receive voting
instructions from a customer on non-routine matters and accordingly does not
vote on these matters, this is called a broker non-vote.

PROPOSAL 1 - ELECTION OF DIRECTORS

NOMINEES

Katy's business is managed under the direction of its Board of Directors.
There are currently nine directors, divided into two classes serving staggered
terms. The classes are as nearly equal in number as possible with five Class II
directors, elected to two-year terms at the 2003 annual meeting, and four Class
I directors, elected to two-year terms at the 2002 annual meeting. Stockholders
will elect four Class I directors at the annual meeting to serve for a two-year
term ending at the time of the 2006 annual meeting.

Nominees for election whose terms will expire in 2006 (Class I):

Robert M. Baratta
Daniel B. Carroll
Wallace E. Carroll, Jr.
C. Michael Jacobi

All of the nominees are current directors of the Company and have
indicated their willingness to serve as directors. The five Class II directors
of Katy are: William F. Andrews (Chairman), Christopher Lacovara, Christopher W.
Anderson, Samuel P. Frieder, and James A. Kohlberg. The Class II directors are
not up for re-election at the annual meeting, as their terms expire at the time
of the 2005 annual meeting.

For information concerning the nominees for director and the current
directors, see the sections of this Proxy Statement entitled "Information
Concerning Directors and Executive Officers," "Security Ownership of Management"
and "Security Ownership of Certain Beneficial Owners."

REQUIRED VOTE

Directors are elected by the affirmative vote of a plurality of the votes
cast in the election.

RECOMMENDATION OF THE BOARD OF DIRECTORS

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF PROPOSAL 1. IF ANY NOMINEE BECOMES UNAVAILABLE TO SERVE ON THE BOARD
OF DIRECTORS FOR ANY REASON, YOUR 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 NUMBER OF CLASS I DIRECTORS.

INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS

The following table shows information with respect to nominees for
director, current directors, and executive officers of Katy:

Nominees - Class I Directors

The following table shows information about the nominees to Katy's Board
of Directors who are currently Class I directors.

Principal Occupation and
Business Experience Period of Service
Name Age During the Past Five Years Other Directorships as Katy Director
------------------------ ----- ---------------------------------------- ------------------- -----------------

Robert M. Baratta 74 2001 to Present: Director of Katy None 2001 to Present
2001 (February) to 2001 (June):
President and Chief Executive Officer
and Director of Katy
1999 to 2000 (June): Senior Vice
President of Katy
1995 to 1999: Executive Vice President
of Katy
Daniel B. Carroll 68 2002 to Present: Private Investor None 1994 to Present
1998 to 2002: Member and Manager of
Newgrange L.L.C., a components
supplier to the global footwear
industry
1994 to 2002: Partner of Newgrange
L.P., a holding company for Newgrange
L.L.C.
1985 to Present: Vice President of ATP
Manufacturing, LLC, a manufacturer of
molded poly-urethane components
Wallace E. Carroll, Jr. 66 1992 to Present: Chairman of CRL, Inc., None 1991 to Present
a diversified holding company

C. Michael Jacobi 62 2001 to Present: Chief Executive Corrections Corp. 2001 to Present
Officer, President, and a Director of of America
Katy Webster Financial
2001 to Present: Chairman of Invisible Corporation
Technologies, Inc., a privately held
company engaged in the manufacturing
and distribution of electronic
products for the training, tracking
and containment of sporting dogs and
companion pets
1999 to 2001: Owner, Stable House
Consulting
1999 to 2000: Chairman of Timex Watches
Limited (India), a publicly held
company headquartered in New Delhi,
India
1999 to 2000: Chairman and Chief
Executive Officer of Beepwear Paging
Products, LLC, a company jointly owned
by Timex Corporation and Motorola, Inc.
1993 to 1999: Chief Executive Officer,
President, and a director of Timex
Corporation, a leading worldwide
manufacturer and marketer of watches
1993 to 1999: Chairman of Callanen
International, a company engaged in
the fashion watch business

Wallace E. Carroll, Jr. and Daniel B. Carroll are first cousins.

Class II Directors

The following directors were elected to two year terms at the 2003 annual
meeting, and are not up for re-election at the 2004 annual meeting.

Christopher W. Anderson 29 1998 to Present: Associate at Kohlberg None 2001 to Present
& Co., L.L.C.
William F. Andrews 72 2001 to Present: Chairman of Katy Black Box 1991 to Present
Industries, Inc. Corporation
2001 to Present: Chairman of Allied Corrections Corp.
Aerospace Industries, Inc., an of America
aerospace and defense engineering firm TREX Corp.
and provider of comprehensive
aerospace and defense products and
services
2000 to Present: Chairman of
Corrections Corp. of America, a
private sector provider of detention
and correction services
1998 to 2001: Chairman of Northwestern
Steel & Wire Company, a manufacturer
of steel rods and beams
1997 to Present: Consultant with
Kohlberg & Co., L.L.C.
1995 to 2001: Chairman of Scovill
Fasteners, a manufacturer of apparel
and industrial fasteners
Samuel P. Frieder 39 1989 to Present: Principal of Kohlberg 2001 to Present
& Co., L.L.C.
James A. Kohlberg 46 1987 to Present: Co-Founder and 2001 to Present
Managing Principal of Kohlberg & Co.,
L.L.C.
Christopher Lacovara 39 1988 to Present: Principal of Kohlberg 2001 to Present
& Co., L.L.C.

Executive Officers

Principal Occupation and Business Experience
Name Age During the Past Five Years
------------------------ ----- --------------------------------------------------------

Thomas D. Burns 50 2002 to Present: President, Katy Commercial Products
1999 to 2002: President, Rubbermaid Closet &
Organization, a division of Newell Rubbermaid
1998 to 1999: President, Bernzomatic, a division of
Newell Rubbermaid
David C. Cooksey 59 2001 to Present: Corporate Director of Accounting and
Assistant Treasurer
1999 to Present: Chief Financial Officer of Continental
Commercial Products, LLC (successor to Contico
International, L.L.C.), a wholly-owned subsidiary of
Katy
1987 to 1999: Chief Financial Officer of Contico
International, Inc. (predecessor to Contico
International, L.L.C.)
Michael C. Paul 41 2003 to Present: Corporate Director of Financial
Reporting and Treasurer
2002 to 2003: Director of Financial Systems and
Compliance of Asbury Automotive Group Inc.
2000 to 2002: Corporate Controller of Asbury Automotive
Group Inc.
1999 to 2000: Assistant Controller, Crompton Corporation
1997 to 1999: Project Team Leader, Crompton Corporation
David S. Rahilly 59 2002 to Present: President, Katy Consumer Products
2001 to 2002: President and General Manager, Woods
Industries, Inc., a wholly-owned subsidiary of Katy
1998 to 2001: Principal and President of Stunt, L.L.C.
and Radius, L.L.C., companies engaged in the import
and distribution of watches
Amir Rosenthal 43 2001 to Present: Vice President, Chief Financial
Officer, General Counsel and Secretary, Katy
2000 to 2001: Chairman of Timex Watches Limited (India),
a publicly held company headquartered in New Delhi,
India
1997 to 2001: Treasurer, Timex Corporation

Officers hold office until their successors are elected or appointed by
the Board of Directors and duly qualified. Officers elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors.

PROPOSAL 2 - RATIFICATION OF THE INDEPENDENT PUBLIC AUDITORS

PricewaterhouseCoopers LLP ("PwC"), independent public auditors, audited
the financial statements of the Company for 2003. The Board of Directors, upon
the recommendation of the Audit Committee, has approved the selection of PwC as
independent public auditors to audit the books of Katy and its subsidiaries for
the year ending December 31, 2004, to report on the consolidated balance sheets
and related statement of operations of Katy and its subsidiaries, and to perform
such other appropriate accounting services as may be required by the Board of
Directors. The Board of Directors recommends that the stockholders vote in favor
of ratifying the selection of PwC for the purposes set forth above. PwC has
advised the Company that they are independent auditors with respect to the
Company, within the meaning of standards established by the American Institute
of Certified Public Accountants, the Independence Standards Board, and federal
securities laws administered by the Securities and Exchange Commission.

A representative of PwC will be present at the annual meeting with the
opportunity to make a statement and respond to appropriate questions.

PwC billed Katy for audit services and certain other professional services
during 2003 and early 2004. These amounts are divided into the following four
categories, and are detailed below.

Audit Fees

Fees for professional services rendered by PwC for the audit of the
Company's annual financial statements for 2003 were $507,051, of which an
aggregate amount of $477,820 had been billed through March 31, 2004.

Fees for professional services rendered by PwC in 2002 for the audits of
the Company's annual financial statements for 2002, 2001 and 2000, and the
review of the financial statements included in the Company's second and third
quarter 2002 quarterly reports, were $912,401. As a result of several factors
described below, full reaudits of the 2001 and 2000 financial statements were
required to be performed along with the routine 2002 audit. The reaudits had a
significant impact on the level of fees for the 2002 audit. The reaudits of our
2001 and 2000 financial statements came about for two reasons: 1) the Company is
a former client of Arthur Andersen LLP, which has ceased operations, and 2) as a
result of the actual or planned sale of certain subsidiaries, the Company
presented certain businesses as discontinued operations in its financial
statements for all periods presented in accordance with generally accepted
accounting principles. The accounting for discontinued operations resulted in
changes to the presentation of nearly all amounts in the prior years' financial
statements, which were audited by Arthur Andersen LLP. As a result of these
circumstances, and the Company's interpretation of Auditing Interpretation 508
of Statement of Auditing Standards No. 58, "Reports on Financial Statements," we
determined that full reaudits of the prior period financial statements were
required.

Audit-Related Fees

PwC billed the Company $74,709 of audit-related fees in 2003, of which
$63,709 consisted of fees for employee benefit plan audits, and $11,000 is
related to review and preparation in accordance with the Section 404 of the
Sarbanes-Oxley Act of 2002.

PwC billed the Company $98,227 of audit-related fees in 2002, of which
$96,227 consisted of fees for employee benefit plan audits, and $2,000 is
related to other audit and attest services, transaction and due diligence
services, risk and controls review and financial accounting, reporting and
compliance consulting matters.

Tax Fees

PwC billed the Company $10,530 for tax compliance and advisory services in
2003.

PwC billed the Company $7,350 for tax compliance and advisory services in
2002.

All Other Fees

There were no fees billed to the Company by PwC for all other services in
2003 or 2002.

REQUIRED VOTE

Approval of this proposal to ratify the appointment of PwC requires the
affirmative vote by the majority of the outstanding shares of common stock
present, in person, or by proxy, at the annual meeting.

Although the ratification of independent auditors is not required to be
submitted to a vote of the stockholders, the Company believes that such
ratification is a matter on which the stockholders should express their opinion.
Notwithstanding stockholder approval of the ratification of independent
auditors, the Audit Committee, in its discretion, may direct the appointment of
new independent auditors at any time during the year, if the Audit Committee
believes that such a change would be in the best interest of Katy and its
stockholders. If the stockholders fail to ratify the selection, the Audit
Committee will reconsider whether to retain PwC as independent auditors for the
fiscal year ending December 31, 2004.

RECOMMENDATION OF THE BOARD OF DIRECTORS

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.

INFORMATION ABOUT KATY STOCK OWNERSHIP

OUTSTANDING SHARES

The shares of common stock are the only outstanding class of Katy voting
securities. As of March 31, 2004, there were 7,880,877 shares of Katy common
stock outstanding and 1,795,300 options to acquire shares of common stock
exercisable within the next 60 days.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table and notes show, as of March 31, 2004, information on
the beneficial ownership of those persons or entities (including certain members
of the family of Wallace E. Carroll, former Chairman of the Board, since
deceased (the "Carroll Family")), and related persons and entities, who are
known to Katy to be the beneficial owners of more than 5% of the shares of the
Company's common stock. The notes below the table describe the nature of that
beneficial ownership. Unless otherwise indicated, the nature of beneficial
ownership is that of sole voting power and sole investment power. In calculating
percentages for a given person, shares for which such person has the right to
acquire beneficial ownership within 60 days (e.g., through exercising options)
are deemed to be outstanding.

Amount and
Nature of
Name and Address Beneficial Percent of
of Beneficial Owner Ownership Notes Class
------------------------------------ ------------ ------- ----------
Wallace E. Carroll, Jr. and 3,128,261 (1) 39.6%
the WEC Jr. Trusts
c/o CRL, Inc.
7505 Village Square Drive, Suite 200
Castle Rock, CO 80104

Amelia M. Carroll and 3,154,261 (2) 39.9%
the WEC Jr. Trusts
c/o CRL, Inc.
7505 Village Square Drive, Suite 200
Castle Rock, CO 80104

Dimensional Fund Advisors, Inc. 443,500 (3) 5.6%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401

Gabelli Funds, LLC, GAMCO Investors, 1,897,700 (4) 24.1%
Inc., MJG Associates, Inc., Gabelli
Advisers, Inc.
One Corporate Center
Rye, NY 10580-1434

Supplemental Disclosure Regarding
Convertible Preferred Stock

KKTY Holding Company, L.L.C. * (5) *
111 Radio Circle
Mt. Kisco, NY 10549

(1) Wallace E. Carroll, Jr. directly holds 181,239 shares and options to
acquire 25,000 shares. He is a trustee of trusts for his and his descendants'
benefit (the "WEC Jr. Trusts") which collectively hold 804,635 shares. He and
certain of the WEC Jr. Trusts own all the outstanding shares of CRL, Inc. which
holds 2,071,036 shares. He is also a trustee of the Wallace Foundation which
holds 32,910 shares. Wallace E. Carroll, Jr. also beneficially owns 8,729 shares
directly owned by his wife, Amelia M. Carroll, and 2,106 shares held by a "rabbi
trust" for his wife and 2,106 shares held for him in connection with the Katy
Industries, Inc. Directors' Deferred Compensation Plan. Amounts shown for
Wallace E. Carroll, Jr. and Amelia M. Carroll reflect multiple counting of
shares where more than one of them is a trustee of a particular trust and is
required to report beneficial ownership of shares that these trusts hold.

(2) Amelia M. Carroll holds 8,729 shares directly. She is a trustee of the
WEC Jr. Trusts which collectively own 804,635 shares, and the Wallace Foundation
which holds 32,910 shares. Wallace E. Carroll, Jr., her husband, and certain of
the WEC Jr. Trusts, of which she is a trustee, own all the outstanding shares of
CRL, Inc., which holds 2,071,036 shares. Amelia M. Carroll is also trustee of
trusts for Lelia Carroll and her descendants' benefit holding 26,000 shares in
the aggregate. Amelia M. Carroll also beneficially owns 181,739 shares and
options to acquire 25,000 shares directly owned by her husband, and 2,106 shares
held by a "rabbi trust" for her and 2,106 shares held for her husband in
connection with the Katy Industries, Inc. Directors' Deferred Compensation Plan.
Amounts shown for Amelia M. Carroll and Wallace E. Carroll, Jr. reflect multiple
counting of shares where more than one of them is a trustee of a particular
trust and is required to report beneficial ownership of shares that these trusts
hold.

(3) Information obtained from Schedule 13G dated December 31, 2003 filed
by Dimensional Fund Advisors, Inc. for the calendar year 2003.

(4) Information obtained from Schedule 13D/A dated August 29, 2003, filed
by Gabelli Asset Management, Inc. ("GAMI"). That Schedule 13D/A was filed by
Mario Gabelli and various entities which he directly or indirectly controlled or
for which he acted as chief investment officer. The reporting persons
beneficially owning the stock shown in the chart are as follows: Gabelli Funds,
LLC ("Gabelli Funds") 546,600 shares, GAMCO Investors, Inc. ("GAMCO") 1,206,700
shares, MJG Associates, Inc. ("MJG") 113,400 shares, and Gabelli Advisers, Inc.
("Gabelli Advisers") 31,000 shares. Mario Gabelli, Gabelli Asset Management,
Inc. ("GAMI") and Gabelli Group Capital Partners, Inc. ("Gabelli Partners") are
all deemed to have beneficial ownership of the securities owned beneficially by
each of these persons. Each of the reporting persons has the sole power to vote
or direct the vote and sole power to dispose or to direct the disposition of the
securities reported for it, except that (i) GAMCO does not have the authority to
vote 22,000 of the reported shares, and (ii) Gabelli Funds has sole dispositive
and voting power with respect to the shares of Katy held by the funds so long as
the aggregate voting interest of all joint filers does not exceed 25% of their
total voting interest in Katy, and, in that event, the proxy voting committee of
each fund shall vote that funds shares, (iii) the proxy voting committee of each
fund may take and exercise in its sole discretion the entire voting power with
respect to the shares held by such fund under special circumstances such as
regulatory considerations, and (iv) the power of Mario Gabelli, GAMI and Gabelli
Partners is indirect with respect to securities beneficially owned directly by
other reporting persons.

(5) KKTY Holding Company, L.L.C., a Delaware limited liability company,
currently owns 925,750 shares of the Company's convertible preferred stock,
which is convertible into 15,429,241 shares of the Company's common stock. The
preferred stock is convertible upon the earlier of June 28, 2006 or the
occurrence of certain fundamental changes in Katy. Through

December 31, 2004 (except under certain circumstances), the holders of the
convertible preferred stock are entitled to a paid-in-kind (PIK) stock dividend,
which accrues from and is payable on August 1 of each year. Through March 31,
2004, the accrued and unpaid PIK dividend on the shares of convertible preferred
stock held by KKTY Holding Company equaled 92,829 shares of convertible
preferred stock, which when paid will be convertible into 1,547,175 shares of
common stock. KKTY Holding Company is controlled by several entities, which have
Kohlberg Management IV, L.L.C., a Delaware limited liability company ("KMIV"),
as their general partner. Christopher Lacovara, Samuel P. Frieder, Christopher
W. Anderson, James A. Kohlberg and C. Michael Jacobi, all of whom are members of
the Board of Directors of Katy, are members of KMIV. Each of Messrs. Lacovara,
Frieder, Anderson, Kohlberg and Jacobi disclaim beneficial ownership of these
securities for purposes of Section 16 of the Exchange Act and any other purpose.
It is not expected that the preferred shares will be converted into common stock
prior to June 28, 2006. However, if a conversion did occur, based upon the
ownership level of convertible preferred stock at March 31, 2004, the disclosed
percentage ownerships of the Katy common stock on the above table would change
as follows:

Ownership
Percentage
Name of Beneficial Owner Upon Conversion
------------------------ ---------------

Wallace E. Carroll, Jr. 12.6%

Amelia M. Carroll 12.7%

Dimensional Fund Advisors, Inc 1.8%

Gabelli Funds, GAMCO, MJG, 7.6%
Gabelli Advisers

KKTY Holding Company, L.L.C. 68.3%

SECURITY OWNERSHIP OF MANAGEMENT

The following tables show, as of March 31, 2004, 1) the number of shares
of common stock (first table) and 2) the number of shares of Convertible
Preferred Stock (second table) that directors and certain executive officers
beneficially own, and that directors and executive officers as a group own.
Unless otherwise indicated, the nature of beneficial ownership is that of sole
voting power and sole investment power. In calculating percentages, shares for
which a person has the right to acquire beneficial ownership within 60 days
(e.g., through exercising options) are deemed to be outstanding.

Common Stock

Amount and
Nature of
Name and Address Beneficial Percent of
of Beneficial Owner Ownership Notes Class
----------------------------- ------------ --------- ----------
Christopher W. Anderson -- *
William F. Andrews 17,000 (1) *
Robert M. Baratta 66,459 (1)(3) *
Thomas D. Burns 75,000 (1) *
Daniel B. Carroll 33,500 (1) *
Wallace E. Carroll, Jr 3,129,757 (1)(2)(3) 39.6%
David C. Cooksey 30,400 (1) *
Samuel P. Frieder -- *
C. Michael Jacobi 1,054,500 (1) 11.8%
James A. Kohlberg -- *
Christopher Lacovara -- *
David S. Rahilly 75,000 (1) *
Amir Rosenthal 260,000 (1) 3.2%
All directors and executive 4,741,616 (1)(2)(3) 50.1%
officers of Katy as a group
(13 persons)

* Indicates 1% or less

Convertible Preferred Stock

Amount and
Nature of
Name and Address Beneficial Percent of
of Beneficial Owner Ownership Notes Class
----------------------------- ------------ --------- ----------
Christopher W. Anderson -- (4) *
Samuel P. Frieder -- (4) *
James A. Kohlberg -- (4) *
Christopher Lacovara -- (4) *
C. Michael Jacobi -- (4) *
All directors and executive -- (4) *
officers of Katy as a group
(5 persons)

* Indicates 1% or less

(1) Includes options to acquire the following number of shares within 60
days:

William F. Andrews 12,000
Robert M. Baratta 45,500
Thomas D. Burns 75,000
Daniel B. Carroll 25,000
Wallace E. Carroll, Jr. 25,000
David C. Cooksey 30,000
C. Michael Jacobi 1,050,000
David S. Rahilly 75,000
Amir Rosenthal 250,000

(2) Includes shares deemed beneficially owned by Wallace E. Carroll, Jr.
in his capacity as trustee of certain trusts for the benefit of members of the
Carroll Family (see notes (1) and (2) under "Security Ownership of Certain
Beneficial Owners.").

(3) Includes shares held by a "rabbi trust" in connection with either the
Katy Industries, Inc. Supplemental Retirement and Deferral Plan or the
Directors' Deferred Compensation Plan:

Robert M. Baratta 3,936
Wallace E. Carroll, Jr. 2,106

(4) Christopher Lacovara, Samuel P. Frieder, Christopher W. Anderson,
James A. Kohlberg and C. Michael Jacobi have membership interests in Kohlberg
Management IV, L.L.C., a Delaware limited liability company ("KMIV"). KMIV is
the general partner of several entities with ownership interests in KKTY Holding
Company, which currently owns 925,750 shares of the Company's convertible
preferred stock, which is convertible into 15,429,241 shares of the Company's
common stock. The preferred stock is convertible upon the earlier of June 28,
2006 or the occurrence of certain fundamental changes in Katy. Through December
31, 2004 (except under certain circumstances) the holders of the convertible
preferred stock are entitled to a paid-in-kind (PIK) stock dividend, which
accrues from and is payable on August 1 of each year. Through March 31, 2004,
the accrued and unpaid PIK stock dividend on the shares of convertible preferred
stock held by KKTY Holding Company equaled 92,829 shares of convertible
preferred stock, which when paid will be convertible into 1,547,175 shares of
common stock. KKTY Holding Company is controlled by several entities, which have
KMIV as their general partner. Each of Messrs. Lacovara, Frieder, Anderson,
Kohlberg and Jacobi disclaim beneficial ownership of these securities.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under Section 16 of the Exchange Act, Katy's directors, executive officers
and persons beneficially owning more than 10% of the shares must file reports of
ownership and changes in ownership with the SEC, and copies of these reports
with the New York Stock Exchange and Katy. Based solely on reviewing copies of
the Section 16 reports, Katy believes that, through December 31, 2003, its
directors, executive officers and greater than 10% beneficial owners complied
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, 2003, 2002,
and 2001, the cash compensation paid by Katy and its subsidiaries (and certain
other compensation paid or accrued for those years) to Katy's Chief Executive
Officer ("CEO"), and the four other most highly compensated executive officers
for the year ended December 31, 2003.

Annual Compensation Long-Term Compensation
---------------------------------------- -------------------------
Other Restricted Securities
Name and Annual Stock Underlying All Other
Principal Position Year Salary Bonus Compensation(1) Awards Options Compensation(2)
------------------ ---- -------- --------- --------------- ---------- ----------- ---------------

C. Michael Jacobi 2003 $537,511 $167,400 $ 27,245 $ -- -- $ --
President and Chief 2002 509,803 133,000 19,998 -- -- --
Executive Officer 2001 250,061 -- 7,398 -- 1,050,000 --

Amir Rosenthal 2003 $300,000 $ 93,000 $ 13,557 $ -- -- $ --
Vice President,
Chief Financial 2002 266,346 75,000 11,765 -- 50,000 $ --
Officer, General 2001 81,731 75,000 3,322 -- 200,000 --
Counsel and
Secretary

David S. Rahilly 2003 $250,000 $121,000 $ 11,953 $ -- -- $ --
President, Katy 2002 221,154 187,500 9,365 -- 25,000 --
Consumer Products 2001 33,654 24,063 99 -- 50,000 12,544

Thomas D. Burns 2003 $255,625 $ 50,000 $ 15,808 $ -- -- $ --
President, 2002 113,461 $ 26,125 4,703 -- 75,000 --
Katy Commercial Products 2001 -- -- -- -- -- --

David C. Cooksey 2003 $159,032 $ 39,717 $ 12,645 $ -- -- $ --
Corporate Director of 2002 152,354 23,000 9,216 -- -- --
Accounting and 2001 130,492 -- 838 -- 30,000 26,120
Assistant Treasurer

(1) The 2003, 2002 and 2001 figures include employer contributions to the named
executive Officers' 401(k) retirement accounts, automobile and other allowances,
and non-cash compensation in the form of group term life insurance.

The 2003 figures include the following amounts:

Other Group Term Life
Auto Allowance Allowances Insurance 401(k) Match
-------------- ---------- --------- ------------

C. Michael Jacobi $ 12,000 $ 4,097 $ 5,148 $ 6,000
Amir Rosenthal 9,600 1,200 540 2,217
David S. Rahilly 7,200 1,200 2,135 1,418
Thomas D. Burns 7,200 3,186 237 5,185
David C. Cooksey 7,200 -- 1,387 4,059

(2) During 2001, David S. Rahilly was an independent consultant to Katy prior to
accepting employment with the Company on October 8, 2001. Mr. Rahilly was paid
$12,544 during 2001 for services rendered in that capacity.

During 2001, David C. Cooksey received a success bonus related to the
completion of the recapitalization, equal to 25% of his base salary in December,
2000.

Option/SAR Grants in last fiscal year

There were no stock options or Stock Appreciation Rights ("SARs") granted
to the named executive officers during 2003.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUE TABLE

The following table shows the value of in-the-money options at December
31, 2003 to the named executive officers. No options were exercised in 2003.

Aggregate Fiscal Year-End Option Value
---------------------------------------------------------

Number of Securities
Underlying Unexercised Value of In-the-Money
Options at Year End Options at Year End (1)
--------------------------- ---------------------------

Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------

C. Michael Jacobi 0 1,050,000 $ 0 $1,585,500

Amir Rosenthal 0 250,000 0 475,000

David S. Rahilly 0 75,000 41,500 139,499

Thomas D. Burns 16,667 58,333 0 124,500

David C. Cooksey 0 30,000 0 69,300

(1) Based on closing price of the New York Stock Exchange Composite Tape on
December 31, 2003 of $5.71.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, CHANGE OF CONTROL AND OTHER
ARRANGEMENTS

President and Chief Executive Officer

On June 28, 2001, C. Michael Jacobi entered into an employment agreement
with Katy. The contract states that if Mr. Jacobi is terminated other than for
cause, Katy will continue to pay his base salary for (i) one year, if such
termination occurs other than as a result of a Change in Control, or (ii) two
years, if such termination is a result of or within the six month period
following a Change in Control.

Vice President, Chief Financial Officer, General Counsel and Secretary

On August 6, 2001, Amir Rosenthal entered into an employment agreement
with Katy. The contract states in the event that, if prior to December 31, 2004,
Mr. Rosenthal's employment is terminated other than for cause, or there is a
Change of Control event after which (i) Mr. Rosenthal is terminated other than
for cause, (ii) he is required to relocate or (iii) there is substantial change
in his job responsibilities, Katy will continue to pay his regular base salary
for a period of one year.

For purposes of Messrs. Jacobi's and Rosenthal's agreements, "Change in
Control" means (i) a sale of 100% of Katy's outstanding capital stock, (ii) a
sale of all or substantially all of Katy's operating subsidiaries or assets or
(iii) a transaction or transactions in which any third party acquires Katy stock
in an amount greater than that held by KKTY Holding Company and in which KKTY
Holding Company relinquishes its right to nominate a majority of the candidates
for election to the Board.

DIRECTORS' COMPENSATION

For 2003, directors who were not employed by Katy or its subsidiaries
received: (i) an annual retainer of $10,000; (ii) options to acquire 2,000
shares under the Directors Stock Option Plan (see below); (iii) a stock grant of
500 shares for service on the Board of Directors; and (iv) $2,500 for attending
each meeting of the Board. This group of directors also received in 2003: (i) an
annual retainer of $6,000 if they chaired a Board committee, and (ii) $1,000 for
attending each meeting of a Board committee. Class II directors and those
directors that are also officers do not receive the compensation described in
this section for their service on the Board of Directors. For 2004, there is no
change anticipated for directors' compensation.

Under the Katy Industries, Inc. Non-Employee Director Stock Option Plan
(the "Directors' Stock Option Plan"), each non-employee director who is not a
Class II director receives on the date immediately following the annual meeting
an annual grant of options to acquire 2,000 shares of Katy common stock. The
exercise price is the fair market value on the date of grant. The director may
exercise these options at any time during the ten years from the date of grant.

Directors receiving compensation for their services may also participate
in the Directors' Deferred Compensation Plan which became effective June 1, 1995
(the "Directors' Deferred Compensation Plan"). Under this Plan, a director may
defer directors' fees, retainers and other compensation paid for services as a
director until the later of the director's attainment of age 62 or ceasing to be
a director. Each director has 30 days before the beginning of a Plan Year (as
defined in the Directors' Deferred Compensation Plan) in which to elect to
participate in the Directors' Deferred Compensation Plan. Directors may invest
these amounts in one or more investment alternatives offered by Katy. Directors
may elect to receive distributions of deferred amounts in a lump sum or five
annual installments.

COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors (the "Compensation
Committee") presents the following executive compensation report for the 2003
fiscal year:

The Compensation Committee consists of Wallace E. Carroll, Jr.,
(Chairman), Christopher Lacovara and Christopher W. Anderson. A current copy of
the Compensation Committee charter is available on the Company's website at
www.katyindustries.com. The Committee makes decisions on executive officer
compensation and reports its decisions to the Board. It also seeks the Board's
approval on the Chief Executive Officer's compensation. The following summarizes
the compensation practice and philosophy that was in effect at Katy for the
fiscal year ended December 31, 2003. Modifications to such philosophy have been,
and may continue to be, made.

Compensation Philosophy

Katy's compensation program aims to align executive officers' economic
interests with those of stockholders (including Katy's 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. It reviews the executive compensation
program annually in view of Katy's annual strategic and financial objectives and
performance.

Compensation Program Components

Annual compensation for Katy's Chief Executive Officer and other executive
officers (including the named executive officers) consists of two cash
compensation components: base salary and annual cash bonuses. A third component,
stock options and SARs, are used for executive retention, to attract new key
people, and to align the long-term interests of eligible executives with those
of stockholders.

Salary and bonus levels reflect job responsibility, Compensation Committee
judgments of individual effort and performance, and Katy's financial and market
performance (in light of the competitive environment in which Katy operates).
Annual cash compensation is also influenced by comparable companies'
compensation practices so that Katy remains reasonably competitive in the
market. While competitive pay practices are important, the Compensation
Committee believes that the most important considerations are individual merit
and is Katy's financial and market performance. In considering Katy's financial
and market performance, the Compensation Committee reviews, among other things,
net income, cash flow, working capital and revenues and share price performance
relative to comparable companies and historical performance.

The annual bonus plan compensates employees based on target bonus
opportunities established by the Compensation Committee stated as a percentage
of annual base salary for recommended key employees each year (including the
Chief Executive Officer and the other named executive officers). An employee
achieves the target bonus opportunity if he or she meets 100% of pre-established
performance goals. A higher or lower bonus is earned if performance exceeds or
falls short of the target levels. All bonuses paid for 2003 were based on the
provisions of the annual bonus plan. For 2003, all bonuses paid were based on
the provisions of the annual bonus plan and all named executive officers
received a bonus based on the achievement of specific performance goals.
However, the Compensation Committee felt that certain employees, including one
of the named executive officers (Thomas D. Burns), performed in a manner that
exceeded expectations in certain areas that benefited the Company during 2003.
As a result, cash bonuses were awarded in amounts indicated in the executive
compensation table. These bonuses were less than the named executive officer's
bonus target in each case, with the exception of David S. Rahilly. Also,
employees at certain subsidiaries received bonuses based on the operating
performance at their divisions

The Supplemental Retirement and Deferral Plan (the "Supplemental Deferral
Plan"), among other things, allows participants to voluntarily defer up to 100%
of their annual bonus and up to 50% of their base salary until retirement or
termination of his or her employment. Katy invests voluntary deferrals and
profit sharing allocations at the employee's election in several investment
alternatives offered by Katy.

The third compensation component is a stock option and SAR program. Under
Katy's current stock option program, the Board may 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 on Katy's share price reaching certain goals specified under
the stock option and SAR program. The Compensation Committee believes that the
stock option and SAR program optimizes Katy's growth and profitability by
providing incentives to employees which are consistent with Katy's goals and
which link employees' personal interests to those of the stockholders. The stock
option program is also intended to give Katy flexibility to attract, motivate,
and retain the services of employees and other individuals who contribute to its
success. During 2003, 30,000 stock options and 50,000 SARs were granted to
employees.

Chief Executive Officer Compensation

C. Michael Jacobi became President and Chief Executive Officer in June
2001. Mr. Jacobi's salary for 2003 was increased in April 2003 from $530,000 to
$540,000 on an annual basis. This increase was based upon his experience,
qualifications and responsibilities. Mr. Jacobi was awarded a cash bonus of
$167,400 for his achievement of specific performance goals in 2003. Mr. Jacobi
was not granted any stock options or SARs during 2003.

Summary

The Compensation Committee believes that the total compensation program
for executive officers is appropriately related to individual performance and
Katy's performance (including Katy's financial results and stockholder value).
The Compensation Committee monitors the executive compensation of comparable
companies and believes that 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

Wallace E. Carroll, Jr. (Chairman)
Christopher Lacovara
Christopher W. Anderson

The Compensation Committee Report on Executive Compensation shall not be
deemed to be incorporated by reference as a result of any general incorporation
by reference of this Proxy Statement or any part hereof in the Company's 2003
Annual Report to Stockholders, its Annual Report on Form 10-K for the year ended
December 31, 2003 or any other filings with the SEC.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During 2003, Katy paid Kohlberg & Co. $500,000 for ongoing management
advisory services. Katy expects to pay $500,000 per year for these services, as
outlined in the Recapitalization Agreement of June 2, 2001. Christopher W.
Anderson is an Associate at Kohlberg & Co. Samuel P. Frieder and Christopher
Lacovara are Principals of Kohlberg & Co. James A. Kohlberg is Co-Founder and
Managing Principal of Kohlberg & Co. William F. Andrews, Chairman of the Board,
is a consultant, or "Operating Principal," with Kohlberg & Co.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors met eight times during 2003. Each director in
office at the time of such meeting attended at least 75% of the Board meetings
and the meetings of the Board

committees of which he is a member. The non-management directors meet in
executive session without members of management present at every regular Board
meeting. At these meetings, the presiding director rotates through each
non-management director based on the alphabetical order of the directors' last
names.

Katy's bylaws 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 consists of Christopher Lacovara, Christopher
W. Anderson and C. Michael Jacobi.

The Board of Directors also has an Audit Committee, Compensation Committee
and Nominating and Governance Committee. All of the members of these three Board
committees are independent within the meaning of SEC regulations (as
applicable), the listing standards of the New York Stock Exchange and Katy's
Corporate Governance Guidelines.

In November 2003, the Board approved its Corporate Governance Guidelines.
The Guidelines adopted by the Board meet or exceed the standards adopted by the
New York Stock Exchange. The full text of the Corporate Governance Guidelines
can be found in the Corporate Governance section of the Company's website
(www.katyindustries.com). A copy may also be obtained upon request from the
Company's Corporate Secretary.

Pursuant to the Corporate Governance Guidelines, the Board undertook its
annual review of director independence in November 2003. During this review, the
Board considered transactions and relationships between each director or any
member of his or her immediate family and the Company and its subsidiaries and
affiliates, including those reported under "Certain Relationships and Related
Transactions" below. The Board also examined transactions and relationships
between directors or their affiliates and members of the Company's senior
management or their affiliates. The purpose of this review was to determine
whether any such relationships or transactions were inconsistent with a
determination that the director is independent.

As a result of this review, the Board affirmatively determined that all of
the directors nominated for election at the annual meeting are independent of
the Company and its management under the standards set forth in the Corporate
Governance Guidelines, with the exception of C. Michael Jacobi and Robert M.
Baratta. Mr. Jacobi is considered a non-independent inside director because of
his employment as a senior executive of the Company. Mr. Baratta is considered a
non-independent director because he was a senior executive of the Company within
the past three years.

The Audit Committee consists of Daniel B. Carroll (Chairman), Christopher
Lacovara and William F. Andrews. This Committee met six times during 2003. The
Audit Committee reviews the results of the annual audit with Katy's independent
auditors, reviews the scope and adequacy of Katy's internal auditing procedures
and its system of internal controls, reviews Katy's financial statements and
related financial issues with management and the independent auditors, and
reports its findings and recommendations to the Board of Directors. Mr.
Lacovara, a member of the Audit Committee, is qualified as an audit committee
financial expert within the meaning of SEC regulations and the Board has
determined that he has accounting and related financial management expertise
within the meaning of the listing standards of the New York Stock Exchange. As
mentioned above, the Board of Directors has determined that Mr. Lacovara is an
independent director.

The Compensation Committee consists of Wallace E. Carroll, Jr. (Chairman),
Christopher Lacovara and Christopher W. Anderson. This Committee, which reviews
current and deferred compensation for Katy officers and for some officers and
key employees of its subsidiaries, met two times during 2003. It makes decisions
on executive officer compensation and reports its decisions to the Board of
Directors. It also seeks the Board's approval on the Chief Executive Officer's
compensation.

The Nominating and Governance Committee consists of Samuel P. Frieder
(Chairman), William F. Andrews and Daniel B. Carroll. This Committee met two
times during 2003. The Nominating and Governance Committee is responsible for
developing and implementing policies and practices relating to corporate
governance, including reviewing and monitoring implementation of Katy's
Corporate Governance Guidelines, and sets and reviews policies and procedures in
place throughout various disciplines within the Company to ensure high ethical
standards are practiced. In addition, the Committee makes recommendations to the
Board regarding candidates for the Board. The Committee reports its findings and
recommendations to the Board. A current copy of the Nominating and Governance
Committee charter is available on the Company's website at
www.katyindustries.com.

The entire Board of Directors considers and selects nominees for directors
on the basis of recommendations from the Nominating and Governance Committee.
The Governance and Nominating Committee considers candidates for Board
membership suggested by its members and other Board members, as well as
management. Additionally, subject to compliance with the requirement of the
bylaws, the Nominating and Governance Committee will consider nominations from
stockholders.

Once the Governance and Nominating Committee has identified a prospective
nominee, the Committee makes an initial determination as to as to whether to
conduct a full evaluation of the candidate. This initial determination is based
on whatever information is provided to the Committee with the recommendation of
the prospective candidate, as well as the Committee's own knowledge of the
prospective candidate, which may be supplemented by inquiries to the person
making the recommendation or others. The preliminary determination is based
primarily on the need for additional Board members to fill vacancies or expand
the size of the Board and the likelihood that the prospective nominee can
satisfy the evaluation factors described below.

o the ability of the prospective nominee to represent the interests of
the shareholders of the Company;

o the prospective nominee's standards of integrity, commitment and
independence of thought and judgment;

o the prospective nominee's ability to dedicate sufficient time,
energy and attention to the diligent performance of his or her
duties, including the prospective nominee's service on other public
company boards; and

o the extent to which the prospective nominee contributes to the range
of talent, skill and expertise appropriate for the Board.

The Committee also considers such other relevant factors as it deems
appropriate, including the current composition of the Board, the balance of
management and independent directors, the need for Audit Committee expertise and
the evaluations of other prospective nominees. In connection with this
evaluation, the Committee determines whether to interview the prospective
nominee, and if warranted, one or more members of the Committee, and others as
appropriate, will interview prospective nominees in person or by telephone.
After completing this evaluation and interview, the Committee makes a
recommendation to the full Board as to the

persons who should be nominated by the Board, and the Board determines the
nominees after considering the recommendation and report of the Committee.

Pursuant to the advance notice provision of our bylaws, stockholder
nominations for directors must be received by Katy not less than 50 days or more
than 90 days before the annual meeting. Any nominations for directors made by
stockholders must include the following information regarding the nominee: name;
age; business address; residence address; principal occupation or employment;
class and number of shares of Katy beneficially owned; and any other information
required to be disclosed in a proxy solicitation for the election of directors.
Additionally, the stockholder making such nomination must provide his or her
name and address, and the number of shares of the Company beneficially owned by
such stockholder. No person is eligible for election as a director of the
Company unless he or she is nominated (i) by the Board of Directors or (ii) in
accordance with the foregoing requirements.

AUDIT COMMITTEE REPORT

The Audit Committee acts pursuant to a written charter, as amended on
March 9, 2004, by the Board of Directors. A current copy of the Audit Committee
charter is available on the Company's website at www.katyindustries.com. As set
forth in more detail in the charter, the Audit Committee's primary
responsibilities are focused in four broad categories:

1. Recommend to the Board of Directors the appointment of independent
auditors;

2. Consult with management or independent auditors regarding the audit
scope and the audit plan;

3. Review and approve company financial statements; and

4. Review with management and independent auditors the adequacy of
internal controls.

The Audit Committee has adopted pre-approval policies and procedures for
audit and permissible non-audit procedures provided by our independent auditors,
consistent with the requirements of SEC regulations. The policy provides for the
pre-approval of particular types of services and provides specific cost limits
for each such service on an annual basis. All other services provided by our
independent auditors must be individually pre-approved by the Audit Committee.
In determining whether to pre-approve services, the Audit Committee considers
whether such services are consistent with the rules of the SEC on auditor
independence. The Audit Committee delegates to its members the authority to
address any requests for pre-approval of services between Audit Committee
meetings. Any pre-approval determination by a member of the committee must be
reported to the Audit Committee at its next scheduled meeting. There is no
delegation of the Audit Committee's pre-approval authority to management.
Requests or applications to provide services that require pre-approval by the
Audit Committee must be submitted to the Audit Committee by both the independent
auditor and the Chief Financial Officer, Treasurer or Assistant Treasurer of the
Company, and must include a joint statement as to whether, in their view, the
request or application is consistent with the SEC's rules on auditor
independence.

The Audit Committee has reviewed and discussed the audited financial
statements for the year ending 2003 with management and the Company's
independent auditors, and has discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards 61
(Communications with Audit Committees). The Audit Committee has received the

written disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and has discussed with the independent auditors the independent
auditors' independence from Katy and the Company's management. Based on these
reviews and discussions, the Audit Committee recommended to the Board of
Directors, and the Board approved, that the audited financial statements be
included in Katy's Annual Report on Form 10-K for the year ended December 31,
2003 filed with the Securities and Exchange Commission.

Audit Committee of the Board of Directors

Daniel B. Carroll (Chairman)
Christopher Lacovara
William F. Andrews

The Audit Committee Report shall not be deemed to be incorporated by
reference as a result of any general incorporation by reference of this Proxy
Statement or any part hereof in the Company's 2003 Annual Report to
Stockholders, its Annual Report on Form 10-K for the year ended December 31,
2003 or any other filings with the SEC.

STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS

Shareholders and other parties interested in communicating directly with
whole Board of Directors or the non-management directors as a group may do so by
writing to Chairman of the Board, Katy Industries, Inc., 765 Straits Turnpike,
Middlebury, CT 06762.

STOCK PRICE PERFORMANCE GRAPH

The graph below compares the yearly percentage change in the cumulative
total stockholder return on the shares of Katy common stock with the cumulative
total return of the Russell 2000 and the cumulative total return of the Dow
Jones US Industrial Diversified Index for the fiscal years ending December 31,
1998 through 2003. The graph below assumes $100 invested, including reinvestment
of dividends, on December 31, 1998.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG KATY INDUSTIRES, INC., THE RUSSELL 2000 INDEX
AND THE DOW JONES US INDUSTRIAL DIVERSIFIED INDEX

[LINE GRAPH OMITTED]

*$100 invested on 12/31/98 in stock or index-
including reinvestment of dividends.
Fiscal year ending December 31.

Comparison of Five Year Cumulative Total Return

Cumulative Total Return
------------------------------------------------------------
12/98 12/99 12/00 12/01 12/02 12/03

Katy Industries, Inc. 100.00 50.72 36.24 20.66 20.78 34.49

Russell 2000 100.00 121.26 117.59 120.52 95.83 141.11

Dow Jones US Industrial Diversified 100.00 135.47 136.45 122.67 79.65 107.76

PROPOSALS OF STOCKHOLDERS FOR 2005 ANNUAL MEETING

In order to be considered for inclusion in Katy's proxy materials for the
2005 annual meeting of stockholders, any stockholder proposal must be addressed
to Katy Industries, Inc., 765 Straits Turnpike, Middlebury, Connecticut 06762,
Attention: Secretary, and must be received no later than December 29, 2004.

If proposals are not received in time to be included in the proxy
materials, Katy's bylaws set forth additional requirements and procedures
regarding the submission of stockholder proposals for consideration at an annual
meeting of stockholders. A stockholder proposal or nomination intended to be
brought before the 2005 annual meeting must be received by the Secretary in
writing not less than 50 days or more than 90 days prior to the 2005 annual
meeting. A nomination or proposal that does not comply with such requirements
and procedures will be disregarded.

OTHER MATTERS

As of the date of this Proxy Statement, the Board of Directors does not
know of any matters to be presented at the meeting other than the proposals
noted in this Proxy Statement. 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. Katy's Board of
Directors has adopted an advance notice bylaw provision requiring that
stockholder proposals to be made at any annual meeting be received by Katy not
less than 50 days nor more than 90 days prior to the annual meeting. No such
stockholder proposals were received for the 2004 annual meeting.

HOUSEHOLDING

Unless we have received contrary instructions, the Company may send a
single copy of the annual report, proxy statement and notice of annual meeting
to any household at which two or more stockholders reside if the Company
believes the stockholders are members of the same family. Each stockholder in
the household will continue to receive a separate proxy card. This process,
known as "householding," reduces the volume of duplicate information received at
your household and helps to reduce the Company's expenses.

If you would like to receive your own set of the Company's annual
disclosure documents this year or in future years, follow the instructions
described below. Similarly, if you share an address with another stockholder and
together both of you would like to receive only a single set of the Company's
annual disclose documents, follow these instructions:

If your shares are registered in your own name, please contact our
corporate office at 765 Straits Turnpike, Middlebury, Connecticut 06762, Attn:
Secretary, and inform us of your request.

If a bank, broker or other nominee holds your shares please contact your
bank, broker or other nominee directly.

FORM 10-K

Upon written request to our corporate office at 765 Straits Turnpike,
Middlebury, Connecticut 06762, stockholders will be furnished without charge a
copy of our Annual Report on Form 10-K required to be filed with the Securities
and Exchange Commission, including the financial statements and the schedules
thereto for the most recent fiscal year.

Middlebury, Connecticut
April 29, 2003

The shares represented hereby shall be voted as specified. If no
specification is made, such shares shall be voted "FOR" proposals 1 and 2.

1. Election of Directors:

Nominees:

Robert M. Baratta
Daniel B. Carroll
Wallace E. Carroll, Jr.
C. Michael Jacobi

|_| For All |_| Withhold All |_| For All Except*

--------------------------------------------------------------------------------

* To withhold authority to vote for any individual nominee, write the nominee's
name in the space provided above and fill in the "For All Except" oval.

Proposal 2. To ratify the selection of PricewaterhouseCoopers LLP as the
independent public auditors of Katy.

|_| For |_| Against |_| Abstain

Please check this box if you plan to attend the annual meeting.

|_|

Date:
--------------------------------------------
(signature)

Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand of record in the names of two or more persons or in the name of a
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the above Proxy. If shares of stock are held of record by a
corporation, the Proxy should be executed in corporate name by the President or
Vice President and the Secretary or Assistant Secretary, and the corporate seal
should be affixed thereto. If shares of stock are held of record by any other
legal entity, the Proxy should be executed in the entity name by an authorized
person. Executors or administrators or other fiduciaries who execute the above
Proxy for a deceased stockholder should give their full title. Where applicable,
indicate your official position or representative capacity. Please date the
proxy.

--------------------------------------------------------------------------------
FOLD AND DETACH HERE

A-1