When you create a new database with Cato's, from the File Menu, it will prompt you for the name and location of the database. When you enter that, it will create two subdirectories under that location, named "data" and "website".
That's where the tool is going to look for the csv files and where it's going to store the website it creates.
To create the OOTP HTML files, from inside the game go to the Online League Options, under the League menu. There are buttons there to specify the location of the HTML files, as well as buttons to specify whether or not you want player files, box scores, etc.
You do not need player files or box scores for Cato's utility. Enter the location you want OOTP to use to store the files, and make sure that it's the same as one you tell Cato's utility.
Cato has a pretty good readme with the tool, also available online at his website
www.jcato.net
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Evan