AGREEMENT, dated as of the 11th day of May, 2000 (this "Agreement"), by
and among Lilly  Industries,  Inc., a Canadian  corporation  organized under the
laws of the Province of Ontario ("Lilly  Canada"),  Lilly  Industries,  Inc., an
Indiana corporation (the "Company"), and Alain DeBlandre (the "Executive").

         WHEREAS,  the Board of  Directors  of the Company  (the  "Board"),  has
determined that it is in the best interests of the Company and its  shareholders
to assure that the Company and Lilly Canada will have the  continued  dedication
of the Executive,  notwithstanding  the  possibility,  threat or occurrence of a
Change of Control (as defined  herein).  The Board  believes it is imperative to
diminish the  inevitable  distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage  the  Executive's  full  attention  and  dedication  to the current
Company and in the event of any threatened or pending Change of Control,  and to
provide the Executive with compensation and benefits  arrangements upon a Change
of Control that ensure that the  compensation  and benefits  expectations of the
Executive  will be  satisfied  and  that  are  competitive  with  those of other
corporations.  Therefore, in order to accomplish these objectives, the Board has
caused the Company and Lilly Canada to enter into this Agreement.

                  NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

         Section 1. Certain  Definitions.  (a) "Effective  Date" means the first
date during the Change of Control  Period (as defined  herein) on which a Change
of Control occurs.  Notwithstanding  anything in this Agreement to the contrary,
if a Change of Control occurs and if the Executive's employment with the Company
and Lilly Canada is terminated  prior to the date on which the Change of Control
occurs,  and  if it is  reasonably  demonstrated  by  the  Executive  that  such
termination of employment (1) was at the request of a third party that has taken
steps reasonably calculated to effect a Change of Control or (2) otherwise arose
in connection with or anticipation of a Change of Control, then "Effective Date"
means the date immediately prior to the date of such termination of employment.

         (b) "Change of Control Period" means the period  commencing on the date
hereof  and  ending  on the  third  anniversary  of the date  hereof;  provided,
however,  that,  commencing  on the date one year after the date hereof,  and on
each  annual  anniversary  of such date (such date and each  annual  anniversary
thereof,  the  "Renewal  Date"),  unless  previously  terminated,  the Change of
Control Period shall be  automatically  extended so as to terminate  three years
from such Renewal Date,  unless, at least 60 days prior to the Renewal Date, the
Company  shall give notice to the  Executive  that the Change of Control  Period
shall not be so extended.

         (c) "Affiliated  Company" means any company  controlled by, controlling
or under common control with the Company,  including  without  limitation  Lilly
Canada.

         (d) "Change of Control" means:

         (1) The  acquisition  by any  individual,  entity or group  (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities  Exchange Act of 1934,
as amended (the "Exchange  Act")) (a "Person") of beneficial  ownership  (within
the meaning of Rule 13d-3  promulgated under the Exchange Act) of 20% or more of
either  (A) the  then-outstanding  shares of common  stock of the  Company  (the
"Outstanding  Company  Common  Stock") or (B) the  combined  voting power of the
then-outstanding  voting securities of the Company entitled to vote generally in
the  election  of  directors  (the  "Outstanding  Company  Voting  Securities");
provided,  however,  that,  for purposes of this  Section  1(d),  the  following
acquisitions  shall not  constitute  a Change of  Control:  (i) any  acquisition
directly  from the  Company,  (ii) any  acquisition  by the  Company,  (iii) any
acquisition  by any  employee  benefit  plan (or  related  trust)  sponsored  or
maintained by the Company or any Affiliated  Company or (iv) any  acquisition by
any  corporation   pursuant  to  a  transaction   that  complies  with  Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C).

         (2) Individuals  who, as of the date hereof,  constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided,  however, that any individual becoming a director subsequent to
the date hereof whose  election,  or  nomination  for election by the  Company's
shareholders,  was  approved by a vote of at least a majority  of the  directors
then  comprising  the  Incumbent  Board  shall  be  considered  as  though  such
individual  were a  member  of the  Incumbent  Board,  but  excluding,  for this
purpose,  any such  individual  whose  initial  assumption of office occurs as a
result of an actual or threatened  election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.

         (3) Consummation of a reorganization,  merger, consolidation or sale or
other  disposition of all or  substantially  all of the assets of the Company (a
"Business   Combination"),   in  each  case,  unless,  following  such  Business
Combination,  (A) all or substantially  all of the individuals and entities that
were the  beneficial  owners of the  Outstanding  Company  Common  Stock and the
Outstanding  Company  Voting  Securities  immediately  prior  to  such  Business
Combination  beneficially  own,  directly  or  indirectly,  more than 60% of the
then-outstanding  shares of common  stock and the  combined  voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors,  as the case may be, of the corporation  resulting from such Business
Combination (including,  without limitation,  a corporation that, as a result of
such transaction,  owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same  proportions  as  their  ownership   immediately  prior  to  such  Business
Combination of the Outstanding  Company Common Stock and the Outstanding Company
Voting Securities,  as the case may be, (B) no Person (excluding any corporation
resulting  from such  Business  Combination  or any  employee  benefit  plan (or
related trust) of the Company or such  corporation  resulting from such Business
Combination)  beneficially  owns,  directly  or  indirectly,  20%  or  more  of,
respectively,  the  then-outstanding  shares of common stock of the  corporation
resulting  from such Business  Combination  or the combined  voting power of the
then-outstanding  voting  securities of such  corporation,  except to the extent
that such ownership existed prior to the Business Combination,  and (C) at least
a majority of the members of the board of directors of the corporation resulting
from such Business  Combination  were members of the Incumbent Board at the time
of the  execution  of  the  initial  agreement  or of the  action  of the  Board
providing for such Business Combination; or

         (4)  Approval  by  the  shareholders  of  the  Company  of  a  complete
liquidation or dissolution of the Company.

         Section 2. Employment Period. The Company and Lilly Canada hereby agree
to continue the  Executive in the employ of either the Company or Lilly  Canada,
subject to the terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third  anniversary of the Effective Date
(the  "Employment  Period").  The  Employment  Period shall  terminate  upon the
Executive's termination of employment for any reason.

         Section 3. Terms of Employment. (a) Position and Duties. (1) During the
Employment Period,  (A) the Executive's  position  (including  status,  offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least  commensurate in all material  respects with the most significant of
those  held,  exercised  and  assigned  at any time  during the  120-day  period
immediately  preceding the Effective Date and (B) the Executive's services shall
be  performed  at the  office  where  the  Executive  was  employed  immediately
preceding  the Effective  Date or at any other  location less than 35 miles from
such office.

         (2) During the Employment Period, and excluding any periods of vacation
and sick leave to which the  Executive  is  entitled,  the  Executive  agrees to
devote  reasonable  attention  and  time  during  normal  business  hours to the
business  and  affairs  of the  Company  and Lilly  Canada  and,  to the  extent
necessary to discharge the responsibilities assigned to the Executive hereunder,
to use the  Executive's  reasonable  best  efforts  to  perform  faithfully  and
efficiently such responsibilities. During the Employment Period, it shall not be
a violation of this Agreement for the Executive to (A) serve on corporate, civic
or charitable  boards or  committees,  (B) deliver  lectures,  fulfill  speaking
engagements  or  teach  at  educational  institutions  and (C)  manage  personal
investments,  so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company or
Lilly Canada, as applicable,  in accordance with this Agreement. It is expressly
understood  and agreed that,  to the extent that any such  activities  have been
conducted by the Executive prior to the Effective Date, the continued conduct of
such  activities  (or the  conduct  of  activities  similar  in nature and scope
thereto)  subsequent  to the  Effective  Date shall not  thereafter be deemed to
interfere  with  the  performance  of the  Executive's  responsibilities  to the
Company and Lilly Canada.

         (b) Compensation.  (1) Base Salary.  During the Employment  Period, the
Executive  shall  receive an annual base salary (the "Annual Base Salary") at an
annual rate at least equal to 12 times the highest  monthly  base salary paid or
payable,  including  any base salary that has been earned but  deferred,  to the
Executive by the Company and the Affiliated Companies in respect of the 12-month
period  immediately  preceding the month in which the Effective Date occurs. The
Annual  Base  Salary  shall be paid at such  intervals  as the  Company or Lilly
Canada, as applicable,  pays executive salaries generally. During the Employment
Period, the Annual Base Salary shall be reviewed at least annually, beginning no
more than 12 months  after the last  salary  increase  awarded to the  Executive
prior to the  Effective  Date.  Any increase in the Annual Base Salary shall not
serve to limit or reduce  any  other  obligation  to the  Executive  under  this
Agreement.  The Annual Base Salary shall not be reduced  after any such increase
and the term "Annual  Base  Salary"  shall refer to the Annual Base Salary as so
increased.

         (2) Annual Bonus. In addition to the Annual Base Salary,  the Executive
shall be awarded,  for each fiscal year ending during the Employment  Period, an
annual  bonus (the  "Annual  Bonus") in cash at least  equal to the  Executive's
target  bonus most  recently  established  before the  Effective  Date under the
Company's  Variable  Compensation Plan, or under any successor plan (the "Target
Bonus"). Each such Annual Bonus shall be paid no later than the end of the third
month of the fiscal  year next  following  the fiscal  year for which the Annual
Bonus is awarded,  unless the Executive shall elect to defer the receipt of such
Annual Bonus.

         (3)  Incentive,  Savings and  Retirement  Plans.  During the Employment
Period,  the Executive  shall be entitled to participate in all cash  incentive,
equity  incentive,  savings  and  retirement  plans,  practices,  policies,  and
programs  applicable  generally to other peer  executives of the Company and the
Affiliated Companies, but in no event shall such plans, practices,  policies and
programs  provide the Executive  with  incentive  opportunities  (measured  with
respect to both regular and special incentive  opportunities,  to the extent, if
any, that such distinction is applicable),  savings opportunities and retirement
benefit opportunities,  in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and the Affiliated Companies for
the Executive under such plans, practices, policies and programs as in effect at
any time during the 120-day period immediately  preceding the Effective Date or,
if more favorable to the Executive,  those provided  generally at any time after
the Effective  Date to other peer  executives of the Company and the  Affiliated
Companies.

         (4) Welfare Benefit Plans.  During the Employment Period, the Executive
and/or  the  Executive's  family,  as the case may be,  shall  be  eligible  for
participation  in and shall receive all benefits  under welfare  benefit  plans,
practices,  policies  and  programs  provided by the Company and the  Affiliated
Companies  (including,  without  limitation,   medical,  prescription,   dental,
disability,  employee life,  group life,  accidental  death and travel  accident
insurance plans and programs) to the extent  applicable  generally to other peer
executives of the Company and the  Affiliated  Companies,  but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
that are less  favorable,  in the  aggregate,  than the most  favorable  of such
plans, practices,  policies and programs in effect for the Executive at any time
during the 120-day period  immediately  preceding the Effective Date or, if more
favorable  to the  Executive,  those  provided  generally  at any time after the
Effective  Date to other  peer  executives  of the  Company  and the  Affiliated
Companies.

         (5) Expenses.  During the  Employment  Period,  the Executive  shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the  Executive in accordance  with the most  favorable  policies,  practices and
procedures  of the  Company  and the  Affiliated  Companies  in  effect  for the
Executive  at any time  during the  120-day  period  immediately  preceding  the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
Affiliated Companies.

         (6) Fringe Benefits.  During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning  services,  executive  physicals,  and, if applicable,  payment of club
dues, use of an automobile and payment of related  expenses,  in accordance with
the most favorable  plans,  practices,  programs and policies of the Company and
the  Affiliated  Companies  in effect for the  Executive  at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive,  as in effect  generally at any time  thereafter  with respect to
other peer executives of the Company and the Affiliated Companies.

         (7)  Office  and  Support  Staff.  During the  Employment  Period,  the
Executive  shall  be  entitled  to an  office  or  offices  of a size  and  with
furnishings and other  appointments,  and to exclusive personal  secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated  Companies at any time during
the  120-day  period  immediately  preceding  the  Effective  Date  or,  if more
favorable to the Executive,  as provided  generally at any time  thereafter with
respect to other peer executives of the Company and the Affiliated Companies.

         (8) Vacation.  During the  Employment  Period,  the Executive  shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated  Companies as in effect
for the Executive at any time during the 120-day  period  immediately  preceding
the  Effective  Date  or,  if more  favorable  to the  Executive,  as in  effect
generally at any time  thereafter  with respect to other peer  executives of the
Company and the Affiliated Companies.

         Section 4.  Termination  of Employment.  (a) Death or  Disability.  The
Executive's  employment  shall  terminate  automatically  if the Executive  dies
during the Employment  Period. If the Company  determines in good faith that the
Disability  (as  defined  herein)  of the  Executive  has  occurred  during  the
Employment Period (pursuant to the definition of  "Disability"),  it may give to
the Executive  written notice in accordance  with Section 11(b) of its intention
to  terminate  the  Executive's  employment.  In  such  event,  the  Executive's
employment  with the Company or Lilly Canada,  as  applicable,  shall  terminate
effective  on the 30th day after  receipt of such notice by the  Executive  (the
"Disability  Effective  Date"),  provided  that,  within  the 30 days after such
receipt,  the Executive shall not have returned to full-time  performance of the
Executive's  duties.  "Disability"  means the absence of the Executive  from the
Executive's  duties with the Company and Lilly  Canada on a full-time  basis for
180  consecutive  business  days as a result  of  incapacity  due to  mental  or
physical  illness that is  determined  to be total and  permanent by a physician
selected by the Company or its insurers and  acceptable  to the Executive or the
Executive's legal representative.

         (b) Cause. The Company may terminate the Executive's  employment during
the Employment Period for Cause. "Cause" means:

                  (1) the  willful and  continued  failure of the  Executive  to
         perform  substantially  the  Executive's  duties  (as  contemplated  by
         Section  3(a)(1)(A)) with the Company or any Affiliated  Company (other
         than any such  failure  resulting  from  incapacity  due to physical or
         mental  illness or following  the  Executive's  delivery of a Notice of
         Termination  for Good Reason),  after a written demand for  substantial
         performance  is  delivered  to the  Executive by the Board or the Chief
         Executive  Officer of the  Company  that  specifically  identifies  the
         manner in which the Board or the Chief Executive Officer of the Company
         believes  that  the  Executive  has  not  substantially  performed  the
         Executive's duties, or

                  (2) the willful  engaging by the Executive in illegal  conduct
         or gross  misconduct that is materially and  demonstrably  injurious to
         the Company or Lilly Canada.

For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive  shall be  considered  "willful"  unless it is done,  or omitted to be
done,  by the  Executive  in bad faith or  without  reasonable  belief  that the
Executive's  action or  omission  was in the best  interests  of the Company and
Lilly Canada. Any act, or failure to act, based upon authority given pursuant to
a  resolution  duly adopted by the Board or upon the  instructions  of the Chief
Executive  Officer of the  Company or a senior  officer of the  Company or based
upon the advice of counsel for the Company shall be conclusively  presumed to be
done,  or omitted  to be done,  by the  Executive  in good faith and in the best
interests of the Company. The cessation of employment of the Executive shall not
be deemed to be for Cause  unless and until there shall have been  delivered  to
the Executive a copy of a resolution duly adopted by the affirmative vote of not
less than  three-quarters  of the entire  membership of the Board (excluding the
Executive,  if the Executive is a member of the Board) at a meeting of the Board
called and held for such  purpose  (after  reasonable  notice is provided to the
Executive and the Executive is given an  opportunity,  together with counsel for
the  Executive,  to be heard before the Board),  finding that, in the good faith
opinion  of the Board,  the  Executive  is guilty of the  conduct  described  in
Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail.

         (c) Good Reason.  The  Executive's  employment may be terminated by the
Executive for Good Reason or by the Executive  voluntarily  without Good Reason.
"Good Reason" means:

                  (1) the assignment to the Executive of any duties inconsistent
         in  any  respect  with  the  Executive's  position  (including  status,
         offices,  titles  and  reporting  requirements),  authority,  duties or
         responsibilities   as  contemplated  by  Section  3(a),  or  any  other
         diminution  in such  position,  authority,  duties or  responsibilities
         (whether or not occurring  solely as a result of the Company's  ceasing
         to  be a  publicly  traded  entity),  excluding  for  this  purpose  an
         isolated,  insubstantial and inadvertent  action not taken in bad faith
         and that is  remedied by the Company or Lilly  Canada,  as  applicable,
         promptly after receipt of notice thereof given by the Executive;

                  (2) any failure by the Company or Lilly  Canada to comply with
         any  of the  provisions  of  Section  3(b),  other  than  an  isolated,
         insubstantial  and  inadvertent  failure not occurring in bad faith and
         that is  remedied  by the  Company  or  Lilly  Canada,  as  applicable,
         promptly after receipt of notice thereof given by the Executive;

                  (3) the  Company's or Lilly  Canada's  requiring the Executive
         (i) to be based at any office or  location  other than as  provided  in
         Section  3(a)(1)(B),  (ii) to be based  at a  location  other  than the
         principal  executive  offices  of  the  Company  or  Lilly  Canada,  as
         applicable,  if the Executive was employed at such location immediately
         preceding  the  Effective  Date, or (iii) to travel on Company or Lilly
         Canada  business  to  a  substantially  greater  extent  than  required
         immediately prior to the Effective Date;

                  (4) any purported  termination  by the Company or Lilly Canada
         of the Executive's  employment otherwise than as expressly permitted by
         this Agreement; or

                  (5) any failure by the Company or Lilly  Canada to comply with
         and satisfy Section 10(c).

For purposes of this Section 4(c), any good faith  determination  of Good Reason
made by the Executive  shall be  conclusive.  Anything in this  Agreement to the
contrary notwithstanding, a termination by the Executive for any reason pursuant
to a Notice of Termination given during the 30-day period immediately  following
the first  anniversary of the Effective Date shall be deemed to be a termination
for Good Reason for all purposes of this Agreement.  The  Executive's  mental or
physical  incapacity  following the  occurrence of an event  described  above in
clauses (1) through (5) shall not affect the  Executive's  ability to  terminate
employment for Good Reason.

         (d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of Termination
to the Executive or The Company, as applicable, given in accordance with Section
11(b).  "Notice of  Termination"  means a written  notice that (1) indicates the
specific termination  provision in this Agreement relied upon, (2) to the extent
applicable,  sets forth in reasonable detail the facts and circumstances claimed
to  provide a basis for  termination  of the  Executive's  employment  under the
provision so indicated,  and (3) if the Date of Termination  (as defined herein)
is  other  than  the  date of  receipt  of such  notice,  specifies  the Date of
Termination  (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of  Termination  any fact or  circumstance  that  contributes to a
showing of Good  Reason or Cause shall not waive any right of the  Executive  or
the Company,  respectively,  hereunder or preclude the Executive or the Company,
respectively,  from  asserting  such  fact  or  circumstance  in  enforcing  the
Executive's or the Company's respective rights hereunder.

         (e)  Date  of  Termination.  "Date  of  Termination"  means  (1) if the
Executive's  employment  is  terminated  by the  Company  for  Cause,  or by the
Executive for Good Reason,  the date of receipt of the Notice of  Termination or
any later date specified in the Notice of Termination,  (which date shall not be
more than 30 days after the giving of such  notice),  as the case may be, (2) if
the Executive's  employment is terminated by the Company other than for Cause or
Disability,  the Date of  Termination  shall be the  date on which  the  Company
notifies  the  Executive  of  such  termination,  and  (3)  if  the  Executive's
employment  is  terminated  by  reason  of  death  or  Disability,  the  Date of
Termination  shall  be the  date of death  of the  Executive  or the  Disability
Effective Date, as the case may be.

         Section  5.  Obligations  of the  Company  upon  Termination.  (a) Good
Reason;  Other Than for Cause,  Death or  Disability.  If, during the Employment
Period, the Company  terminates the Executive's  employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:

                  (1) the Company or Lilly Canada shall pay to the Executive, in
         a lump sum in cash  within 30 days after the Date of  Termination,  the
         aggregate of the following amounts:

                           (A) the sum of (i) the Executive's Annual Base Salary
                  through the Date of Termination to the extent not  theretofore
                  paid,  (ii) the  product  of (x) the  higher of (I) the Target
                  Bonus and (II) the  Annual  Bonus  actually  paid or  payable,
                  including  any bonus or portion  thereof  that has been earned
                  but deferred (and annualized for any fiscal year consisting of
                  less than 12 full  months or during  which the  Executive  was
                  employed for less than 12 full months),  for the most recently
                  completed  fiscal year before the Date of Termination,  if any
                  (such higher  amount,  the "Highest  Annual  Bonus") and (y) a
                  fraction,  the numerator of which is the number of days in the
                  current  fiscal year through the Date of  Termination  and the
                  denominator  of which is 365,  and (iii) any accrued  vacation
                  pay, in each case, to the extent not theretofore paid (the sum
                  of the amounts  described in  subclauses  (i), (ii) and (iii),
                  the "Accrued Obligations");

                           (B) the  amount  equal to the  product of (i) two and
                  (ii) the sum of (x) the  Executive's  Annual Base Salary,  (y)
                  the  Highest  Annual  Bonus  and  (z)  the  average   employer
                  contributions  credited  to the  Executive's  accounts  in the
                  Company's Employee 401(k) Savings Plan,  Defined  Contribution
                  Plan  and   Employee   Stock   Purchase   Plan,   the  defined
                  contribution  portion of the Company's  Replacement  Plan, and
                  any other or successor defined  contribution  pension plans in
                  which the  Executive  participates,  for the three most recent
                  plan years ended before the Effective Date or, if higher,  for
                  the three  most  recent  plan years  ended  before the Date of
                  Termination; and

                           (C)  an  amount  equal  to  the  excess  of  (i)  the
                  actuarial  present  value of the benefit  under the  Company's
                  qualified  defined  benefit  retirement  plan, if any, and any
                  nonqualified   defined  benefit  pension  plan  in  which  the
                  Executive participates (collectively,  the "Retirement Plans")
                  that the Executive would receive if the Executive's employment
                  continued  for  two  years  after  the  Date  of  Termination,
                  assuming for this purpose that all accrued  benefits are fully
                  vested and assuming that the Executive's  compensation in each
                  of the three years is that  required  by Sections  3(b)(1) and
                  3(b)(2),   over  (ii)  the  actuarial  present  value  of  the
                  Executive's  actual  benefit (paid or payable),  if any, under
                  the Retirement Plans as of the Date of Termination,  including
                  without limitation any amounts paid in connection with or as a
                  result of the  occurrence of the Change of Control,  with such
                  actuarial  present  values in each case  being  determined  in
                  accordance with Schedule I hereto;

         (2) for two years after the Executive's  Date of  Termination,  or such
longer period as may be provided by the terms of the appropriate plan,  program,
practice  or policy,  the Company or Lilly  Canada  shall  continue  medical and
welfare  benefits to the Executive  and/or the Executive's  family,  and tax and
financial planning services and executive physicals for the Executive,  at least
equal to those that  would have been  provided  to them in  accordance  with the
plans, programs, practices and policies described in Section 3(b)(4) and Section
3(b)(6),  as applicable,  if the Executive's  employment had not been terminated
or, if more  favorable  to the  Executive,  as in effect  generally  at any time
thereafter  with  respect  to  other  peer  executives  of the  Company  and the
Affiliated  Companies  and  their  families,  provided,  however,  that,  if the
Executive  becomes  reemployed with another  employer and is eligible to receive
medical or other welfare  benefits  under another  employer  provided  plan, the
medical and other welfare benefits  described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility; and
for purposes of determining  eligibility  (but not the time of  commencement  of
benefits)  of the  Executive  for  retiree  benefits  pursuant  to  such  plans,
practices,  programs and  policies,  the  Executive  shall be considered to have
remained  employed until three years after the Date of  Termination  and to have
retired on the last day of such period; and provided,  further,  that the period
of  the  continuation  coverage  required  by  Section  4980B  of the  Code,  if
applicable to the Executive,  shall run concurrently with the continued coverage
under this Section 5(a)(2);

         (3) the Company shall cause all stock  options that the Executive  then
holds (whether or not such stock options are otherwise exercisable)  ("Options")
to be exercisable from the Date of Termination  through the 90th day thereafter;
provided,  that any tax benefit  provisions  with  respect to any Options  shall
apply;  and provided,  further,  that if as a result of such  acceleration,  any
Options that were  incentive  stock options within the meaning of Section 422 of
the Code cease to qualify as incentive  stock  options,  such  Options  shall be
treated  as  non-qualified  stock  options,  and the  Company  shall  pay to the
Executive,  upon exercise of such Options,  an additional  cash payment equal to
the tax benefit to be received by the Company attributable to its federal income
tax deduction resulting from the exercise of such Options; and

         (4) to the extent not  theretofore  paid or  provided,  the  Company or
Lilly Canada shall timely pay or provide to the  Executive  any other amounts or
benefits  required to be paid or provided or that the  Executive  is eligible to
receive under any plan, program,  policy or practice or contract or agreement of
the Company and the Affiliated  Companies (such other amounts and benefits,  the
"Other Benefits").

         (b) Death. If the Executive's employment is terminated by reason of the
Executive's  death  during the  Employment  Period,  the Company or Lilly Canada
shall  provide  the  Executive's   estate  or  beneficiaries  with  the  Accrued
Obligations and the timely payment or delivery of the Other Benefits,  and shall
have  no  other  severance   obligations  under  this  Agreement.   The  Accrued
Obligations  shall  be  paid  to  the  Executive's  estate  or  beneficiary,  as
applicable,  in a lump sum in cash  within  30 days of the Date of  Termination.
With respect to the provision of the Other Benefits,  the term "Other  Benefits"
as utilized in this  Section 5(b) shall  include,  without  limitation,  and the
Executive's estate and/or  beneficiaries shall be entitled to receive,  benefits
at least equal to the most  favorable  benefits  provided by the Company and the
Affiliated  Companies to the estates and beneficiaries of peer executives of the
Company and the Affiliated Companies under such plans,  programs,  practices and
policies relating to death benefits,  if any, as in effect with respect to other
peer  executives and their  beneficiaries  at any time during the 120-day period
immediately   preceding  the  Effective  Date  or,  if  more  favorable  to  the
Executive's  estate and/or the  Executive's  beneficiaries,  as in effect on the
date of the  Executive's  death with  respect to other  peer  executives  of the
Company and the Affiliated Companies and their beneficiaries.

         (c) Disability.  If the Executive's  employment is terminated by reason
of the Executive's Disability during the Employment Period, the Company or Lilly
Canada shall provide the Executive with the Accrued  Obligations  and the timely
payment or delivery  of the Other  Benefits,  and shall have no other  severance
obligations under this Agreement.  The Accrued  Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.  With
respect to the  provision of the Other  Benefits,  the term "Other  Benefits" as
utilized in this Section 6(c) shall include, and the Executive shall be entitled
after the Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable of those generally provided by the Company and
the  Affiliated  Companies  to  disabled  executives  and/or  their  families in
accordance  with such  plans,  programs,  practices  and  policies  relating  to
disability, if any, as in effect generally with respect to other peer executives
and their families at any time during the 120-day period  immediately  preceding
the Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.

         (d) Cause; Other Than for Good Reason. If the Executive's employment is
terminated for Cause during the Employment  Period,  the Company or Lilly Canada
shall provide to the Executive (1) the  Executive's  Annual Base Salary  through
the Date of Termination,  (2) the amount of any compensation previously deferred
by the  Executive,  and (3) the Other  Benefits,  in each  case,  to the  extent
theretofore  unpaid,  and shall have no other severance  obligations  under this
Agreement.  If  the  Executive  voluntarily  terminates  employment  during  the
Employment Period, excluding a termination for Good Reason, the Company or Lilly
Canada shall  provide to the Executive  the Accrued  Obligations  and the timely
payment or delivery  of the Other  Benefits,  and shall have no other  severance
obligations  under this  Agreement.  In such case,  all the Accrued  Obligations
shall be paid to the  Executive in a lump sum in cash within 30 days of the Date
of Termination.

         Section 6.  Non-exclusivity of Rights.  Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program,  policy or practice provided by the Company or the Affiliated Companies
and for which the Executive may qualify,  nor,  subject to Section 11(f),  shall
anything herein limit or otherwise  affect such rights as the Executive may have
under any  other  contract  or  agreement  with the  Company  or the  Affiliated
Companies.  Amounts that are vested  benefits or that the Executive is otherwise
entitled  to  receive  under any plan,  policy,  practice  or  program of or any
contract  or  agreement  with the  Company  or the  Affiliated  Companies  at or
subsequent to the Date of Termination  shall be payable in accordance  with such
plan, policy, practice or program or contract or agreement, except as explicitly
modified by this  Agreement.  Notwithstanding  the  foregoing,  if the Executive
receives payments and benefits  pursuant to Section 5(a) of this Agreement,  the
Executive  shall not be entitled  to any  severance  pay or  benefits  under any
severance plan,  program or policy of the Company and the Affiliated  Companies,
unless otherwise  specifically  provided therein in a specific reference to this
Agreement,  and such  payments  and benefits  are  inclusive of the  Executive's
entitlement to termination pay and settlement pay under the Employment Standards
Act, R.S.O. 1990, E.14, as amended.

         Section 7. Full Settlement. The Company's and Lilly Canada's obligation
to make the payments provided for in this Agreement and otherwise to perform its
obligations  hereunder  shall  not be  affected  by any  set-off,  counterclaim,
recoupment,  defense,  or other claim, right or action that the Company or Lilly
Canada may have against the Executive or others. In no event shall the Executive
be  obligated  to seek  other  employment  or take any  other  action  by way of
mitigation of the amounts  payable to the Executive  under any of the provisions
of this  Agreement,  and such  amounts  shall not be reduced  whether or not the
Executive  obtains  other  employment.  The  Company  agrees to pay as  incurred
(within  10  days  following  the  Company's  receipt  of an  invoice  from  the
Executive),  to the full extent  permitted  by law,  all legal fees and expenses
that the Executive may reasonably  incur as a result of any contest  (regardless
of the outcome thereof) by the Company,  the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of  performance  thereof  (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement),  plus, in
each case,  interest  on any  delayed  payment at the  applicable  federal  rate
provided for in Section  7872(f)(2)(A)  of the Internal Revenue Code of 1986, as
amended (the "Code").

         Section 8. Certain Additional Payments by the Company.

         (a)  Anything in this  Agreement to the  contrary  notwithstanding  and
except as set forth below,  in the event it shall be determined that any Payment
would be subject to the Excise  Tax,  then the  Executive  shall be  entitled to
receive an additional  payment (the "Gross-Up  Payment") in an amount such that,
after  payment by the  Executive  of all taxes (and any  interest  or  penalties
imposed with respect to such taxes), including,  without limitation,  any income
taxes (and any interest and penalties  imposed with respect  thereto) and Excise
Tax imposed upon the Gross-Up  Payment,  the Executive  retains an amount of the
Gross-Up   Payment   equal  to  the  Excise  Tax  imposed  upon  the   Payments.
Notwithstanding  the  foregoing  provisions of this Section 8(a), if it shall be
determined that the Executive is entitled to the Gross-Up Payment,  but that the
Parachute  Value of all  Payments do not exceed 110% of the Safe Harbor  Amount,
then no Gross-Up  Payment shall be made to the Executive and the amounts payable
under  this  Agreement  shall  be  reduced  so that the  Parachute  Value of all
Payments, in the aggregate,  equals the Safe Harbor Amount. The reduction of the
amounts payable  hereunder,  if applicable,  shall be made by first reducing the
payments under Section 5(a)(1)(B),  unless an alternative method of reduction is
elected by the Executive,  and in any event shall be made in such a manner as to
maximize the Value of all Payments actually made to the Executive.  For purposes
of reducing the Payments to the Safe Harbor Amount,  only amounts  payable under
this Agreement (and no other Payments) shall be reduced. If the reduction of the
amount  payable  under this  Agreement  would not result in a  reduction  of the
Parachute  Value of all Payments to the Safe Harbor Amount,  no amounts  payable
under  the  Agreement  shall be  reduced  pursuant  to this  Section  8(a).  The
Company's obligation to make Gross-Up Payments under this Section 8 shall not be
conditioned upon the Executive's termination of employment.

         (b)  Subject to the  provisions  of Section  8(c),  all  determinations
required to be made under this Section 8, including  whether and when a Gross-Up
Payment is required,  the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such  determination,  shall be made by Ernst & Young,
LLP, or such other nationally recognized certified public accounting firm as may
be designated by the Executive (the  "Accounting  Firm").  The  Accounting  Firm
shall  provide  detailed  supporting  calculations  both to the  Company and the
Executive  within 15 business  days of the receipt of notice from the  Executive
that  there has been a  Payment  or such  earlier  time as is  requested  by the
Company.  In the event that the  Accounting  Firm is serving  as  accountant  or
auditor for the individual, entity or group effecting the Change of Control, the
Executive may appoint another nationally  recognized accounting firm to make the
determinations  required hereunder (which accounting firm shall then be referred
to as the Accounting  Firm  hereunder).  All fees and expenses of the Accounting
Firm shall be borne solely by the Company.  Any Gross-Up Payment,  as determined
pursuant to this Section 8, shall be paid by the Company to the Executive within
5 days of the receipt of the Accounting Firm's determination.  Any determination
by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the  uncertainty in the application of Section 4999 of the Code at the
time of the  initial  determination  by the  Accounting  Firm  hereunder,  it is
possible  that  Gross-Up  Payments  that will not have been made by the  Company
should have been made (the  "Underpayment"),  consistent  with the  calculations
required to be made  hereunder.  In the event the Company  exhausts its remedies
pursuant  to Section  8(c) and the  Executive  thereafter  is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment  shall be promptly paid
by the Company to or for the benefit of the Executive.

         (c) The  Executive  shall notify the Company in writing of any claim by
the Internal  Revenue Service that, if successful,  would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable,  but no later than 10 business days after the Executive is informed
in writing of such claim.  The Executive shall apprise the Company of the nature
of such  claim and the date on which  such claim is  requested  to be paid.  The
Executive  shall not pay such claim prior to the expiration of the 30-day period
following the date on which the  Executive  gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due).  If the Company  notifies the  Executive in writing prior to
the  expiration  of such period that the Company  desires to contest such claim,
the Executive shall:

                  (1) give the Company any information  reasonably  requested by
         the Company relating to such claim,

                  (2) take such action in connection  with contesting such claim
         as the Company shall  reasonably  request in writing from time to time,
         including,  without  limitation,  accepting legal  representation  with
         respect  to  such  claim  by an  attorney  reasonably  selected  by the
         Company,

                  (3)  cooperate  with  the  Company  in  good  faith  in  order
         effectively to contest such claim, and

                  (4)  permit  the  Company to  participate  in any  proceedings
         relating to such claim;

provided,  however,  that the Company  shall bear and pay directly all costs and
expenses  (including  additional  interest and penalties) incurred in connection
with such contest,  and shall indemnify and hold the Executive  harmless,  on an
after-tax  basis,  for any  Excise  Tax or income tax  (including  interest  and
penalties)  imposed as a result of such  representation and payment of costs and
expenses.  Without limitation on the foregoing  provisions of this Section 8(c),
the Company shall control all proceedings taken in connection with such contest,
and,  at its sole  discretion,  may  pursue or forgo any and all  administrative
appeals,  proceedings,  hearings  and  conferences  with the  applicable  taxing
authority  in  respect  of such claim and may,  at its sole  discretion,  either
direct the  Executive to pay the tax claimed and sue for a refund or contest the
claim in any  permissible  manner,  and the Executive  agrees to prosecute  such
contest to a determination  before any  administrative  tribunal,  in a court of
initial  jurisdiction and in one or more appellate  courts, as the Company shall
determine;  provided, however, that, if the Company directs the Executive to pay
such claim and sue for a refund,  the Company  shall  advance the amount of such
payment to the Executive,  on an  interest-free  basis,  and shall indemnify and
hold the  Executive  harmless,  on an  after-tax  basis,  from any Excise Tax or
income tax  (including  interest  or  penalties)  imposed  with  respect to such
advance or with respect to any imputed  income in connection  with such advance;
and provided, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive  with respect to which
such  contested  amount is claimed to be due is limited solely to such contested
amount.  Furthermore,  the Company's  control of the contest shall be limited to
issues with respect to which the Gross-Up  Payment  would be payable  hereunder,
and the  Executive  shall be entitled to settle or contest,  as the case may be,
any other  issue  raised by the  Internal  Revenue  Service or any other  taxing
authority.

         (d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 8(c), the Executive  becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 8(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable  thereto).  If, after the receipt by the Executive of an amount
advanced by the Company  pursuant to Section 8(c), a determination  is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company  does not notify the  Executive  in writing of its intent to contest
such  denial  of  refund  prior  to  the   expiration  of  30  days  after  such
determination,  then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance  shall offset,  to the extent  thereof,
the amount of Gross-Up Payment required to be paid.

         (e)  Notwithstanding any other provision of this Section 8, the Company
may,  in its sole  discretion,  withhold  and pay over to the  Internal  Revenue
Service  or any  other  applicable  taxing  authority,  for the  benefit  of the
Executive,  all or any portion of the Gross-Up Payment, and the Executive hereby
consents to such withholding.

         (f) Definitions.  The following terms shall have the following meanings
for purposes of this Section 8.

         (i) "Excise  Tax" shall mean the excise tax imposed by Section  4999 of
the Code,  together with any interest or penalties  imposed with respect to such
excise tax.

         (ii) The "Net After-Tax  Amount" of a Payment shall mean the Value of a
Payment net of all taxes  imposed on the  Executive  with respect  thereto under
Sections 1 and 4999 of the Code and applicable  state and local law,  determined
by  applying  the  highest  marginal  rates  that are  expected  to apply to the
Executive's taxable income for the taxable year in which the Payment is made.

         (iii) "Parachute Value" of a Payment shall mean the present value as of
the date of the change of control for  purposes  of Section  280G of the Code of
the portion of such Payment that constitutes a "parachute payment" under Section
280G(b)(2),  as determined by the  Accounting  Firm for purposes of  determining
whether and to what extent the Excise Tax will apply to such Payment.

         (iv) A "Payment"  shall mean any payment or  distribution in the nature
of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of the Executive, whether paid or payable pursuant to this Agreement
or otherwise.

         (v) The "Safe Harbor Amount" means the maximum  Parachute  Value of all
Payments that the Executive  can receive  without any Payments  being subject to
the Excise Tax.

         (vi) "Value" of a Payment  shall mean the economic  present  value of a
Payment as of the date of the change of control for  purposes of Section 280G of
the Code, as determined by the Accounting  Firm using the discount rate required
by Section 280G(d)(4) of the Code.

         Section 9.  Confidential  Information.  The  Executive  shall hold in a
fiduciary capacity for the benefit of the Company and Lilly Canada all secret or
confidential  information,  knowledge  or data  relating  to the  Company or the
Affiliated  Companies,  and  their  respective  businesses,  which  information,
knowledge  or  data  shall  have  been  obtained  by the  Executive  during  the
Executive's  employment  by the Company or the  Affiliated  Companies  and which
information,  knowledge or data shall not be or become public  knowledge  (other
than by acts by the Executive or  representatives  of the Executive in violation
of this  Agreement).  After  termination of the Executive's  employment with the
Company and Lilly  Canada,  the Executive  shall not,  without the prior written
consent of the Company or as may otherwise be required by law or legal  process,
communicate or divulge any such  information,  knowledge or data to anyone other
than the Company and those persons designated by the Company.  In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding  any amounts  otherwise  payable to the Executive under
this Agreement.

         Section  10.  Successors.   (a)  This  Agreement  is  personal  to  the
Executive,  and, without the prior written consent of the Company,  shall not be
assignable  by the  Executive  other  than by will or the  laws of  descent  and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.

         (b) This  Agreement  shall inure to the benefit of and be binding  upon
the Company,  Lilly Canada, and their respective successors and assigns.  Except
as provided in Section 10(c) or 10(d),  without the prior written consent of the
Executive this Agreement shall not be assignable by the Company or Lilly Canada.

         (c) The Company will require any successor (whether direct or indirect,
by purchase, merger,  consolidation or otherwise) to all or substantially all of
the  business  and/or  assets of the  Company to assume  expressly  and agree to
perform  this  Agreement  in the same  manner  and to the same  extent  that the
Company would be required to perform it if no such  succession  had taken place.
"Company"  means the Company as  hereinbefore  defined and any  successor to its
business  and/or  assets as  aforesaid  that  assumes and agrees to perform this
Agreement by operation  of law or  otherwise.  The Company and Lilly Canada will
require  any  successor  (whether  direct  or  indirect,  by  purchase,  merger,
consolidation or otherwise) to all or  substantially  all of the business and/or
assets of Lilly Canada to assume and expressly  agree to perform this  Agreement
in the same manner and to the same extent that Lilly Canada would be required to
perform it if no such  succession  had taken place.  "Lilly  Canada" means Lilly
Canada as  hereinbefore  defined and any successor to its business and/or assets
as aforesaid  that assumes and agrees to perform this  Agreement by operation of
law or otherwise.

         Section 11. Miscellaneous.  (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana,  U.S.A.,  without
reference to principles of conflict of laws.  The captions of this Agreement are
not part of the  provisions  hereof  and  shall  have no force or  effect.  This
Agreement  may not be amended  or  modified  other  than by a written  agreement
executed  by the  parties  hereto  or  their  respective  successors  and  legal
representatives.

         (b) All notices and other communications  hereunder shall be in writing
and shall be given by hand  delivery  to the  other  party or by  registered  or
certified mail, return receipt requested, postage prepaid, addressed as follows:

                  if to the Executive:

                           Alain DeBlandre
                           1216 Gordon Street
                           Guelph ON Canada  N1H6H9

                  if to the Company:

                           Lilly Industries, Inc.
                           200 West 103rd Street
                           Indianapolis, Indiana  46290

                           Attention:  Chief Executive Officer

                  if to Lilly Canada:
                           Lilly Industries, Inc.
                           65 Duke Street
                           London, Ontario

                           Attention:

or to such other  address as either  party shall have  furnished to the other in
writing in accordance  herewith.  Notice and  communications  shall be effective
when actually received by the addressee.

         (c)  The  invalidity  or  unenforceability  of any  provision  of  this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

         (d) The  Company  may  withhold  from any  amounts  payable  under this
Agreement  such  United  States or  Canadian  federal,  state or local  taxes or
foreign taxes as shall be required to be withheld pursuant to any applicable law
or regulation.

         (e) The  Executive's  or the  Company's  failure to insist  upon strict
compliance  with any  provision  of this  Agreement or the failure to assert any
right the  Executive  or the  Company  may have  hereunder,  including,  without
limitation,  the right of the Executive to terminate  employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.

         (f)  This  Agreement,  upon  its  execution  by  both  parties  hereto,
supersedes the Change in Control  Agreement among Lilly Canada,  the Company and
the Executive dated as of February 3, 2000. The Executive, the Company and Lilly
Canada  acknowledge  that,  except as may otherwise be provided  under any other
written agreement between the Executive and the Company and/or Lilly Canada, the
employment  of the  Executive  by the Company and Lilly Canada is "at will" and,
subject to Section 1(a), prior to the Effective Date, the Executive's employment
may be  terminated  by the  Executive,  the Company or Lilly  Canada at any time
prior to the Effective  Date, in which case the Executive  shall have no further
rights  under  this  Agreement.  From and after the  Effective  Date,  except as
specifically provided herein, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.

         Section 12.  Guarantee.  The Company  guarantees  the  obligations  and
performance of Lilly Canada under this Agreement.



<PAGE>



         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization  from the Board, the Company has caused these
presents to be  executed  in its name on its behalf,  all as of the day and year
first above written.

                                       Alain DeBlandre
                                       --------------------------------------

                                       LILLY INDUSTRIES, INC., an Indiana
                                          corporation


                                       By

                                      Name:

                                     Title:


                                       LILLY INDUSTRIES, INC., an Indiana
                                          corporation


                                       By

                                      Name:

                                     Title:


<PAGE>





                                   Schedule I

         Present values shall be determined using (i) a discount factor equal to
the interest rate for the most recently  issued  ten-year  U.S.  Treasury  Notes
outstanding on the Date of Termination and (ii) the 1983 Group Annuity Marketing
Table for Males.