Document:

<PAGE>

                                                                  Exhibit 10.13

                                                                 EXECUTION COPY

                      PREFERRED UNIT REPURCHASE AGREEMENT
                      -----------------------------------

     PREFERRED UNIT REPURCHASE AGREEMENT (this "Agreement") dated as of March
29, 2001 among Contico International, L.L.C., a Delaware limited liability
company ("Contico"), Katy Industries, Inc., a Delaware corporation ("Katy") and
Newcastle Industries, Inc., a Missouri corporation ("Newcastle").

     WHEREAS, Katy and Newcastle entered into the Members Agreement, dated as of
January 8, 1999, as amended (the "Members Agreement") which provides for the
terms and conditions of the Preferred Units (as defined therein).

     WHEREAS, simultaneously with entering into this Agreement, Katy is entering
into a Preferred Stock Purchase and Recapitalization Agreement (the "Purchase
Agreement"), dated as of March 29, 2001, by and between KKTY Holding Company,
L.L.C. ("Purchaser"), a Delaware limited liability company and Katy providing,
subject to the terms and conditions set forth therein, for (a) the acquisition
by Purchaser of certain shares of common stock of Katy (the "Offered Shares")
pursuant to a cash tender offer (the "Offer") by Purchaser, which Offered Shares
shall not represent more than twenty-nine and nine-tenths percent (29.9%) of the
outstanding voting securities of Katy, (b) the purchase by Purchaser from Katy
of not less than 400,000 shares of newly issued preferred stock (the
"Convertible Preferred Stock") convertible at a ratio of twelve and one-half
common shares per share of Convertible Preferred Stock into an aggregate of not
less than 5,000,000 common shares, the proceeds of such purchase to be used by
Katy to (i) partially repay existing indebtedness of Katy and (ii) pay the
Consideration (as defined below) payable pursuant to the terms of this
Agreement, and (c) the refinancing of the remaining existing indebtedness of
Katy (the matters described in clauses (a) through (c) and the other
transactions contemplated by the Purchase Agreement, are collectively referred
to herein as the "Recapitalization").

     NOW, THEREFORE, in connection with the Recapitalization and in
consideration of the mutual agreements, provisions and covenants contained in
this Agreement, the parties hereto agree as follows:

     SECTION 1.  Definitions.
                 -----------

     Capitalized terms used herein and not described herein have the respective
meaning ascribed to them in the Members Agreement.
<PAGE>

     SECTION 2.  Purchase and Sale of Preferred Units.
                 ------------------------------------

     On the Closing Date (as defined in the Purchase Agreement) Newcastle shall
tender to Contico, Contico shall repurchase from Newcastle, and Katy shall cause
Contico to repurchase from Newcastle, 165 Preferred Units (the "Repurchase") for
a purchase price of $60,000 per Preferred Unit (the "Preferred Unit
Consideration"), plus an amount equal to the aggregate accrued but unpaid
                 ----
Priority Return Consideration for each such Preferred Unit (the "Additional
Consideration" and together with the Preferred Unit Consideration, the
"Consideration").  The Consideration shall be payable by Contico in cash by wire
transfer of immediately available funds.  Notwithstanding anything herein to the
contrary, Newcastle shall not be entitled to receive and Katy shall not be
obligated to pay the Consideration unless and until the Closing (as defined in
the Purchase Agreement) is consummated.

     SECTION 3.  Waiver.
                 ------

     Notwithstanding any language in the Members Agreement to the contrary, the
parties hereto acknowledge that, solely for purposes of this Agreement and not
in respect of any other transaction, a Change in Control has not occurred in
connection with the Recapitalization, and Newcastle hereby knowingly and
voluntarily (i) waives all rights under Section 1.5 of the Members Agreement
(including, without limitation, its Control Put Right as it relates to the
remaining 164 Preferred Units) to the extent such rights arise by reason of the
Recapitalization, and (ii) waives, releases and discharges Katy from any and all
suits, claims, causes of action, rights, damages, liabilities, and costs that
Newcastle has, may have or will have in the future relating to (A) the Control
Put Right, as applicable to the Recapitalization, and the Recapitalization, and
(B) Katy granting a security interest in any or all of Contico's assets in order
to secure indebtedness of Katy or any of its subsidiaries, including, without
limitation, such indebtedness as may be necessary to consummate the transactions
contemplated by the Purchase Agreement.  No amendment to the Purchase Agreement
shall have the effect of expanding or otherwise altering the foregoing waiver or
any of Newcastle's other commitments or obligations set forth in this Agreement,
in a manner adverse to Newcastle, unless Newcastle gives its consent to such
amendment in writing.

     SECTION 4.  Amendment To Members Agreement, Contico Limited Liability
                 ---------------------------------------------------------
Company Agreement.
-----------------

     Amendment No.1 to the Members Agreement attached hereto as Exhibit A and
                                                                ---------
the Second Amendment to Amended and Restated Limited Liability Company Agreement
of

                                       2
<PAGE>

Contico set forth below (the "Second Amendment") shall take effect subject to
and upon the Closing and the receipt of the Consideration by Newcastle in
exchange for the tendered Preferred Units without any further action required to
be taken on behalf of Newcastle.

     The Second Amendment is as follows: The definition of "Reserves" set forth
in paragraph (41) of Exhibit A to the Amended and Restated Limited Liability
Company Agreement of Contico is deleted and amended in its entirety to read as
follows:

          (41) The Board shall establish and keep available adequate reserves
     with respect to working capital, taxes, future capital expenditures,
     mandatory distributions pursuant to Section 10.1, or for any other purpose,
     in such amounts as the Board shall reasonably deem necessary or appropriate
     in its reasonable judgment, and such amounts shall constitute "Reserves."

     SECTION 5.  Termination.
                 -----------

     This Agreement shall terminate upon the earlier to occur of (i) June 30,
2001, unless the Closing shall have occurred on or prior to such date, in which
case this Agreement shall continue in full force and effect or (ii) the
termination of the Purchase Agreement, unless in the case of clause (i) above,
                                       ------
such period of time is extended at the sole discretion of Newcastle; provided
that the waiver contained in Section (3) above with respect to the Control Put
Right insofar as it relates to the entry by Katy into the Purchase Agreement
shall be permanently waived, without regard to the lapse of time or the
termination of the Purchase Agreement.

                  [THE FOLLOWING PAGE IS THE SIGNATURE PAGE]

                                       3
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

                                  CONTICO INTERNATIONAL, L.L.C.

                                  By:___________________________________
                                  Name:_________________________________
                                  Title:________________________________

                                  KATY INDUSTRIES, INC.

                                  By:___________________________________
                                  Name:_________________________________
                                  Title:________________________________

                                  NEWCASTLE INDUSTRIES, INC.

                                  By:___________________________________
                                  Name:_________________________________
                                  Title:________________________________

                                       4<PAGE>

                                                                  Exhibit 10.14

                                                                 EXECUTION COPY

                   AMENDMENT NO. 1 TO THE MEMBERS AGREEMENT
                   ----------------------------------------

     THIS AMENDMENT NO. 1 (the "First Amendment") to the Members Agreement dated
as of January 8, 1999 (the "Members Agreement") by and between Newcastle
Industries, Inc., a Missouri corporation formerly known as Contico
International, Inc. ("Newcastle"), and Katy Industries, Inc., a Delaware
corporation ("Katy"), is entered into by and between Newcastle and Katy as of
March 29, 2001.

     WHEREAS, Katy and Newcastle constitute 100% of the members and owners of
Contico International, L.L.C. (the "Company");

     WHEREAS, Katy has entered into a Preferred Stock Purchase and
Recapitalization Agreement (the "Purchase Agreement"), dated as of March 29,
2001, by and between KKTY Holding Company, L.L.C., a Delaware limited liability
company ("Purchaser"), and Katy providing, subject to the terms and conditions
set forth therein, for (a) the acquisition by Purchaser of certain shares of
common stock of Katy pursuant to a cash tender offer by Purchaser, (b) the
purchase by Purchaser from Katy of a certain number of newly issued shares of
preferred stock (with conversion rights) of Katy and (c) such other transactions
as contemplated by the Purchase Agreement (collectively, the "Transaction"); and

     WHEREAS, in order to consummate the Transaction, Newcastle has agreed, by
executing and delivering to the Company and Katy that certain Preferred Unit
Repurchase Agreement, dated March 29, 2001 (the "Repurchase Agreement"), to (a)
waive the Control Put Right pursuant to Section 1.5 of the Members Agreement
with respect to 164 Preferred Units of the Company to the extent such right
arises by reason of the Transaction and (b) enter into the First Amendment, in
each case, subject to closing of the Transaction (the "Closing") and receipt by
Newcastle of the purchase price for the remaining 165 Preferred Units owned by
it (the "Consideration") no later than June 30, 2001, as provided for in the
Repurchase Agreement.

     NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree and consent as follows.

     1.   Definitions.  Capitalized terms used and not defined herein shall have
          -----------
the meaning given such terms in the Members Agreement.

     2.   Amendments to the Members Agreement.
          -----------------------------------

          (A)  Section 1.2 shall be deleted and amended in its entirety to read
as follows:

               1.2  Intentionally Omitted.

          (B)  Sections 1.3 and 1.4 shall be deleted and amended in their
entirety to read as follows:
<PAGE>

               1.3  Put Option.
                    ----------

                    (a)  The Right.  At any time during the period beginning on
                         ---------
     the earlier to occur of

                         (i)   the fifth (5th) anniversary of the Effective Date
     or

                         (ii)  the date on which all outstanding indebtedness
     for borrowed money incurred by Katy in connection with the Transaction has
     been paid in full and the lenders owed such indebtedness have released any
     and all security interests in connection with such indebtedness, and ending
     January 7, 2010, inclusive (the "Put Exercise Period"), the Holders shall
     have the right to require Katy to purchase from the Holders in accordance
     with this Section 1.3 all or any portion of their Eligible Units (a "Put
     Right"). The purchase price for each Eligible Unit required to be purchased
     by Katy pursuant to the Put Right shall be (subject to adjustment pursuant
     to Section 1.8) the sum of (i) $100,000 (the "Cash Consideration"), plus
                                                                         ----
     (ii) cash in an amount equal to the aggregate accrued and unpaid Priority
     Return and Profit Participation with respect to such Eligible Unit through
     the date of the closing of the purchase of such Eligible Unit by Katy (the
     "Priority Return Consideration").

                    (b)  Notice.  To exercise the Put Right, the Holder
                         ------
     Representative shall notify Katy, in writing, within the Put Exercise
     Period of the Holders' intention so to exercise (the "Put Notice"). The Put
     Notice shall identify each Holder exercising the Put Right and the number
     of Eligible Units to be purchased from such Holder, and shall certify that
     the Holder Representative has notified each Holder in writing of the
     exercise of the Put Right and of such Holder's opportunity to participate
     in the exercise thereof. Holders exercising the Put Right are hereinafter
     collectively referred to as the "Put Selling Holders" and the Eligible
     Units to be purchased by Katy from the Put Selling Holders are hereinafter
     collectively referred to as the "Put Units".

                    (c)  Closing.  At the closing of the purchase and sale of
                         -------
     the Put Units (the "Put Closing"), (i) Katy shall deliver to each Put
     Selling Holder for each Put Unit sold by such Put Selling Holder the
     purchase price in cash as set forth in Section 1.3(a), and (ii) each Put
     Selling Holder shall execute and deliver to Katy an Assignment of Preferred
     Units in the form attached hereto as Exhibit B with respect to the Put
                                          ---------
     Units to be sold by such Put Selling Holder. The cash payment to be made by
     Katy to any Put Selling Holder pursuant to the exercise of the Put Right
     shall be in the form of a certified check or wire transfer of immediately
     available funds. The Put Closing shall take place on the sixtieth (60th)
     day after the date that the Put Notice is given or on such other date as
     Katy and the Holder Representative may agree. Unless otherwise agreed by
     Katy and the Holder Representative, the Put Closing shall take place at the
     principal office of Katy.

                                       2
<PAGE>

               1.4  Limitations on Exercise of Put Right.
                    ------------------------------------

                    (a)  The Put Right may not be exercised more than three (3)
     times.

                    (b)  Katy shall not be obligated to purchase Eligible Units
     pursuant to the exercise of Put Right within eighteen months after the
     closing of a previous purchase of Eligible Units pursuant to the exercise
     of a Put Right.

                    (c)  Section 1.5 shall be deleted and amended in its
     entirety to read as follows:

               1.5  Control Put Option.
                    ------------------

                    (a)  The Right.  Katy shall give notice to the Holder
                         ---------
     Representative of a Change in Control with respect to Katy or the Company
     upon the earlier of (i) the first (1st) business day after the execution of
     (A) a letter of intent (the "Letter of Intent") or (B) a definitive
     agreement (the "Definitive Agreement") to engage in such activity which
     would result in a Change in Control, whichever occurs first, or (ii)
     fifteen (15) days before the closing of the Change in Control transaction.
     At any time during the period beginning on the date on which Katy gives
     notice to the Holder Representative of the agreement to engage in such
     Change in Control and ending on the 15th day after Katy gives such notice,
     inclusive (the "Control Put Exercise Period"), the Holders shall have the
     right to require Katy to purchase from all Holders in accordance with this
     Section 1.5 all, and not less than all, of their Eligible Units, subject to
     consummation of the Change in Control (a "Control Put Right").

                    (b)  Purchase Price.  The purchase price for each Eligible
     Unit required to be purchased by Katy pursuant to the Control Put Right
     shall be, subject to adjustment pursuant to Section 1.8, the sum of (i)
     $100,000, plus (ii) cash in an amount equal to the Priority Return
               ----
     Consideration.

                    (c)  Notice.  To exercise the Control Put Right, the Holder
                         ------
     Representative shall notify Katy, in writing, within the Control Put
     Exercise Period of the Holders' intention so to exercise, subject to
     closing of the transaction(s) constituting the Change in Control as
     specified in the Letter of Intent or the Definitive Agreement, as
     applicable (the "Control Put Notice"). The Control Put Notice shall
     identify each Holder exercising the Control Put Right and the number of
     Eligible Units to be purchased from such Holder, and shall certify that the
     Holder Representative has notified each Holder in writing of the exercise
     of the Control Put Right and the obligation of such Holder to participate
     in the Control Put Right. Holders exercising the Control Put Right are
     hereinafter collectively referred to as the "Control Put Selling Holders"
     and the Eligible Units to be purchased by Katy from the Control Put Selling
     Holders are hereinafter collectively referred to as the "Control Put
     Units".

                    (d)  Closing.  At the closing of the purchase and sale of
                         -------
     the Control Put Units (the "Control Put Closing"), (i) Katy shall deliver
     to each Control Put Selling Holder for each Control Put Unit sold by such
     Control Put Selling Holder (A) $100,000 plus (B) cash in an amount equal to
                                             ----
     the Priority Return Consideration, and (ii) each Control Put Selling Holder

                                       3
<PAGE>

     shall execute and deliver to Katy an Assignment of Preferred Units in the
     form attached hereto as Exhibit B with respect to the Control Put Units to
                             ---------
     be sold by such Control Put Selling Holder. Any cash payment to be made by
     Katy to any Control Put Selling Holder pursuant to the exercise of the
     Control Put Right shall be in the form of a certified check or wire
     transfer of immediately available funds. The Control Put Closing shall take
     place contemporaneously with the closing of the transaction(s) constituting
     the Change in Control as specified in the Letter of Intent or Definitive
     Agreement, as applicable, or on such other date as Katy and the Holder
     Representative may agree. Unless otherwise agreed by Katy and the Holder
     Representative, the Control Put Closing shall take place at the principal
     office of Katy. Notwithstanding anything herein to the contrary, in no
     event shall the Control Put Closing take place prior to the closing of the
     transaction(s) contemplated by the Letter of Intent or Definitive
     Agreement. In the event that such transactions are not consummated, the
     Holder Representative shall revoke its Control Put Notice and Katy shall
     have no obligation to consummate the purchase pursuant to the Control Put
     Notice.

          (D)  Section 1.6(a) shall be deleted and amended in its entirety to
read as follows:

               (a)  The Right.  At any time on or after the Effective Date, Katy
                    ---------
     shall have the right (a "Call Right") to require every Person to sell to
     Katy all, or any portion, of the Preferred Units then held by such Person
     but in no event shall Katy purchase less than eighty-two (82) Preferred
     Units in the aggregate with respect to all Persons. The purchase price for
     each Preferred Unit required to be sold by a Person pursuant to the Call
     Right shall be, subject to adjustment pursuant to Section 1.8, the sum of
     (i) $100,000, plus (ii) cash in an amount equal to the Priority Return
                   ----
     Consideration.  If Katy exercises a Call Right with respect to one Person,
     it must simultaneously exercise its Call Right with respect to all Persons.

          (E)  Section 1.7 shall be deleted and amended in its entirety to read
as follows:

          1.7  Trigger Right.
               -------------

               (a)  The Right.  Katy shall give notice to the Holder
                    ---------
     Representative of a Trigger Event at least fifteen (15) days before the
     occurrence of the Trigger Event. At any time during the period beginning
     on the date on which Katy gives notice to the Holder Representative of the
     occurrence of a Trigger Event and ending on the 15th day after Katy gives
     such notice, inclusive (the "Trigger Event Exercise Period"), the Holders
     shall have the right to require Katy to purchase from all Holders in
     accordance with this Section 1.7 all, and not less than all, of their
     Eligible Units, subject to consummation of the Trigger Event (a "Trigger
     Event Right").

               (b)  Purchase Price.   The purchase price for each Eligible Unit
                    --------------
     required to be purchased by Katy pursuant to the Trigger Event Right shall
     be, subject to adjustment pursuant to Section 1.8, the sum of (i) $100,000,
     plus (ii) cash in an amount equal to the Priority Return Consideration.
     ----

                                       4
<PAGE>

               (c)  Notice.  To exercise the Trigger Event Right, the Holder
                    ------
     Representative shall notify Katy, in writing, within the Trigger Event
     Exercise Period of the Holders' intention so to exercise, subject to the
     consummation of the Trigger Event (the "Trigger Event Exercise Notice").
     The Trigger Event Exercise Notice shall identify each Holder exercising the
     Trigger Event Right and the number of Eligible Units to be purchased from
     such Holder, and shall certify that the Holder Representative has notified
     each Holder in writing of the exercise of the Trigger Event Right and the
     obligation of such Holder to participate in the Trigger Event Right.
     Holders exercising the Trigger Event Right are hereinafter collectively
     referred to as the "Trigger Event Selling Holders" and the Eligible Units
     to be purchased by Katy from the Trigger Event Selling Holders are
     hereinafter collectively referred to as the "Trigger Event Units".

               (d)  Closing.  At the closing of the purchase and sale of the
                    -------
     Trigger Event Units (the "Trigger Event Closing"), (i) Katy shall deliver
     to each Trigger Event Selling Holder for each Trigger Event Unit sold by
     such Trigger Event Selling Holder (A) $100,000, plus (B) cash in an amount
                                                     ----
     equal to the Priority Return Consideration, and (ii) each Trigger Event
     Selling Holder shall execute and deliver to Katy an Assignment of Preferred
     Units in the form attached hereto as Exhibit B with respect to the Trigger
                                          ---------
     Event Units to be sold by such Trigger Event Selling Holder. Any cash
     payment to be made by Katy to any Trigger Event Selling Holder pursuant to
     the exercise of the Trigger Event Right shall be in the form of a certified
     check or wire transfer of immediately available funds. The Trigger Event
     Closing shall take place contemporaneously with the consummation of the
     Trigger Event, or on such other date as Katy and the Holder Representative
     may agree. Unless otherwise agreed by Katy and the Holder Representative,
     the Trigger Event Closing shall take place at the principal office of Katy.
     Notwithstanding anything herein to the contrary, in no event shall the
     Trigger Event Closing take place prior to the consummation of the Trigger
     Event. In the event that such transactions are not consummated, the Holder
     Representative shall revoke its Trigger Event Notice, and Katy shall have
     no obligation to consummate the purchase pursuant to the Trigger Event
     Notice. To the extent that Katy does not have sufficient funds to pay both
     (x) the consideration required to be paid by this Section to the Trigger
     Event Selling Holders, and (y) the dividend, payment or other distribution
     giving rise to the Trigger Event, Katy shall pay in full the consideration
     required to be paid by this Section to the Trigger Event Selling Holders
     prior to making any payment in respect of the Trigger Event.

          (F)  Section 1.8 shall be deleted and amended in its entirety to read
as follows:

          1.8  Price Adjustment for Defaulted Obligation.  Every other provision
               -----------------------------------------
     of this Agreement notwithstanding, if Katy at any time fails timely to
     perform its obligations to purchase any Eligible Unit for cash in
     accordance with the exercise of a Put Right, a Control Put Right, a Trigger
     Event Right or a Call Right, then the cash purchase price applicable to
     such Eligible Unit shall increase at the rate of two percent (2%) per
     month, compounded monthly, from the date the Put Notice, the Control Put
     Notice, the Trigger Event Exercise Notice or the Call Notice, as the case
     may be, was given, until the date Katy actually performs all of its
     obligations to purchase such Eligible Unit for cash.

                                       5
<PAGE>

          (G)  Section 1.9 shall be deleted and amended in its entirety to read
as follows:

          1.9  Intentionally Omitted.
               ---------------------

          (H)  Subparagraphs (i) and (ii) of paragraph (a) of Section 1.10 shall
be deleted and amended in their entirety to read as follows:

               (i)   to deliver all notices required to be delivered by such
     Holder under this Agreement, including, without limitation, any notice in
     connection with the exercise of the Put Right, the Control Put Right or the
     Trigger Event Right;

               (ii)  to receive all notices required to be delivered to such
     Holder under this Agreement, including, without limitation, any notice in
     connection with the exercise of the Put Right, the Control Put Right, the
     Trigger Event Right or the Call Right;

          Paragraph (c) of Section 1.10 shall be amended to delete all of the
language between parentheses in the last sentence of such paragraph.

          (I)  Section 1.11 shall be deleted and amended in its entirety to read
as follows:

          1.11 Intentionally Omitted.
               ---------------------

          (J)  Paragraph (b) of Section 1.12 shall be deleted and amended in its
entirety to read as follows:

               (b)  Intentionally Omitted.
                    ---------------------

          (K)  Article II and Article III shall each be deleted and amended in
their entirety to read as follows:

                                  Article II

                            Intentionally Omitted.
                            ---------------------

                                  Article III

                            Intentionally Omitted.
                            ---------------------

          (L)  Section 4.1 shall be amended so that the reference to "signature
page hereof" in the first sentence shall be deemed to be a reference to
"Schedule I hereto".

          (M)  Paragraphs (a) and (b) of Section 4.4 shall be deleted and
amended in their entirety to read as follows:

                                       6
<PAGE>

                (a)  A Holder may assign freely any of its rights or delegate
any of its duties under this Agreement without the prior written consent of Katy
if such assignee agrees to be bound by the terms and conditions of this
Agreement.

                (b)  Katy shall not, directly or indirectly, enter into any
merger, consolidation or reorganization unless (i) Katy is the ultimate
surviving parent corporation or (ii) Katy is not the ultimate surviving parent
corporation and the proposed surviving corporation (or the ultimate parent
entity, in the case of a triangular merger) shall, prior to such merger,
consolidation or reorganization, agree in writing to assume the obligations of
Katy hereunder.

          (N)   Section 4.12 shall be added to Article IV to read as follows:

          4.12.  Reserve Allocation.  Katy shall cause the Company to establish
                 ------------------
and keep available adequate reserves with respect to working capital, taxes,
future capital expenditures, and Priority Return distributions in such amounts
as the Company shall reasonably deem necessary or appropriate in its reasonable
judgment.

     3.   Amendments to Exhibit A.
          ------------------------

          (A)  Each of the following definitions shall be deleted in their
entirety, including any references thereto in the Members Agreement, and shall
be amended to read "Intentionally Omitted" after its respective number in
Exhibit A.

          (2)   "Basic Put Closing"
          (3)   "Basic Put Consideration Notice"
          (4)   "Basic Put Exercise Period"
          (5)   "Basic Put Notice"
          (6)   "Basic Put Right"
          (7)   "Basic Put Selling Holder"
          (8)   "Basic Put Unit"
          (9)   "Beneficial Owner"
          (10)  "Black-Out Period"
          (15)  "Common Stock"
          (17)  "Closing Market Price"
          (18)  "Commission"
          (19)  "Common Stock"
          (30)  "Conversion Amount"
          (33)  "Exchange Act"
          (37)  "Inspector"
          (40)  "Market Value"
          (43)  "Participating Holder"
          (45)  "Piggyback Put Closing"
          (46)  "Piggyback Put Consideration Notice"

                                       7
<PAGE>

          (47)  "Piggyback Put Exercise Period"
          (48)  "Piggyback Put Notice"
          (49)  "Piggyback Put Right"
          (50)  "Piggyback Put Selling Holders"
          (51)  "Piggyback Put Units"
          (52)  "Piggyback Registration"
          (57)  "Prospectus"
          (59)  "Put Right"
          (60)  "Record"
          (61)  "Register", "registered" and "registration"
          (62)  "Registrable Securities"
          (63)  "Registration Expenses"
          (64)  "Registration Statement"
          (65)  "Rule 144"
          (66)  "Rule 145"
          (67)  "Rule 158"
          (68)  "Rule 415"
          (69)  "Rule 424"
          (70)  "Secondary Put Closing"
          (71)  "Secondary Put Exercise Period"
          (72)  "Secondary Put Notice"
          (73)  "Secondary Put Right"
          (74)  "Secondary Put Selling Holders"
          (75)  "Secondary Put Units"
          (76)  "Shelf Registration"
          (77)  "Stock Consideration"
          (78)  "Underwritten Offering"
          (79)  "Voluntary Change in Control"

          (B)   The definition of "Change in Control" shall be amended to delete
paragraph (c) and the last paragraph of the definition in its entirety and to
amend paragraph (c) and the last paragraph of the definition to read as follows:

                (c)  The owners of such Person approve:  (i) a plan of complete
liquidation of such Person; or (ii) an agreement for the sale or disposition of
all or substantially all of such Person's assets; or (iii) a merger,
consolidation, or reorganization of Katy with or involving any other
corporation, other than a merger, consolidation or reorganization that would
result in the voting securities of such Person outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty percent
(50%) of the combined voting power of the voting securities of such Person (or
such surviving entity) outstanding immediately after such merger, consolidation,
or reorganization; or (iv) a majority of the preferred stock issued in the
Transaction is converted into common stock; or (v) the disposition of all or
substantially all of the assets constituting either the janitorial supply
division or the consumer products division of the

                                       8
<PAGE>

Company; or (vi) in respect of the Company or Katy, the filing of a bankruptcy
petition, the making of an assignment for the benefit of creditors or the
appointment of a receiver.

          However, in no event shall a "Change in Control" be deemed to have
occurred, with respect to a Holder, if the Holder is part of a purchasing group
which consummates the Change in Control transaction. The Holder shall be deemed
"part of a purchasing group" for purposes of the preceding sentence if the
Holder is an equity participant in the purchasing company or group (except for
passive ownership of equity participation in the purchasing company or group
which is not significant, as determined in good faith prior to the Change in
Control by a majority of the nonemployee continuing Directors). In addition, a
"Change in Control" shall not have occurred upon the closing of the Transaction
and/or the purchase by Purchaser or any of its affiliates of up to an additional
1,000,000 shares of common stock of Katy following closing of the Transaction.

          (C)  The following Definitions shall be deleted and amended in their
entirety to read as follows:

          (26) "Control Put Notice" has the meaning set forth in Section 1.5(c).

          (28) "Control Put Selling Holder" has the meaning set forth in Section
     1.5(c).

          (29) "Control Put Unit" has the meaning set forth in Section 1.5(c).

          (31) "Effective Date" has the meaning set forth in Section 4 of the
     First Amendment.

          (35) "Holder" means any Person holding an Eligible Unit.

          (55) "Preferred Units" mean the 164 Preferred Units of Contico
     International, L.L.C. owned by Newcastle, which constitute all of the
     Preferred Units currently issued and outstanding after the First Amendment
     becomes effective.

          (57) "Priority Return Consideration" has the meaning set forth in
     Section 1.3(a).

          (65) "Put Right" has the meaning set forth in Section 1.3(a).

          (79) "Transaction" has the meaning set forth in the Recitals to the
     First Amendment.

          (86) "Trigger Event" means (a) any payment resulting directly from
     rights and preferences attached to, or any redemption or repurchase by Katy
     or its Affiliates of, Katy preferred stock issued and outstanding as of the
     Closing or any securities into which such preferred stock is convertible,
     and/or (b) any declaration of the payment of dividends to any holder of
     capital stock of Katy, or any other distribution, whether in liquidation or
     otherwise, in respect of any of the capital stock of Katy.

                                       9
<PAGE>

          (87) "Trigger Event Closing" has the meaning set forth in Section
     1.7(d).

          (88) "Trigger Event Exercise Period" has the meaning set forth in
     Section 1.7(a).

          (89) "Trigger Event Exercise Notice" has the meaning set forth in
     Section 1.7(c).

          (90) "Trigger Event Right" has the meaning set forth in Section
     1.7(a).

          (91) "Trigger Event Selling Holder" has the meaning set forth in
     Section 1.7(c).

          (92) "Trigger Event Unit" has the meaning set forth in Section 1.7(c).

     (D)  The following Definitions shall be added to Exhibit A:

          (87) "Cash Consideration" has the meaning set forth in Section 1.3(a).

          (88) "Definitive Agreement" has the meaning set forth in Section
     1.5(a).

          (89) "Letter of Intent" has the meaning set forth in Section 1.5(a).

          (62) "Put Closing" has the meaning set forth in Section 1.3(c).

          (63) "Put Exercise Period" has the meaning set forth in Section
     1.3(a).

          (64) "Put Notice" has the meaning set forth in Section 1.3(b).

          (66) "Put Selling Holder" has the meaning set forth in Section 1.3(b).

          (67) "Put Unit" has the meaning set forth in Section 1.3(b).

     4.   Conditions to Effectiveness.  The First Amendment shall become
          ---------------------------
effective on the date the Transaction is closed as provided for in the Purchase
Agreement (the "Effective Date"), provided that Newcastle shall have received
the Consideration as set forth in the Repurchase Agreement. In the event the
closing of the Transaction has not occurred by June 30, 2001, or, if such has
occurred, such Consideration has not been received by Newcastle by such date,
the First Amendment shall be of no binding force and effect on either party to
the Members Agreement, unless both parties shall have agreed in writing to an
extension of the date for the closing of the Transaction and the payment of the
Consideration.

     5.   Governing Law.  The First Amendment shall be governed by, and
          -------------
construed and enforced in accordance with, the laws of the state of Delaware.

     6.   Counterparts.  The First Amendment may be executed in two or more
          ------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                 [REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]

                                      10
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed the First Amendment as
of the date first above written.

                                    NEWCASTLE INDUSTRIES, INC.

                                    By:___________________________________

                                    Name:_________________________________

                                    Title:________________________________

                                    KATY INDUSTRIES, INC.

                                    By:___________________________________

                                    Name:_________________________________

                                    Title:________________________________

                                      11
<PAGE>

                                  Schedule I
                                  ----------

1.   Newcastle Industries, Inc.
     c/o Lester Miller
     20043 North East 39th Place
     Aventura, Florida 33180

     with a copy to:

     Thompson Coburn LLP
     One Firstar Plaza
     St. Louis, MO 63101
     Attention: Millard Backerman and Christopher B. Reid
     Facsimile: (314) 552-7000

2.   Katy Industries, Inc.
     6300 S. Syracuse Way, Suite 300
     Englewood, Colorado 80111
     Attention:  Chief Executive Officer
     Facsimile: (303) 290-9344

     with a copy to:

     KKTY Holding Company, L.L.C.
     111 Radio Circle
     Mt. Kisco, New York 10549
     Attention: Christopher Lacovara
     Facsimile: (914) 241-7476

                                      12

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