In this paper we describe a canonical basis for the equivariant $K$-theory (with respect to a $\bc^*$-action) of the variety of Borel subalgebras containing a subregular nilpotent element of a simple complex Lie algebra of type $D$ or~$E$.

We continue in this paper our study of conjugacy classes of a reductive monoid $M$. The main theorems establish a strong connection with the Bruhat-Renner decomposition of $M$. We use our results to decompose the variety $M_{\nil}$ of nilpotent elements of $M$ into irreducible components. We also identify a class of nilpotent elements that we call standard and prove that the number of conjugacy classes of standard nilpotent elements is always finite.