LILLY INDUSTRIES, INC.

                                REPLACEMENT PLAN





















                         Effective as of January 1, 1996


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                                TABLE OF CONTENTS

                                                                            Page

ARTICLE I.  ESTABLISHMENT OF PLAN...........................................  1
         Section 1.01.  Establishment.......................................  1
         Section 1.02.  Purpose.............................................  1
         Section 1.03.  Funding.............................................  1
         Section 1.04.  Trust...............................................  1

ARTICLE II.  DEFINITIONS AND INTERPRETATION.................................  1
         Section 2.01.  Definitions.........................................  1
         Section 2.02.  Construction and Governing Law......................  5

ARTICLE III.  PARTICIPATION.................................................  5

ARTICLE IV.  VESTING AND FORFEITURE.........................................  6
         Section 4.01.  Vesting.............................................  6
         Section 4.02.  Forfeiture..........................................  6

ARTICLE V.  PENSION REPLACEMENT BENEFIT.....................................  6
         Section 5.01.  Pension Replacement Benefit.........................  6
         Section 5.02.  Alternate Form......................................  7
         Section 5.03.  Death of Participant................................  7

ARTICLE VI.  401(k) REPLACEMENT BENEFIT.....................................  7
         Section 6.01.  Matching Contributions and 
                           Profit Sharing Contributions.....................  7
         Section 6.02.  Adjustments to Participant Accounts.................  7
         Section 6.03.  Distribution of Net Earnings........................  8
         Section 6.04.  401(k) Replacement Benefit..........................  8
         Section 6.05.  Alternate Form......................................  8
         Section 6.06.  Death of Participant................................  8

ARTICLE VII.  MISCELLANEOUS.................................................  9
         Section 7.01.  Plan Terminations...................................  9
         Section 7.02.  Amendments..........................................  9
         Section 7.03.  General Administration..............................  9
         Section 7.04.  No Employment Rights................................  9
         Section 7.05.  Non-alienation......................................  9
         Section 7.06.  Limitation of Liability.............................  9
         Section 7.07.  Acceleration or Change of Payment................... 10
         Section 7.08.  Tax Withholding..................................... 10
         Section 7.09.  Counterparts........................................ 10


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                     LILLY INDUSTRIES, INC. REPLACEMENT PLAN


                                   ARTICLE I.

                              ESTABLISHMENT OF PLAN

         Section 1.01. Establishment.  Lilly Industries, Inc. ("Company") hereby
establishes the Lilly  Industries,  Inc.  Replacement  Plan ("Plan"),  effective
January 1, 1996.

         Section  1.02.  Purpose.  The sole  purpose  of the Plan is to  replace
certain  benefits  for a  select  group of  management  and  highly  compensated
employees  of the Company and its  Affiliated  Employers  to the extent that the
benefits to which such  employees  would  otherwise be entitled  under the Lilly
Employees'  Pension Plan, the Lilly  Industries,  Inc.  Employee  401(k) Savings
Plan, and the Lilly  Industries,  Inc. Defined  Contribution Plan are limited by
Sections  401(a)(17),  402(g),  and 415 of the Internal Revenue Code of 1986, as
amended,  and  corresponding  provisions of subsequent  federal  income tax laws
("Code").

         Section 1.03. Funding.  The Plan is an unfunded benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974, as amended,  and
the Code. The right of a Participant or Beneficiary to receive payment under the
Plan is  merely  a  contractual  right  to  payment  from  the  Employer  of the
Participant,  and the Plan  does  not give  Participants  or  Beneficiaries  any
interest  in, or right to,  any of the assets of the  Company or any  Affiliated
Employer  other  than as a  general  creditor  of his or her  Employer.  Pension
Replacement  Benefits payable under the Plan with respect to a Participant shall
be paid solely from the general assets of the Employer of the Participant.

         Section 1.04.  Trust. The Company has established the Company Trust for
the  purpose of  satisfying  the  payment  obligations  of the Company and other
Employers  with respect to Matching  Contribution  Accounts  and Profit  Sharing
Contribution Accounts of Participants under the Plan. Benefits payable under the
Plan with  respect to the  Matching  Contribution  Account  and  Profit  Sharing
Contribution  Account of a Participant  shall be paid from the Company Trust, or
if the assets of the Company Trust are not sufficient to pay such benefits,  the
Employer of the Participant shall pay such benefits from its general assets. The
interests or rights of Participants or  Beneficiaries in or to any of the funds,
property,  or  assets  held by the  Company  Trust  shall  not be  senior to the
unsecured general creditors of the Company or any Affiliated Employer.

                                   ARTICLE II.

                         DEFINITIONS AND INTERPRETATION

         Section 2.01. Definitions.  When the initial letter of a word or phrase
is capitalized  herein,  such word or phrase shall have the meaning  hereinafter
set forth:

         (a)      "Affiliated Employer" means:


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                  (i) a member of a controlled group of corporations (as defined
         in Code Section 414(b)) of which the Company is a member; or

                  (ii) an unincorporated trade or business which is under common
         control (as defined in Code Section 414(c)) with the Company.

         (b) "Beneficiary" means the person or persons entitled to Plan benefits
with respect to the Participant after he or she is deceased.

         (c)      "Board" means the board of directors of the Company.

         (d) "Code" means the Internal Revenue Code of 1986, as amended,  or any
corresponding provisions of any subsequent federal income tax law.

         (e) "Committee"  means the Compensation  Committee of the Board to whom
authority  to  administer  and  interpret  the  Plan and to  designate  eligible
participants has been delegated by the Board.

         (f) "Company" means Lilly  Industries,  Inc. and any successor to Lilly
Industries, Inc.

         (g) "Company  Trust" means the trust  created by the Company  under the
"Trust Agreement for Lilly Industries,  Inc.  Replacement Plan," as amended from
time to time.

         (h)  "Competition"  means any of the activities  described  within this
Subsection.  A Participant  engages in  Competition if he or she at any time (A)
directly or  indirectly  engages in any activity or business that is the same as
or  substantially  similar  to or  competitive  with that of the  Company or any
Affiliated  Employer,  (B) directly or  indirectly  engages in,  owns,  manages,
operates,  joins, controls,  lends money or other assistance to, or participates
in  or is  connected  with,  as  an  officer,  employee,  partner,  stockholder,
consultant, or otherwise, an individual, partnership, firm, corporation or other
business organization or entity that is engaged in any activity or business that
is the same as or  substantially  similar  to or  competitive  with  that of the
Company or any Affiliated Employer,  or (C) discloses or uses, other than in the
normal and ordinary  performance of service for the Employer,  any  Confidential
Information of the Company or any Affiliated Employer.  Nothing contained in the
foregoing,  however,  shall prohibit the Participant from owning shares of stock
representing  less  than  one  percent  (1%) of the  outstanding  shares  of any
publicly-held competitor of the Employer or any Affiliated Employer.

         (i) "Confidential  Information" means any information not in the public
domain and not previously disclosed to the public by the Board or the management
of  the  Company  or an  Affiliated  Employer  with  respect  to  the  products,
facilities and methods, trade secrets and other intellectual property,  systems,
procedures,  manuals, confidential reports, product price lists, customer lists,
financial  information,  business  plans,  prospects,  or  opportunities  of the
Company

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or an Affiliated Employer, or any information which the Company or an Affiliated
Employer has designated as Confidential Information.

         (j) "Creditor  Exempt Group Annuity  Contract"  means any group annuity
contract  issued  by an  insurance  company  to the  Company,  as agent for each
Participant  who elects to make  Participant  Contributions,  for the purpose of
receiving and holding in accordance with its terms (i) Participant Contributions
(and  investment  earnings,  gains and losses  thereon)  and (ii)  amounts  (and
investment  earnings,  gains,  and losses thereon)  transferred from the Company
Trust to the Creditor Exempt Group Annuity Contract in accordance with the terms
of the Plan and the Company  Trust.  Any amounts (plus  additions  thereon) held
under such Creditor  Exempt Group Annuity  Contract shall be solely the property
of the Participant and shall be paid to the Participant or to his beneficiary at
the time and in the manner provided for the 401(k)  Replacement  Benefit and the
terms of such annuity contract.

         (k) "Employer" means the Company,  any Affiliated Employer which adopts
the Plan with the consent of the Committee, and any successor thereto.

         (l) "Good Cause" means (i)  conviction  for a felony or conviction  for
any crime or offense lesser than a felony  involving the property of the Company
or an Affiliated Employer, whether such conviction occurs before or after his or
her  termination  of  employment;  (ii)  engaging  in  conduct  that has  caused
demonstrable  and  material  injury to the  Company or an  Affiliated  Employer,
monetary  or  otherwise;  (iii)  gross  dereliction  of  duties  or other  gross
misconduct and the failure to cure such situation  within thirty (30) days after
receipt of notice thereof from the  Committee,  or (iv) the disclosure or use of
Confidential  Information  other than in the normal and ordinary  performance of
service for the  Company or an  Affiliated  Employer.  The  determination  as to
whether Good Cause  exists  shall be made by the  Committee in good faith and in
its sole discretion.

         (m) "Matching Contribution" means for any Plan Year the excess, if any,
of (i) the Employer matching  contributions which would have been contributed to
the  Savings  Plan  with  respect  to a  Participant  for the  Plan  Year if the
Participant had contributed  his or her Participant  Contributions  for the Plan
Year to the Savings Plan and if the  limitations  of Code  Sections  401(a)(17),
402(g),  and 415  had not  applied,  over  (ii)  the  actual  Employer  matching
contributions  contributed  to the Savings Plan with respect to the  Participant
for the Plan Year.

         Such Matching Contribution shall be contributed to the Company Trust at
least  annually and at such times and in such manner as may be determined by the
Committee in its sole discretion from time to time.

         (n) "Matching Contribution Account" means the bookkeeping account under
which  Matching  Contributions  of a Participant  are credited,  as adjusted for
investment   earnings,   gains,   and  losses   thereon  and  reduced  by  prior
distributions therefrom as provided under the terms of the Plan.


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         (o) "Participant" means each employee of an Employer who is employed in
a key executive or managerial position, who is designated by the Committee to be
eligible  for  participation  in the  Plan,  and who  agrees  to be bound by the
provisions of the Plan on a form provided by the Committee.

         (p)  "Participant  Contribution"  means for any Plan Year the after-tax
amount contributed, at the written election of the Participant on the applicable
form, by the  Participant to the Creditor  Exempt Group Annuity  Contract or the
Participant  Trust, if any, up to an amount equal to the difference  between (i)
the amount  that he or she could have  contributed  to the  Savings  Plan if the
limitations  of Code Sections  401(a)(17),  402(g),  and 415 had not applied and
(ii) the amount  that he or she was  actually  permitted  to  contribute  to the
Savings  Plan for  such  year,  taking  into  account  those  limitations.  Such
Participant  Contributions  shall be  withheld  from the pay of the  Participant
throughout the year (after  withholding  applicable  federal,  state,  and local
taxes) and shall be contributed to the Creditor Exempt Group Annuity Contract or
the  Participant  Trust,  if any,  at such  times  and in such  manner as may be
determined by the Committee in its sole discretion from time to time.

         (q) "Participant  Trust" refers to any grantor trust established by any
Participant  for the  purpose  of holding  (i)  Participant  Contributions  (and
investment earnings, gains, and losses thereon) and (ii) amounts (and investment
earnings,  gains, and losses thereon)  transferred from the Company Trust to the
Participant  Trust  in  accordance  with the  terms of the Plan and the  Company
Trust.

         (r)  "Pension  Plan"  means the  "Lilly  Employees'  Pension  Plan," as
amended from time to time.

         (s) "Pension  Replacement Benefit" means the excess, if any, of (i) the
amount of benefit  that would have  accrued to a  Participant  under the Pension
Plan if the amount of such accrued benefit were calculated without giving effect
to the limitations on compensation  and benefits under Code Sections  401(a)(17)
and 415;  provided,  however,  that such amount shall be determined after taking
into account the reduction in such retirement  income that would have accrued if
Code  Section  415(e)  limitations  applied,  but only to the  extent  that such
reduction is  attributable  to  contributions  of the Participant to the Savings
Plan which are not matched by  Employer  Matching  Contributions,  over (ii) the
retirement  benefit  actually  accrued to, or with  respect to, the  Participant
under the Pension Plan.

         (t) "Plan" means the "Lilly Industries,  Inc. Replacement Plan," as set
forth herein and as it may be amended from time to time hereafter.

         (u)      "Plan Year" means the calendar year.

         (v) "Profit Sharing  Contribution"  means for any Plan Year the excess,
if any, of (i) the Employer profit sharing  contributions  which would have been
contributed to the Savings Plan with respect to a Participant  for the Plan Year
if the limitations of Code Sections 401(a)(17) and

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415 had not applied,  over (ii) the actual Company profit sharing  contributions
to the Savings Plan with respect to the Participant for the Plan Year.

         Such Profit  Sharing  Contribution  shall be contributed to the Company
Trust  at  least  annually  and at  such  times  and in  such  manner  as may be
determined by the Committee in its sole discretion from time to time.

         (w) "Profit Sharing Contribution Account" means the bookkeeping account
under which Profit  Sharing  Contributions  of a Participant  are  credited,  as
adjusted for investment earnings, gains, and losses thereon and reduced by prior
distributions therefrom as provided under the terms of the Plan.

         (x) "401(k)  Replacement  Benefit"  means the  aggregate  amount of the
Matching  Contribution  Account  and Profit  Sharing  Contribution  Account of a
Participant  as of the  date of the  retirement  of the  Participant  under  the
Savings Plan.

         (y) "Savings Plan" refers  collectively to the "Lilly Industries,  Inc.
Employees  401(k)  Savings  Plan," as amended from time to time,  and the "Lilly
Industries, Inc. Defined Contribution Plan," as amended from time to time.

         Section 2.02.  Construction and Governing Law.

         (a) The Plan shall be construed,  enforced,  and administered,  and the
validity  thereof  determined  in  accordance  with,  the  laws of the  State of
Indiana.

         (b) Words used herein in the  masculine  gender  shall be  construed to
include the feminine gender where appropriate,  and the words used herein in the
singular or plural shall be  construed as being in the plural or singular  where
appropriate.

         (c) Whenever any actuarial present value or actuarial equivalency is to
be determined under the Plan, it shall be based on such actuarial assumptions as
may be provided under the Pension Plan for  comparable  situations as determined
by the Committee in its sole discretion.

                                  ARTICLE III.

                                  PARTICIPATION

         The  Committee may  designate  from time to time which  employees of an
Employer are eligible to participate in the Plan. Any such employee shall become
a Participant  only after completing such forms and making such elections as the
Committee may prescribe,  including an agreement to be bound by all terms of the
Plan and all  determinations  of the  Committee.  A  Participant  shall remain a
Participant until all amounts to which he or she is entitled under the Plan have
been paid to him or her.


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                                   ARTICLE IV.

                             VESTING AND FORFEITURE

         Section 4.01.  Vesting. A Participant shall become vested in his or her
Pension Replacement Benefit and 401(k) Replacement Benefit as follows:

         (a)  Subject to Section  4.02,  the  Pension  Replacement  Benefit of a
Participant shall be vested in accordance with the vesting  provisions set forth
in the Pension Plan.

         (b)  Subject  to Section  4.02,  the  401(k)  Replacement  Benefit of a
Participant shall be fully vested at all times.

         Section  4.02.  Forfeiture.  A  Participant  shall  forfeit  his or her
Pension Replacement Benefit and 401(k) Replacement Benefit as follows:

         (a) A  Participant  shall forfeit any and all rights he or she may have
to the  nonvested  portion of his or her Pension  Replacement  Benefit as of the
date  his or her  employment  with  the  Employer  ends  either  voluntarily  or
involuntarily.

         (b)  Notwithstanding  any other  provision of the Plan,  a  Participant
shall  forfeit  any and all rights he or she may have to any 401(k)  Replacement
Benefit or Pension  Replacement Benefit if (i) the employment of the Participant
is involuntarily terminated by the Employer for Good Cause, as determined by the
Committee in its sole  discretion,  or (ii) the  Participant,  either  before or
after any  termination  of  employment  with the  Employer  (including,  without
limitation, retirement from the Employer) engages in Competition.

         (c) If a Participant  dies before any benefit becomes payable to him or
her under the Plan,  the  Participant  shall  forfeit  any and all  rights  that
Participant may have had to any benefit under the Plan, except any death benefit
payable pursuant to Article V or VI.

                                   ARTICLE V.

                           PENSION REPLACEMENT BENEFIT

         Section 5.01.  Pension  Replacement  Benefit. A Participant who retires
from the Employer in accordance with the Pension Plan and is entitled to receive
a  retirement  benefit  under the Pension  Plan shall be entitled to receive the
vested  portion  of  his or  her  Pension  Replacement  Benefit,  payable  as an
actuarially  equivalent lump sum payment at the same time as the initial benefit
payment of the  pension  under the Pension  Plan,  unless an  alternate  form of
benefit  then  available  under  the  Pension  Plan  has  been  elected  by  the
Participant as provided in Section 5.02.


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         Section 5.02.  Alternate  Form. Upon becoming a Participant in the Plan
and at any time  thereafter  at least  one (1) year  before  his or her  Pension
Replacement  Benefit  becomes due and payable under the Plan, a Participant  may
elect  in  writing,  on a form  prescribed  by  the  Committee,  an  actuarially
equivalent  alternate  form of benefit then  available  under the Pension  Plan;
provided,  however,  that any such election shall not become effective until the
date that is one (1) year after the date on which such  election  is approved by
the  Committee,  which  approval  may be withheld by the  Committee  in its sole
discretion.

         Section 5.03.  Death of Participant.

         (a) If a married  Participant  dies  prior to the date he or she begins
receiving  payments  under the Plan,  and the  survivor  annuity  payable to the
spouse of the  Participant  under  the  Pension  Plan is less than the  survivor
annuity  which  would have been  payable if it were  calculated  without  giving
effect to the  limitations on benefits  under Code Sections  401(a)(17) and 415,
the spouse of the deceased  Participant  shall be entitled to receive a survivor
annuity  equal to the excess of (i) the  survivor  annuity  that would have been
payable if it were  calculated  without giving effect to such Code  limitations,
over (ii) the survivor annuity actually payable to such spouse under the Pension
Plan. Such survivor  annuity payable under the Plan shall be payable at the same
time and in the same form as the  survivor  annuity  under the  Pension  Plan is
payable.

         (b) If a  Participant  dies after the date he or she  begins  receiving
payments  under the Plan,  survivor  benefits,  if any, will continue to be paid
pursuant to the alternate form of benefit, if any, elected under Section 5.02.

                                   ARTICLE VI.

                           401(k) REPLACEMENT BENEFIT

         Section 6.01. Matching  Contributions and Profit Sharing Contributions.
Subject to the  provisions  of Section  6.03,  the Employer  shall credit to the
Matching  Contribution Account of a Participant the Matching  Contributions,  if
any, with respect to the  Participant  for the Plan Year at the time and in such
manner as determined by the Committee in its sole  discretion from time to time.
Subject to the provisions of Section 6.03, the Employer shall also credit to the
Profit  Sharing  Contribution  Account  of  a  Participant  the  Profit  Sharing
Contributions,  if any, with respect to the Participant for the Plan Year at the
time and in such manner as determined  by the  Committee in its sole  discretion
from time to time.

         Section  6.02.   Adjustments  to  Participant  Accounts.  The  Matching
Contribution  Account and Profit Sharing  Contribution  Account of a Participant
shall be  adjusted  from time to time to  reflect  actual  investment  earnings,
gains, and losses under the equivalent  accounts  maintained for the Participant
under the Company Trust.  The assets of said Trust shall be invested in a manner
which  approximates as closely as practicable  the investment  options under the
equivalent  accounts  established and maintained for the  Participant  under the
Savings Plan.

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The Matching  Contribution  Account and Profit Sharing Contribution Account of a
Participant shall also be adjusted to reflect  distributions  from such accounts
under the Plan and from the equivalent  accounts  established and maintained for
the Participant under the Company Trust.

         Section  6.03.  Distribution  of  Net  Earnings.  A  Participant  shall
receive,  as soon as  administratively  practicable  after  the end of each Plan
Year, an annual  distribution in an amount equal to the investment  earnings and
realized gains with respect to each account of the Participant for the Plan Year
under the Company Trust.  Upon becoming a Participant in the Plan or at any time
thereafter,  a  Participant  may elect in writing,  on a form  prescribed by the
Committee,  that distributions made pursuant to this Section 6.03 shall, in lieu
of being paid directly to the Participant, be contributed to the Creditor Exempt
Group Annuity  Contract or the Participant  Trust of the  Participant.  Any such
election shall remain effective until revoked by the Participant in writing,  on
a form  prescribed by the Committee.  If the  Participant  does not make such an
election,  or later  revokes  such an  election,  the  Participant  shall not be
entitled to any Matching  Contributions or Profit Sharing  Contributions for the
Plan Year within which a  distribution  of net earnings is made  directly to the
Participant pursuant to this Section 6.03, or for any Plan Year thereafter until
the Participant has made such an election.

         Section 6.04. 401(k) Replacement  Benefit. A Participant who terminates
employment  with the  Employer  shall be  entitled  to receive his or her 401(k)
Replacement  Benefit,  payable  as a lump sum  payment  at the same  time as the
initial  benefit payment of the  Participant  under the Savings Plan,  unless an
alternate form of benefit then available under the Savings Plan has been elected
by the Participant as provided in Section 6.05.

         Section 6.05.  Alternate  Form. Upon becoming a Participant in the Plan
and at any time  thereafter  at  least  one (1) year  before  his or her  401(k)
Replacement  Benefit  becomes due and payable under the Plan, a Participant  may
elect  in  writing,  on a form  prescribed  by  the  Committee,  an  actuarially
equivalent  alternate  form of benefit  permitted  by the  Committee;  provided,
however,  that any such election shall not become  effective until the date that
is one (1) year  after  the date on  which  such  election  is  approved  by the
Committee,  which  approval  may be  withheld  by  the  Committee  in  its  sole
discretion.

         Section 6.06.  Death of Participant.

         (a) If a Participant  dies prior to the date he or she begins receiving
payments under the Plan, the designated  Beneficiary of the Participant shall be
entitled  to receive  an amount  equal to the sum of the  Matching  Contribution
Account and Profit Sharing  Contribution  Account balances of the Participant as
of the date of death of the Participant.  The spouse of the Participant shall be
the beneficiary if the  Participant is married at the time of his death,  unless
the spouse consents to the designation of an alternate beneficiary.

         (b) If a  Participant  dies after the date he or she  begins  receiving
payments  under the Plan,  survivor  benefits,  if any, will continue to be paid
pursuant to the alternate form of benefit, if any, elected under Section 6.05.

                                      - 8 -

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                                  ARTICLE VII.

                                  MISCELLANEOUS

         Section 7.01. Plan  Terminations.  If the Pension Plan is terminated in
accordance  with the terms  thereof,  the  obligation  to  provide  any  Pension
Replacement  Benefit accrued up to the termination date shall continue and shall
be payable in  accordance  with the terms of the Plan.  If the Savings  Plan (or
either  of  them) is  terminated  in  accordance  with the  terms  thereof,  the
obligation to provide any 401(k) Replacement Benefit shall continue and shall be
payable in accordance with the terms of the Plan.

         Section  7.02.  Amendments.  The  Board  from  time to time may  amend,
suspend, or terminate the Plan or any part hereof, effective as of the beginning
of any Plan Year  commencing  on or after the date of adoption of such action by
the Board; provided, however, that no such action shall affect the rights of the
Participant  or the  operation  of the Plan with  respect to any benefits of the
Participant that may have accrued or become payable before such action.

         Section  7.03.  General   Administration.   The  Committee  shall  have
exclusive  authority  to  administer  the Plan.  The  Committee  shall  have the
exclusive right and authority to interpret the Plan and resolve any ambiguities.
The  decisions,  actions and records of the Committee  shall be  conclusive  and
binding upon the Company,  any Employer,  and all persons  having or claiming to
have any right or interest in or under the Plan.  The  Committee may delegate to
such officers,  employees or departments of the Company such authority,  duties,
and  responsibilities of the Committee as it, in its sole discretion,  considers
necessary or  appropriate  for the proper and  efficient  operation of the Plan,
including,  without limitation, (a) interpretation of the plan, (b) approval and
payment of claims, and (c) establishment of procedures for administration of the
Plan.

         Section 7.04. No Employment  Rights.  Neither the  establishment of the
Plan nor the status of an employee as a Participant  shall give any  Participant
any right to be retained in the employ of the Employer;  and no Participant  and
no person  claiming  under or through such  Participant  shall have any right or
interest in any benefit  under the Plan unless and until the terms,  conditions,
and provisions of the Plan affecting such Participant shall have been satisfied.

         Section  7.05.  Non-alienation.  The  right of any  Participant  or any
person claiming under or through such  Participant to any benefit or any payment
hereunder  shall not be  subject  in any  manner to  attachment  or other  legal
process for the debts of such  Participant or person;  and the same shall not be
subject to anticipation, alienation, sale, transfer, assignment or encumbrance.

         Section 7.06.  Limitation  of Liability.  No member of the Board or the
Committee, and no officer or employee of the Company or any Affiliated Employer,
shall be liable to any person for any action taken or omitted in connection with
the administration of the Plan, nor shall the

                                      - 9 -

<PAGE>


Company or any  Affiliated  Employer be liable to any person for any such action
or  omission.  No person  shall,  because of the Plan,  acquire  any right to an
accounting  or to  examine  the  books  or the  affairs  of the  Company  or any
Affiliated Employer.  Nothing in the Plan shall be construed to create any trust
or any fiduciary relationship between the Company or any Affiliated Employer and
any Participant or any other person.

         Section 7.07.  Acceleration or Change of Payment.  Notwithstanding  any
provision of the Plan to the contrary,  the Committee,  in its sole  discretion,
may accelerate the time of payment of any benefit to a Participant to the extent
that it deems  equitable or desirable under the  circumstances  or, if there has
been a change in the family  circumstances  of the  Participant,  may change the
method of payment of any such benefit; provided,  however, any such change shall
not reduce the  benefit  payable to an amount  which is less than the  actuarial
equivalent of the benefit payable to the Participant.

         Section  7.08.  Tax  Withholding.  The Employer  may withhold  from any
payment  due  hereunder  any taxes  required  to be  withheld  under  applicable
federal, state, or local tax laws or regulations.

         Section 7.09. Counterparts.  The Plan may be evidenced by any number of
counterparts, each of which shall constitute an original.

         The Lilly  Industries,  Inc.  Replacement Plan has been executed by the
duly  authorized  officers  of  Lilly  Industries,  Inc.  on  this  27th  day of
September, 1996.

                                          LILLY INDUSTRIES, INC.


                                       By: /s/ Douglas W. Huemme
                                          --------------------------------------
                                          Douglas W. Huemme, Chairman, President
                                          & Chief Executive Officer

By:    /s/ Kenneth L. Mills
       ------------------------------------------------
       Kenneth L. Mills


Title: Corporate Accounting Director
       ----------------------------------------------



                                     - 10 -

<PAGE>

                                 TRUST AGREEMENT
                           FOR LILLY INDUSTRIES, INC.
                                REPLACEMENT PLAN


         This Agreement is executed by and between LILLY INDUSTRIES,  INC., with
its  principal  place of  business in  Indianapolis,  Indiana  ("Company"),  and
Bankers Trust Company of Des Moines, as trustee ("Trustee").

                                    RECITALS

         The Company has established the Lilly Industries, Inc. Replacement Plan
("Plan")  to  provide  a  select  group  of  employees  of the  Company  and its
subsidiaries  and affiliates with benefits to replace those lost under the Lilly
Employees'  Pension Plan, the Lilly  Industries,  Inc.  Employee  401(k) Savings
Plan, and the Lilly  Industries,  Inc. Defined  Contribution Plan as a result of
the limitations of Sections 401(a)(17),  402(g), and 415 of the Internal Revenue
Code of 1986, as amended,  and  corresponding  provisions of subsequent  federal
income tax laws ("Code"). The Plan is incorporated herein and made a part hereof
by this reference the same as if fully set forth herein.

         The Company  wishes to establish a trust  ("Trust")  for the purpose of
satisfying  the payment  obligations  of the Company  and other  Employers  with
respect  to  Matching  Contribution  Accounts  and Profit  Sharing  Contribution
Accounts of  Participants  under the Plan,  and the Company and other  Employers
wish to contribute assets to the Trust for such purpose.  Assets  contributed by
an Employer (including the Company) will be subject to the claims of the general
creditors of the Employer in the event of the  insolvency  or  bankruptcy of the
Employer.  Benefits payable under the Plan with respect to Matching Contribution
Accounts and Profit Sharing  Contribution Account of a Participant shall be paid
from the Trust, or if the assets of the Trust

                                                        -1-

<PAGE>



are not sufficient to pay such benefits,  the Employer of the Participant  shall
pay  such  benefits  from  its  general  assets.  The  interests  or  rights  of
Participants  or their  beneficiaries  in or to any of the funds,  property,  or
assets held by the Trust shall not be senior to the unsecured  general creditors
of the Company or any Affiliated Employer.

         Pension  Replacement  Benefits payable under the Plan with respect to a
Participant  shall not be paid from the Trust,  but instead shall be paid solely
out of the general assets of the Employer of the Participant.

         The Company has  selected the Trustee to serve as trustee of the Trust,
and  the  Trustee  agrees  to  serve  in that  capacity,  all on the  terms  and
conditions set forth herein.

         The  Company  intends  that the  Trust  shall  constitute  an  unfunded
arrangement  and shall not affect the status of the Plan as an unfunded  benefit
plan within the meaning of the Employee  Retirement Income Security Act of 1974,
as amended ("ERISA").

                                    AGREEMENT

         NOW, THEREFORE, the Company and the Trustee hereby agree as follows:

         Section 1.  Establishment of Trust.  The Company  establishes the Trust
for the purpose of providing  assets to satisfy the payment  obligations  of the
Company and other Employers with respect to Matching  Contribution  Accounts and
Profit Sharing Contribution Accounts of Participants under the Plan.

         Section  2.  Defined  Terms.  Except as  otherwise  expressly  provided
herein, whenever the initial letter of a word or phrase is capitalized,  and the
word or phrase is defined by  Article II of the Plan,  the word or phrase  shall
have the meaning given to that term in Article II of the Plan.

                                                        -2-

<PAGE>



         Section  3.  Rules  of  Construction.  Except  as  otherwise  expressly
provided  herein,  the rules of  construction  specified in the Plan shall apply
with respect to the Trust. The Trust is intended to be a grantor trust, of which
the Company is the grantor,  within the meaning of Section 671 of the Code,  and
it shall be construed accordingly.

         Section 4.  Trust Fund.

         (a) The Trustee  shall  receive and accept for the purposes  hereof all
property paid to it by or at the direction of the Company or other Employer from
time to  time,  and  shall  hold,  invest,  reinvest,  manage,  administer,  and
distribute  such property and the  increments,  proceeds,  earnings,  and income
thereof for the exclusive  benefit of the Participants  and their  beneficiaries
under the Plan.  All assets  held by the  Trustee in the Trust are  referred  to
herein as the "Trust  Fund." The Trust  Fund  shall be held by the  Trustee,  in
trust, and dealt with in accordance with the provisions of this Trust Agreement.
The Trustee shall maintain  accurate and detailed records  regarding the receipt
and amount of property paid to it by or at the direction of the Company and each
other Employer.

         (b) Except as may be provided in Sections 6(d),  (6(e), and 7(a), at no
time  shall any part of the Trust Fund be used for,  or  diverted  to,  purposes
other than for the exclusive benefit of Participants and their  beneficiaries as
provided in the Plan or for defraying the reasonable  expenses of  administering
the Trust Fund. However, Participants and their beneficiaries shall not have any
preferred claim on, or any beneficial  ownership interest in the Trust Fund, and
any rights  created under the Plan and this Trust  Agreement  shall be unsecured
contractual rights of Participants and their beneficiaries.

                                                        -3-

<PAGE>



         Section 5.  Investments by Trustee.

         (a) The Trustee  shall,  if so  directed  in writing by the  Committee,
segregate  all or a portion  of the  Trust  Fund held by it into one (1) or more
separate investment  accounts,  each separate account being hereinafter referred
to as an "Investment Fund." The Trustee shall be under no duty to question,  and
shall not incur any liability on account of following, any such direction of the
Committee.  The Trustee  shall manage,  acquire,  or dispose of the assets in an
Investment Fund in accordance with the investment  guidelines,  objectives,  and
restrictions  established,  or the specific  investment  directions given by the
Committee  for that  Investment  Fund.  Unless  otherwise  provided  in specific
investment directions given by the Committee,  it is the intent of the Committee
that the assets held in an  Investment  Fund shall be  invested  pursuant to the
written directions of the Participants in accordance with procedures established
by the Committee  from time to time.  Subject to the  provisions of the Plan and
this Trust  Agreement,  all income  received  with  respect to, and any proceeds
received from the  disposition  of, property held in an Investment Fund shall be
credited to, and reinvested in, that Investment Fund.  Subject to the provisions
of the Plan, the Committee may direct the Trustee to transfer all or part of the
assets of one Investment Fund to another Investment Fund.

         (b) The Trustee  shall hold any portion of the Trust Fund not  invested
pursuant to  Subsection  (a) in an  Investment  Fund to be known as the "General
Fund".  Except as  otherwise  directed by the  Committee  in writing or provided
herein,  the Trustee shall have the power and authority,  in its discretion,  to
manage,  acquire,  or dispose of the assets held in the  General  Fund and shall
invest and reinvest the assets of the General Fund without  distinction  between
principal  and  income  in  preferred  or  common  stocks,  including  shares of
investment companies or mutual

                                                        -4-

<PAGE>

funds,  bonds,  notes,  debentures or mortgages,  equipment trust  certificates,
investment trust certificates,  common trust funds,  insurance contract or group
annuity contract,  or other real or personal property  investments or securities
of any kind,  class,  or character.  The Trustee in its discretion may hold such
portion of the  General  Fund in cash or cash  balances  as the Trustee may from
time to time deem to be in the best interests of the Trust Fund.

         Section 6.  Disbursements from the Trust Fund.

         (a)  The  Trustee   shall  make   payments   from  the  Trust  Fund  to
Participants,  their beneficiaries,  and such other persons as the Committee may
direct from time to time.  Such payments  shall be made in such manner,  in such
amounts,  and for such purposes,  including the payment of Plan benefits and the
payment of expenses of  administration  of the Plan,  as may be specified in the
directions  of the  Committee.  The  Committee  shall  ensure  that any  payment
directed under this Section  conforms to the provisions of the Plan,  this Trust
Agreement,  and the  provisions of any  applicable  law.  Each  direction of the
Committee  shall be in writing  and shall be deemed to  include a  certification
that  any  payment  or  other  distribution  directed  thereby  is one  that the
Committee is authorized to direct, and the Trustee may rely conclusively on such
certification  without further  investigation.  Payments by the Trustee shall be
made by its  check  (or the  check of its  agent)  to the  order  of the  payee.
Payments  or other  distributions  hereunder  may be  mailed to the payee at the
address last furnished to the Trustee by the Committee or if no such address has
been so furnished, to the payee in care of the Committee.  The Trustee shall not
incur  any  liability  or other  damage  on  account  of any  payments  or other
distributions  made by it in  accordance  with  the  written  directions  of the
Committee.

                                                        -5-

<PAGE>



(b) A Participant who terminates  employment with the Employer shall be entitled
to a  distribution  from the  Trust  Fund in an  amount  equal  to the  Matching
Contribution  Account and Profit Sharing  Contribution  Account  balances of the
Participant  under the Plan as of the date of  termination  of employment of the
Participant. Unless otherwise directed by the Committee, such distribution shall
be made as a lump sum payment at the same time as the initial benefit payment of
the Participant under the Lilly Industries, Inc. 401(k) Savings Plan, as amended
from time to time. If a  Participant  dies prior to the date he or she begins to
receive  distributions  from the Trust Fund as provided in this Subsection,  the
designated  beneficiary of the  Participant  shall be entitled to a distribution
from the Trust Fund in an amount equal to the Matching  Contribution Account and
Profit Sharing  Contribution  Account balances of the Participant under the Plan
as of the date of death of the  Participant,  payable  as a lump sum  payment as
soon as administratively practicable after the date of death of the Participant,
unless otherwise directed by the Committee. If a Participant dies after the date
he or she begins to receive  distributions  from the Trust Fund as  provided  in
this Subsection,  the Trustee shall make such additional  distributions from the
Trust Fund on behalf of the Participant as may be directed by the Committee.

         (c) Each calendar year the Trustee shall set aside for each Participant
and each Participant  shall be entitled to a distribution from the Trust Fund of
an amount equal to the  investment  earnings and realized  gains with respect to
the  Trust  Fund for such  calendar  year  that were  credited  to the  Matching
Contribution  Account  and  the  Profit  Sharing  Contribution  Account  of  the
Participant  under the Plan for such calendar year. As soon as  administratively
practicable,  the Trustee shall distribute such amount to the Participant unless
the  Participant  directs the Trustee to  transfer  such amount to the  Creditor
Exempt Group Annuity Contract or to his or her

                                                        -6-

<PAGE>

Participant  Trust.  Payments  made by the Trustee  pursuant to this  Subsection
shall be made by its  check  (or the  check of its  agent)  to the  order of the
Participant  or the Creditor  Exempt Group Annuity  Contract or the  Participant
Trust,  as the case may be,  and shall be  mailed  to the  payee at the  address
furnished  by the  Trustee by the  Committee.  The  Trustee  shall not incur any
liability  or other  damage on account of any such  payment  or  transfer  as so
directed by the Participant. Any amount set aside by the Trustee hereunder shall
not be subject to the general creditors of the Company and the Participant shall
have a security interest in such amounts until so paid or transferred.

         (d) All  expenses  of the  Trust  that are  allocable  to a  particular
Investment  Fund shall be  allocated  and charged to that Fund.  Expenses of the
Trust that are not  allocable to a particular  Investment  Fund shall be charged
against any separate  Investment  Funds in proportion to their value relative to
the value of the entire Trust Fund.

         (e) The Trustee shall pay from the Trust Fund all expenses of the Trust
and any real and personal  property taxes,  income taxes, and other taxes levied
or assessed  under  existing or future laws  against the Trust Fund,  unless the
Company or other Employer elects to pay such expenses or taxes.

         (f) Upon  termination  of the Plan,  after all Plan  benefits have been
paid  to  Participants  and  their  beneficiaries,  the  Trustee  shall  pay any
remaining assets of the Trust to the Company.

         Section 7.  Trustee  Responsibility  Regarding  Payments if an Employer
Becomes Insolvent or Files for Bankruptcy.

         (a) The portion of the Trust Fund  attributable to  contributions by an
Employer  to the Trust  Fund  shall at all times be subject to the claims of the
Employer's general creditors in the

                                                        -7-

<PAGE>



event the Employer  becomes  Insolvent  (as defined in  Subsection  (c)).  If an
Employer  becomes  Insolvent,  and the  Trustee is  informed  of that fact,  the
Trustee shall  transfer  Trust assets to satisfy  claims against the Employer as
directed by a court of competent jurisdiction.  The Employer shall have the duty
to inform the Trustee  within  three  business  days,  if the  Employer  becomes
Insolvent. If the Employer so notifies the Trustee, or a person claiming to be a
creditor of the Employer alleges in writing to the Trustee that the Employer has
become Insolvent, the Trustee shall independently determine,  within thirty (30)
days after receipt of the notice,  whether the  allegation  is correct.  Pending
that determination,  the Trustee shall discontinue  payments to Participants and
their beneficiaries pursuant to the Plan which are attributable to contributions
by the Employer and shall hold such portion of the Trust Fund for the benefit of
the  Employer's  general  creditors.  The Trustee  shall  notify the Employer in
writing before any  discontinuance of benefit payments pursuant to the preceding
sentence.  The Trustee  shall  resume  payments to such  Participants  and their
beneficiaries  only after the Trustee has  determined  that the  Employer is not
Insolvent  or is no longer  Insolvent.  Except as otherwise  expressly  provided
herein,  the Trustee  shall have no duty to inquire as to whether an Employer is
Insolvent.  Moreover,  in  determining  whether an  Employer is  Insolvent,  the
Trustee may rely  conclusively on any evidence that gives it a reasonable  basis
for making a determination concerning the Employer's solvency.

         (b) If the Trustee  discontinues  payments from the Trust Fund pursuant
to  Subsection  (a) above and  subsequently  resumes  such  payments,  the first
payment following the discontinuance  shall include,  to the extent available in
the Trust Fund,  the aggregate  amount of all payments that would have been made
to the Participants and their beneficiaries in accordance with the provisions

                                                        -8-

<PAGE>



of the Plan during the period of  discontinuance,  less the aggregate  amount of
payments made to Participants and their beneficiaries by the Employer in lieu of
the payments provided for hereunder during any period of discontinuance.

         (c) An Employer  shall be considered  "Insolvent"  for purposes of this
Trust  Agreement  if (i) the Employer is unable to pay its debts as they mature,
or (ii) the  Employer is subject to a pending  proceeding  as a debtor under any
bankruptcy law.

         (d)  Nothing  in this Trust  Agreement  shall in any way  diminish  any
rights of a  Participant  or a  Participant's  beneficiary  to pursue his or her
rights as a general  creditor of an Employer  with  respect to any  payments due
under the Plan.

         Section 8. Powers and Duties of Trustee.  Except as otherwise expressly
provided  herein,  the  Trustee  shall  discharge  its  duties  under this Trust
Agreement  solely in the interest of Participants and their  beneficiaries  with
the care, skill, prudence, and diligence under the circumstances then prevailing
that a prudent  person  acting in like  capacity and familiar  with such matters
would use in the conduct of an enterprise of like  character and with like aims,
all in  accordance  with the  provision of this Trust  Agreement.  Except to the
extent that the Committee provides  otherwise,  in administering the Trust Fund,
the Trustee shall have the power in its discretion:

         (a) To exercise, or to refrain from exercising,  all voting rights with
respect  to any  stocks,  bonds,  or other  securities  and to grant  general or
special  proxies or powers of attorney  with or without  power of  substitution,
whether  discretionary  or  otherwise,  and to enter  into any  voting  trust or
similar agreement;

                                                        -9-

<PAGE>



         (b) To register and hold any investment in the name of the Trustee,  in
the name of one or more of its  nominees or in the name of one or more  nominees
of any system for the central handling of securities, with or without indication
of the capacity in which the  investment is held,  and to hold any investment in
bearer  form,  but the books and records of the Trustee  shall at all times show
that such investments are part of the Trust Fund;

         (c) To collect and receive any and all money and other  property due to
the Trust Fund and to give full discharge therefor;

         (d) To employ suitable agents and counsel,  and to pay their reasonable
expenses and compensation from the Trust Fund;

         (e)  To  provide  ancillary   services  for  no  more  than  reasonable
compensation;

         (f) To make, execute, acknowledge, and deliver any and all documents of
transfer and conveyance and any and all other  instruments that may be necessary
or appropriate to carry out the powers herein granted;

         (g) To invest  the Trust  Fund in  deposits  of the  Trustee  bearing a
reasonable rate of interest,  including,  but not limited to, savings  accounts,
money market accounts, certificates of deposit and repurchase agreements;

         (h) To  withhold  any tax that by any present or future law is required
to be withheld from any payment under the Plan and to issue required  reports to
payees and governmental authorities;

         (i) To pay the reasonable expenses of the Trust; and

         (j)  Generally,  to do all acts,  whether or not expressly  authorized,
that the Trustee may deem necessary or desirable for the protection of the Trust
Fund.

                                                       -10-

<PAGE>



         Section 9.  Compensation  to Trustee.  The  Trustee  shall be paid such
reasonable  compensation as shall from time to time be agreed upon in writing by
the Company and the Trustee.  Such compensation shall include all reasonable and
proper expenses of  administration of the Trust,  including  reasonable fees for
legal services.  Such compensation shall be paid by the Trustee out of the Trust
Fund, unless paid by the Company or other Employer.

         Section 10.   Records of Trust.

         (a) The  Trustee  shall keep  accurate  and  detailed  accounts  of all
investments,  receipts,  disbursements and other transactions hereunder, and all
accounts,  books,  and records  relating thereto shall be open to inspection and
audit at all reasonable  times by any person  designated by the Company.  Within
sixty  (60)  days  following  the  close  of each  calendar  year  of the  Trust
(hereinafter  referred to as "Trust Year"), and within sixty (60) days after the
removal or  resignation  of the  Trustee as  provided in Section 12, the Trustee
shall file with the Company a written  account  setting  forth all  investments,
receipts,  disbursements, and other transactions effected by it during the Trust
Year or during the  period  from the close of the last Trust Year to the date of
the removal or resignation.

         (b) The Trustee shall determine the fair market value of the Trust Fund
and each  Investment  Fund as of the close of  business  on the last day of each
Plan quarter and as of each other date  designated  by the Committee by a method
uniformly  applied.  The Trustee  shall  determine  the fair market value of the
Trust  Fund and each  Investment  Fund  based  upon  information  and  financial
publications of general circulation, statistical and valuation services, records
of security  exchanges,  appraisals by qualified persons,  transactions and bona
fide offers

                                                       -11-

<PAGE>



in assets of the type in question, and other information customarily used in the
valuation of property.

         (c) The Trustee shall provide any additional  information or reports as
reasonably requested by the Company from time to time.

         Section 11. Limitation of  Responsibilities  of Trustee.  The Trustee's
responsibilities and liabilities shall be subject to the following limitations:

         (a) The Trustee  shall have no duties  other than those  expressly  set
forth in this Trust  Agreement  and those  imposed on the Trustee by  applicable
law.

         (b) The Trustee shall not be responsible for the  administration of the
Plan, for the correctness of any determination of payments or disbursements from
the  Trust  Fund,  or for the  adequacy  of the Trust  Fund to pay the  benefits
arising under the provisions of the Plan. The Trustee is not a party to the Plan
and shall have no responsibility to monitor any provisions of the Plan.

         (c) The Trustee  shall not be under any duty to require  payment of any
contributions  to the  Trust  Fund  or to see  that  any  payment  made to it is
computed in accordance with the terms of the Plan.

         (d) The Trustee shall have no duty to make  recommendations  concerning
actions to be taken  hereunder or to question the  propriety of any action it is
directed  to  take  hereunder  with  respect  to  matters   falling  within  the
jurisdiction  of the Company or the Committee,  to the extent that the action is
consistent with this Trust Agreement and applicable law.

         (e) The  Trustee  shall  not be  required  to give  any  bond or  other
obligation to secure the due  performance of the Trust by it, unless required by
law.

                                                       -12-

<PAGE>



         (f) The Trustee  shall have no  liability  for the acts or omissions of
any predecessors or successors in office.

         Section 12.  Resignation  or  Termination  of Trustee.  The Trustee may
resign  at any time by giving  sixty  (60)  days'  prior  written  notice to the
Company, provided, however, that the Company may waive the sixty (60) day notice
requirement.  The  Trustee may be removed by the Company at any time upon giving
sixty (60) days' prior written notice to the Trustee,  provided,  however,  that
the Trustee may waive the sixty (60) day notice requirement. Upon resignation or
removal of the Trustee or a successor  trustee or trustees,  the Committee shall
appoint a successor trustee or trustees. The successor trustee or trustees shall
have the same powers and duties as those  conferred upon the Trustee  hereunder,
and upon acceptance of the successor  trustee's  acceptance of his  appointment,
the Trustee shall assign and transfer to the  successor  trustee or trustees the
funds  and  properties  then   constituting  the  Trust  Fund.  The  Trustee  is
authorized, however, to reserve such sums of money as it may deem advisable, for
payment of reasonable fees and expenses in connection with the settlement of its
account,  and any balance of such  reserve  remaining  after the payment of such
fees  and  expenses  shall  be paid  transferred  to the  successor  trustee  or
trustees.

         Section 13. Non-alienation. To the extent permitted by law, benefits or
rights  under  this  Trust  Agreement  shall  not be  subject  in any  manner to
anticipation,  alienation,  sale,  transfer  or  assignment,  charge,  pledge or
encumbrance  of any kind, nor shall any such benefit or rights be liable for, or
subject to attachment, executions,  garnishment,  sequestration, or other legal,
equitable  or other  processes,  nor shall  the same be  subject  to the  debts,
obligations, liabilities, or torts of the Participants or beneficiaries entitled
to any such benefits or rights under the Plan.

                                                       -13-

<PAGE>



         Section 14. Duty to Furnish Information.  The Committee and the Trustee
shall furnish to each other any  documents,  reports,  returns,  statements,  or
other  information  that the other  reasonably deems necessary to perform duties
imposed under the Plan or this Trust Agreement or otherwise imposed by law.

         Section 15.  Reliance.  Whenever  any action is required to be taken by
the Company hereunder,  it shall be taken by the Chief Executive Officer,  Chief
Financial Officer,  or Director of Corporate  Accounting of the Company, or such
other officer as may be  authorized  from time to time by the Board of Directors
of the Company,  in writing.  Whenever any action is required to be taken by the
Board of Directors, it shall be taken by a duly adopted resolution.  All orders,
requests, and instructions of the Committee or its delegate to the Trustee shall
be in writing,  and the Trustee shall act and shall be fully protected in acting
in accordance with such orders, requests, and instructions.

         Section 16. Foreign Assets. The Trustee shall not permit the indicia of
ownership of any of the assets of the Trust Fund to be  maintained at a location
outside the jurisdiction of the district courts of the United States.

         Section 17. Amendments.  The Company may amend this Trust Agreement, in
whole or in part,  from time to time by action  of its  Board of  Directors  and
notice  thereof in  writing  delivered  to the  Trustee,  provided  that no such
amendment that affects the rights,  duties, or  responsibilities  of the Trustee
shall  be made  without  its  written  consent,  and  provided  further  that no
amendment shall authorize or permit,  at any time before the satisfaction of all
liabilities with respect to the Participants or their  beneficiaries,  the Trust
Fund to be used for or diverted to purposes other than for the exclusive benefit
of such persons. In addition, no amendment shall

                                                       -14-

<PAGE>



make this Trust Agreement revocable or terminate this Trust Agreement other than
as provided in Section 18.

         Section 18.  Termination of the Trust  Agreement.  This Trust Agreement
shall  terminate  automatically  on the date that all payments have been paid to
the  Participants  and their  beneficiaries  as  required  by the Plan.  On such
termination, any remaining assets of the Trust Fund shall paid to the Company.

         Section 19. Governing Laws. This Trust Agreement shall be administered,
construed, and enforced according to the laws of the State of Indiana.

         Section  20.  Counterparts.  This Trust  Agreement  may be  executed in
several counterparts, each one of which shall be deemed to be an original.

         IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be executed as of the 27th day of September, 1996.


                                    LILLY INDUSTRIES, INC.


                                    By: /s/ Douglas W. Huemme
                                        ---------------------------------------
                                         Douglas W. Huemme, Chairman, President
                                         & CEO


ATTEST:


By: /s/ Kenneth L. Mills
    --------------------------------
Title: Corporate Accounting Director


                                                       -15-

<PAGE>


                                    BANKERS TRUST COMPANY OF DES
                                    MOINES


                                    By: /s/ Niki Green
                                        ---------------------------------------
                                    Title: Trust Officer


ATTEST:


By: /s/ Bryan H. Hall
    -----------------------------------
Title:   Vice President & Trust Officer