KATY.OB Definitive proxy filed SH hold vote March 19.
1-500 R/S split cash out fraction shares @ $2.00.
QUESTIONS AND ANSWERS
The following questions and answers are intended to briefly address potential questions regarding the Special Meeting and the Reverse Stock Split. These questions and answers may not address all questions that may be important to you as a stockholder. Please refer to the more detailed information contained elsewhere in this Proxy Statement, the exhibits to this Proxy Statement, and any information and documents referred to or incorporated by reference in this Proxy Statement.
Q: What is the date, time and place of the Special Meeting?
A: The Special Meeting will be held on March 19, 2009 at 9:00 am local time at the Holiday Inn Mount Kisco, located at One Holiday Inn Drive, Mount Kisco, New York.
Q: What will stockholders be asked to vote upon at the Special Meeting?
A: We will ask our stockholders to approve the following proposals:
1. To amend Katy’s Certificate to effect the Reverse Stock Split; and
2. To approve the adjournment or postponement of the Special Meeting, if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the Reverse Stock Split.
Q: What is the Reverse Stock Split proposal?
A: We are proposing that our stockholders approve a reverse 1-for-500 stock split of our outstanding shares, which is accomplished through the amendment of our Certificate.
The purpose of the Reverse Stock Split is to allow us to suspend our SEC-reporting obligations (referred to as “going private”) by reducing the number of our stockholders of record to fewer than 300. As a result, we expect to terminate the registration of our common stock under federal securities laws.
Q: If the Company suspends its SEC-reporting obligations, will it still publish quarterly financial results?
A: Yes. We plan to publicly post our annual audited financial statements and quarterly unaudited financial statements through the pink sheets financial reports service. We also currently intend to continue to solicit proxies in connection with our annual meetings, though we will no longer be subject to proxy rules under federal securities laws. However, there is no requirement that we do any of the foregoing, and if provided, these documents will not be as detailed or extensive as the information we currently file with the SEC and deliver to stockholders. As noted elsewhere, should we choose to make any information available from time to
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time, such a decision would be at our complete discretion and should in no way be interpreted to mean that the same type of information will be supplied in the future.
Q: Why should I vote to approve the Reverse Stock Split?
A: The Board of Directors believes that the monetary expense and the burden to management incident to continued compliance with the Exchange Act significantly outweigh any benefits derived from continued registration of the shares. The Reverse Stock Split will also serve as a source of liquidity for those stockholders who receive cash for their shares. In addition, the Reverse Stock Split will provide Cashed Out Holders with an opportunity to liquidate their shares at a premium to recent trading prices without paying brokerage commissions or other transaction fees.
Q: What will I receive in the Reverse Stock Split?
A: If you are the owner of fewer than 500 Katy shares on the date of the Reverse Stock Split, you will receive $2.00 in cash, without interest, from us for each pre-split share you own. If you are the owner of more than 500 Katy shares on the date of the Reverse Stock Split, you will receive one share for each 500 shares held before the Reverse Stock Split and, in lieu of any fractional shares following the Reverse Stock Split, will receive $2.00 in cash, without interest, for any shares held immediately before the Reverse Stock Split that result in the fraction.
Q: How will the Reverse Stock Split affect the Company’s directors, executive officers and their affiliates?
A: We expect that none of our directors or their affiliates will be cashed out in the Reverse Stock Split given their level of ownership of the Company’s shares, though two will receive a nominal amount of cash for fractional shares that are cashed out. Two of our executive officers currently hold less than 500 shares and therefore will likely be cashed out. After the Reverse Stock Split, no executive officers will be a shareholder of the Company; however, the executive officers will continue to hold outstanding and unexercised stock options. The Reverse Stock Split will have no material effect on our directors, executive officers and their affiliates except that the total ownership of the Company’s common stock owned by such affiliated stockholders will increase slightly and such stockholders may receive cash from the Company for any fractional shares owned after the Reverse Stock Split. In addition, these stockholders will no longer be subject to the same reporting requirements after the Company deregisters as a reporting company under the Exchange Act.
Q: How will the Reverse Stock Split affect the day to day operations of the Company?
A: Though the Reverse Stock Split will have very little effect on the Company’s business and operations, it will reduce management time spent on compliance and disclosure matters attributable to our Exchange Act filings, and may therefore enable management to increase its focus on managing Katy’s business and growing shareholder value.
Q: What are the accounting consequences of the Reverse Stock Split?
A: On the Effective Date of the Reverse Stock Split, the Company will (i) change the number of authorized shares of Katy common stock by dividing the total authorized shares by 500, (ii) change the par value of Katy common stock by multiplying the current par value by 500, and (iii) change the number of issued and outstanding common shares of Katy by dividing the total issued and outstanding common shares by 500 and paying cash in lieu of any resulting fractional shares. The Company anticipates accounting for the repurchased shares as treasury shares, thus increasing the amount reflected as treasury stock. The stated capital and additional paid-in capital dollar amounts will not change. The loss per share of common stock and book value per share of common stock will increase as a result of there being fewer shares of our common stock outstanding. We do not anticipate that any other material accounting consequence would arise as a result of the Reverse Stock Split.
Q: How was the price of $2.00 in cash for each pre-split share determined?
A: In arriving at the $2.00 in cash for each pre-split share, the Board of Directors analyzed the average closing price for the stock over a range of time periods, in order to ensure that it captured the long-term value of the stock rather than short term values affected by recent stock market volatility.
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The Cash Out Price of $2.00 per Katy share represents (i) a premium of 40.8% over the average closing price of Katy shares over the one year prior to and including September 19, 2008, which was $1.42 per share, (ii) a premium of 53.8% over the average closing price of Katy shares over the 3-month period prior to and including September 19, 2008, which was $1.30 per share, and (iii) a premium of 135.3% over the closing price of Katy shares on September 19, 2008, which was $0.85 per share.
The Board of Directors engaged the valuation firm of VRC to opine on whether that price was fair to the holders of the Company’s common stock. In connection with such determination, VRC has issued a Fairness Opinion which is attached to this Proxy Statement as Exhibit A.
Q: How will the Company pay the stockholders who will receive cash pursuant to the Reverse Stock Split?
A: The Company has access to sufficient funds under its credit facility to pay for all the fractional shares cashed out in connection with the Reverse Stock Split.
Q: Why is 500 shares the “cutoff” number for determining which stockholders will be cashed out and which stockholders will remain as stockholders of Katy?
A: We estimate that a 500 share “cutoff’’ will result in approximately 113 stockholders of record, such stockholders owning approximately 97% of the issued and outstanding shares of the Company prior to the Reverse Stock Split. This reduced number of stockholders will permit us to deregister with the SEC and will provide a “cushion” to help ensure that the record number of stockholders does not increase again to over 500 in the foreseeable future.
Q: Is there a limit on the number of shares Katy will exchange for cash?
A: Katy has not set a limit on the number of shares it will exchange for cash. However, the Board of Directors may, in its discretion, cancel the Special Meeting or abandon the Reverse Stock Split if it determines the Reverse Stock Split is not in the best interests of Katy, including if there is a change in the number of shares that will be exchanged for cash that would substantially increase the cost of the Reverse Stock Split from what is currently anticipated.
Q: Why should I vote to approve the adjournment proposal?
A: We are proposing that our stockholders approve a proposal to adjourn or postpone the Special Meeting, if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the Reverse Stock Split.
Q: What happens if the Special Meeting is postponed or adjourned?
A: Your proxy will be good and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is voted.
Q: How will I know if Katy decides to cancel the Special Meeting?
A: The Board of Directors will promptly notify stockholders of the decision by mail if time permits or by announcement at the Special Meeting.
Q: May I buy additional shares in order to remain a stockholder of Katy?
A: Yes. As long as you are able to acquire a sufficient number of shares so that you are the owner of 500 or more shares which are held in the same name and in the same account prior to the Effective Date, your Katy shares will not be cashed out in the Reverse Stock Split.
Q: What happens if I buy shares after February 5, 2009?
A: Shares bought after February 5, 2009 (the record date for voting at the Special Meeting) are not entitled to vote, and as with all other shares, will be subject to the Reverse Stock Split on the Effective Date.
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Q: What if I hold my shares in “street name”?
A: It is our desire to treat stockholders who hold shares of our common stock in street name through a nominee (such as a bank or broker) in the same manner as stockholders whose shares are registered in their name. However, we or BNY Mellon Shareowner Services, Katy’s transfer agent and the exchange agent for the Reverse Stock Split (the “Transfer Agent” or “Exchange Agent”), will not attempt to compare your record holdings with any shares that you may hold in street name in a brokerage account and these banks, brokers and other nominees may have different procedures for processing the Reverse Stock Split. Accordingly, if you hold your shares of our common stock in “street name,” we encourage you to contact your bank, broker or other nominee.
Q: What is the recommendation of our Board of Directors regarding the proposals?
A: Our Board of Directors has determined that the Reverse Stock Split is advisable and in the best interests of both the Continuing Holders and the Cashed Out Holders. Our Board of Directors has approved the Reverse Stock Split and unanimously recommends that you vote “FOR” the amendment to the Certificate so the Reverse Stock Split may be effected and “FOR” the proposal to adjourn or postpone the Special Meeting, if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the Reverse Stock Split.
Q: When is the Reverse Stock Split expected to be completed?
A: Our Special Meeting will be held on March 19, 2009. We need to file the necessary amendment with the Delaware Secretary of State for the Reverse Stock Split to become effective. If the proposed amendment to our Certificate is approved at the Special Meeting, we expect the Reverse Stock Split to be completed as soon as practicable thereafter, likely within twenty-four hours.
Q: What if the proposed Reverse Stock Split is not completed?
A: If the Reverse Stock Split is not completed, we will continue our current operations, and we will continue to be subject to the reporting requirements of the SEC.
Q: Who is entitled to vote at the Special Meeting?
A: Holders of record of Katy shares on the Record Date, February 5, 2009, are entitled to vote at the Special Meeting. Each of our stockholders is entitled to one vote for each common share owned on the Record Date.
Q: What vote is required for our stockholders to approve the Reverse Stock Split?
A: The holders of a majority of the outstanding shares entitled to vote at the Special Meeting must vote “FOR” the Reverse Stock Split.
Q: What vote is required for our stockholders to approve the proposal to adjourn or postpone the Special Meeting, if necessary or appropriate to solicit additional proxies?
A: The holders of a majority of the shares present in person or represented by proxy at the Special Meeting and entitled to vote at the Special Meeting must vote “FOR” the adjournment or postponement of the Special Meeting.
Q: What happens if I do not return my proxy card?
A: Unless you vote in person, a failure to return your proxy card will have the same effect as voting against the Reverse Stock Split. The failure to return a proxy card will not affect the outcome of the vote regarding the adjournment or postponement of the meeting, if necessary or appropriate to solicit additional proxies.
Q: Can I change my vote after I have mailed my proxy card?
A: Yes. You may revoke your proxy by either (i) submitting a new proxy with a later date or a written revocation so long as the new proxy or written revocation is received by the Company before the proxy is exercised, or (ii) attending the Special Meeting and voting in person or giving notice of revocation in open meeting before the proxy is exercised.
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Q: What do I need to do now?
A: After reading and considering the information contained in this Proxy Statement, please vote your Katy shares as soon as possible. You may vote your shares by returning the enclosed proxy or by voting in person at the Special Meeting. If your shares are held by a broker, your broker will vote your shares only if you provide instructions to your broker on how to vote. You should instruct your broker on how to vote your shares using the voting instruction card provided by your broker.
Q: Will I have appraisal or dissenters’ rights in connection with the Reverse Stock Split?
A: No. Under Delaware Law, you do not have appraisal or any other dissenters’ rights whether or not you vote for the Reverse Stock Split.
Q: Should I send in my share certificates now?
A: No. If the Reverse Stock Split is approved, our Exchange Agent will send you written instructions in a letter of transmittal for exchanging your share certificates.
Q: What is the approximate length of time between the Effective Date of the Reverse Stock Split and the date on which stockholders will receive cash payments for their fractional shares?
A: As soon as practicable after filing the amendment to our Certificate of Incorporation with the Delaware Secretary of State and the amendment becoming effective, shareholders will be notified and sent a letter of transmittal and instructed how to transmit their certificates representing shares of Common Stock to the Company. Upon proper completion and execution of the letter of transmittal, and the return of the letter of transmittal to the Exchange Agent, each shareholder entitled to receive payment will receive payment from the Exchange Agent as outlined in the letter of transmittal. Shareholders should allow for approximately five business days after mailing for the Exchange Agent to receive the letter of transmittal and approximately ten business days following receipt of materials by the Exchange Agent for payment to be made. No interest will be made on cash payments from the Effective Date of the Reverse Stock Split and payment date. In the event we are unable to locate a shareholder, or if a shareholder fails to properly complete, execute and return the letter of transmittal to the Exchange Agent, any funds payable to such shareholder pursuant to the Reverse Stock Split will be administered in accordance with the relevant state abandoned property laws.
Q: If the Reverse Stock Split is completed and I am still a shareholder, will I be able to buy or sell shares in a public market?
A: After completing the Reverse Stock Split, the liquidity of the shares in public markets may be reduced. It is the intention of the Board of Directors that the Company’s shares be quoted in the pink sheets — limited information tier following the Reverse Stock Split. This tier covers issuers that have provided limited information with respect to the preceding six months, including quarterly financial reports that include, at a minimum, balance sheet, income statement and total shares outstanding for a period within the preceding six months. If, however, a qualified broker-dealer is not willing to quote the Katy shares, stockholders will be unable to use the pink sheets to trade Katy shares.
Q: Who can help answer my questions?
A: If you have questions about the Reverse Stock Split, you should contact James Shaffer at (314) 656-4388, or contact the Company’s proxy solicitor, Morrow & Co., LLC, toll-free within the United States at 1-800-607-0088.
SPECIAL FACTORS |
