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| ARTICLE I | DEFINITIONS  | 1 |
|-----------|-------------------|---|

|   | 1.01 | Administrator  | 1 |
|--------|------|---------------------|---|

|   | 1.02 | Affiliate  | 1 |
|--------|------|-----------------|---|

|   | 1.03 | Aggregate Change in Control Consideration  | 1 |
|--------|------|-------------------------------------------------|---|

|   | 1.04 | Board  | 1 |
|--------|------|-------------|---|

|   | 1.05 | Cause  | 1 |
|--------|------|-------------|---|

|   | 1.06 | Change in Control  | 2 |
|--------|------|-------------------------|---|

|   | 1.07 | Change in Control Protection Period  | 2 |
|--------|------|-------------------------------------------|---|

|   | 1.08 | Code  | 2 |
|--------|------|------------|---|

|   | 1.09 | Committee  | 3 |
|--------|------|-----------------|---|

|   | 1.10 | Company  | 3 |
|--------|------|---------------|---|

|   | 1.11 | Effective Date  | 3 |
|--------|------|----------------------|---|

|   | 1.12 | Employee  | 3 |
|--------|------|----------------|---|

|   | 1.13 | Options  | 3 |
|--------|------|---------------|---|

|   | 1.14 | Participant  | 3 |
|--------|------|-------------------|---|

|   | 1.15 | Participant’s Share  | 3 |
|--------|------|---------------------------------|---|

|   | 1.16 | Plan  | 3 |
|--------|------|------------|---|

|   | 1.17 | Stock Appreciation Rights  | 3 |
|--------|------|---------------------------------|---|

| ARTICLE II | PARTICIPATION  | 4 |
|------------|---------------------|---|

|   | 2.01 | Eligibility Requirements  | 4 |
|--------|------|--------------------------------|---|

|   | 2.02 | Determination of Eligibility  | 4 |
|--------|------|------------------------------------|---|

|   | 2.03 | Conditions to Participation  | 4 |
|--------|------|-----------------------------------|---|

| ARTICLE III | COMPENSATION  | 5 |
|-------------|--------------------|---|

|   | 3.01 | Compensation  | 5 |
|--------|------|--------------------|---|

|   | 3.02 | Conditions for Payment  | 5 |
|--------|------|------------------------------|---|

|   | 3.03 | Excise Taxes  | 6 |
|--------|------|--------------------|---|

|   | 3.04 | Beneficiary  | 8 |
|--------|------|-------------------|---|

| ARTICLE IV | AMENDMENT AND TERMINATION  | 8 |
|------------|---------------------------------|---|

| ARTICLE V | ADMINISTRATION  | 8 |
|-----------|----------------------|---|

|   | 5.01 | Allocation of Responsibility  | 8 |
|--------|------|------------------------------------|---|

|   | 5.02 | Administrator and Committee Powers and Duties  | 8 |
|--------|------|-----------------------------------------------------|---|

|   | 5.03 | Discretion of Administrator and Committee  | 9 |
|--------|------|-------------------------------------------------|---|

|   | 5.04 | Records and Reports  | 9 |
|--------|------|---------------------------|---|

|   | 5.05 | Payment of Expenses  | 9 |
|--------|------|---------------------------|---|

|   | 5.06 | Limitation of Liability  | 9 |
|--------|------|-------------------------------|---|

|   | 5.07 | Claims  | 9 |
|--------|------|--------------|---|

|   | 5.08 | Review of Claims  | 10 |
|--------|------|------------------------|----|

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| ARTICLE VI | MISCELLANEOUS  | 12 |
|------------|---------------------|----|

|   | 6.01 | Construction  | 12 |
|--------|------|--------------------|----|

|   | 6.02 | Governing Law  | 12 |
|--------|------|---------------------|----|

|   | 6.03 | Plan Creates No Separate Rights  | 12 |
|--------|------|---------------------------------------|----|

|   | 6.04 | Non-Alienation of Benefits  | 12 |
|--------|------|----------------------------------|----|

|   | 6.05 | Action by Corporation  | 12 |
|--------|------|-----------------------------|----|

|   | 6.06 | Unfunded Plan  | 12 |
|--------|------|---------------------|----|

|   | 6.07 | Section 409A  | 13 |
|--------|------|--------------------|----|

|   | 6.08 | Successor Provision  | 13 |
|--------|------|---------------------------|----|

|   | 6.09 | Tax Withholdings  | 13 |
|--------|------|------------------------|----|

| ARTICLE VII | ADOPTION OF PLAN  | 14 |
|-------------|------------------------|----|

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|   | (a) | I hereby surrender any and all rights I now have in any Options (as defined in the Plan) and/or Stock Appreciation Rights (as defined in the Plan) that Katy Industries, Inc. (the “Company”) previously awarded to me (which awards are denoted on the attached Exhibit (a)); and |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | I hereby acknowledge that I will not be entitled to receive from the Company any further Options and/or Stock Appreciation Rights or any other equity-based awards, including but not limited to restricted stock, restricted stock units, and the like, notwithstanding the terms of any employment or other agreement, equity plan or other arrangement that may purport to entitle me to any such additional awards (except that nothing herein will restrict the Company from making any further such awards if the Company in its sole discretion elects to make such awards after I become a Participant in the Plan); and |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | I hereby agree to execute any documents or instruments the Company may request to evidence my compliance with any of the conditions for participation in the Plan set forth in Section 2.03 of the Plan or as otherwise imposed by the Administrator (as defined in the Plan). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Type of Award(Option/Stock Appreciation Right) |   | Date of Grant |   | Number of Underlying Shares of Common Stock |
|------------------------------------------------|--------|---------------|--------|---------------------------------------------|
| Option                                         |   | 4/21/08       |   | 750,000                                     |

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|   | (a) | I hereby surrender any and all rights I now have in any Options (as defined in the Plan) and/or Stock Appreciation Rights (as defined in the Plan) that Katy Industries, Inc. (the “Company”) previously awarded to me (which awards are denoted on the attached Exhibit (a)); and |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | I hereby acknowledge that I will not be entitled to receive from the Company any further Options and/or Stock Appreciation Rights or any other equity-based awards, including but not limited to restricted stock, restricted stock units, and the like, notwithstanding the terms of any employment or other agreement, equity plan or other arrangement that may purport to entitle me to any such additional awards (except that nothing herein will restrict the Company from making any further such awards if the Company in its sole discretion elects to make such awards after I become a Participant in the Plan); and |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | I hereby agree to execute any documents or instruments the Company may request to evidence my compliance with any of the conditions for participation in the Plan set forth in Section 2.03 of the Plan or as otherwise imposed by the Administrator (as defined in the Plan). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Type of Award(Option/Stock Appreciation Right) |   | Date of Grant |   | Number of Underlying Shares of Common Stock |
|------------------------------------------------|--------|---------------|--------|---------------------------------------------|
| Option                                         |   | 10/27/08      |   | 125,000                                     |
| Stock Appreciation Right                       |   | 3/12/10       |   | 20,000                                      |

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