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Exhibit 10.31
 
AMENDMENT NO. 3 TO CREDIT AND SECURITY AGREEMENT AND WAIVER

This AMENDMENT NO. 3 TO CREDIT AND SECURITY AGREEMENT AND WAIVER (this
“Agreement”) is entered into and effective as of March 30, 2016, by and among
Katy Industries, Inc., a Delaware corporation, Continental Commercial Products,
LLC, a Delaware limited liability company, 2155735 Ontario Inc., an Ontario
corporation, CCP Canada Inc., an Ontario corporation, FTW Holdings, Inc., a
Delaware corporation and Fort Wayne Plastics, Inc., an Indiana corporation
(individually and collectively, the “Borrower” or the “Borrowers”) and BMO
Harris Bank N.A. (the “Lender”).

Recitals:

A. Borrowers and the Lender are party to that certain Credit and Security
Agreement dated as of February 19, 2014 (as amended from time to time, the
“Credit Agreement”).

B. Borrowers and the Lender have agreed to the provisions set forth herein on
the terms and conditions contained herein.

Agreement

Therefore, in consideration of the mutual agreements herein and other sufficient
consideration, the receipt of which is hereby acknowledged, each Borrower and
the Lender hereby agree as follows:
   
1.             Definitions.  Capitalized terms used and not otherwise defined
herein have the meanings given them in the Credit Agreement.
 
2.             Effectiveness of Agreement.  This Agreement shall become
effective as of the date first written above, but only if this Agreement has
been executed by each Borrower and the Lender, and the other items listed on
Exhibit A attached hereto to be delivered prior to this Agreement becoming
effective have been delivered and, as applicable, executed, attested,
acknowledged, certified, or authenticated (or such delivery or execution,
attestation, acknowledgement, certification or authentication is waived by the
Lender), each in form and substance satisfactory to the Lender, and all fees and
expenses of the Lender have been fully reimbursed for which invoices or amounts
have been presented.

3.             Waiver.  Borrowers have advised the Lender that certain Events of
Default have occurred and are continuing pursuant to Section 9.01(b) of the
Credit Agreement, as a result of the Loan Parties’ failure to meet the minimum
Consolidated EBITDA covenant set forth in Section 8.12(c) of the Credit
Agreement and the Leverage Ratio covenant set forth in Section 8.12(e) of the
Credit Agreement, in each case, for the Fiscal Quarter ended December 31, 2015
(each a “Specified Financial Covenant Default” and, collectively, the “Specified
Financial Covenant Defaults”).  The Loan Parties have requested, among other
things, that the Lender waive the Specified Financial Covenant Defaults and the
following Defaults and Events of Default resulting directly from the occurrence
of any Specified Financial Covenant Default (including each Specified Financial
Covenant Default, each a “Specified Default” and, collectively, the “Specified
Defaults”):  (a) that certain Event of Default under Section 9.01(e) of the
Credit Agreement resulting from the Loan Parties’ failure to meet the minimum
Consolidated EBITDA covenant set forth in Section 8.12(c) of the Second Lien
Credit Agreement and the Leverage Ratio covenant set forth in Section 8.12(e) of
the Second Lien Credit Agreement, in each case, for the Fiscal Quarter ended
December 31, 2015 (each a “Second Lien Specified Financial Covenant Default”)
and any other Default or Event of Default (each as defined under the Second Lien
Credit Agreement) under the Second Lien Credit Agreement resulting directly from
the occurrence of any other Specified Default, (b) any Event of Default under
Section 9.01(k) of the Credit Agreement, if applicable, resulting directly from
the occurrence of any other Specified Default, (c) any Event of Default under
Section 9.01(b) under the Credit Agreement arising from any failure to promptly
notify the Lender of the occurrence of (i) any Default under the Credit
Agreement with respect to any Specified Default pursuant to Section 7.03(a) of
the Credit Agreement and (ii) any Default or Event of Default (each as defined
under the Second Lien Credit Agreement) under the Second Lien Credit Agreement
due to the occurrence of any Second Lien Specified Financial Covenant Default or
any other Default or Event of Default under the Second Lien Credit Agreement
resulting directly from the occurrence of any of the Specified Defaults pursuant
to Section 7.03(b) of the Credit Agreement, and (d) any Event of Default under
Section 9.01(d) of the Credit Agreement arising from a breach of any
representation, warranty, certification or statement regarding the occurrence or
existence of any Specified Default.
 

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Subject to the satisfaction of the conditions set forth herein, the Lender is
willing to accommodate such request, on the terms set forth herein. 
Notwithstanding anything to the contrary contained in the Credit Agreement, and
subject to the terms and conditions hereof and in reliance upon the
representations and warranties of the Loan Parties set forth herein, the Lender
hereby waives the Specified Defaults and the Specified Defaults shall no longer
exist and, except as expressly set forth herein, its right to take any action
under the Credit Agreement or the other Loan Documents (including any right to
terminate the Commitment) that it may otherwise have had as a result of the
occurrence of any of the Specified Defaults.

This is a limited, one-time waiver and shall not be deemed to: (a) constitute a
waiver of any other Event of Default or any other breach of the Credit Agreement
or any of the other Loan Documents, whether now existing or hereafter arising,
except as expressly set forth herein with respect to the Specified Defaults, (b)
constitute a waiver of any right or remedy of the Lender under the Loan
Documents which does not arise as a result of any Specified Default (all such
rights and remedies being expressly reserved by the Lender) or (c) establish a
custom or course of dealing or conduct between the Lender, on the one hand, and
Borrowers or any other Loan Party on the other hand.  Except to the extent
otherwise provided herein, the Credit Agreement and each of the other Loan
Documents shall remain in full force and effect in accordance with their
respective terms.

4.             Amendment.  The Credit Agreement is hereby amended as follows:

4.1.          Consolidated EBITDA.  In Section 1.01 of the Credit Agreement, the
definition of “Consolidated EBITDA” is deleted and replaced with the following:
 

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““Consolidated EBITDA” means, for any period, Consolidated Net Income for such
period, plus (a) in each case to the extent deducted in determining such
Consolidated Net Income, without duplication, (i) Consolidated Interest Charges
(net of interest income for such period of the Company and its Subsidiaries) for
such period, (ii) federal, state, local and foreign income tax expense for such
period, net of income tax credits, (iii) depreciation and amortization for such
period, (iv) non-cash compensation expense, or other non-cash expenses or
charges, for such period arising from the granting of stock options, stock
appreciation rights or similar equity arrangements, (v) the noncash rental
expense calculated on a straight-line basis with respect to the property subject
to the Jefferson City Lease for the period June 1, 2015 through and including
December 31, 2015, in an amount not to exceed $137,523 per calendar month, and,
if agreed upon in writing by the Lender, other non-cash expenses or losses and
other non-cash charges incurred (excluding any non-cash charges representing an
accrual of, or reserve for, cash charges to be paid within the next twelve
months), (vi) LIFO reserves established during such period, (vii) Management
Fees which have been expensed in such period, and (viii) the reasonable costs
and expenses incurred by the Loan Parties in connection with the negotiation,
documentation and closing of the Centrex Acquisition in an aggregate amount not
to exceed $120,000 in total during the term of this Agreement and incurred no
later than 60 days after the First Amendment Effective Date, minus (b) (i)
non-cash income, gains or profits or LIFO reserves terminated during such
period, in each case as determined for the Company and its Subsidiaries on a
Consolidated basis, and (ii) solely with respect to any period ending on or
before September 30, 2015, Facility Relocation Expenses incurred and paid in
cash for such period (net of (x) up to $534,000 in tenant improvement proceeds
actually received in cash by CCP during such period (or paid on its behalf
directly to the applicable vendor) under the Jefferson City Lease during such
period and (y) up to $500,000 actually received in cash by CCP (or paid on its
behalf directly to the applicable vendor) during such period from the City of
Jefferson for building improvements at the premises leased under the Jefferson
City Lease); provided that, for any period that includes a material Disposition
or the Centrex Acquisition, the calculation of Consolidated EBITDA shall be
subject to the adjustments set forth in Sections 1.03(c) and 1.03(d). 
Notwithstanding the foregoing, Consolidated EBITDA for the applicable Fiscal
Quarter end as set forth in the table below shall be deemed to be the respective
amount as follows:
 
Fiscal Quarter Ending on or
Closest To
Consolidated EBITDA
   
September 30, 2014
$3,514,000
December 31, 2014
$1,669,000
March 31, 2015
$1,417,000

”
4.2.          Eurodollar Rate.  In Section 1.01 of the Credit Agreement, the
definition of “Eurodollar Rate” is deleted and replaced with the following:

““Eurodollar Rate” means with respect to a Eurodollar Rate Loan, a rate per
annum determined by the Lender pursuant to the following formula:

Eurodollar Rate  =
Eurodollar Base Rate
1.00 – Eurodollar Reserve Percentage

; provided that in no event shall the “Eurodollar Rate” be less than 0.00%.”
 

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4.3.          Third Amendment Effective Date.  The following new definitions
added in alphabetical order to Section 1.01 of the Credit Agreement:

“Termination Fee” has the meaning specified in Section 2.06.

“Third Amendment Effective Date” means March ___, 2016.
 
4.4.          Termination or Reduction of Revolving Loan Commitment.  Section
2.06 of the Credit Agreement is deleted and replaced with the following:

“2.06        Termination or Reduction of Revolving Loan Commitment.  The
Borrowers may, upon notice to the Lender from the Borrower Agent, terminate the
Revolving Credit Commitment or the Letter of Credit Sublimit, or from time to
time permanently reduce the Revolving Credit Commitment or the Letter of Credit
Sublimit; provided that (i) any such notice shall be received by the Lender not
later than 11:00 a.m. five Business Days prior to the date of termination or
reduction, (ii) any such partial reduction shall be in an aggregate amount of
$1,000,000 or any whole multiple of $500,000 in excess thereof, (iii) the
Borrowers shall not terminate or reduce (A) the Revolving Credit Commitment if,
after giving effect thereto and to any concurrent prepayments hereunder, the
Total Revolving Credit Outstandings would exceed the Revolving Credit Commitment
or (B) the Letter of Credit Sublimit if, after giving effect thereto, the
Outstanding Amount of L/C Obligations not fully Cash Collateralized hereunder
would exceed the Letter of Credit Sublimit, (iv) if, after giving effect to any
reduction or termination of the Revolving Credit Commitment or the Letter of
Credit Sublimit exceeds the amount of the Revolving Credit Commitment such
Sublimit shall be automatically reduced by the amount of such excess, and (v) if
the Revolving Credit Commitment is voluntarily terminated in full prior to the
Revolving Credit Maturity Date, the Borrowers shall pay to the Lender a one-time
payment of an amount as follows (such payment being the “Termination Fee”),
which Termination Fee shall not apply to a partial termination of the Revolving
Credit Commitment:

Date of Termination
Percent of Revolving Credit Commitment
Amount
On or prior to the first anniversary of the Third Amendment Effective Date
2.00%
After the first anniversary of the Third Amendment Effective Date
1.00%

The foregoing percentages are of the Revolving Credit Commitment Amount as of
the Third Amendment Effective Date.  In addition, the Termination Fee will also
be owing and shall be paid by the Borrowers to the Lender if the Revolving
Credit Facility is terminated on account of an Event of Default or any
acceleration of the Obligations.  Borrowers hereby acknowledge that the
Termination Fee shall be included as part of the Obligations under the Credit
Agreement, and shall be secured by the Collateral.
 
All fees accrued until the effective date of any termination of the Revolving
Credit Commitment shall be paid on the effective date of such termination.”
 

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4.5.          Consolidated Fixed Charge Coverage Ratio.  Section 8.12(a) of the
Credit Agreement is deleted and replaced with the following:
 
“(a)          Consolidated Fixed Charge Coverage Ratio.  Permit the Consolidated
Fixed Charge Coverage Ratio as of the last day of the Measurement Period most
recently ended to be less than the ratio set forth below opposite such Fiscal
Quarter, provided, however, that for (i) the June 30, 2015 calculation, such
ratio shall be calculated only for such Fiscal Quarter ending on or closest to
such date, (ii) the September 30, 2015 calculation, such ratio shall be
calculated only for the two most recent Fiscal Quarters ended, and (iii) the
December 31, 2015 calculation, such ratio shall be calculated only for the three
most recent Fiscal Quarters ended:
 
Measurement Period Ending on or Closest
To
Minimum Consolidated Fixed
Charge Coverage Ratio
June 30, 2015
2.51 to 1.00
September 30, 2015
1.84 to 1.00
December 31, 2015
1.34 to 1.00
March 31, 2016
1.57 to 1.00
June 30, 2016
1.34 to 1.00
September 30, 2016
1.45 to 1.00
December 31, 2016
2.01 to 1.00
March 31, 2017
1.88 to 1.00
June30, 2017
1.96 to 1.00
September 30, 2017
2.00 to 1.00
December 31, 2017
2.00 to 1.00
March 31, 2018
2.00 to 1.00
June 30, 2018
2.00 to 1.00
September 30, 2018
2.00 to 1.00
December 31, 2018
2.00 to 1.00
Last Day of Each Fiscal Quarter Thereafter
2.00 to 1.00

”
4.6.          Minimum Consolidated EBITDA.  Section 8.12(c) of the Credit
Agreement is deleted and replaced with the following:

“(c)          Minimum Consolidated EBITDA.

(x)          Permit Consolidated EBITDA as of the last day of the Measurement
Period most recently ended set forth below to be less than the amount set forth
below opposite such Fiscal Quarter:
 
Measurement Period Ending on or Closest
To
Minimum Consolidated
EBITDA
June 30, 2015
$9,694,496
September 30, 2015
$7,987,462
December 31, 2015
$7,337,041
December 31, 2016
$14,017,576
March 31, 2017
$14,261,132
June30, 2017
$14,500,000
September 30, 2017
$14,500,000
December 31, 2017
$14,500,000
March 31, 2018
$14,500,000
June 30, 2018
$14,500,000
September 30, 2018
$14,500,000
December 31, 2018
$14,500,000
Last Day of Each Fiscal Quarter Thereafter
$14,500,000

 

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(y)          Permit Consolidated EBITDA as of the last day of any Fiscal Month
set forth below, for the twelve-month period then ended, to be less than the
amount set forth below opposite such Fiscal Month:
 
Measurement Period Ending on or Closest
To
Minimum Consolidated
EBITDA
March 31, 2016
$8,376,891
April 30, 2016
$8,477,984
May 31, 2016
$8,852,273
June 30, 2016
$7,961,575
July 31, 2016
$8,962,559
August 30, 2016
$10,213,016
September 30, 2016
$9,812,870

”
4.7.          Leverage Ratio.  Section 8.12(e) of the Credit Agreement is
deleted and replaced with the following:

“(e)          Leverage Ratio.

(x)          Permit the Leverage Ratio as at the last day of any period of four
consecutive Fiscal Quarters ending on the last day of any Fiscal Quarter set
forth in the table below to be greater than the maximum ratio set forth opposite
such quarter in the table below:

Measurement Period Ending on or Closest
To
Maximum Ratio
June 30, 2015
5.25 to 1.00
September 30, 2015
6.46 to 1.00
December 31, 2015
7.12 to 1.00
December 31, 2016
2.95 to 1.00
March 31, 2017
2.75 to 1.00
June30, 2017
2.46 to 1.00
September 30, 2017
2.25 to 1.00
December 31, 2017
2.25 to 1.00
March 31, 2018
2.25 to 1.00
June 30, 2018
2.25 to 1.00
September 30, 2018
2.25 to 1.00
December 31, 2018
2.25 to 1.00
Last Day of Each Fiscal Quarter Thereafter
2.25 to 1.00

 

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(y)          Permit the Leverage Ratio as at the last day of any Measurement
Period of twelve consecutive Fiscal Months ending on the last day of any Fiscal
Month set forth in the table below to be greater than the maximum ratio set
forth opposite such Fiscal Month in the table below:
 
Measurement Period Ending on or Closest
To
Maximum Ratio
March 31, 2016
5.88 to 1.00
April 30, 2016
5.69 to 1.00
May 31, 2016
5.28 to 1.00
June 30, 2016
5.84 to 1.00
July 31, 2016
5.25 to 1.00
August 30, 2016
4.52 to 1.00
September 30, 2016
4.80 to 1.00

”
4.8.          Compliance Certificate.  The form of Compliance Certificate
attached to the Credit Agreement as Exhibit C is amended by deleting item “A.11”
in its entirety and substituting the following language therefor:

“A.11  Facility Relocation Expenses pursuant to clause (b)(ii) of the definition
of “Consolidated EBITDA”  $_______”

5.             Additional Covenants.  In consideration for the agreements of the
Lender herein set forth, and anything contained in the Loan Documents to the
contrary notwithstanding, Borrowers hereby agree and covenant to and for the
benefit of the Lender to comply with each of the following, the failure of which
shall constitute an immediate Event of Default without further action or notice
by or on behalf of the Lender, any Lender or any other Person:

(i) the Loan Parties and their Subsidiaries will permit the representatives
designated by the Lender to perform such audits with respect to the Loan Parties
and/or the Loan Parties’ books, records, assets, operations or business, at such
times and intervals during normal business hours as the Lender may reasonably
request, all at the Loan Parties’ sole cost and expense.  Promptly after receipt
thereof by a Loan Party, the Borrowers shall provide to the Lender a true and
correct copy of each such audit and other reports with respect to the Loan
Parties and/or the Loan Parties’ books, records, assets, operations or business
prepared by or for the Second Lien Agent or the Second Lien Lenders;

 

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(ii) no Loan Party will, nor will it permit any of its Subsidiaries to, merge or
consolidate or enter into any analogous reorganization or transaction with any
Person; and no Loan Party shall consummate or commit to consummate any
acquisitions or take any other actions that, under the terms of the Loan
Documents, are not permitted during the existence of any Event of Default
without the prior written consent of the Lender, except for actions under
Sections 8.06(a) and 8.06(b) and intercompany loans among Loan Parties and other
intercompany loans permitted under Section 8.02 (and prepayments thereof), in
each case, to which the Lender hereby consents;

(iii) commencing with March 21, 2016 and on or before Wednesday of each week
thereafter, Borrowers shall deliver to the Lender, at the sole expense of the
Borrower, (x) a statement of projected cash receipts and cash disbursements of
Borrowers and their Subsidiaries for each week in the period of thirteen (13)
continuous weeks commencing with the week in which such statement is delivered,
which statement shall be substantially in the same format as an initial forecast
reasonably satisfactory to the Lender (each such statement, including the
initial forecast, a “13-Week Forecast”); and (y) a report reflecting the cash
receipts and cash disbursements of Borrowers and their Subsidiaries for the
immediately preceding week, accompanied by a variance report against the
forecast for such week set forth in the latest 13-Week Forecast signed on behalf
of Borrowers; and

 

(iv) within ten (10) Business Days (or such longer period as the Lender may
agree in its sole discretion) after the Lender makes a request thereof and the
Lender shall have delivered to Borrowers a commercially reasonable form thereof,
Borrowers shall complete, execute and deliver to the Lender a perfection
certificate in such form, and the disclosures therein contained shall be
certified by Borrowers as being true, correct and complete in all material
respects as of the date so delivered.

In addition to the above, as a condition to the effectiveness of this Agreement:

(a) Borrowers shall have entered into a waiver agreement under the Second Lien
Loan Documents (the “Second Lien Waiver”), pursuant to which all existing and
known “Events of Default” thereunder, and all related rights to exercise any
rights or remedies in respect thereof, shall have been effectively waived
concurrently with the effectiveness of the waivers contemplated hereby;

(b) the Lender shall have received a fully executed copy of the Second Lien
Waiver; and

(c) Borrowers shall have paid to the Lender, a non-refundable amendment fee of
$25,000.00 (the “Amendment Fee”), which Amendment Fee shall be deemed fully
earned on the date of this Agreement and in addition to any previous fee
arrangement between or among Borrowers, the Lender, or any of them.  Borrowers
hereby agree that (A) the Amendment Fee shall be included as part of the
Obligations under the Credit Agreement, and shall be secured by the Collateral,
and (B) the Amendment Fee shall be due and payable in full on the date hereof.

6.             Representations and Warranties of Borrower.  Each Borrower hereby
jointly and severally represents and warrants to the Lender that (i) each
Borrower’s execution of this Agreement has been duly authorized by all requisite
action of each Borrower, (ii) no consents are necessary from any third parties
for any Borrower’s execution, delivery or performance of this Agreement, (iii)
this Agreement, the Credit Agreement, and each of the other Loan Documents,
constitute the legal, valid and binding obligations of each Borrower enforceable
against such Borrower in accordance with their terms, except to the extent that
the enforceability thereof against Borrower may be limited by bankruptcy,
insolvency or other laws affecting the enforceability of creditors rights
generally or by equity principles of general application, (iv) all of the
representations and warranties contained in Article 6 of the Credit Agreement
are true and correct with the same force and effect as if made on and as of the
date of this Agreement, and (v) other than the Specified Defaults, there are no
Defaults or Event of Defaults as of the date hereof.
 

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7.            Customer Identification - USA PATRIOT Act Notice.  The Lender
hereby notifies each Borrower, each other Loan Party that, pursuant to the
requirements of the USA Patriot Act, Title III of Pub. L. 107-56, signed into
law October 26, 2001 (as amended from time to time (including any successor
statute) and together with all rules promulgated thereunder, collectively, the
“Act”), it is required to obtain, verify and record information that identifies
each Borrower, each other Loan Party, which information includes the name and
address of each Borrower, each other Loan Party and other information that will
allow the Lender to identify each Borrower, each other Loan Party in accordance
with the Act.

8.            Reaffirmation.  Each Borrower hereby jointly and severally
represents, warrants, acknowledges and confirms that (i) except as specifically
modified by the terms of this Agreement, the Credit Agreement and the other Loan
Documents remain in full force and effect as amended by this Agreement, (ii)
Borrower has no defense to its obligations under the Credit Agreement and the
other Loan Documents, and the Obligations are due and owing to the Lender
without setoff or counterclaim, (iii) the Liens of the Lender under the Loan
Documents secure all the Obligations, are reaffirmed in all respects, continue
in full force and effect, have the same priority as before this Agreement, and
are not impaired or extinguished in any respect by this Agreement, and (iv)
Borrower has no claim against the Lender arising from or in connection with the
Credit Agreement or the other Loan Documents and any such claim is hereby
irrevocably waived and released and discharged forever.  Until the Obligations
are paid in full in cash or, with respect to any outstanding L/C Obligations,
Cash Collateralized, and all obligations and liabilities of Borrower under this
Agreement and the Loan Documents are performed and paid in full in cash or, with
respect to any outstanding L/C Obligations, Cash Collateralized, Borrower agrees
and covenants it is bound by the covenants and agreements set forth in the
Credit Agreement, Loan Document and in this Agreement.  Each Borrower hereby
ratifies and confirms the Obligations.  This Agreement does not create or
constitute, and is not, a novation of the Credit Agreement and the other Loan
Documents.
 
9.            Release.  AS A MATERIAL PART OF THE CONSIDERATION FOR LENDER
ENTERING INTO THIS AGREEMENT, EACH BORROWER, FOR ITSELF AND ITS OFFICERS,
MEMBERS, MANAGERS, SHAREHOLDERS, PARTNERS, DIRECTORS, EMPLOYEES AND AGENTS
(COLLECTIVELY “RELEASOR”) HEREBY FOREVER RELEASES, FOREVER WAIVES AND FOREVER
DISCHARGES LENDER AND ITS PREDECESSORS, SUCCESSORS, ASSIGNS, OFFICERS, MANAGERS,
DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS, ATTORNEYS, REPRESENTATIVES, PARENT
CORPORATIONS, SUBSIDIARIES, AND AFFILIATES (HEREINAFTER ALL OF THE ABOVE
COLLECTIVELY REFERRED TO AS “LENDER GROUP”), JOINTLY AND SEVERALLY, FROM ANY AND
ALL CLAIMS, COUNTERCLAIMS, DEMANDS, DAMAGES, DEBTS, AGREEMENTS, COVENANTS,
SUITS, CONTRACTS, OBLIGATIONS, LIABILITIES, ACCOUNTS, OFFSETS, RIGHTS, ACTIONS,
AND CAUSES OF ACTION OF ANY NATURE WHATSOEVER, INCLUDING, WITHOUT LIMITATION,
ALL CLAIMS, DEMANDS, AND CAUSES OF ACTION FOR CONTRIBUTION AND INDEMNITY,
WHETHER ARISING AT LAW OR IN EQUITY, AND WHETHER ARISING UNDER, ARISING IN
CONNECTION WITH, OR ARISING FROM, THE CREDIT AGREEMENT, AND THE OTHER LOAN
DOCUMENTS OR OTHERWISE, PRESENTLY POSSESSED, WHETHER KNOWN OR UNKNOWN, WHETHER
LIABILITY BE DIRECT OR INDIRECT, LIQUIDATED OR UNLIQUIDATED, PRESENTLY ACCRUED,
WHETHER ABSOLUTE OR CONTINGENT, FORESEEN OR UNFORESEEN, AND WHETHER OR NOT
HERETOFORE ASSERTED, WHICH RELEASOR MAY HAVE OR CLAIM TO HAVE, AGAINST ANY OF
LENDER GROUP, IN EACH CASE TO THE EXTENT ARISING OR ACCRUING ON OR PRIOR TO THE
DATE HEREOF.
 

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10.          Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS.

11.          Section Titles.  The section titles in this Agreement are for
convenience of reference only and shall not be construed so as to modify any
provisions of this Agreement.
 
12.          Fees and Expenses.  Borrower shall promptly pay to the Lender all
fees, expenses and other amounts owing to the Lender under the Credit Agreement
and the other Loan Documents, including, without limitation, all reasonable
fees, costs and expenses incurred by the Lender in connection with the
preparation, negotiation, execution, and delivery of this Agreement.
 
13.          Counterparts; Facsimile Transmissions.  This Agreement may be
executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy or in PDF format
shall be effective as delivery of a manually executed counterpart of this
Agreement.

14.          Loan Document.  This Agreement is a Loan Document.

15.          Notice—Oral Commitments Not Enforceable.  The following notice is
given pursuant to Section 815 ILCS 160/1 et seq of the Illinois Revised
Statutes.  Nothing contained in the following notice shall be deemed to limit or
modify the terms of this Agreement and the other Loan Documents:

ORAL OR UNEXECUTED AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW
SUCH DEBT ARE NOT ENFORCEABLE REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS
BASED AND THAT IS IN ANY WAY RELATED TO THE LOAN AND THE LOAN DOCUMENTS. TO
PROTECT BORROWER AND EACH OTHER OBLIGOR (BORROWER) AND LENDER (CREDITOR) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS THE BORROWER AND LENDER REACH
COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN
WRITING TO MODIFY IT.
 

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Each Borrower acknowledges that there are no other agreements between or among
the Lender, any Borrower, any other Loan Parties, oral or written, concerning
the subject matter of the Loan Documents, and that all prior agreements
concerning the same subject matter, including any proposal or commitment letter,
are merged into the Loan Documents and thereby extinguished.

16.          Notice-Insurance.  UNLESS YOU PROVIDE US WITH EVIDENCE OF THE
INSURANCE COVERAGE REQUIRED BY YOUR AGREEMENT WITH US, WE MAY PURCHASE INSURANCE
AT YOUR EXPENSE TO PROTECT OUR INTERESTS IN YOUR COLLATERAL. THIS INSURANCE MAY,
BUT NEED NOT, PROTECT YOUR INTERESTS. THE COVERAGE THAT WE PURCHASE MAY NOT PAY
ANY CLAIM THAT YOU MAKE OR ANY CLAIM THAT IS MADE AGAINST YOU IN CONNECTION WITH
THE COLLATERAL. YOU MAY LATER CANCEL ANY INSURANCE PURCHASED BY US, BUT ONLY
AFTER PROVIDING US WITH EVIDENCE THAT YOU HAVE OBTAINED INSURANCE AS REQUIRED BY
OUR AGREEMENT. IF WE PURCHASE INSURANCE FOR THE COLLATERAL, YOU WILL BE
RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER
CHARGES WE MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL
THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS
OF THE INSURANCE MAY BE ADDED TO YOUR TOTAL OUTSTANDING BALANCE OR OBLIGATION.
THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE YOU MAY BE
ABLE TO OBTAIN ON YOUR OWN.

{remainder of page intentionally left blank; signature pages follows}
 

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first
above written.

 
Katy Industries, Inc.,
 
a Delaware corporation
       
By:
/s/ David J. Feldman    
David J. Feldman, Chief Executive Officer
       
Continental Commercial Products, LLC,
 
a Delaware limited liability company
       
By:
/s/ David J. Feldman    
David J. Feldman, Chief Executive Officer
       
2155735 Ontario Inc.,
 
an Ontario corporation
       
By:
/s/ David J. Feldman    
David J. Feldman, Chief Executive Officer
             
CCP Canada Inc.,
 
an Ontario corporation
       
By:
/s/ David J. Feldman    
David J. Feldman, Chief Executive Officer
       
FTW Holdings, Inc., a Delaware corporation
       
By:
/s/ David J. Feldman    
David J. Feldman, Chief Executive Officer
       
Fort Wayne Plastics, Inc., an Indiana corporation
       
By:
/s/ David J. Feldman    
David J. Feldman, Chief Executive Officer
       
BMO Harris Bank N.A.
 
By:
/s/ Jason Hoefler   Print Name:  Jason Hoefler   Title:  Director

{end of signatures}
 
Signature Page to Amendment No. 3 to Credit and Security Agreement
 

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Exhibit A

1.     Amendment No. 3 to Credit and Security Agreement executed by each
Borrower and the Lender.

2.     Limited Waiver and Amendment to Second Lien Credit and Security Agreement
executed by each Borrower party thereto, the Second Lien Lenders and the Second
Lien the Lender.
 
 

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