<PAGE>   1
                                                                    Exhibit 10.2

                              AMENDED AND RESTATED
                              --------------------
                              EMPLOYMENT AGREEMENT
                              --------------------

         This Amended and Restated Employment Agreement (this "Agreement") is
made as of the 1st day of February, 2001, between RPM, INC., an Ohio corporation
(the "Company"), and James A. Karman ("Executive").

         WHEREAS, Executive is currently Vice Chairman of the Company; and

         WHEREAS, Executive and the Company entered into the Amended and
Restated Employment Agreement, dated as of June 1, 2000 (the "Existing
Agreement"), to ensure Executive's continued employment with the Company; and

         WHEREAS, the Board of Directors of the Company recognizes the
importance of Executive's continuing contribution to the future growth and
success of the Company and desires to assure the Company and its shareholders of
Executive's continued employment in an executive capacity and to compensate him
therefor; and

         WHEREAS, Executive is desirous of committing himself to continue to
serve the Company on the terms herein provided.

         NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:

         1. TERM OF EMPLOYMENT. The Company hereby agrees to continue to employ
Executive, and Executive hereby agrees to continue to serve the Company, on the
terms and conditions set forth herein for the period commencing as of the date
hereof and expiring on December 31, 2002 (the "Employment Period"). In the event
of a Change in Control, the Employment Period shall automatically be extended
for a period of three years beginning on the date of the Change in Control and
ending on the third anniversary of the date of such Change in Control. In any
case, the Employment Period may be terminated earlier under the terms and
conditions set forth herein.

         2. POSITION AND DUTIES. Executive shall serve as Vice Chairman
reporting to the Chairman of the Board of the Company and shall have such powers
and duties as may from time to time be assigned by the Chairman of the Board or
the Board of Directors of the Company; provided, however, that such duties are
consistent with his present duties and his position with the Company. Executive
shall devote substantially all his working time and efforts to the continued
success of the business and affairs of the Company.

         3. PLACE OF EMPLOYMENT. In connection with his employment by the
Company, Executive shall not be required to relocate or move from his existing
principal residence in Bratenahl, Ohio, and shall not be required to perform
services which would make the continuance of his principal residence in
Bratenahl, Ohio, unreasonably difficult or inconvenient for him. The






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Company shall give Executive at least six months' advance notice of any proposed
relocation of its Medina, Ohio offices to a location more than 50 miles from
Medina, Ohio and, if Executive in his sole discretion chooses to relocate his
principal residence, the Company shall promptly pay (or reimburse him for) all
reasonable relocation expenses (consistent with the Company's past practice for
similarly situated senior executive officers) incurred by him relating to a
change of his principal residence in connection with any such relocation of the
Company's offices from Medina, Ohio.

         4. COMPENSATION.
            ------------

         (a) BASE SALARY. During the Employment Period, Executive shall receive
a base salary at the rate of not less than Six Hundred Eighty-Five Thousand
Dollars ($685,000) per annum ("Base Salary"), payable in substantially equal
monthly installments at the end of each month during the Employment Period
hereunder. It is contemplated that annually in the first quarter of each fiscal
year of the Company the Compensation Committee of the Board of Directors (the
"Compensation Committee") will review Executive's Base Salary and other
compensation during the Employment Period and, at the discretion of the
Compensation Committee, it may increase his Base Salary and other compensation,
effective as of June 1 of such fiscal year, based upon his performance, then
generally prevailing industry salary scales, the Company's results of
operations, and other relevant factors. Any increase in Base Salary or other
compensation shall in no way limit or reduce any other obligation of the Company
hereunder and, once established at an increased specified rate, Executive's Base
Salary hereunder shall not be reduced without his written consent.

         (b) INCENTIVE COMPENSATION. In addition to his Base Salary, Executive
shall be entitled to receive such annual cash incentive compensation ("Incentive
Compensation") during the Employment Period as the Compensation Committee may
determine in its sole discretion based upon the Company's results of operation
and other relevant factors. At the election of Executive, such annual Incentive
Compensation may be received by Executive as soon as possible, but no later than
90 days after the close of the Company's fiscal year for which such Incentive
Compensation is granted, or the payment may be deferred provided Executive gives
written notice no later than May 31 of the current fiscal year to the Chairman
of the Compensation Committee that he elects to defer payment, which notice
shall also state the date(s) on which he desires to be paid.

         (c) EXPENSES. During the Employment Period, Executive shall be entitled
to receive prompt reimbursement for all reasonable business expenses incurred by
him (in accordance with Company practice) in performing services hereunder,
provided that Executive properly accounts therefor in accordance with either
Company policies or guidelines established by the Internal Revenue Service if
such are less burdensome.

         (d) PARTICIPATION IN BENEFIT PLANS. During the Employment Period,
Executive shall be entitled to continue to participate in or receive benefits
under the Benefit Plans, subject to and on a basis consistent with the terms,
conditions and overall administration of the Benefit Plans. Except with respect
to any benefits related to salary reductions authorized by Executive, nothing
paid or awarded to Executive under any Benefit Plan presently in effect or made
available in the future shall reduce or be deemed to be in lieu of compensation
to Executive pursuant to any other provision of this Section 4.




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         (e) VACATIONS. During the Employment Period, Executive shall be
entitled to the same number of paid vacation days in each fiscal year determined
by the Company from time to time for its other senior executive officers, but
not less than four weeks in any fiscal year, to be taken at such time or times
as is desired by Executive after consultation with the Chairman of the Board (or
his designee) to avoid scheduling conflicts (prorated in any fiscal year during
which Executive is employed hereunder for less than the entire such year in
accordance with the number of days in such fiscal year during which he is so
employed). Executive also shall be entitled to all paid holidays given by the
Company to its other salaried employees.

         (f) OTHER BENEFITS. During the Employment Period, Executive shall be
entitled to continue to receive the fringe benefits appertaining to his position
with the Company in accordance with present practice, including the use of the
most recent model of a full-sized automobile. During the Employment Period,
Executive shall be entitled to the full-time use of an office and furniture at
the Company's offices in Medina, Ohio, and shall be entitled to the full-time
use of a secretary paid by the Company.

         5. TERMINATION OUTSIDE OF PROTECTED PERIOD.
            ---------------------------------------

         (a) EVENTS OF TERMINATION. At any time other than during the Protected
Period, the Employment Period shall terminate immediately upon the occurrence of
any of the following events: (i) expiration of the Employment Period; (ii) the
death of Executive; (iii) the expiration of 30 days after the Company gives
Executive written notice of its election to terminate the Employment Period upon
the Disability of Executive, if before the expiration of such 30-day period
Executive has not returned to the performance of his duties hereunder on a
full-time basis; (iv) the resignation of Executive; (v) the Company's
termination of the Employment Period for Cause; or (vi) the Company's
termination of the Employment Period at any time, without Cause, for any reason
or no reason.

         (b) COMPENSATION UPON TERMINATION. This Subsection 5(b) sets forth the
payments and benefits to which Executive is entitled under any termination of
employment pursuant to Subsection 5(a).

               (i) EXPIRATION OF EMPLOYMENT PERIOD. If Executive's employment is
terminated pursuant to Subsection 5(a)(i) upon expiration of the Employment
Period, Executive shall be entitled to no further payment of Base Salary and
shall no longer be entitled to participate in the Benefit Plans, except as
required by applicable law or as governed by the Benefit Plans in which
Executive participates immediately prior to such termination, but Executive
shall be entitled to receive any Incentive Compensation payable but not yet paid
under the terms of Section 4(b) for the period from June 1, 2002 through the
Termination Date.

               (ii) DEATH; DISABILITY. During any period in which Executive
fails to perform his duties hereunder as a result of incapacity due to physical
or mental illness, Executive shall continue to receive his full Base Salary only
until his employment is terminated pursuant to Subsection 5(a)(ii) or (iii).
Upon termination of the Employment Period under Subsection 5(a)(ii) or (iii),
Executive shall no longer be entitled to participate in the Benefit Plans,
except as required by applicable law or as governed by the Benefit Plans
including the Group Long Term Disability







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Insurance in which Executive participates immediately prior to such termination,
but Executive shall be entitled to receive his Earned Incentive Compensation, if
any, promptly after the Termination Date.

               (iii) RESIGNATION OR CAUSE. If Executive's employment is
terminated pursuant to Subsection 5(a)(iv) or (v), the Company shall pay
Executive his full Base Salary through the Termination Date at the rate in
effect at such time. The Company shall then have no further obligations to
Executive under this Agreement and Executive shall no longer be entitled to
participate in the Benefit Plans, except as required by applicable law.

               (iv) TERMINATION WITHOUT CAUSE. If Executive's employment is
terminated without Cause pursuant to Subsection 5(a)(vi), then in lieu of any
further salary payments to Executive for periods subsequent to the Termination
Date, the Company shall pay to Executive no later than 30 calendar days
following such date, a lump sum amount equal to the sum of (A) 500% of
Executive's Base Salary in effect as of such date and (B) the amount of
Executive's Earned Incentive Compensation. Executive also shall be entitled to
certain continuing benefits under the terms of Subsection 5(c). Notwithstanding
any other provision of this Subsection 5(b)(iv), Subsection 5(c) or this
Agreement, the Company shall have no obligation to make the lump-sum payment
referred to in this Subsection 5(b)(iv) or provide any continuing benefits or
payment referred to in Subsection 5(c) unless (X) Executive executes and
delivers to the Company a Release and Waiver of Claims and (Y) Executive
refrains from revoking, rescinding or otherwise repudiating such Release and
Waiver of Claims for all applicable periods during which Executive may revoke
it.

         (c) ADDITIONAL BENEFITS FOLLOWING TERMINATION UNDER SUBSECTION
5(a)(vi). This Subsection 5(c) sets forth the benefits to which Executive shall
be entitled, in addition to those set forth in Subsection 5(b)(iv), following a
termination of the Employment Period under Subsection 5(a)(vi). Executive shall
not be entitled to the benefit of any provision of this Subsection 5(c)
following a termination of the Employment Period under any other provision
hereof.

               (i) CONTINUING BENEFIT PLANS. For a period of five years
following such a Termination Date, Executive shall also be entitled to continue
to participate, on the same terms and conditions as active employees, in the
Continuing Benefit Plans in which Executive participated immediately prior to
the Termination Date, except that (A) Executive shall be entitled to
Estate/Financial Planning Benefits for a period of only six months following the
Termination Date and (B) if Executive's continued participation is not possible
and Executive does not continue to participate under the terms of any such
Continuing Benefit Plan, the Company shall instead pay to Executive, promptly
upon presentation to the Company of an invoice or receipt for payment, the
amount Executive spends to receive comparable coverage under such a comparable
plan for such five-year period. Notwithstanding the foregoing sentence, the
Company's obligations to Executive with respect to continued benefits under the
Continuing Benefit Plans shall be deemed satisfied to the extent of any such
comparable benefits which are provided to Executive by another employer. During
such continuation period, Executive shall be responsible for paying the normal
employee share of the applicable premiums for coverage under the Continuing
Benefit Plans. The Company shall have the right to modify,





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amend or terminate the Continuing Benefit Plans (other than the Estate/Financial
Planning Benefits) following the Termination Date and Executive's continued
participation therein shall be subject to such modification, amendment or
termination if such modification, amendment or termination applies generally to
the then-current participants in such plan. Upon completion of the five-year
period following such a Termination Date, the Company shall afford Executive the
opportunity to continue Executive's coverage under the Continuing Benefit Plans
(other than the Estate/Financial Planning Benefits), at Executive's expense, for
an additional period under COBRA Continuation Coverage, so long as Executive
timely elects to receive COBRA Continuation Coverage under the terms thereof and
otherwise complies with the conditions of continuation of benefits under COBRA
Continuation Coverage.

               (ii) LIMITED BENEFIT PLANS. After such a Termination Date,
Executive shall no longer be entitled to participate as an active employee in,
or receive any additional or new benefits under, the Limited Benefit Plans,
except as set forth in this Subsection 5(c)(ii) and except for such benefits, if
any, available under such plans to former employees. After such a Termination
Date, Executive shall be entitled to the following additional benefits:

                    (A) Continued coverage, for a period of five years after the
Termination Date, under the Split Dollar Life Insurance, with the Company paying
such expenses as it otherwise would have paid thereunder if Executive had
continued to be employed, all on the terms of the Split Dollar Life Insurance;

                    (B) A lump-sum payment to be paid under the Restricted Stock
Plan equal to the cash value of the benefits Executive would have received had
he continued to participate in and receive annual awards under the Restricted
Stock Plan on a basis consistent with his past practice for a period of five
years after the Termination Date, determined and payable in accordance with the
terms of the Restricted Stock Plan and the Company's past practice; and

                    (C) The lapse of all restrictions on transfer and forfeiture
provisions to which Executive's awards under the Restricted Stock Plan are
subject, so that any restricted shares previously awarded to Executive under
such plan shall be nonforfeitable and freely transferable thereafter, all on the
terms of the Restricted Stock Plan or the agreements thereunder.

         (d) NOTICE OF TERMINATION. Any termination by the Company pursuant to
Subsection 5(a)(iii), (v) or (vi) or by Executive pursuant to Subsection
5(a)(iv) shall be communicated to the other party hereto by written notice of
termination, which shall state in reasonable detail the facts upon which the
termination has occurred.

         6. TERMINATION DURING PROTECTED PERIOD.
            -----------------------------------

         (a) EVENTS OF TERMINATION. During the Protected Period, the Employment
Period shall terminate immediately upon the occurrence of any of the following
events: (i) the death of Executive; (ii) the expiration of 30 days after the
Company gives Executive written notice of its election to terminate the
Employment Period upon the Disability of Executive, if





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before the expiration of such 30-day period Executive has not returned to the
performance of his duties hereunder on a full-time basis; (iii) the resignation
of Executive without delivering Notice of Termination for Good Reason; (iv) the
Company's termination of the Employment Period for Cause; (v) the Company's
termination of the Employment Period at any time, without Cause, for any reason
or no reason; or (vi) Executive's termination of the Employment Period for Good
Reason by delivery of Notice of Termination for Good Reason to the Company
during the Protected Period indicating that an event constituting Good Reason
has occurred, provided that Executive's failure to object in writing to an event
alleged to constitute Good Reason within six months of the date of occurrence of
such event shall be deemed a waiver of such event by Executive and Executive
thereafter may not terminate the Employment Period under this Subsection
6(a)(vi) based on such event.

         (b) COMPENSATION UPON TERMINATION. This Subsection 6(b) sets forth the
payments and benefits to which Executive is entitled under any termination of
employment pursuant to Subsection 6(a).

               (i) DEATH; DISABILITY. During any period in which Executive fails
to perform his duties hereunder as a result of incapacity due to physical or
mental illness, Executive shall continue to receive his full Base Salary only
until his employment is terminated pursuant to Subsection 6(a)(i) or (ii). Upon
termination of the Employment Period under Subsection 6(a)(i) or (ii), Executive
shall no longer be entitled to participate in the Benefit Plans, except as
required by applicable law or as governed by the Benefit Plans including the
Group Long Term Disability Insurance in which Executive participates immediately
prior to such termination, but Executive shall be entitled to receive his Earned
Incentive Compensation, if any, promptly after the Termination Date.

               (ii) RESIGNATION OR CAUSE. If Executive's employment is
terminated pursuant to Subsection 6(a)(iii) or (iv), the Company shall pay
Executive his full Base Salary through the Termination Date at the rate in
effect at such time. The Company shall then have no further obligations to
Executive under this Agreement and Executive shall no longer be entitled to
participate in the Benefit Plans, except as required by applicable law.

               (iii) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If
Executive's employment is terminated by the Company without Cause pursuant to
Subsection 6(a)(v) or by Executive for Good Reason pursuant to Subsection
6(a)(vi), then in lieu of any further salary payments to Executive for periods
subsequent to the Termination Date, the Company shall pay to Executive no later
than 30 calendar days following such date, a lump sum amount equal to the sum of
(A) 500% of Executive's Base Salary in effect as of such date and (B) the amount
of Executive's Earned Incentive Compensation. Executive also shall be entitled
to certain continuing benefits under the terms of Subsection 6(c).
Notwithstanding any other provision of this Subsection 6(b)(iii), Subsection
6(c), Section 7 or this Agreement, the Company shall have no obligation to make
the lump-sum payment referred to in this Subsection 6(b)(iii), to provide any
continuing benefits or payment referred to in Subsection 6(c), or to make any
Gross-Up Payment unless (X) Executive executes and delivers to the Company a
Release and Waiver of Claims and (Y) Executive refrains from revoking,
rescinding or otherwise repudiating such Release and Waiver of Claims for all
applicable periods during which Executive may revoke it.




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         (c) ADDITIONAL BENEFITS FOLLOWING TERMINATION UNDER SUBSECTIONS 6(A)(V)
OR (VI). This Subsection 6(c) sets forth the benefits to which Executive shall
be entitled, in addition to those set forth in Subsection 6(b)(iii), following a
termination of the Employment Period under Subsection 6(a)(v) or (vi). Executive
shall not be entitled to the benefit of any provision of this Subsection 6(c)
following a termination of the Employment Period under any other provision
hereof.

               (i) CONTINUING BENEFIT PLANS. For a period of five years
following such a Termination Date, Executive shall also be entitled to continue
to participate, on the same terms and conditions as active employees, in the
Continuing Benefit Plans in which Executive participated immediately prior to
the Termination Date, except that (A) Executive shall be entitled to
Estate/Financial Planning Benefits for a period of only one year following the
Termination Date and (B) if Executive's continued participation is not possible
and Executive does not continue to participate under the terms of any such
Continuing Benefit Plan, the Company shall instead pay to Executive, promptly
upon presentation to the Company of an invoice or receipt for payment, the
amount Executive spends to receive comparable coverage under such a comparable
plan for such five-year period. Notwithstanding the foregoing sentence, the
Company's obligations to Executive with respect to continued benefits under the
Continuing Benefit Plans shall be deemed satisfied to the extent of any such
comparable benefits which are provided to Executive by another employer. During
such continuation period, Executive shall be responsible for paying the normal
employee share of the applicable premiums for coverage under the Continuing
Benefit Plans. The Company shall have the right to modify, amend or terminate
the Continuing Benefit Plans (other than the Estate/Financial Planning Benefits)
following the Termination Date and Executive's continued participation therein
shall be subject to such modification, amendment or termination if such
modification, amendment or termination applies generally to the then-current
participants in such plan. Upon completion of the five-year period following
such a Termination Date, the Company shall afford Executive the opportunity to
continue Executive's coverage under the Continuing Benefit Plans (other than the
Estate/Financial Planning Benefits), at Executive's expense, for an additional
period under COBRA Continuation Coverage, so long as Executive timely elects to
receive COBRA Continuation Coverage under the terms thereof and otherwise
complies with the conditions of continuation of benefits under COBRA
Continuation Coverage.

               (ii) LIMITED BENEFIT PLANS. After such a Termination Date,
Executive shall no longer be entitled to participate as an active employee in,
or receive any additional or new benefits under, the Limited Benefit Plans,
except as set forth in this Subsection 6(c)(ii) and except for such benefits, if
any, available under such plans to former employees. After such a Termination
Date, Executive shall be entitled to the following additional benefits:

                    (A) The Company shall make a lump sum five-year premium
payment to the carrier equal to the premiums that the Company would have paid
under the Split Dollar Life Insurance if Executive had continued to be employed
for five years following the Termination Date, all on the terms of the Split
Dollar Life Insurance. In addition, immediately following such premium payment,
the Company shall execute such documents as necessary to cause the full
ownership of the Split Dollar Life Insurance policy related to Executive and all
of





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its values to transfer to Executive. The Company shall be responsible for the
payment of all costs imposed by the carrier to carry out such transfer;

                    (B) A lump-sum payment to be paid under the Restricted Stock
Plan equal to the cash value of the benefits Executive would have received had
he continued to participate in and receive annual awards under the Restricted
Stock Plan on a basis consistent with his past practice for a period of five
years after the Termination Date, determined and payable in accordance with the
terms of the Restricted Stock Plan and the Company's past practice; and

                    (C) The lapse of all restrictions on transfer and forfeiture
provisions to which Executive's awards under the Restricted Stock Plan are
subject, so that any restricted shares previously awarded to Executive under
such plan shall be nonforfeitable and freely transferable thereafter, all on the
terms of the Restricted Stock Plan or the agreements thereunder.

         (d) NOTICE OF TERMINATION. Any termination by the Company pursuant to
Subsection 6(a)(ii), (iv) or (v) or by Executive pursuant to Subsection
6(a)(iii) shall be communicated to the other party hereto by written notice of
termination, which shall state in reasonable detail the facts upon which the
termination has occurred. A termination pursuant to Subsection 6(a)(vi) shall be
communicated by Notice of Termination for Good Reason.

         (e) NOTICE OF CHANGE IN CONTROL. The Company shall give Executive
written notice of the occurrence of any event constituting a Change in Control
as promptly as practical, and in no case later than 10 calendar days, after the
occurrence of such event.

         (f) DEEMED TERMINATION AFTER CHANGE IN CONTROL. Any termination of the
employment of Executive by the Company without Cause or the removal of Executive
as an elected officer or Director of the Company or a Subsidiary following the
commencement of any discussion with or communication from a third party that
ultimately results in a Change in Control shall be deemed to be a termination or
removal, respectively, of Executive after a Change in Control for purposes of
this Agreement. In the event Executive is entitled to the benefits under this
Agreement as contemplated by the preceding sentence, then for purposes of
Subsections 6(b)(iii) and 6(c) and Section 7, the Termination Date shall be
deemed to be the date of the Change in Control if the employment of Executive
was terminated before such date.

         (g) SET-OFF. There shall be no right of set-off or counterclaim
against, or delay in, any payment by the Company to Executive of the Lump-Sum
Payment or any Gross-Up Payment in respect of any claim against or debt or
obligation of Executive, whether arising hereunder or otherwise.

         (h) INTEREST ON OVERDUE PAYMENTS. Without limiting the rights of
Executive at law or in equity, if the Company fails to make the Lump-Sum Payment
or any Gross-Up Payment on a timely basis, the Company shall pay interest on the
amount thereof at an annualized rate equal to the rate in effect, at the time
such payment should have been made, under the 401(k) Plan for loans to
participants in such plan.




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               (i) OUTPLACEMENT ASSISTANCE. Promptly after a request in writing
from Executive following a termination of the Employment Period under Subsection
6(a)(v) or (vi), the Company shall retain a professional outplacement assistance
service firm reasonably acceptable to Executive, at the Company's expense, to
provide outplacement assistance to Executive during the Protected Period. Such
services shall be appropriate to Executive's position with the Company.
Executive shall not be entitled to such services, however, following a
termination of the Employment Period under Subsection 6(a)(i), (ii), (iii) or
(iv).

         7. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
            ------------------------------------------

         (a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined (as hereafter provided) that any payment or
distribution by the Company or any of its Affiliates to or for the benefit of
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without limitation
any stock option, performance share, performance unit, restricted stock, stock
appreciation right or similar right, or the lapse or termination of any
restriction on, or the vesting or exercisability of, any of the foregoing
(individually and collectively, a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Code (or any successor provision thereto) by
reason of being considered "contingent on a change in ownership or control" of
the Company, within the meaning of Section 280G of the Code (or any successor
provision thereto), or to any similar tax imposed by state or local law, or to
any interest or penalties with respect to such taxes (such tax or taxes,
together with any such interest and penalties, being hereafter collectively
referred to as the "Excise Tax"), then Executive shall be entitled to receive an
additional payment or payments (individually and collectively, a "Gross-Up
Payment"). The Gross-Up Payment shall be in an amount such that, after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.

         (b) Subject to the provisions of Subsection 7(f), all determinations
required to be made under this Section 7, including whether an Excise Tax is
payable by Executive and the amount of such Excise Tax and whether a Gross-Up
Payment is required to be paid by the Company to Executive and the amount of
such Gross-Up Payment, if any, shall be made (i) by PricewaterhouseCoopers (or
its successor) (the "Accounting Firm"), regardless of any services that
PricewaterhouseCoopers (or its successor) has performed or may be performing for
the Company, or (ii) if PricewaterhouseCoopers (or its successor) is serving as
accountant or auditor for the individual, entity or group effecting a Change in
Control, then by another nationally recognized accounting firm selected by
Executive and reasonably acceptable to the Company (which accounting firm shall
then be the "Accounting Firm" hereunder). The Company, or Executive if he
selects the Accounting Firm, shall direct the Accounting Firm to submit its
determination and detailed supporting calculations to both the Company and
Executive within 30 calendar days after the Termination Date, if applicable, and
any such other time or times as may be requested by the Company or Executive. If
the Accounting Firm determines that any Excise Tax is payable by Executive, the
Company shall pay the required Gross-Up Payment to






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Executive within five business days after the Company's receipt of such
determination and calculations with respect to any Payment to Executive. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it shall,
at the same time as it makes such determination, furnish the Company and
Executive an opinion that Executive has substantial authority not to report any
Excise Tax on his federal, state or local income or other tax return. As a
result of the uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts or fails to pursue its remedies pursuant to Subsection
7(f) and Executive thereafter is required to make a payment of any Excise Tax,
Executive shall direct the Accounting Firm to determine the amount of the
Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and Executive as promptly as
possible. Any such Underpayment shall be promptly paid by the Company to, or for
the benefit of, Executive as a Gross-Up Payment within five business days after
the Company's receipt of such determination and calculations.

         (c) The Company and Executive shall each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by Subsection 7(b). Any determination by the Accounting Firm as to
the amount of any Gross-Up Payment or Underpayment shall be binding upon the
Company and Executive.

         (d) The federal, state and local income or other tax returns filed by
Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
Executive. Executive shall make proper payment of the amount of any Excise Tax,
and at the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed with the
Internal Revenue Service and corresponding state and local tax returns, if
relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment. If prior
to the filing of Executive's federal income tax return, or corresponding state
or local tax return, if relevant, the Accounting Firm determines that the amount
of the Gross-Up Payment should be reduced, Executive shall within five business
days pay to the Company the amount of such reduction.

         (e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Subsection
7(b) shall be borne by the Company.

         (f) Executive shall notify the Company in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as promptly as practicable but no later than 10
business days after Executive actually receives notice of such





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<PAGE>   11

claim and Executive shall further apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid (in each case, to
the extent known by Executive). Executive shall not pay such claim prior to the
earlier of (x) the expiration of the 30-calendar-day period following the date
on which he gives such notice to the Company and (y) the date that any payment
of an amount with respect to such claim is due. If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:

               (i) provide the Company with any written records or documents in
his possession relating to such claim reasonably requested by the Company;

               (ii) 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 competent in respect of the subject matter and reasonably selected
by the Company;

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

               (iv) 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 interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless Executive, on an after-tax basis,
for and against any Excise Tax or income tax, including interest and penalties
with respect thereto, imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing provisions of this Subsection
7(f), the Company shall control all proceedings taken in connection with the
contest of any claim contemplated by this Subsection 7(f) and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that Executive may participate therein at his own cost and
expense) and may, at its option, either direct Executive to pay the tax claimed
and file for a refund or contest the claim in any permissible manner, and
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 Executive to pay the tax claimed and file for a refund, the
Company shall advance the amount of such payment to Executive on an
interest-free basis and shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax or income or other tax, including interest
or penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Executive with respect to
which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested claim
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and 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.




                                       11
<PAGE>   12

         (g) If, after the receipt by Executive of an amount advanced by the
Company pursuant to Subsection 7(f), Executive receives any refund with respect
to such claim, Executive shall (subject to the Company's complying with the
requirements of Subsection 7(f)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by Executive of an amount advanced by
the Company pursuant to Subsection 7(f), a determination is made that Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 calendar days after the Company is notified
of such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of any such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid by the
Company to Executive pursuant to this Section 7.

         8. BINDING AGREEMENT; SUCCESSORS. This Agreement shall inure to the
benefit of and be binding upon Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amounts would still be payable to
him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legatee, or other designee or, if there be no such
designee, to Executive's estate. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Company, including,
without limitation, any person acquiring directly or indirectly all or
substantially all of the assets of the Company, whether by merger,
consolidation, sale or otherwise (and such successor shall thereafter be deemed
the "Company" for the purposes of this Agreement). The Company shall require any
such successor to assume and agree to perform this Agreement.

         9. RESTRICTIVE COVENANTS.
            ---------------------

         (a) NON-COMPETITION. During the Employment Period and for a period of
two years following the Termination Date, Executive shall not, directly or
indirectly, own, manage, operate, control or participate in the ownership,
management, operation or control of, or be connected as an officer, employee,
partner or director with, or have any financial interest in, any business which
is in substantial competition with any business conducted by the Company or by
any group, division or Subsidiary of the Company, in any area where such
business is being conducted at the time of such termination. Ownership of 5% or
less of the voting stock of any corporation which is required to file periodic
reports with the Securities and Exchange Commission under the Exchange Act shall
not constitute a violation hereof.

         (b) NON-SOLICITATION. Executive shall not directly or indirectly, at
any time during the Employment Period and for two years thereafter, solicit or
induce or attempt to solicit or induce any employee, sales representative or
other representative, agent or consultant of the Company or any group, division
or Subsidiary of the Company (collectively, the "RPM Group") to terminate his,
her or its employment, representation or other relationship with the RPM Group
or in any way directly or indirectly interfere with such a relationship.




                                       12
<PAGE>   13

         (c) CONFIDENTIALITY.
             ---------------

               (i) Executive shall keep in strict confidence, and shall not,
directly or indirectly, at any time during or after the Employment Period,
disclose, furnish, publish, disseminate, make available or, except in the course
of performing his duties of employment hereunder, use any Confidential
Information. Executive specifically acknowledges that all Confidential
Information, whether reduced to writing, maintained on any form of electronic
media, or maintained in the mind or memory of Executive and whether compiled by
the RPM Group, and/or Executive, derives independent economic value from not
being readily known to or ascertainable by proper means by others who can obtain
economic value from its disclosure or use, that reasonable efforts have been
made by the RPM Group to maintain the secrecy of such information, that such
information is the sole property of the RPM Group and that any disclosure or use
of such information by Executive during the Employment Period (except in the
course of performing his duties and obligations hereunder) or after the
termination of the Employment Period shall constitute a misappropriation of the
RPM Group's trade secrets.

               (ii) Executive agrees that upon termination of the Employment
Period, for any reason, Executive shall return to the Company, in good
condition, all property of the RPM Group, including, without limitation, the
originals and all copies of any materials, whether in paper, electronic or other
media, that contain, reflect, summarize, describe, analyze or refer or relate to
any items of Confidential Information.

         10. NOTICE. All notices, requests and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a)
when hand delivered, (b) when dispatched by electronic facsimile transmission
(with receipt electronically confirmed), (c) one business day after being sent
by recognized overnight delivery service, or (d) three business days after being
sent by registered or certified mail, return receipt requested, postage prepaid,
and in each case addressed as follows (or addressed as otherwise specified by
notice under this Section):

                          If to Executive:

                          James A. Karman
                          II Bratenahl Place, Suite 2A
                          Bratenahl, Ohio 44108
                          Facsimile: Not applicable




                                       13
<PAGE>   14

                           If to the Company:

                           RPM, Inc.
                           2628 Pearl Road
                           P.O. Box 777
                           Medina, Ohio 44258
                           Facsimile:  330-225-6574

                           Attn:  Secretary

         11. WITHHOLDING. The Company may withhold from any amounts payable
under or in connection with this Agreement all federal, state, local and other
taxes as may be required to be withheld by the Company under applicable law or
governmental regulation or ruling.

         12. AMENDMENTS; WAIVERS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing, and is signed by Executive and by another executive
officer of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.

         13. JURISDICTION. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Ohio, without giving effect to the conflict of law principles of such State.
Executive and the Company each agree that the state and federal courts located
in the State of Ohio shall have jurisdiction in any action, suit or proceeding
against Executive or the Company based on or arising out of this Agreement and
each of Executive and the Company hereby (a) submits to the personal
jurisdiction of such courts, (b) consents to service of process in connection
with any such action, suit or proceeding and (c) waives any other requirement
(whether imposed by statute, rule of court or otherwise) with respect to
personal jurisdiction, venue or service of process.

         14. EQUITABLE RELIEF. Executive and the Company acknowledge and agree
that the covenants contained in Section 9 are of a special nature and that any
breach, violation or evasion by Executive of the terms of Section 9 will result
in immediate and irreparable injury and harm to the Company, for which there is
no adequate remedy at law, and will cause damage to the Company in amounts
difficult to ascertain. Accordingly, the Company shall be entitled to the remedy
of injunction, as well as to all other legal or equitable remedies to which the
Company may be entitled (including, without limitation, the right to seek
monetary damages), for any breach, violation or evasion by Executive of the
terms of Section 9.

         15. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. In the event that any provision of Section 9 is found by a court of
competent jurisdiction to be invalid or unenforceable as against public policy,
such court shall exercise its discretion in reforming such provision to the end
that





                                       14
<PAGE>   15

Executive shall be subject to such restrictions and obligations as are
reasonable under the circumstances and enforceable by the Company.

         16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

         17. HEADINGS; DEFINITIONS. The headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. Certain capitalized terms used in this
Agreement are defined on SCHEDULE A attached hereto.

         18. NO ASSIGNMENT. This Agreement may not be assigned by either party
without the prior written consent of the other party, except as provided in
Section 8.

         19. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the employment of Executive and supersedes
any and all other agreements (including the Existing Agreement), either oral or
in writing, with respect to the employment of Executive.

         20. ENFORCEMENT COSTS. The Company is aware that upon the occurrence of
a Change in Control the Board of Directors or a shareholder of the Company may
then cause or attempt to cause the Company to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the Company
to institute, or may institute, litigation seeking to have this Agreement
declared unenforceable, or may take, or attempt to take, other action to deny
Executive the benefits intended under this Agreement. In these circumstances,
the purpose of this Agreement could be frustrated. It is the intent of the
Company that Executive not be required to incur the expenses associated with the
enforcement of his rights under this Agreement by litigation or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to Executive hereunder, nor be bound to
negotiate any settlement of his rights hereunder under threat of incurring such
expenses. Accordingly, if, following a Change in Control, it should appear to
Executive that the Company has failed to comply with any of its obligations
under this Agreement or the Company or any other person takes any action to
declare this Agreement void or unenforceable, or institutes any litigation or
other legal action designed to deny, diminish or recover from Executive the
benefits intended to be provided to Executive hereunder, and Executive has
complied with all of his obligations under Section 9, then the Company
irrevocably authorizes Executive from time to time to retain counsel of his
choice at the expense of the Company as provided in this Section 20 to represent
Executive in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any Director, officer,
shareholder or other person affiliated with the Company, in any jurisdiction.
The Company's obligations under this Section 20 shall not be conditioned on
Executive's success in the prosecution or defense of any such litigation or
other legal action. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to Executive entering into an attorney-client relationship with such
counsel, and in that connection the Company and Executive agree that a
confidential relationship shall exist between Executive and such counsel. The
reasonable fees and expenses of counsel selected from time to time by Executive
as hereinabove provided shall be paid or reimbursed to Executive by the





                                       15
<PAGE>   16

Company on a regular, periodic basis upon presentation by Executive of a
statement or statements prepared by such counsel in accordance with its
customary practices, up to a maximum aggregate amount of $500,000.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.

IN THE PRESENCE OF:                 RPM, INC.


                                    By:    /s/  Thomas C. Sullivan
--------------------------                 -----------------------
                                           Thomas C. Sullivan, Chairman of the
                                             Board and Chief Executive Officer

--------------------------          And:   /s/  P. Kelly Tompkins
                                           ----------------------
                                           P. Kelly Tompkins, Secretary
                                                    The "Company"


--------------------------                 /s/  James A. Karman
                                    ----------------------------------
                                       James A. Karman
                                                    "Executive"







                                       16
<PAGE>   17





                                   Schedule A
                                   ----------

                               Certain Definitions
                               -------------------

         As used in this Agreement, the following capitalized terms shall have
the following meanings:

         "401(k) Plan" means the RPM, Inc. 401(k) Plan and any successor plan or
         arrangement.

         "Affiliate" of a specified entity means an entity that directly, or
         indirectly through one or more intermediaries, controls, or is
         controlled by, or is under common control with, the entity specified.

         "Average Incentive Compensation" means an amount equal to the average
         amount of the annual Incentive Compensation payable to Executive
         (without regard to any reduction thereof elected by Executive pursuant
         to any qualified or non-qualified salary reduction arrangement
         maintained by the Company, including, without limitation, the Deferred
         Compensation Plan) for the three most recent completed fiscal years (or
         for such shorter period during which Executive has been employed by the
         Company) preceding the Termination Date in which the Company paid
         Incentive Compensation to executive officers of the Company or in which
         the Company considered and declined to pay Incentive Compensation to
         executive officers of the Company.

         "Benefit Plans" means the Continuing Benefit Plans and the Limited
         Benefit Plans.

         "Cause" means a determination of the Board of Directors (without the
         participation of Executive) of the Company pursuant to the exercise of
         its business judgment, that either of the following events has
         occurred: (a) Executive has engaged in willful and intentional acts of
         dishonesty or gross neglect of duty or (b) Executive has breached
         Section 9.

         "Change in Control" shall mean the occurrence at any time of any of the
         following events:

                  (a) The Company is merged or consolidated or reorganized into
         or with another corporation or other legal person or entity, and as a
         result of such merger, consolidation or reorganization less than a
         majority of the combined voting power of the then-outstanding
         securities of such corporation, person or entity immediately after such
         transaction are held in the aggregate by the holders of Voting Stock
         immediately prior to such transaction;

                  (b) The Company sells or otherwise transfers all or
         substantially all of its assets to any other corporation or other legal
         person or entity, and less than a majority of the combined voting power
         of the then-outstanding securities of such corporation, person or
         entity immediately after such sale or transfer is held in the aggregate
         by the holders of Voting Stock immediately prior to such sale or
         transfer;






                                      A-1
<PAGE>   18

                  (c) There is a report filed on Schedule 13D or Schedule TO (or
         any successor schedule, form or report), each as promulgated pursuant
         to the Exchange Act, disclosing that any person (as the term "person"
         is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act)
         has become the beneficial owner (as the term "beneficial owner" is
         defined under Rule l3d-3 or any successor rule or regulation
         promulgated under the Exchange Act) of securities representing 15% or
         more of the Voting Power;

                  (d) The Company files a report or proxy statement with the
         Securities and Exchange Commission pursuant to the Exchange Act
         disclosing in response to Form 8-K or Schedule 14A (or any successor
         schedule, form or report or item therein) that a change in control of
         the Company has or may have occurred or will or may occur in the future
         pursuant to any then-existing contract or transaction; or

                  (e) If during any period of two consecutive years,
         individuals, who at the beginning of any such period, constitute the
         Directors cease for any reason to constitute at least a majority
         thereof, unless the nomination for election by the Company's
         shareholders of each new Director was approved by a vote of at least
         two-thirds of the Directors then in office who were Directors at the
         beginning of any such period.

                  Notwithstanding the foregoing provisions of paragraphs (c) and
         (d) of this definition, a "Change in Control" shall not be deemed to
         have occurred for purposes of this Agreement (i) solely because (A) the
         Company, (B) a Subsidiary, or (C) any Company-sponsored employee stock
         ownership plan or other employee benefit plan of the Company or any
         Subsidiary, or any entity holding shares of Voting Stock for or
         pursuant to the terms of any such plan, either files or becomes
         obligated to file a report or proxy statement under or in response to
         Schedule 13D, Schedule TO, Form 8-K or Schedule 14A (or any successor
         schedule, form or report or item therein) under the Exchange Act,
         disclosing beneficial ownership by it of shares of Voting Stock or
         because the Company reports that a change in control of the Company has
         or may have occurred or will or may occur in the future by reason of
         such beneficial ownership, (ii) solely because any other person or
         entity either files or becomes obligated to file a report on Schedule
         13D or Schedule TO (or any successor schedule, form or report) under
         the Exchange Act, disclosing beneficial ownership by it of shares of
         Voting Stock, but only if both (A) the transaction giving rise to such
         filing or obligation is approved in advance of consummation thereof by
         the Company's Board of Directors and (B) at least a majority of the
         Voting Power immediately after such transaction is held in the
         aggregate by the holders of Voting Stock immediately prior to such
         transaction, or (iii) solely because of a change in control of any
         Subsidiary.

         "COBRA Continuation Coverage" means the health care continuation
         requirements under the federal Consolidated Omnibus Budget
         Reconciliation Act, as amended, Part VI of Subtitle B of Title I of the
         Employee Retirement Income Security Act of 1974, as amended, and Code
         Section 4980B(f), or any successor provisions thereto.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
         time.




                                      A-2
<PAGE>   19

         "Confidential Information" means trade secrets and confidential
         business and technical information of the RPM Group and its customers
         and vendors, without limitation as to when or how Executive may have
         acquired such information. Such Confidential Information shall include,
         without limitation, the RPM Group's manufacturing, selling and
         servicing methods and business techniques, training, service and
         business manuals, promotional materials, vendor and product
         information, product development plans, internal financial statements,
         sales and distribution information, business plans, marketing
         strategies, pricing policies, corporate alliances, business
         opportunities, the lists of actual and potential customers as well as
         other customer information, technology, know-how, processes, data,
         ideas, techniques, inventions (whether patentable or not), formulas,
         terms of compensation and performance levels of RPM Group employees,
         and other information concerning the RPM Group's actual or anticipated
         business, research or development, or which is received in confidence
         by or for the RPM Group from any other person and all other
         confidential information to the extent that such information is not
         intended by the RPM Group for public dissemination.

         "Continuing Benefit Plans" means only the following employee benefit
         plans and arrangements of the Company in effect on the date hereof, or
         any successor plan or arrangement in which Executive is eligible to
         participate immediately before the Termination Date:

                  (a)      The RPM, Inc. Health and Welfare Plan (including
                           medical, dental and prescription drug benefits); and

                  (b)      Estate/Financial Planning Benefits.

         "Deferred Compensation Plan" means the RPM, Inc. Deferred Compensation
         Plan for Key Employees in which executive officers of the Company are
         eligible to participate and any such successor plan or arrangement.

         "Director" means a member of the Board of Directors of the Company.

         "Disability," when determined at any time other than during the
         Protected Period, means the inability of Executive for a continuous
         period in excess of 150 days to perform the essential functions of his
         position on an active full-time basis with or without reasonable
         accommodations by reason of a disability condition; a certificate from
         a physician acceptable to both the Company and Executive to the effect
         that Executive is or has been disabled and incapable of performing the
         essential functions of his position with or without reasonable
         accommodations as previously performed shall be conclusive of the fact
         that Executive is incapable of performing such services and is, or has
         been, disabled for the purposes of this Agreement. "Disability," when
         determined at any time during the Protected Period, means a "Total
         Disability" (as defined and determined under the Group Long Term
         Disability Insurance) that entitles Executive to receive the "Total
         Disability Benefit" under the Group Long Term Disability Insurance.
         Whether determined during or outside of the Protected Period, the
         Company and Executive acknowledge and agree that the essential
         functions of Executive's position are unique and critical to the
         Company





                                      A-3
<PAGE>   20

         and that a disability condition that causes Executive to be unable to
         perform the essential functions of his position under the circumstances
         described above will constitute an undue hardship on the Company.

         "Earned Incentive Compensation" means the sum of:

                  (a) The amount of any Incentive Compensation payable but not
         yet paid for the fiscal year preceding the fiscal year in which the
         Termination Date occurs. If the Compensation Committee has determined
         such amount prior to the Termination Date, then such amount shall be
         the amount so determined by the Compensation Committee. If the
         Compensation Committee has not determined such amount prior to the
         Termination Date, then such amount shall equal the amount of the
         Average Incentive Compensation; and

                  (b) An amount equal to the Average Incentive Compensation
         multiplied by a fraction, the numerator of which is the number of days
         in the current fiscal year of the Company that have expired before the
         Termination Date and the denominator of which is 365.

         "Estate/Financial Planning Benefits" means those estate and financial
         planning services (a) in effect on the date hereof in which Executive
         is eligible to participate or (b) that the Company makes available at
         any time before the Termination Date to the executives and key
         management employees of the Company and in which Executive is then
         eligible to participate.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended,
         and the rules and regulations thereunder, as such law, rules and
         regulations may be amended from time to time.

         "Good Reason" means a determination by Executive made in good faith
         that, upon or after the occurrence of a Change in Control, any of the
         following events has occurred without Executive's express written
         consent: (a) a significant reduction in the nature or scope of the
         title, authority or responsibilities of Executive from those held by
         Executive immediately prior to the Change in Control; (b) a reduction
         in Executive's Base Salary from the amount in effect on the date of the
         Change in Control; (c) a reduction in Executive's Incentive
         Compensation from the amount of Executive's Average Incentive
         Compensation, unless such reduction results solely from the Company's
         results of operations; (d) the failure by the Company to offer to
         Executive an economic value of benefits reasonably comparable to the
         economic value of benefits under the Benefit Plans in which Executive
         participates at the time of the Change in Control; or (e) a material
         breach by the Company of the terms of Section 3.

         "Gross-Up Payment" shall have the meaning given such term in Section 7.

         "Group Long Term Disability Insurance" means the Group Long Term
         Disability Insurance sponsored by the Company and provided by the
         Continental Casualty





                                      A-4
<PAGE>   21

         Company, Chicago, Illinois, as currently in effect and as the same may
         be amended from time to time, and any successor long-term disability
         insurance sponsored by the Company in which the executives and key
         management employees of the Company are eligible to participate.

         "Limited Benefit Plans" means all the Company's employee benefit plans
         and arrangements in effect at any time and in which the executives and
         key management employees of the Company are eligible to participate,
         excluding the Continuing Benefit Plans, but including, without
         limitation, the following employee benefit plans and arrangements or
         any successor or new plan or arrangement made available in the future
         to the executives and key management employees of the Company and in
         which Executive is eligible to participate before the Termination Date:

                  (a)      The 401(k) Plan;

                  (b)      The RPM, Inc. Retirement Plan;

                  (c)      The Supplemental Executive Retirement Plan;

                  (d)      Stock option plans and other equity-based incentive
                           plans, including the RPM, Inc. 1996 Stock Option Plan
                           and the Restricted Stock Plan;

                  (e)      The Split Dollar Life Insurance;

                  (f)      The RPM, Inc. Incentive Compensation Plan;

                  (g)      The Deferred Compensation Plan;

                  (h)      The RPM, Inc. Employee Stock Purchase Plan;

                  (i)      The Group Long Term Disability Insurance;

                  (j)      RPM, Inc. Group Life Insurance;

                  (k)      RPM, Inc. Group Accidental Death & Dismemberment
                           Insurance;

                  (l)      The RPM, Inc. Group Carve Out Plan (also known as
                           GRIP);

                  (m)      The RPM, Inc. Business Travel Insurance Plan;

                  (n)      The fringe benefits appertaining to Executive's
                           position with the Company referred to in Subsection
                           4(f), including the use of an automobile;

                  (o)      Health Care Reimbursement Account; and

                  (p)      Dependent Care Reimbursement Account.





                                      A-5
<PAGE>   22

         "Lump-Sum Payment" means, collectively, the lump-sum payments that may
         be payable to Executive pursuant to the first sentence of Subsection
         6(b)(iii) and pursuant to Subsection 6(c)(ii)(B).

         "Notice of Termination for Good Reason" means a written notice
         delivered by Executive in good faith to the Company under Subsection
         6(a)(vi) setting forth in reasonable detail the facts and circumstances
         that have occurred and that Executive claims in good faith to be an
         event constituting Good Reason.

         "Protected Period" means that period of time commencing on the date of
         a Change in Control and ending two years after such date.

         "Release and Waiver of Claims" means a written release and waiver by
         Executive, to the fullest extent allowable under applicable law and in
         form reasonably acceptable to the Company, of all claims, demands,
         suits, actions, causes of action, damages and rights against the
         Company and its Affiliates whatsoever which he may have had on account
         of the termination of his employment, including, without limitation,
         claims of discrimination, including on the basis of sex, race, age,
         national origin, religion, or handicapped status, and any and all
         claims, demands and causes of action for severance or other termination
         pay. Such Release and Waiver of Claims shall not, however, apply to the
         obligations of the Company arising under this Agreement, any
         indemnification agreement between Executive and the Company, any
         retirement plans, any stock option agreements, COBRA Continuation
         Coverage or rights of indemnification Executive may have under the
         Company's Articles of Incorporation, Code of Regulations or by statute.

         "Restricted Stock Plan" means the RPM, Inc. 1997 Restricted Stock Plan
         and any successor plan or arrangement thereto.

         "Split Dollar Life Insurance" means the Company's Split Dollar Life
         Insurance arrangements in effect on the date hereof or any successor
         arrangement that the Company makes available at any time before the
         Termination Date to the executives and key management employees of the
         Company and in which Executive is then eligible to participate.

         "Subsidiary" means a corporation, company or other entity (a) more than
         50 percent of whose outstanding shares or securities (representing the
         right to vote for the election of directors or other managing
         authority) are, or (b) which does not have outstanding shares or
         securities (as may be the case in a partnership, joint venture or
         unincorporated association), but more than 50 percent of whose
         ownership interest representing the right generally to make decisions
         for such other entity is, now or hereafter, owned or controlled,
         directly or indirectly, by the Company.

         "Supplemental Executive Retirement Plan" means the RPM, Inc. Benefit
         Restoration Plan in effect on the date hereof or any successor plan
         that the Company makes available at





                                      A-6
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         any time before the Termination Date to the executives and key
         management employees of the Company and in which Executive is then
         eligible to participate.

         "Termination Date" means the effective date of the termination of the
         Employment Period.

         "Voting Power" means, at any time, the total votes relating to the
         then-outstanding securities entitled to vote generally in the election
         of Directors.

         "Voting Stock" means, at any time, the then-outstanding securities
         entitled to vote generally in the election of Directors.




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