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Rpm, Inc. Incentive Compensation Plan - RPM INTERNATIONAL INC/DE/ - 8-29-1996

VIEWS: 22 PAGES: 48

									Exhibit 10.11 RPM, INC. INCENTIVE COMPENSATION PLAN SECTION 1. PURPOSE. The purpose of the RPM, Inc. Incentive Compensation Plan (the "Plan") is to provide incentives for specified key employees whose performance in fulfilling the responsibilities of their positions can have a major impact on the profitability and future growth of RPM, Inc. (the "Company") and its subsidiaries. SECTION 2. DEFINITIONS. For the purposes of the Plan, the following terms shall have the meanings indicated: (a) "Aggregate Bonus Pool" shall mean with respect to any Fiscal Year an amount equal to one and three-tenths percent (1.3%) of the Income Before Income Taxes. (b) "Applicable Law" shall mean 26 U.S.C. section 162(m) and regulations and rulings lawfully promulgated thereunder by an agency of the federal government. (c) "Base Salary" shall mean for any Covered Employee in respect of any Fiscal Year the base salary the Covered Employee receives from the Company for such Fiscal Year. (d) "Board of Directors" shall mean the Board of Directors of the Company. (e) "Bonus Award" shall mean the amount payable to a Covered Employee under the Plan in respect of any Fiscal Year. (f) "Committee" shall mean the Compensation Committee of the Board of Directors, which shall be comprised solely of two or more Outside Directors.

(g) "Covered Employee" shall mean in respect of any Fiscal Year one of the five individuals who is a covered employee under the Applicable Law. (h) "Fiscal Year" shall mean any fiscal year of the Company, commencing with the Fiscal Year which began on June 1, 1995. (i) "Income Before Income Taxes" shall mean, for any Fiscal Year, income before income taxes as shown on the Company's financial statement as certified by the Company's independent certified public accountants. (j) "Outside Director" shall mean an outside director under the Applicable Law. (k) "Plan" shall mean the RPM, Inc. Incentive Compensation Plan as set forth in this document and as later amended in accordance with the terms hereof. SECTION 3. ADMINISTRATION. (a) COMMITTEE. The Plan shall be administered by the Committee. The Committee shall have full authority to interpret the Plan and from time to time to adopt such rules and regulations for carrying out the Plan as it may deem best. (b) COMMITTEE DETERMINATIONS. All determinations by the Committee shall be made by the affirmative vote of a majority of its members, but any determination reduced to writing and signed by all of its members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. All decisions by the Committee pursuant to the provisions of the Plan and all orders or resolutions of the Committee pursuant thereto shall be final, conclusive and binding on all persons, including

(g) "Covered Employee" shall mean in respect of any Fiscal Year one of the five individuals who is a covered employee under the Applicable Law. (h) "Fiscal Year" shall mean any fiscal year of the Company, commencing with the Fiscal Year which began on June 1, 1995. (i) "Income Before Income Taxes" shall mean, for any Fiscal Year, income before income taxes as shown on the Company's financial statement as certified by the Company's independent certified public accountants. (j) "Outside Director" shall mean an outside director under the Applicable Law. (k) "Plan" shall mean the RPM, Inc. Incentive Compensation Plan as set forth in this document and as later amended in accordance with the terms hereof. SECTION 3. ADMINISTRATION. (a) COMMITTEE. The Plan shall be administered by the Committee. The Committee shall have full authority to interpret the Plan and from time to time to adopt such rules and regulations for carrying out the Plan as it may deem best. (b) COMMITTEE DETERMINATIONS. All determinations by the Committee shall be made by the affirmative vote of a majority of its members, but any determination reduced to writing and signed by all of its members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. All decisions by the Committee pursuant to the provisions of the Plan and all orders or resolutions of the Committee pursuant thereto shall be final, conclusive and binding on all persons, including 2

the Covered Employees (and their heirs, personal representatives, successors or permitted assigns), the Company, its subsidiaries, and its shareholders. SECTION 4. BONUS AWARDS. (a) DETERMINATION OF BONUS AWARDS. Subject to the next sentence, the Bonus Award of any Covered Employee for any Fiscal Year shall be such percentage share of the Aggregate Bonus Pool as determined by resolution of the Committee adopted no later than the ninetieth day of such Fiscal Year. Notwithstanding the preceding sentence: (i) the sum of the Bonus Awards of all Covered Employees for any Fiscal Year shall not exceed the Aggregate Bonus Pool for the Fiscal Year; (ii) the Bonus Award of any Covered Employee may be less than the amount otherwise determined pursuant to the preceding sentence if, at any time prior to informing the Covered Employee of his Bonus Award, the Committee in its sole and absolute discretion so determines; and (iii) in no event shall a Bonus Award exceed $1,500,000. (b) ANNOUNCEMENT OF BONUS AWARDS. No later than ninety days after the close of a Fiscal Year, the Committee shall promptly inform each Covered Employee of his or her respective Bonus Award for the Fiscal Year. (c) PAYMENT OF BONUS AWARDS. Bonus Awards shall be paid to the Covered Employees at such times as are determined by the Committee. 3

the Covered Employees (and their heirs, personal representatives, successors or permitted assigns), the Company, its subsidiaries, and its shareholders. SECTION 4. BONUS AWARDS. (a) DETERMINATION OF BONUS AWARDS. Subject to the next sentence, the Bonus Award of any Covered Employee for any Fiscal Year shall be such percentage share of the Aggregate Bonus Pool as determined by resolution of the Committee adopted no later than the ninetieth day of such Fiscal Year. Notwithstanding the preceding sentence: (i) the sum of the Bonus Awards of all Covered Employees for any Fiscal Year shall not exceed the Aggregate Bonus Pool for the Fiscal Year; (ii) the Bonus Award of any Covered Employee may be less than the amount otherwise determined pursuant to the preceding sentence if, at any time prior to informing the Covered Employee of his Bonus Award, the Committee in its sole and absolute discretion so determines; and (iii) in no event shall a Bonus Award exceed $1,500,000. (b) ANNOUNCEMENT OF BONUS AWARDS. No later than ninety days after the close of a Fiscal Year, the Committee shall promptly inform each Covered Employee of his or her respective Bonus Award for the Fiscal Year. (c) PAYMENT OF BONUS AWARDS. Bonus Awards shall be paid to the Covered Employees at such times as are determined by the Committee. 3

(d) CERTIFICATION OF BONUS AWARDS. Prior to paying any Bonus Award in respect of any Fiscal Year, the Committee shall certify in writing to the Board of Directors the amount of such Bonus Award and that such Bonus Award was determined in accordance with the terms of the Plan. For this purpose, approved minutes of the Committee meeting in which the certification is made shall be treated as a written certification. SECTION 5. EFFECTIVE DATE AND SHAREHOLDER APPROVAL. The Plan shall become effective for the Fiscal Year commencing on June 1, 1995; PROVIDED, however, that the Plan shall be of no force and effect unless it is approved by the Company's shareholders as provided in the Applicable Law at the Company's 1995 annual meeting of shareholders. SECTION 6. GENERAL PROVISIONS. (a) NO ASSIGNMENT. No portion of any Bonus Award may be assigned or transferred otherwise than by will or by the laws of descent and distribution prior to the payment thereof. (b) TAX REQUIREMENTS. All payments of Bonus Awards shall be subject to withholding in respect of income and other taxes required by law to be withheld, in accordance with the Company's customary procedures. (c) NO ADDITIONAL RIGHTS. A Covered Employee shall not have any right to be retained in the employ of the Company or any of its subsidiaries, and the right of the Company or any such subsidiary to dismiss or discharge any such Covered Employee or to terminate any arrangement pursuant to which any such Covered Employee provides services to the Company or a subsidiary is specifically reserved. 4

(d) LIABILITY. The Board of Directors and the Committee shall be entitled to rely on the advice of counsel and other experts, including the independent certified public accountants for the Company. No member of the Board

(d) CERTIFICATION OF BONUS AWARDS. Prior to paying any Bonus Award in respect of any Fiscal Year, the Committee shall certify in writing to the Board of Directors the amount of such Bonus Award and that such Bonus Award was determined in accordance with the terms of the Plan. For this purpose, approved minutes of the Committee meeting in which the certification is made shall be treated as a written certification. SECTION 5. EFFECTIVE DATE AND SHAREHOLDER APPROVAL. The Plan shall become effective for the Fiscal Year commencing on June 1, 1995; PROVIDED, however, that the Plan shall be of no force and effect unless it is approved by the Company's shareholders as provided in the Applicable Law at the Company's 1995 annual meeting of shareholders. SECTION 6. GENERAL PROVISIONS. (a) NO ASSIGNMENT. No portion of any Bonus Award may be assigned or transferred otherwise than by will or by the laws of descent and distribution prior to the payment thereof. (b) TAX REQUIREMENTS. All payments of Bonus Awards shall be subject to withholding in respect of income and other taxes required by law to be withheld, in accordance with the Company's customary procedures. (c) NO ADDITIONAL RIGHTS. A Covered Employee shall not have any right to be retained in the employ of the Company or any of its subsidiaries, and the right of the Company or any such subsidiary to dismiss or discharge any such Covered Employee or to terminate any arrangement pursuant to which any such Covered Employee provides services to the Company or a subsidiary is specifically reserved. 4

(d) LIABILITY. The Board of Directors and the Committee shall be entitled to rely on the advice of counsel and other experts, including the independent certified public accountants for the Company. No member of the Board of Directors or of the Committee or any officers of the Company or its subsidiaries shall be liable for any act or failure to act under the Plan, except in circumstances involving bad faith on the part of such member or officer. (e) OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the Plan shall prevent the Company or any subsidiary or affiliate of the Company from adopting or continuing in effect other compensation arrangements, which arrangements may be either generally applicable or applicable only to designated individuals including the Covered Employees. SECTION 7. AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors may at any time terminate, in whole or in part, or from time to time amend the Plan; PROVIDED, that no such amendment or termination shall adversely affect the rights of any Covered Employee with respect to Bonus Awards announced by the Committee. The Board of Directors may at any time and from time to time delegate to the Committee any or all of its authority under this Section 7. Any amendment to the Plan shall be approved by the Company's shareholders if required under the Applicable Law. 5

Exhibit 10.12 INDEMNIFICATION AGREEMENT THIS AGREEMENT is made to be effective the 9th day of February, 1995 between RPM, Inc., an Ohio corporation ("Corporation"), and ________________________ ("Director"). WITNESSETH THAT: WHEREAS, Director is a director of Corporation and in such capacity is performing a valuable service for Corporation and its shareholders; and

(d) LIABILITY. The Board of Directors and the Committee shall be entitled to rely on the advice of counsel and other experts, including the independent certified public accountants for the Company. No member of the Board of Directors or of the Committee or any officers of the Company or its subsidiaries shall be liable for any act or failure to act under the Plan, except in circumstances involving bad faith on the part of such member or officer. (e) OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the Plan shall prevent the Company or any subsidiary or affiliate of the Company from adopting or continuing in effect other compensation arrangements, which arrangements may be either generally applicable or applicable only to designated individuals including the Covered Employees. SECTION 7. AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors may at any time terminate, in whole or in part, or from time to time amend the Plan; PROVIDED, that no such amendment or termination shall adversely affect the rights of any Covered Employee with respect to Bonus Awards announced by the Committee. The Board of Directors may at any time and from time to time delegate to the Committee any or all of its authority under this Section 7. Any amendment to the Plan shall be approved by the Company's shareholders if required under the Applicable Law. 5

Exhibit 10.12 INDEMNIFICATION AGREEMENT THIS AGREEMENT is made to be effective the 9th day of February, 1995 between RPM, Inc., an Ohio corporation ("Corporation"), and ________________________ ("Director"). WITNESSETH THAT: WHEREAS, Director is a director of Corporation and in such capacity is performing a valuable service for Corporation and its shareholders; and WHEREAS, the shareholders of Corporation have adopted a Code of Regulations (the "Regulations") providing for the indemnification of the officers, directors, agents, trustees and employees of Corporation; and WHEREAS, Section 1701.13(E) of the Ohio Revised Code (the "Ohio Statute") also provides for the indemnification of directors, officers, employees or agents of Corporation; and WHEREAS, such Regulations (Article VI, Section 6) and the Ohio Statute (1701.13(E)(6)) specifically provide that they are not exclusive, and also specifically contemplate that agreements may be entered into between Corporation and the members of its Board of Directors and officers with respect to indemnification of such directors and officers; and WHEREAS, in accordance with the authorization provided by the Regulations (Article VI, Section 7) and the Ohio Statute (1701.13(E)(7)), Corporation has purchased and presently maintains an Executive Liability and Defense Coverage insurance policy ("D&O Insurance"), insuring Corporation and its directors and officers against certain liabilities which may be incurred by its directors and officers in the performance of their services for Corporation; and WHEREAS, recent developments with respect to the terms, coverage and availability of director and officer insurance and with respect to the application, amendment and enforcement of statutory and corporate indemnification provisions generally have raised questions concerning the adequacy and reliability of the protection afforded to directors and officers thereby; and WHEREAS, in order to resolve such questions and thereby induce Director to continue to serve as a director of Corporation, Corporation has determined and agreed to enter into this Agreement with Director; NOW, THEREFORE, in consideration of Director's continued service as a director after the date hereof, the

Exhibit 10.12 INDEMNIFICATION AGREEMENT THIS AGREEMENT is made to be effective the 9th day of February, 1995 between RPM, Inc., an Ohio corporation ("Corporation"), and ________________________ ("Director"). WITNESSETH THAT: WHEREAS, Director is a director of Corporation and in such capacity is performing a valuable service for Corporation and its shareholders; and WHEREAS, the shareholders of Corporation have adopted a Code of Regulations (the "Regulations") providing for the indemnification of the officers, directors, agents, trustees and employees of Corporation; and WHEREAS, Section 1701.13(E) of the Ohio Revised Code (the "Ohio Statute") also provides for the indemnification of directors, officers, employees or agents of Corporation; and WHEREAS, such Regulations (Article VI, Section 6) and the Ohio Statute (1701.13(E)(6)) specifically provide that they are not exclusive, and also specifically contemplate that agreements may be entered into between Corporation and the members of its Board of Directors and officers with respect to indemnification of such directors and officers; and WHEREAS, in accordance with the authorization provided by the Regulations (Article VI, Section 7) and the Ohio Statute (1701.13(E)(7)), Corporation has purchased and presently maintains an Executive Liability and Defense Coverage insurance policy ("D&O Insurance"), insuring Corporation and its directors and officers against certain liabilities which may be incurred by its directors and officers in the performance of their services for Corporation; and WHEREAS, recent developments with respect to the terms, coverage and availability of director and officer insurance and with respect to the application, amendment and enforcement of statutory and corporate indemnification provisions generally have raised questions concerning the adequacy and reliability of the protection afforded to directors and officers thereby; and WHEREAS, in order to resolve such questions and thereby induce Director to continue to serve as a director of Corporation, Corporation has determined and agreed to enter into this Agreement with Director; NOW, THEREFORE, in consideration of Director's continued service as a director after the date hereof, the mutual covenants herein contained, and for other good and valuable consideration the receipt and adequacy of which hereby is mutually acknowledged, the parties hereto agree as follows:

1. INDEMNITY OF DIRECTOR. Corporation hereby agrees to indemnify and hold harmless Director from loss or liability, including any and all fees and expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Director or his spouse in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (including specifically an action by or in the right of Corporation) to which Director is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Director is, was or at any time becomes a director, officer, employee or agent of Corporation, or is or was serving or at any time serves at the request of Corporation as a director, officer, employee, trustee, or agent of another corporation, partnership, joint venture, trust or other enterprise, to the maximum extent now authorized or permitted by the provisions of the Regulations and Ohio Statute, or by any subsequent amendment(s) thereto or other Regulations or statutory provisions authorizing or permitting such indemnification which are adopted after the date hereof by the shareholders of Corporation or the State of Ohio, respectively. It is the intent of this Agreement that the Director shall be fully and completely indemnified by either Corporation or the D&O Insurance (or a combination thereof) to the absolute maximum permitted by law and except to the extent absolutely prohibited by law on the grounds of illegality as finally determined by a court of competent jurisdiction after all presumptions are made in favor of the Director and from which no appeal is or can be taken by Director.

1. INDEMNITY OF DIRECTOR. Corporation hereby agrees to indemnify and hold harmless Director from loss or liability, including any and all fees and expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Director or his spouse in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (including specifically an action by or in the right of Corporation) to which Director is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Director is, was or at any time becomes a director, officer, employee or agent of Corporation, or is or was serving or at any time serves at the request of Corporation as a director, officer, employee, trustee, or agent of another corporation, partnership, joint venture, trust or other enterprise, to the maximum extent now authorized or permitted by the provisions of the Regulations and Ohio Statute, or by any subsequent amendment(s) thereto or other Regulations or statutory provisions authorizing or permitting such indemnification which are adopted after the date hereof by the shareholders of Corporation or the State of Ohio, respectively. It is the intent of this Agreement that the Director shall be fully and completely indemnified by either Corporation or the D&O Insurance (or a combination thereof) to the absolute maximum permitted by law and except to the extent absolutely prohibited by law on the grounds of illegality as finally determined by a court of competent jurisdiction after all presumptions are made in favor of the Director and from which no appeal is or can be taken by Director. 2. MAINTENANCE OF INSURANCE AND SELF INSURANCE. (a) Corporation represents that it presently has in force and effect a policy of D&O Insurance, a copy of which has been delivered to Director. Subject only to the provisions of Section 2(c) hereof, Corporation hereby agrees that, so long as Director shall continue to serve as a director of Corporation (or shall continue at the request of Corporation to serve as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise) and thereafter so long as Director shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal or investigative by reason of the fact that Director was a director of Corporation (or served in any of said other capacities), Corporation will purchase and maintain in effect for the benefit of Director one or more valid, binding and enforceable policy or policies of director and officer insurance providing, in all respects, coverage at least comparable to that presently provided pursuant to the D&O Insurance. (b) The D&O Insurance currently contains deductible amounts and certain exclusions. Therefore, Corporation shall indemnify and hold harmless Director with respect to the following: 2

(i) any deductible amount set forth in the D&O Insurance, or any similar deductible amount in any replacement director and officer insurance policy; and (ii) any loss to or liability of Director by reason of any Exclusions set forth in, or any of the Endorsements to, the D&O Insurance, except for liabilities arising from Director's intentional fraud, actual dishonesty, or willful misconduct as finally determined by a court of competent jurisdiction, and except for claims under Section 16(b) of the Securities Exchange Act of 1934 for so-called six (6) months "short swing profits". (c) Corporation shall not be required to maintain the D&O Insurance or other director and officer insurance if said insurance is not reasonably available or if, in the reasonable business judgment of the then directors of Corporation, either (i) the premium cost for such insurance is substantially disproportionate to the amount of coverage or (ii) the coverage provided by such insurance is so limited by exclusions that there is insufficient benefit from such insurance. 3. ADDITIONAL INDEMNITY. "Loss to or liability of Director" as used in this Agreement shall include any and all fees and expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Director or his spouse in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (including specifically an action by or in the right of Corporation) to which Director is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Director is, was or at any time becomes a director, officer, employee or agent of Corporation, or is or was serving or at any time serves at the request of Corporation as a director, officer, employee, trustee, or agent of another corporation, partnership, joint venture,

(i) any deductible amount set forth in the D&O Insurance, or any similar deductible amount in any replacement director and officer insurance policy; and (ii) any loss to or liability of Director by reason of any Exclusions set forth in, or any of the Endorsements to, the D&O Insurance, except for liabilities arising from Director's intentional fraud, actual dishonesty, or willful misconduct as finally determined by a court of competent jurisdiction, and except for claims under Section 16(b) of the Securities Exchange Act of 1934 for so-called six (6) months "short swing profits". (c) Corporation shall not be required to maintain the D&O Insurance or other director and officer insurance if said insurance is not reasonably available or if, in the reasonable business judgment of the then directors of Corporation, either (i) the premium cost for such insurance is substantially disproportionate to the amount of coverage or (ii) the coverage provided by such insurance is so limited by exclusions that there is insufficient benefit from such insurance. 3. ADDITIONAL INDEMNITY. "Loss to or liability of Director" as used in this Agreement shall include any and all fees and expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Director or his spouse in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (including specifically an action by or in the right of Corporation) to which Director is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Director is, was or at any time becomes a director, officer, employee or agent of Corporation, or is or was serving or at any time serves at the request of Corporation as a director, officer, employee, trustee, or agent of another corporation, partnership, joint venture, trust or other enterprise. 4. LIMITATION ON INDEMNITY. (a) Notwithstanding anything contained herein to the contrary, except as is provided in Section 8 hereof, Corporation shall not be required hereby to indemnify Director with respect to any action, suit, or proceeding against Corporation that was initiated, directly or indirectly, by Director. (b) Corporation shall not be liable under this Agreement to make any payment in connection with any claim made against Director to the extent Director has actually received payment (under any insurance policy, the Regulations, the Ohio Statute, or otherwise) of the amounts otherwise payable hereunder. 5. CONTINUATION OF INDEMNITY. All agreements and obligations of Corporation contained herein shall continue during 3

the period Director is a director, officer, employee or agent of Corporation (or is or was serving at the request of Corporation as a director, officer, employee, trustee, or agent or another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Director shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether, civil, criminal, investigative or otherwise, by reason of the fact that Director was a director of Corporation or serving in any other capacity referred to herein. 6. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by Director of notice of the commencement of any action, suit or proceeding, Director will, if a claim in respect thereof is to be made against Corporation under this Agreement, notify Corporation in writing of the commencement thereof; but the omission so to notify Corporation will not relieve it from any liability which it may have to Director otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Director notifies Corporation of the commencement thereof: (a) Corporation will be entitled to participate therein at its own expense; (b) Except as otherwise provided below, to the extent that it may wish, Corporation jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel satisfactory to

the period Director is a director, officer, employee or agent of Corporation (or is or was serving at the request of Corporation as a director, officer, employee, trustee, or agent or another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Director shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether, civil, criminal, investigative or otherwise, by reason of the fact that Director was a director of Corporation or serving in any other capacity referred to herein. 6. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by Director of notice of the commencement of any action, suit or proceeding, Director will, if a claim in respect thereof is to be made against Corporation under this Agreement, notify Corporation in writing of the commencement thereof; but the omission so to notify Corporation will not relieve it from any liability which it may have to Director otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Director notifies Corporation of the commencement thereof: (a) Corporation will be entitled to participate therein at its own expense; (b) Except as otherwise provided below, to the extent that it may wish, Corporation jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel satisfactory to Director. After notice from Corporation to Director of its election so to assume the defense thereof, Corporation will not be liable to Director under this Agreement for any legal or other expenses subsequently incurred by Director in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. Director shall have the right to employ his own counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from Corporation of its assumption of the defense thereof shall be at the expense of Director unless (i) the employment of counsel by Director has been authorized by Corporation, (ii) Director shall have reasonably concluded that there may be a conflict of interest between Corporation and Director in the conduct of such defense of such action, or (iii) Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the expense of Corporation. Corporation shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of Corporation or as to which Director shall have made the conclusion provided for in (ii) above; (c) Corporation shall not be liable to indemnify Director under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. Corporation shall not settle any action or claim in any manner which would impose any penalty or limitation on Director without Director's written consent. Neither Corporation or Director will unreasonably withhold consent to any proposed settlement; and 4

(d) Director will reasonably cooperate with Corporation with respect to the defense of any action, suit or proceeding in connection with which Director is seeking to be indemnified and held harmless by Corporation. 7. PAYMENT AND REPAYMENT OF EXPENSES. (a) At Director's request, Corporation shall pay all expenses as and when incurred by Director after receipt of written notice pursuant to Section 6 hereof. That portion of the expenses which represents attorneys' fees and other costs incurred in defending any civil or criminal action, suit or proceeding shall be paid by Corporation to Director, or at his direction directly to his attorneys, within 30 days of Corporation's receipt of such request, together with reasonable documentation evidencing the amount and nature of such expenses. (b) Director agrees that he will reimburse Corporation for all reasonable expenses paid by Corporation in defending any civil or criminal action, suit or proceeding against Director in the event and only to the extent that it shall be finally determined by a court of competent jurisdiction from which no appeal is or can be taken by Director that he is not entitled to be indemnified by Corporation for such expenses under the provisions of the Ohio Statute, the Regulations, this Agreement or otherwise.

(d) Director will reasonably cooperate with Corporation with respect to the defense of any action, suit or proceeding in connection with which Director is seeking to be indemnified and held harmless by Corporation. 7. PAYMENT AND REPAYMENT OF EXPENSES. (a) At Director's request, Corporation shall pay all expenses as and when incurred by Director after receipt of written notice pursuant to Section 6 hereof. That portion of the expenses which represents attorneys' fees and other costs incurred in defending any civil or criminal action, suit or proceeding shall be paid by Corporation to Director, or at his direction directly to his attorneys, within 30 days of Corporation's receipt of such request, together with reasonable documentation evidencing the amount and nature of such expenses. (b) Director agrees that he will reimburse Corporation for all reasonable expenses paid by Corporation in defending any civil or criminal action, suit or proceeding against Director in the event and only to the extent that it shall be finally determined by a court of competent jurisdiction from which no appeal is or can be taken by Director that he is not entitled to be indemnified by Corporation for such expenses under the provisions of the Ohio Statute, the Regulations, this Agreement or otherwise. 8. ENFORCEMENT. (a) Corporation expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on Corporation hereby in order to induce Director to continue as a director of Corporation, and acknowledges that Director is relying upon this Agreement in continuing in such capacity. (b) In the event any dispute or controversy shall arise under this Agreement between Director and Corporation with respect to whether the Director is entitled to indemnification hereunder, Director may seek to enforce this Agreement with respect to such dispute or controversy through legal action or, at Director's sole option and written request, through arbitration. If arbitration is requested, such dispute or controversy shall be submitted by the parties to binding arbitration in the City of Cleveland, State of Ohio, before a single arbitrator agreeable to both parties. If the parties cannot agree on a designated arbitrator within 15 days after arbitration is requested in writing by Director, the arbitration shall proceed in the City of Cleveland, State of Ohio, before an arbitrator appointed by the American Arbitration Association. In either case, the arbitration proceeding shall commence promptly under the rules then in effect of that Association and the arbitrator agreed to by the parties or appointed by that Association shall be an attorney other than an attorney who has, or is associated with a firm having associated with it an attorney which has been retained by or performed services for Corporation or Director at any time during the five years preceding the commencement of the arbitration. The award 5

shall be rendered in such form that judgment may be entered thereon in any court having jurisdiction thereof. (c) In the event Director is required to bring any action to enforce rights or to collect moneys due under this Agreement and is successful in such action, Corporation shall reimburse Director for all of Director's reasonable fees and expenses (including attorneys' fees) in bringing and pursuing such action. (d) Corporation is aware that upon the occurrence of a Change in Control (as defined in paragraph 8(e) below) the Board of Directors or a shareholder of Corporation may then cause or attempt to cause Corporation to refuse to comply with its obligations under this Agreement or may cause or attempt to cause Corporation to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Director the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of Corporation that Director 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 Director 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 Director that Corporation has failed to comply with any of its obligations under this Agreement or in the event that Corporation or any person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or

shall be rendered in such form that judgment may be entered thereon in any court having jurisdiction thereof. (c) In the event Director is required to bring any action to enforce rights or to collect moneys due under this Agreement and is successful in such action, Corporation shall reimburse Director for all of Director's reasonable fees and expenses (including attorneys' fees) in bringing and pursuing such action. (d) Corporation is aware that upon the occurrence of a Change in Control (as defined in paragraph 8(e) below) the Board of Directors or a shareholder of Corporation may then cause or attempt to cause Corporation to refuse to comply with its obligations under this Agreement or may cause or attempt to cause Corporation to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Director the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of Corporation that Director 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 Director 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 Director that Corporation has failed to comply with any of its obligations under this Agreement or in the event that Corporation or any person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from, Director the benefits intended to be provided to Director hereunder, and that Director has complied with all of his obligations under this Agreement, Corporation irrevocably authorizes Director from time to time to retain counsel of his choice at the expense of Corporation as provided in this Section 8(d), to represent Director in connection with the initiation or defense of any litigation or other legal action, whether by or against Corporation or any director, officer, shareholder or other person affiliated with Corporation, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between Corporation and such counsel, and in that connection Corporation and Director agree that a confidential relationship shall exist between Director and such counsel. The reasonable fees and expenses of counsel selected from time to time by Director as hereinabove provided shall be paid or reimbursed to Director by Corporation on a regular, periodic basis upon presentation by Director of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $500,000. (e) For the purpose of this Agreement, the term "Change in Control" shall mean a change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Act of 1934 as 6

in effect on the date of this Agreement; provided that, without limitation, such a change in control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of Corporation representing 20% or more of the combined voting power of Corporation's then outstanding securities or (b) during any period of twelve (12) consecutive months, commencing before or after the date of this Agreement, individuals who, at the beginning of such twelve (12) month period were directors of Corporation for whom Director, as a shareholder, shall have voted cease for any reason to constitute at least a majority of the Board of Directors of Corporation. 9. SEVERABILITY. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid, illegal or unenforceable for any reasons, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the other provisions hereof. 10. EXTRAORDINARY TRANSACTION. Corporation agrees that, in the event of any merger, consolidation or reorganization in which Corporation is not the surviving entity, any sale of all or substantially all of the assets of Corporation or any liquidation of Corporation (each such event is hereinafter referred to as an "extraordinary transaction"), Corporation shall: (a) Have the obligations of Corporation under this Agreement expressly assumed by the survivor, purchaser or successor, as the case may be, in such extraordinary transaction; or

in effect on the date of this Agreement; provided that, without limitation, such a change in control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of Corporation representing 20% or more of the combined voting power of Corporation's then outstanding securities or (b) during any period of twelve (12) consecutive months, commencing before or after the date of this Agreement, individuals who, at the beginning of such twelve (12) month period were directors of Corporation for whom Director, as a shareholder, shall have voted cease for any reason to constitute at least a majority of the Board of Directors of Corporation. 9. SEVERABILITY. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid, illegal or unenforceable for any reasons, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the other provisions hereof. 10. EXTRAORDINARY TRANSACTION. Corporation agrees that, in the event of any merger, consolidation or reorganization in which Corporation is not the surviving entity, any sale of all or substantially all of the assets of Corporation or any liquidation of Corporation (each such event is hereinafter referred to as an "extraordinary transaction"), Corporation shall: (a) Have the obligations of Corporation under this Agreement expressly assumed by the survivor, purchaser or successor, as the case may be, in such extraordinary transaction; or (b) Provide a trust fund, letter of credit, or otherwise provide for the satisfaction of Corporation's obligations under this Agreement in a manner reasonably acceptable to Director. 11. NO PERSONAL LIABILITY. Director agrees that no director, officer, employee, representative or agent of Corporation shall be personally liable for the satisfaction of Corporation's obligations under this Agreement, and Director shall look solely to the assets of Corporation and any director and officer insurance referred to in Section 2 hereof for satisfaction of any claims hereunder. 12. ALLOWANCE FOR COMPLIANCE WITH SEC REQUIREMENTS. Director acknowledges that the Securities and Exchange Commission ("SEC") has expressed the opinion that indemnification of directors and officers from liabilities under the Securities Act of 1933 ("Act") is against public policy as expressed in the Act and, is therefore, unenforceable. Director hereby agrees that it will not be a breach of this Agreement for Corporation to undertake with the Commission in connection with the registration for sale of any stock or other securities of Corporation from time to time that, in the event a claim for indemnification against such liabilities 7

(other than the payment by Corporation of expenses incurred or paid by a director or officer of Corporation in the successful defense of any action, suit or proceeding) is asserted in connection with such stock or other securities being registered, Corporation will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of competent jurisdiction on the questions of whether or not such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Director further agrees that such submission to a court of competent jurisdiction shall not be a breach of this Agreement. 13. SUBROGATION. This Agreement is separate and distinct from the D&O Insurance, and nothing contained herein shall diminish or otherwise modify Director's separate and distinct rights and obligations thereunder. However, in the event of any payment under this Agreement, Corporation shall be subrogated to the extent thereof to all rights to indemnification or reimbursement against any insurer or other entity or person vested in Director, who shall execute all instruments and take all other actions as shall be reasonably necessary for Corporation to enforce such rights. 14. GOVERNING LAW; BINDING EFFECT; AMENDMENT AND TERMINATION. (a) This Agreement shall be interpreted and enforced in accordance with the laws of the State of Ohio.

(other than the payment by Corporation of expenses incurred or paid by a director or officer of Corporation in the successful defense of any action, suit or proceeding) is asserted in connection with such stock or other securities being registered, Corporation will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of competent jurisdiction on the questions of whether or not such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Director further agrees that such submission to a court of competent jurisdiction shall not be a breach of this Agreement. 13. SUBROGATION. This Agreement is separate and distinct from the D&O Insurance, and nothing contained herein shall diminish or otherwise modify Director's separate and distinct rights and obligations thereunder. However, in the event of any payment under this Agreement, Corporation shall be subrogated to the extent thereof to all rights to indemnification or reimbursement against any insurer or other entity or person vested in Director, who shall execute all instruments and take all other actions as shall be reasonably necessary for Corporation to enforce such rights. 14. GOVERNING LAW; BINDING EFFECT; AMENDMENT AND TERMINATION. (a) This Agreement shall be interpreted and enforced in accordance with the laws of the State of Ohio. (b) This Agreement shall be binding upon Director and upon Corporation, its successors and assigns, and shall inure to the benefit of Director, his heirs, personal representatives and assigns and to the benefit of Corporation, its successors and assigns. (c) No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto. Any amendment or modification of this Agreement which is approved in good faith by the Board of Directors of Corporation need not be submitted to the shareholders for subsequent approval or ratification. 8

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written. RPM, INC. By: Thomas C. Sullivan Chairman of the Board and Chief Executive Officer _____________________, Director 9

Exhibit 10.15 AMENDMENT NO. 1 TO CREDIT AGREEMENT AMENDMENT dated as of August 2, 1995 among RPM, INC. (the "Company") and the LENDERS listed on the signature pages hereof (the "Lenders"). WITNESSETH: WHEREAS, the Company, the Lenders and The Chase Manhattan Bank (National Association), as Administrative Agent (the "Administrative Agent") are parties to a Credit Agreement dated as of June 23, 1994 (as amended from time to time, the "Credit Agreement");

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written. RPM, INC. By: Thomas C. Sullivan Chairman of the Board and Chief Executive Officer _____________________, Director 9

Exhibit 10.15 AMENDMENT NO. 1 TO CREDIT AGREEMENT AMENDMENT dated as of August 2, 1995 among RPM, INC. (the "Company") and the LENDERS listed on the signature pages hereof (the "Lenders"). WITNESSETH: WHEREAS, the Company, the Lenders and The Chase Manhattan Bank (National Association), as Administrative Agent (the "Administrative Agent") are parties to a Credit Agreement dated as of June 23, 1994 (as amended from time to time, the "Credit Agreement"); WHEREAS, the parties hereto desire to amend certain provisions of the Credit Agreement in accordance with the terms hereof; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement", "the Credit Agreement" and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended and modified hereby. SECTION 2. AMENDMENT OF SECTION 1.01 OF THE CREDIT AGREEMENT. The definition of "Revolving Credit Period" in Section 1.01 of the Credit Agreement is amended and restated to read in its entirety as follows: "REVOLVING CREDIT PERIOD" shall mean the period from and including the date hereof to but not including August 2, 2000.

SECTION 3. AMENDMENT OF SECTION 2.01 OF THE CREDIT AGREEMENT. Section 2.01 of the Credit Agreement is amended by deleting "(a)" at the beginning thereof and by deleting subsection (b) in its entirety. SECTION 4. AMENDMENT OF SECTION 9.08 OF THE CREDIT AGREEMENT. Section 9.08 of the Credit Agreement is amended to replace "60%" with "62.5%". SECTION 5. AMENDMENT OF SECTION 9.13 OF THE CREDIT AGREEMENT. Clause (iv) of Section 9.13 of the Credit Agreement is amended to insert "(other than a Subsidiary of the Company)"

Exhibit 10.15 AMENDMENT NO. 1 TO CREDIT AGREEMENT AMENDMENT dated as of August 2, 1995 among RPM, INC. (the "Company") and the LENDERS listed on the signature pages hereof (the "Lenders"). WITNESSETH: WHEREAS, the Company, the Lenders and The Chase Manhattan Bank (National Association), as Administrative Agent (the "Administrative Agent") are parties to a Credit Agreement dated as of June 23, 1994 (as amended from time to time, the "Credit Agreement"); WHEREAS, the parties hereto desire to amend certain provisions of the Credit Agreement in accordance with the terms hereof; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement", "the Credit Agreement" and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended and modified hereby. SECTION 2. AMENDMENT OF SECTION 1.01 OF THE CREDIT AGREEMENT. The definition of "Revolving Credit Period" in Section 1.01 of the Credit Agreement is amended and restated to read in its entirety as follows: "REVOLVING CREDIT PERIOD" shall mean the period from and including the date hereof to but not including August 2, 2000.

SECTION 3. AMENDMENT OF SECTION 2.01 OF THE CREDIT AGREEMENT. Section 2.01 of the Credit Agreement is amended by deleting "(a)" at the beginning thereof and by deleting subsection (b) in its entirety. SECTION 4. AMENDMENT OF SECTION 9.08 OF THE CREDIT AGREEMENT. Section 9.08 of the Credit Agreement is amended to replace "60%" with "62.5%". SECTION 5. AMENDMENT OF SECTION 9.13 OF THE CREDIT AGREEMENT. Clause (iv) of Section 9.13 of the Credit Agreement is amended to insert "(other than a Subsidiary of the Company)" immediately after "Company" in both places in such clause in which "Company" appears. SECTION 6. AMENDMENT OF PRICING SCHEDULE. The Pricing schedule is amended and restated to read in its entirety as set forth in the attached Pricing Schedule. SECTION 7. REDUCTION OF COMMITMENTS. As of the date hereof, the Commitments shall be reduced by $150,000,000 to $150,000,000. SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 9. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective as of the date hereof when the Administrative Agent shall have received:

SECTION 3. AMENDMENT OF SECTION 2.01 OF THE CREDIT AGREEMENT. Section 2.01 of the Credit Agreement is amended by deleting "(a)" at the beginning thereof and by deleting subsection (b) in its entirety. SECTION 4. AMENDMENT OF SECTION 9.08 OF THE CREDIT AGREEMENT. Section 9.08 of the Credit Agreement is amended to replace "60%" with "62.5%". SECTION 5. AMENDMENT OF SECTION 9.13 OF THE CREDIT AGREEMENT. Clause (iv) of Section 9.13 of the Credit Agreement is amended to insert "(other than a Subsidiary of the Company)" immediately after "Company" in both places in such clause in which "Company" appears. SECTION 6. AMENDMENT OF PRICING SCHEDULE. The Pricing schedule is amended and restated to read in its entirety as set forth in the attached Pricing Schedule. SECTION 7. REDUCTION OF COMMITMENTS. As of the date hereof, the Commitments shall be reduced by $150,000,000 to $150,000,000. SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 9. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective as of the date hereof when the Administrative Agent shall have received: (a) duly executed counterparts hereof signed by the Company and the Lenders (or, in the case of any party as to which an executed counterpart shall not have been received, the Administrative Agent shall have received facsimile, telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) an opinion of Calfee, Halter & Griswold, counsel to the Company, substantially in the form of Exhibit A hereto; and (c) all documents the Administrative Agent may reasonably request relating to the existence of the Company, the corporate authority for and the validity of the Credit Agreement as amended by this Amendment, 2

and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent. SECTION 10. EFFECT OF AMENDMENTS. Except as expressly set forth herein, the amendments contained herein shall not constitute a waiver or amendment of any term or condition of the Credit Agreement, and all such terms and conditions shall remain in full force and effect and are hereby ratified and confirmed in all respects. 3

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. RPM, INC.
By: /s/ Frank C. Sullivan ----------------------------------Name: Frank C. Sullivan Title: Vice President and Chief Financial Officer

and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent. SECTION 10. EFFECT OF AMENDMENTS. Except as expressly set forth herein, the amendments contained herein shall not constitute a waiver or amendment of any term or condition of the Credit Agreement, and all such terms and conditions shall remain in full force and effect and are hereby ratified and confirmed in all respects. 3

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. RPM, INC.
By: /s/ Frank C. Sullivan ----------------------------------Name: Frank C. Sullivan Title: Vice President and Chief Financial Officer

THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
By: /s/ Lawrence Shields ----------------------------------Name: Lawrence Shields Title: Managing Director

NATIONAL CITY flANK
By: /s/ Terri L. Cable ----------------------------------Name: Terri L. Cable Title: Vice President

THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Stephanie L. Tucker ----------------------------------Name: Stephanie L. Tucker Title: Vice President

CREDIT LYONNAIS CHICAGO BRANCH
By: /s/ Mary Ann Klemm ----------------------------------Name: Mary Ann Klemm Title: Vice President and Group Head

4

CREDIT LYONNAIS CAYMAN

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. RPM, INC.
By: /s/ Frank C. Sullivan ----------------------------------Name: Frank C. Sullivan Title: Vice President and Chief Financial Officer

THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
By: /s/ Lawrence Shields ----------------------------------Name: Lawrence Shields Title: Managing Director

NATIONAL CITY flANK
By: /s/ Terri L. Cable ----------------------------------Name: Terri L. Cable Title: Vice President

THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Stephanie L. Tucker ----------------------------------Name: Stephanie L. Tucker Title: Vice President

CREDIT LYONNAIS CHICAGO BRANCH
By: /s/ Mary Ann Klemm ----------------------------------Name: Mary Ann Klemm Title: Vice President and Group Head

4

CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ Mary Ann Klemm ----------------------------------Name: Mary Ann Klemm Title: Authorized Signature

HARRIS TRUST AND SAVINGS BANK

CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ Mary Ann Klemm ----------------------------------Name: Mary Ann Klemm Title: Authorized Signature

HARRIS TRUST AND SAVINGS BANK
By: /s/ Keith L. Burson ----------------------------------Name: Keith L. Burson Title: Vice President

PNC BANK, NATIONAL ASSOCIATION
By: /s/ Christonher L. Helmeci ----------------------------------Name: Christopher L. Helmeci Title: Assistant Vice President

SOCIETY NATIONAL RANK
By: /s/ Marianne T. Meil ----------------------------------Name' Marianne T. Meil Title: Assistant vice President

THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
By: /s/ Jay H. Nilson ----------------------------------Name: Jay H. Nilson Title: Vice President

WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ J. Peter Peyton ----------------------------------Name: J. Peter Peyton Title: Senior Vice president

5

PRICING SCHEDULE The "Applicable Margin" for each Type of Loan and the commitment fee rate for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day:
--------------------------------------------------------------

PRICING SCHEDULE The "Applicable Margin" for each Type of Loan and the commitment fee rate for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day:
-------------------------------------------------------------Level Level Level Level Level Level Status I II III IV V VI -------------------------------------------------------------Euro-Dollar .30% .35% .425% .475% .625% 1.0% Loans -------------------------------------------------------------CD Loans .425% .475% .55% .60% .75% 1.125% -------------------------------------------------------------Commitment Fee .10% .115% .14% .1875% .25% .375% Rate -------------------------------------------------------------Base Rate Loans 0% 0% 0% 0% 0% 0% --------------------------------------------------------------

For purposes of this Schedule, the following terms have the following meanings: "Applicable Indebtedness" means senior unsecured long-term debt of the Company. "Implied Rating" means the implied rating issued for the Company's Applicable Indebtedness on the basis of the rating issued for the Company's zero coupon redeemable convertible subordinated notes (the "Notes"), or, if no such implied rating has been issued, a rating one designation higher than the rating issued for the Notes. "Level I Status" exists at any date if, at such date, the Applicable Indebtedness is rated or has received an Implied Rating of A- or higher by or from S&P and A3 or higher by or from Moody's. "Level II Status" exists at any date if, at such date, (i) the Applicable Indebtedness is rated or has received an Implied Rating of BBB+ or higher by or from S&P and Baa1 or higher by or from Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Applicable Indebtedness is rated or has received an Implied Rating of BBB or higher by or from S&P

and Baa2 or higher by or from Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Applicable Indebtedness is rated or has received an Implied Rating of BBB- or higher by or from S&P and Baa3 or higher by or from Moody's and (ii) none of Level I Status, Level II Status or Level III Status exists. "Level V Status" exists at any date if, at such date, (i) the Applicable Indebtedness is rated or has received an Implied Rating of BB+ or higher by or from S&P and Ba1 or higher by or from Moody's and (ii) none of Level I Status, Level II Status, Level III Status or Level IV Status exists. "Level VI Status" exists at any date if, at such date, no other Status exists. "Moody's" means Moody's Investors Service, Inc. "S&P" means Standard & Poor's Corporation. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date.

and Baa2 or higher by or from Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Applicable Indebtedness is rated or has received an Implied Rating of BBB- or higher by or from S&P and Baa3 or higher by or from Moody's and (ii) none of Level I Status, Level II Status or Level III Status exists. "Level V Status" exists at any date if, at such date, (i) the Applicable Indebtedness is rated or has received an Implied Rating of BB+ or higher by or from S&P and Ba1 or higher by or from Moody's and (ii) none of Level I Status, Level II Status, Level III Status or Level IV Status exists. "Level VI Status" exists at any date if, at such date, no other Status exists. "Moody's" means Moody's Investors Service, Inc. "S&P" means Standard & Poor's Corporation. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date. The credit ratings to be utilized for purposes of this Schedule are those assigned to senior unsecured long-term debt securities without third-party credit enhancement, and except as set forth in the definition of "Implied Rating" any rating assigned to any other debt security shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. If no Implied Rating is in effect, Status shall be determined as a function of the leverage ratio described in Section 9.08, with appropriate levels and related mechanics to be agreed by the Company and each of the Lenders. 2 Exhibit 11.1 RPM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPUTATIONS OF EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENTS EQUIVALENTS Exhibit XI (In thousands except per share amounts)
Year End --------------------1996 19 ----------(Res Net Income - ---------Net income applicable to common shares for primary earnings per share Add back interest net of tax on convertible securities assumed to be converted

$ 68,929

$ 62

4,982 --------

4 ----

Net income applicable to common shares for fully-diluted earnings per share

$ 73,911 ========

$ 67 ====

Shares Outstanding - -----------------For computation of primary earnings per common share Weighted average shares Net issuable common share equivalents

76,166 382 -------

73 ---

Total shares for primary earnings per share

76,548

73

Exhibit 11.1 RPM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPUTATIONS OF EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENTS EQUIVALENTS Exhibit XI (In thousands except per share amounts)
Year End --------------------1996 19 ----------(Res Net Income - ---------Net income applicable to common shares for primary earnings per share Add back interest net of tax on convertible securities assumed to be converted

$ 68,929

$ 62

4,982 --------

4 ----

Net income applicable to common shares for fully-diluted earnings per share

$ 73,911 ========

$ 67 ====

Shares Outstanding - -----------------For computation of primary earnings per common share Weighted average shares Net issuable common share equivalents

76,166 382 -------

73 ---

Total shares for primary earnings per share For computation of fully-diluted earnings per common share Additional shares of issuable common share equivalents assuming conversion of convertible securities Additional common share equivalents ending market value higher than average market value

76,548

73

9,767

9

112 -------

---

Total shares for fully-diluted earnings per share

86,427 =======

83 ===

Earnings Per Common Share And Common - -----------------------------------Share Equivalents ----------------Earnings Per Common Share Assuming Full - --------------------------------------Dilution --------

$.90 ====

$.8 ===

$.86 ====

$.8 ===

Exhibit 13.1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RPM, Inc. and Subsidiaries

Exhibit 13.1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RPM, Inc. and Subsidiaries RESULTS OF OPERATIONS FISCAL 1996 COMPARED TO FISCAL 1995 The Company acquired TCI, Inc. on January 12, 1996 on a pooling-of-interests basis. TCI is a leading manufacturer of powdered coatings with annual sales of approximately $20 million. Powdered coatings are the fastest growing line of the paint and coatings industry and TCI is evidence of this fact, having achieved a 53% compounded annual growth rate during the past five years. Prior years' results have been restated to reflect this pooling [Refer to Note A]. Dryvit Systems, Inc. was acquired on September 21, 1995. Dryvit, with annual sales of approximately $75 million, is the leading North American manufacturer of exterior insulating and finishing systems [EIFS], used in the construction and renovation of commercial buildings and increasingly on homes. The acquisition of Dryvit and several smaller businesses this year, plus that of Rust-Oleum Corporation on June 28, 1994, accounted for approximately two-thirds of the 1996 sales increase. The Company's existing operations generated the balance of sales growth from a combination of pricing adjustments, that averaged approximately 2% year-to-year, and higher unit volume. Exchange rate differences and several small product line additions had a slight, yet positive effect on sales. The Company's gross profit margin improved to 42.8% from 42.7% a year ago. Strength in certain industrial lines, most notably floorings, coupled with leveraged purchasing of significant materials, resulted in improved overall margins among the industrial businesses. In addition, the recent acquisitions combined have comparatively higher gross profit margins. These positive effects on margin were partly offset by certain higher material costs among primarily the consumer lines. Raw material price increases have somewhat stabilized and the Company is confident that any further increases will continue to be effectively managed. Selling, general and administrative expenses remained at 30% of sales this year. The Company had initiated an expense reduction campaign during the second quarter of 1996 in consideration of the slower than planned sales growth. During this past year, the Company disposed of certain assets and businesses that no longer conformed to management's long-term objectives. The net gains that resulted were offset by costs associated with several product line discontinuations. Interest expense increased $5.6 million in 1996, reflecting primarily the indebtedness associated with RustOleum, Dryvit and other acquisitions with the balance attributable to comparatively higher interest rates and the LYONs [Refer to Note B] interest accretion. Debt reductions of approximately $30 million during the past year and slightly higher interest income reduced net interest expense comparatively. The tax attributes of TCI, prior to acquisition, had historically passed through to its respective shareholders as a Subchapter S Corporation. Consequently, on a restatement basis, last year's provision for income taxes appears as a lower percentage of pre-tax income than this year's from the effects of this pooling. Upward pressures on the tax rate from revised tax laws, continual upward trends in state and local taxes, and unfavorable tax treatment of certain acquisition related expenses were effectively mitigated through generally improved operations throughout Europe where previous tax disadvantaged losses were significantly reduced or eliminated [Refer to Note I for geographic breakout of results of operations]. The Company's environmental obligations continue to be appropriately addressed and, based upon the latest available information, it is not anticipated that the outcome of such matters will materially affect the Company's results of operations or financial position. However, such costs could be material to results of operations in a

future period [Refer to Note H]. The Company's European and other foreign sales and results of operations are subject to the impact of foreign currency fluctuations. Since most of the Company's foreign operations are in Belgium, and the Belgian franc has been a fairly stable currency in relation to the majority of other currencies in which those operations transact business, this effect has been minimal. In addition, foreign debt is denominated in the respective foreign currency thereby eliminating any related translation impact on earnings. The Company's earnings per share this year were affected by the averaging of Company shares issued in connection with the Dryvit acquisition [more fully described in Capital Resources and Liquidity-Financing Activities]. As a result, a 10% increase in earnings this year equates to a 6% increase in earnings per share. Previously reported per share data has been restated to reflect the 25% stock dividend issued December 8, 1995. Subsequent to year-end, on June 13, 1996, the Company completed its acquisition of Okura Holdings, Inc., Dallas, Texas. With sales of approximately $35 million, Okura is a leading global manufacturer of molded and pultruded fiberglass reinforced plastic grating products, used for pedestrian walkways, platforms, staircases and similar types of industrial structures. Okura has posted a strong growth record under the leading brand names Fibergrate and Chemgrate. Okura offers the Company an attractive opportunity to capitalize on market, product and customer synergies. This acquisition is not expected to be dilutive in 1997. FISCAL 1995 COMPARED TO FISCAL 1994 On June 28, 1994, the Company acquired Rust-Oleum Corporation, the leading North American producer of consumer rust-preventative coatings. Nearly two-thirds of Rust-Oleum sales are consumer products and the balance industrial, both complementing the Company's existing product lines. Rust-Oleum accounted for $139 million, or approximately 70%, of the $205 million sales increase. The Com-pany's existing operations generated the balance of sales growth mainly from higher unit volume, approximately two-thirds industrial and the balance consumer. Pricing adjustments were somewhat more in 1995 than in the recent past to compensate for nearly universal supplier cost increases, averaging less than 3%. Exchange rate differences and several small product line additions had a slight, yet positive effect on sales. The Company's gross profit margin strengthened during 1995 to 42.7% from 41.5% in 1994. This improvement reflects Rust-Oleum's higher gross profit margin, positive shifts in product mix, and the benefit of increased sales volume among the existing businesses. Management was able to effectively control a number of raw material and packaging cost increases through the leverage of combined purchasing of significant materials, pricing adjustments where necessary, and product reformulations. 20

Selling, general and administrative expenses increased to 30.0% of sales from 29.1% the previous year as a result of Rust-Oleum's higher percentage in this category plus related acquisition expenses. Higher sales volume and increased joint venture income had slightly offsetting favorable effects. Interest expense increased $10.8 million from indebtedness associated with the Rust-Oleum acquisition. Slightly higher interest rates and the LYONs [Refer to Note B] interest accretion added to interest expense in 1995, while the 1994 Eurobond conversion, debt refinancing in both years and debt reductions totaling nearly $40 million during 1995 reduced interest expense comparatively. The tax attributes of TCI, acquired during 1996, and those of Dynatron/Bondo and Stonhard, acquired during 1994, had historically passed through to the respective shareholders as Subchapter S Corporations. Consequently, the restated 39.7% provision for income taxes in 1994 [Refer to Note C] was comparably low. As a result and as expected, the 1995 effective tax rate increased from the reported 1994 rate, to 42.3%. This higher rate was driven by revised tax laws, certain foreign tax loss carryforwards, continuing upward trends in state and local taxes, and unfavorable tax treatment of certain acquisition related expenses. As a result of the expenses associated with the acquisition of Rust-Oleum and the tax rate differences discussed above, the Company's net income margin declined to 6.1% from 6.5% in 1994. Rust-Oleum contributed

Selling, general and administrative expenses increased to 30.0% of sales from 29.1% the previous year as a result of Rust-Oleum's higher percentage in this category plus related acquisition expenses. Higher sales volume and increased joint venture income had slightly offsetting favorable effects. Interest expense increased $10.8 million from indebtedness associated with the Rust-Oleum acquisition. Slightly higher interest rates and the LYONs [Refer to Note B] interest accretion added to interest expense in 1995, while the 1994 Eurobond conversion, debt refinancing in both years and debt reductions totaling nearly $40 million during 1995 reduced interest expense comparatively. The tax attributes of TCI, acquired during 1996, and those of Dynatron/Bondo and Stonhard, acquired during 1994, had historically passed through to the respective shareholders as Subchapter S Corporations. Consequently, the restated 39.7% provision for income taxes in 1994 [Refer to Note C] was comparably low. As a result and as expected, the 1995 effective tax rate increased from the reported 1994 rate, to 42.3%. This higher rate was driven by revised tax laws, certain foreign tax loss carryforwards, continuing upward trends in state and local taxes, and unfavorable tax treatment of certain acquisition related expenses. As a result of the expenses associated with the acquisition of Rust-Oleum and the tax rate differences discussed above, the Company's net income margin declined to 6.1% from 6.5% in 1994. Rust-Oleum contributed approximately a third of the earnings increase in 1995. CAPITAL RESOURCES AND LIQUIDITY CASH PROVIDED FROM OPERATIONS The Company generated cash from operations of $87 million in 1996, or $18 million more than net income for the year from non-cash expenses less growth-related increases in working capital. Cash flow from operations continues to be the primary source of financing the Company's internal growth. During 1995, the Company had embarked on a campaign to reduce its working capital requirements, and thereby generate additional cash flow. This program has produced positive results, evidenced by the decline in the current ratio from 2.8:1 to 2.5:1 this past year. Dryvit contributed to this improvement, having a relatively lower investment in working capital. Notably, there had been a significant one-time reduction of working capital at Rust-Oleum upon its acquisition in June 1994, without which cash generation from operations this year would have exceeded that of last year to a much greater extent. INVESTING ACTIVITIES The Company annually invests in capital expenditures primarily to improve production and distribution efficiency and capacity. Such expenditures generally do not exceed depreciation and amortization in a given year. Capital expenditures amounted to $33 million in 1996 compared with depreciation and amortization of $43 million. The investment of $45.4 million in businesses this year reflects primarily the cash portion of Dryvit, along with several smaller acquisitions, net of cash acquired. The Company historically has acquired complementary businesses and this trend is expected to continue. The Company's captive insurance company generates trades in marketable securities in the ordinary course of conducting its operations and this activity will continue. The Company divested a small business and certain assets during 1996, as previously discussed under Results of Operations. FINANCING ACTIVITIES On June 15, 1995 the Company issued and sold $150 million [aggregate principal] of 7% senior unsecured notes due 2005. The total net proceeds of this offering were used to reduce the $190 million balance of the Company's $300 million revolving credit agreement to $40 million. The Company thereafter reduced the limit of its revolving credit facility to $150 million and extended its final maturity to 2000. The Company completed the acquisition of Dryvit Systems, Inc. on September 21, 1995 for approximately $32 million in cash, the retirement of approximately $14.5 million of Dryvit's existing long-term debt, and the issuance of 4 million

[restated for the December 8, 1995 stock split] Company shares. The Company's revolving credit facility was utilized for the cash and debt retirement portions of this transaction. This instrument had an outstanding balance of $82 million at May 31, 1996, having been reduced by nearly $30 million during 1996 through cash provided from operations, after exchange rate differences and net of the uses of this facility for acquisitions. Interest accretion on the LYONs issue added $8.7 million to long-term debt during 1996. LYONs interest to be accreted in 1997 will be $9.1 million. As a result of the above transactions, the Company's debt to capital ratio improved to 50% at May 31, 1996 from 54% a year ago. The acquisition of Okura, subsequent to year-end, was financed through the Company's revolving credit agreement. The Company has since renegotiated this facility to $250 million and extended its final maturity to 2001. The Company maintains excellent relations with its banks and other financial institutions to further enable the financing of future growth opportunities. 21 CONSOLIDATED BALANCE SHEETS RPM, Inc. and Subsidiaries (In thousands, except per share amounts)
MAY 31 -----1996 ---(Resta ASSETS CURRENT ASSETS Cash and short-term investments (Note A) Marketable securities, at cost (Note A) Trade accounts receivable (less allowances of $9,993 in 1996 and $9,813 in 1995) Inventories (Note A) Prepaid expenses and other current assets TOTAL CURRENT ASSETS PROPERTY, PLANT AND EQUIPMENT, AT COST (NOTE A) Land Buildings and leasehold improvements Machinery and equipment 20,969 143,478 235,133 ----------399,580 174,920 ----------224,660 ----------18 131 212 ---363 157 ---206 ---19,855 14,422 231,560 178,929 20,360 ----------465,126 ----------$ $ 19 8 209 170 16 ---425 ----

Less allowance for depreciation and amortization PROPERTY, PLANT AND EQUIPMENT, NET OTHER ASSETS Cost of businesses over net assets acquired, net of amortization (Note A) Other intangible assets, net of amortization (Note A) Equity in unconsolidated affiliates Other TOTAL OTHER ASSETS TOTAL ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable Current portion of long-term debt (Note B) Accrued compensation and benefits Accrued loss reserves (Note H) Other accrued liabilities Income taxes payable (Notes A and C)

268,492 159,798 16,623 20,377 ----------465,290 ----------$ 1,155,076 -----------

211 85 14 21 ---333 ---$965 ----

85,874 1,747 29,678 33,731 26,910 11,464 -----------

$

$ 71 1 30 23 20 6 ----

CONSOLIDATED BALANCE SHEETS RPM, Inc. and Subsidiaries (In thousands, except per share amounts)
MAY 31 -----1996 ---(Resta ASSETS CURRENT ASSETS Cash and short-term investments (Note A) Marketable securities, at cost (Note A) Trade accounts receivable (less allowances of $9,993 in 1996 and $9,813 in 1995) Inventories (Note A) Prepaid expenses and other current assets TOTAL CURRENT ASSETS PROPERTY, PLANT AND EQUIPMENT, AT COST (NOTE A) Land Buildings and leasehold improvements Machinery and equipment 20,969 143,478 235,133 ----------399,580 174,920 ----------224,660 ----------18 131 212 ---363 157 ---206 ---19,855 14,422 231,560 178,929 20,360 ----------465,126 ----------$ $ 19 8 209 170 16 ---425 ----

Less allowance for depreciation and amortization PROPERTY, PLANT AND EQUIPMENT, NET OTHER ASSETS Cost of businesses over net assets acquired, net of amortization (Note A) Other intangible assets, net of amortization (Note A) Equity in unconsolidated affiliates Other TOTAL OTHER ASSETS TOTAL ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable Current portion of long-term debt (Note B) Accrued compensation and benefits Accrued loss reserves (Note H) Other accrued liabilities Income taxes payable (Notes A and C) TOTAL CURRENT LIABILITIES LONG - TERM LIABILITIES Long-term debt, less current maturities (Note B) Other long-term liabilities Deferred income taxes (Notes A and C) TOTAL LIABILITIES SHAREHOLDERS' EQUITY Common shares, stated value $.018 per share; authorized 100,000,000 shares, issued and outstanding 77,449,000; 73,302,000 in 1995 (Note D) Paid-in capital Cumulative translation adjustment (Note A) Retained earnings TOTAL SHAREHOLDERS' EQUITY TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY - -----------------------See Notes to Consolidated Financial Statements.

268,492 159,798 16,623 20,377 ----------465,290 ----------$ 1,155,076 -----------

211 85 14 21 ---333 ---$965 ----

85,874 1,747 29,678 33,731 26,910 11,464 ----------189,404

$

$ 71 1 30 23 20 6 ---153

447,654 14,375 57,810 ----------709,243 -----------

407 14 39 ---615 ----

1,410 215,019 (2,492) 231,896 ----------445,833 ----------$ 1,155,076 -----------

1 149 199 ---350 ---$965 ----

22 CONSOLIDATED STATEMENTS OF INCOME RPM, Inc. and Subsidiaries (In thousands, except per share amounts)
1996 ---YEAR ENDED MAY 31 ----------------1995 1994 ------(Restated) (Restated) $1,030,736 590,394 ---------440,342 309,069 22,781 ---------108,492 45,876 ---------$ 62,616 ---------73,660 ---------$ .85 ---------$ .81 ---------$ .44 ---------$825,292 482,658 -------342,634 239,861 13,566 -------89,207 35,454 -------$ 53,753 -------73,003 -------$ .74 -------$ .70 -------$ .41 --------

NET SALES Cost of sales Gross profit Selling, general and administrative expenses Interest expense, net Income before income taxes Provision for income taxes (Note C) NET INCOME Average shares outstanding (Note D) Earnings per common share and common share equivalents (Note D) Earnings per common share assuming full dilution (Note D) Cash dividends per common share

$1,136,396 649,819 ---------486,577 340,851 25,840 ---------119,886 50,957 ---------$ 68,929 ---------76,548 ---------$ .90 ---------$ .86 ---------$ .47 ----------

- -----------------------See Notes to Consolidated Financial Statements.

23

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY RPM, Inc. and Subsidiaries (In thousands, except per share amounts)
COMMON SHARES ------------NUMBER OF SHARES STATED (NOTE D) VALUE ------------68,356 $ 1,244 CUMULATIVE TRANSLATION ADJUSTMENT ---------$ (673)

BALANCE AT MAY 31, 1993 (RESTATED) Net income Dividends paid Sub S Corp. income Sub S Corp. distributions Stock option exercises Conversion of debt Translation adjustments BALANCE AT MAY 31, 1994 (RESTATED) Net income Dividends paid Sub S Corp. income Sub S Corp. distributions Business combinations Stock option exercises Translation adjustments BALANCE AT MAY 31, 1995 (RESTATED) Net income Dividends paid Sub S Corp. income Sub S Corp. distributions Business combinations

PAID-IN CAPITAL ------$ 97,390

94 4,595 -----73,045

1 84 ------1,329

3,290 (1,994) 566 48,466 -------147,718 (1,617) ------(2,290)

RETAI EARNI ----$147 53 (27 (3

135 122 -----73,302 (4)

3 2 ------1,334

1,517 (607) (252) 652 -------149,028 (78) 962 (1,067) 65,127 2,870 ------580

----169 62 (31 (1

----199 68 (35

4,000

73

CONSOLIDATED STATEMENTS OF INCOME RPM, Inc. and Subsidiaries (In thousands, except per share amounts)
1996 ---YEAR ENDED MAY 31 ----------------1995 1994 ------(Restated) (Restated) $1,030,736 590,394 ---------440,342 309,069 22,781 ---------108,492 45,876 ---------$ 62,616 ---------73,660 ---------$ .85 ---------$ .81 ---------$ .44 ---------$825,292 482,658 -------342,634 239,861 13,566 -------89,207 35,454 -------$ 53,753 -------73,003 -------$ .74 -------$ .70 -------$ .41 --------

NET SALES Cost of sales Gross profit Selling, general and administrative expenses Interest expense, net Income before income taxes Provision for income taxes (Note C) NET INCOME Average shares outstanding (Note D) Earnings per common share and common share equivalents (Note D) Earnings per common share assuming full dilution (Note D) Cash dividends per common share

$1,136,396 649,819 ---------486,577 340,851 25,840 ---------119,886 50,957 ---------$ 68,929 ---------76,548 ---------$ .90 ---------$ .86 ---------$ .47 ----------

- -----------------------See Notes to Consolidated Financial Statements.

23

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY RPM, Inc. and Subsidiaries (In thousands, except per share amounts)
COMMON SHARES ------------NUMBER OF SHARES STATED (NOTE D) VALUE ------------68,356 $ 1,244 CUMULATIVE TRANSLATION ADJUSTMENT ---------$ (673)

BALANCE AT MAY 31, 1993 (RESTATED) Net income Dividends paid Sub S Corp. income Sub S Corp. distributions Stock option exercises Conversion of debt Translation adjustments BALANCE AT MAY 31, 1994 (RESTATED) Net income Dividends paid Sub S Corp. income Sub S Corp. distributions Business combinations Stock option exercises Translation adjustments BALANCE AT MAY 31, 1995 (RESTATED) Net income Dividends paid Sub S Corp. income Sub S Corp. distributions Business combinations Stock option exercises Translation adjustments

PAID-IN CAPITAL ------$ 97,390

94 4,595 -----73,045

1 84 ------1,329

3,290 (1,994) 566 48,466 -------147,718 (1,617) ------(2,290)

RETAI EARNI ----$147 53 (27 (3

135 122 -----73,302 (4)

3 2 ------1,334

1,517 (607) (252) 652 -------149,028 (78) 962 (1,067) 65,127 1,047 -------(3,072) ------2,870 ------580

----169 62 (31 (1

----199 68 (35

4,000 151 ------

73 3 -------

-----

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY RPM, Inc. and Subsidiaries (In thousands, except per share amounts)
COMMON SHARES ------------NUMBER OF SHARES STATED (NOTE D) VALUE ------------68,356 $ 1,244 CUMULATIVE TRANSLATION ADJUSTMENT ---------$ (673)

BALANCE AT MAY 31, 1993 (RESTATED) Net income Dividends paid Sub S Corp. income Sub S Corp. distributions Stock option exercises Conversion of debt Translation adjustments BALANCE AT MAY 31, 1994 (RESTATED) Net income Dividends paid Sub S Corp. income Sub S Corp. distributions Business combinations Stock option exercises Translation adjustments BALANCE AT MAY 31, 1995 (RESTATED) Net income Dividends paid Sub S Corp. income Sub S Corp. distributions Business combinations Stock option exercises Translation adjustments BALANCE AT MAY 31, 1996 - ------------------------

PAID-IN CAPITAL ------$ 97,390

94 4,595 -----73,045

1 84 ------1,329

3,290 (1,994) 566 48,466 -------147,718 (1,617) ------(2,290)

RETAI EARNI ----$147 53 (27 (3

135 122 -----73,302 (4)

3 2 ------1,334

1,517 (607) (252) 652 -------149,028 (78) 962 (1,067) 65,127 1,047 -------$215,019 -------(3,072) ------$ (2,492) ------2,870 ------580

----169 62 (31 (1

----199 68 (35

4,000 151 -----77,449 ------

73 3 ------$ 1,410 -------

----$231 -----

See Notes to Consolidated Financial Statements.

24 CONSOLIDATED STATEMENTS OF CASH FLOWS RPM, Inc. and Subsidiaries (In thousands, except per share amounts)
YEAR EN ------1996 ---CASH FLOWS FROM OPERATING ACTIVITIES: (RESTATED) (RESTATED) Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization (Decrease) in deferred liabilities (Earnings) of unconsolidated affiliates Changes in assets and liabilities, net of effect from purchases and sales of businesses: Decrease (increase) in marketable securities (Increase) in accounts and notes receivable (Increase) in inventory (Increase) in prepaid and other assets Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Other $ 68,929 $ 62

42,562 (5,696) (2,120)

37 (2

212 (17,249) (4,441) (3,319) 9,808 (728) (935) --------87,023 --------(33,196) (45,375)

(10 (20 11 8 -----83 -----(28 (173

CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures Acquisition of new businesses, net of cash acquired

CONSOLIDATED STATEMENTS OF CASH FLOWS RPM, Inc. and Subsidiaries (In thousands, except per share amounts)
YEAR EN ------1996 ---CASH FLOWS FROM OPERATING ACTIVITIES: (RESTATED) (RESTATED) Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization (Decrease) in deferred liabilities (Earnings) of unconsolidated affiliates Changes in assets and liabilities, net of effect from purchases and sales of businesses: Decrease (increase) in marketable securities (Increase) in accounts and notes receivable (Increase) in inventory (Increase) in prepaid and other assets Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Other $ 68,929 $ 62

42,562 (5,696) (2,120)

37 (2

212 (17,249) (4,441) (3,319) 9,808 (728) (935) --------87,023 --------(33,196) (45,375) (17,453) 10,951 1,571 (1,663) 11,666 --------(73,499) --------227,785 (205,595) (36,743) 1,050 --------(13,503) --------21 19,834 --------$ 19,855 ---------

(10 (20 11 8 -----83 -----(28 (173 (7 6 1

CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures Acquisition of new businesses, net of cash acquired Payments for the purchase of marketable securities Proceeds from maturities or redemptions of marketable securities Distribution from joint ventures Investments in joint ventures Proceeds from sale of assets and businesses

-----(202 -----251 (99 (31

CASH FLOWS FROM FINANCING ACTIVITIES: Additions to long-term debt Reductions of long-term and short-term debt Cash dividends/distributions paid Exercise of stock options Other

NET INCREASE (DECREASE) IN CASH CASH AT BEGINNING OF YEAR CASH AT END OF YEAR SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest Income taxes SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Conversion from debt to equity Interest accreted on LYONs Common shares issued for acquisition - ----------------------------See Notes to Consolidated Financial Statements.

-----120 -----1 18 -----$ 19 ------

$

14,369 59,277

$

15 42

8,666 65,200 ---------

8 ------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MAY 31, 1996, 1995 AND 1994 RPM, Inc. and Subsidiaries NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. PRINCIPLES OF CONSOLIDATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MAY 31, 1996, 1995 AND 1994 RPM, Inc. and Subsidiaries NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of RPM, Inc. and its majority owned domestic and foreign subsidiaries. The Company accounts for its investment in less than majority owned joint ventures under the equity method. Income and distributions recognized from Subchapter S Corporations are solely a result of the Company's acquisitions of these subsidiaries on a pooling-of-interests basis. Intercompany accounts, transactions and unrealized profits and losses are eliminated in consolidation. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. 2. BUSINESS COMBINATIONS During the two year period ended May 31, 1996, the Company completed several acquisitions. As reported last year, on June 28, 1994, the Company acquired all the outstanding shares of Rust-Oleum Corporation. Rust-Oleum manufactures and markets primarily rust-preventative coatings for the consumer market. On August 10, 1995, the Company acquired all of the outstanding shares of Star Finishing Products. Located in Illinois, Star manufactures and sells furniture finishes. On September 21, 1995, the Company acquired all of the outstanding shares of Dryvit Systems, Inc. Dryvit, based in Rhode Island, manufactures and sells exterior insulation and finishing systems used in the construction and renovation of both commercial and residential properties. These acquisitions as well as several small product line acquisitions have been accounted for by the purchase method of accounting and the difference of approximately $70,000,000 between the fair value of net assets acquired and the purchase consideration of $119,500,000 ($52,500,000 in cash, $1,800,000 in notes and 4,000,000 of the Company's shares) has been allocated to goodwill. The assets, liabilities and operating results of these companies are reflected in the Company's financial statements from their respective dates of acquisition forward. The following data summarizes, on an unaudited pro-forma basis, the combined results of operations of the Company and the busi-nesses acquired accounted for by the purchase method for the two years ended May 31, 1996. The pro-forma amounts give effect to appropriate adjustments resulting from the combination, but are not necessarily indicative of future results of operations or of what results would have been for the combined companies.
YEAR ENDED MAY 31 1996 1995 ------------------(Unaudited) (In thousands, except per share amounts) $1,165,396 $1,126,107 ------------------$ 68,091 $ 60,828 ------------------$ .88 $ .78 ------------------$ .83 $ .75 -------------------

Net sales Net income Earnings per common share and common share equivalent Earnings per common share assuming full dilution

In addition, on January 12, 1996, the Company acquired all the outstanding shares of TCI, Inc., a manufacturer of powdered coatings located in Ellaville, Georgia in exchange for 2,106,000 shares of the Company's common stock. This acquisition has been accounted for as a pooling-of-interests. Accordingly, historical financial data

presented in this report has been restated to include the accounts and transactions of TCI, Inc. as though TCI was acquired as of June 1, 1993. The following table reconciles combined net sales and net income of the separate companies for the two years ended May 31, 1995 and the nine months ended February 29, 1996:
JUNE 1, 1995 THROUGH FEBRUARY 29,1996 ---------------NET SALES (In thousands) RPM, Inc. $807,158 TCI, Inc. 12,355 -------Combined $819,513 -------NET INCOME (In thousands) RPM, Inc. TCI, Inc. Combined $ 43,040 1,258 -------$ 44,298 -------YEAR ENDED MAY 31 1995 1994 ---------------$1,016,954 13,782 ---------$1,030,736 ---------$815,598 9,694 -------$825,292 --------

$

61,099 1,517 ---------$ 62,616 ----------

$ 52,640 1,113 -------$ 53,753 --------

3. FOREIGN CURRENCY For the periods presented, assets and liabilities have been translated using exchange rates prevailing at year end. Income and expense for the periods have been translated using an average exchange rate. The resulting translation adjustments have been recorded in shareholders' equity and will be included in net earnings only upon the sale or liquidation of the underlying foreign investment, which is not contemplated at this time. Transaction gains and losses have been immaterial during the past three fiscal years. 4. CASH AND SHORT-TERM INVESTMENTS For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The Company does not believe it is exposed to any significant credit risk on cash and short-term investments. 5. MARKETABLE SECURITIES Marketable securities are included in the accompanying consolidated balance sheets at cost, which approximates market. 6. INVENTORIES Inventories are stated at the lower of cost or market, cost being determined substantially on a first-in, first-out (FIFO) basis and market being determined on the basis of replacement cost or net realizable value. Inventory costs include raw material, labor and manufacturing overhead. Inventories were composed of the following major classes:
MAY 31 (IN THOUSANDS) 1996 1995 - --------------------------------------------------------Raw materials and supplies $ 64,995 $ 60,385 Finished goods 113,934 110,535 --------------Total inventory $178,929 $170,920 ---------------

26

7. DEPRECIATION Depreciation is computed over the estimated useful lives of the assets primarily using the straight-line method. The

7. DEPRECIATION Depreciation is computed over the estimated useful lives of the assets primarily using the straight-line method. The annual depreciation rates are based on the following ranges of useful lives:
Land improvements Buildings and improvements Machinery and equipment 5 to 25 years 10 to 50 years 3 to 20 years

8. INTANGIBLES The excess of cost over the underlying value of the net assets of companies acquired is being amortized on the straight-line basis, primarily over 40 years. Amortization expense charged to operations for the three years ended May 31, 1996 was $7,562,000, $5,888,000 and $3,688,000, respectively. Cost of businesses over net assets acquired is shown net of accumulated amortization of $33,079,000 at May 31, 1996 ($26,630,000 at May 31, 1995). Intangible assets also represent costs allocated to formulae, trademarks, tradenames and other specifically identifiable assets arising from business acquisitions. These assets are being amortized using the straight-line method over periods of 10 to 40 years. The Company assesses the recoverability of the excess of cost over the assigned value of net assets acquired by determining whether the amortization of the balance over its remaining life can be recovered through undiscounted future operating cash flows of the acquired operations. Amortization expense charged to operations for the three years ended May 31, 1996, was $7,553,000, $4,991,000 and $1,142,000, respectively. Other intangible assets were composed of the following major classes:
MAY 31 (IN THOUSANDS) - --------------------Trademarks Formulae Other 1996 ---$ 65,530 62,995 51,706 ------180,231 20,433 ------$159,798 ------1995 ---$ 37,436 35,120 25,759 ------98,315 12,940 ------$ 85,375 -------

Accumulated amortization Other intangible assets, net

9. RESEARCH AND DEVELOPMENT Research and development costs are charged to operations when incurred and are included in operating expenses. The amounts charged for the three years ended May 31, 1996, were $13,712,000, $12,337,000 and $11,081,000, respectively. The customer sponsored portion of such expenditures was not significant. 10. INTEREST EXPENSE, NET Interest expense is shown net of investment income which consists of interest and dividends. Investment income for the three years ended May 31, 1996 was $2,005,000, $1,739,000 and $856,000, respectively. 11. INCOME TAXES The Company and its wholly owned domestic subsidiaries file a consolidated federal income tax return. The tax effects of transactions are recognized in the year in which they enter into the determination of net income, regardless of when they are recognized for tax purposes. As a result, income tax expense differs from actual taxes payable. The accumulation of these differences at May 31, 1996, is shown as a noncurrent liability of $57,810,000 (net of a noncurrent asset of $29,366,000). At May 31, 1995, the noncurrent liability was $39,812,000 (net of a noncurrent asset of $11,396,000). The Company does not intend to distribute the

accumulated earnings of consolidated foreign subsidiaries amounting to $31,826,000 at May 31, 1996, and $26,347,000 at May 31, 1995, and therefore no provision has been made for the taxes which would result if such earnings were remitted to the Company. 12. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE B - BORROWINGS A description of long-term debt follows:
MAY 31 - -----$400 million face value at maturity Liquid Yield Option Notes (LYONs) due 2012. The 5.25% LYONs are zero coupon (In thousands) subordinated notes currently convertible at $17.57 ($16.68 at May 31, 1995) and are redeemable by the holder for the issuance price plus accrued original issue discount in September 1997, 2002 and 2007. There are 9,767,000 shares reserved for the conversion of this debt. Revolving credit agreement for $150,000,000 ($300,000,000 at May 31, 1995) with nine banks through August 2, 2000. Interest, which is tied to one of various rates, was 5.87% at May 31, 1996. The Chairman of the Board and Chief Executive Officer of the Company is a director of one of the banks providing this facility. 7% unsecured senior notes due June 15, 2005, the proceeds of which were used to reduce the credit agreement described above. Multi-currency revolving credit agreement for $45,000,000 with a bank through December 14, 1998. Interest, which is tied to one of various rates, averaged 3.14% on the $14,667,000 Dutch Guilder component and 3.71% on the $14,500,000 Belgian Franc component at May 31, 1996. 6.75% unsecured senior notes due to an insurance company in annual installments from 1997 through 2003. Other notes and mortgages payable at various rates of interest due in installments through 2005, substantiallysecured by property. 1996 ---(In tho

$171,589 $

82,000

150,000

29,167

12,000

4,645 ------449,401 1,747 ------$447,654 $ -------

Less current portion Total long-term debt, less current maturities - ----------------------------------Additionally, at May 31, 1996, the Company had an unused short-term line of credit with a bank for $30,000,000. The aggregate maturities of long-term debt for the five years subsequent to May 31, 1996, are as follows: 1997 - $1,747,000; 1998 - $2,922,000; 1999 $31,974,000; 2000 - $2,087,000; 2001 - $83,889,000.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MAY 31, 1996, 1995 AND 1994 RPM, Inc. and Subsidiaries Note C - Taxes The provision for taxes on income includes the following:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MAY 31, 1996, 1995 AND 1994 RPM, Inc. and Subsidiaries Note C - Taxes The provision for taxes on income includes the following:
YEAR ENDED MAY 31 (IN THOUSANDS) - -------------------------------Federal income tax rate of 35% applied to income before income taxes Increase (decrease) in taxes resulting from: Tax credits State and local taxes - Net of Federal income tax benefit Foreign taxes in excess of U.S. Federal tax rate Permanent differences between tax and book basis, related to acquisitions Difference between tax and book income, related to pooled entities All other items, none of which exceed 5% of computed tax Actual tax expense Actual tax rate The provision for income taxes consists of the following: Current Federal State Foreign 1996 ---$ 41,960 (585) 5,323 500 3,411 (404) 752 -----$ 50,957 -----42.50% -----1995 --$ 37,972 (411) 4,870 1,440 1,880 (572) 697 -----$ 45,876 -----42.29% ------

$ 43,992 8,189 4,473 -----56,654 (5,814) 117 -----$ 50,957 ------

$ 34,292 7,492 4,789 -----46,573 (809) 112 -----$ 45,876 ------

Deferred Federal Foreign Actual tax expense

Deferred income taxes result from timing differences in recognition of revenue and expense for book and tax purposes, primarily from the tax timing differences relating to business combinations. NOTE D - COMMON SHARES There are 100,000,000 common shares authorized with a stated value of $.018 per share. At May 31, 1996 and 1995, there were 77,449,000 and 73,302,000 shares outstanding respectively, each of which is entitled to one vote. Share data for May 31, 1995 and May 31, 1994, has been re-stated to reflect a 25% stock dividend in December 1995 and the acquisition of TCI, Inc. in which 2,106,000 common shares were exchanged for all of the outstanding shares of TCI in a transaction accounted for as a pooling of interests. See consolidated statements of shareholders' equity for more information. Earnings per share are based on the weighted average number of common shares and common share equivalents outstanding during each year (76,548,000 in 1996, 73,660,000 in 1995 and 73,003,000 in 1994). In computing such average number of shares outstanding, the number of common shares was increased by common stock options with exercisable prices lower than the average market prices of common shares during each year and reduced by the number of shares assumed to have been purchased with the proceeds from the exercise of the options. The Company has options outstanding under two stock option plans: the 1979 Nonqualified Stock Option Plan, which, prior to its expiration in September 1989, provided for the granting of options for up to 2,104,000 shares; and the 1989 Stock Option Plan, which provides for the granting of options for up to 3,516,000 shares at a price equal to the fair market value at the date of grant. These options are exercisable cumulatively in equal annual installments commencing one year from the grant date and have expiration dates ranging from September 1997 to October 2005. At May 31, 1996, 1,177,000 shares (1,791,000 May 31, 1995) were available for future grant. The Company does not expect to adopt the recognition provisions of the recently issued SFAS No. 123 "Accounting for Stock-Based Compensation." Disclosures required by the new accounting standard will be

included in future financial statements pursuant to the effective date criteria. 28

Transactions during the two years are summarized as follows:
SHARES UNDER OPTION (IN THOUSANDS) - ---------------------------------Outstanding, beginning of year Granted during the year Expired during the year Exercised during the year (at prices ranging from $5.40 to $15.40 per share) Outstanding, end of year (at an average price of $12.97 ranging from $5.48 to $15.80 per share) Exercisable, end of year (at an average price of $10.89 ranging from $5.48 to $15.40 per share) 1,087 ----935 ----1996 ---1,828 614 (33) (164) ----1995 ---1,565 452 (29) (160) -----

2,245 -----

1,828 -----

NOTE E - LEASES At May 31, 1996, certain property, plant and equipment were leased by the Company under long-term leases. Certain of these leases provide for increased rental based upon an increase in the cost-of-living index. Future minimum lease commitments as of May 31, 1996, for all noncancellable leases are as follows:
MAY 31 (IN THOUSANDS) - --------------------$3,982 3,045 1,753 785 545 478 -----Total minimum lease commitments $10,588 -----1997 1998 1999 2000 2001 Thereafter

Rental expenses for all operating leases totalled $6,614,000 in 1996, $6,290,000 in 1995 and $5,185,000 in 1994. Capitalized leases were insignificant for the three year period ended May 31, 1996. NOTE F - RETIREMENT PLANS To provide uniform retirement income for its non-union employees, the Company has a defined benefit retirement plan in which substantially all non-union employees participate. The Retirement Plan is a non-contributory plan fully paid for by the Company, with accrued benefits vesting after five years of service. This plan provides benefits that are based on years of service and average compensation. Benefits for union employees are provided by separate plans and are generally based on years of service. The Company's funding policy is to contribute annually an amount that can be deducted for federal income tax purposes using a different actuarial cost method and different assumptions from those used for financial reporting. The net periodic pension cost for the three years ended May 31, 1996, included the following components:
MAY 31 (IN THOUSANDS) - --------------------Service cost - Benefits 1996 ---1995 ---1994 ----

Transactions during the two years are summarized as follows:
SHARES UNDER OPTION (IN THOUSANDS) - ---------------------------------Outstanding, beginning of year Granted during the year Expired during the year Exercised during the year (at prices ranging from $5.40 to $15.40 per share) Outstanding, end of year (at an average price of $12.97 ranging from $5.48 to $15.80 per share) Exercisable, end of year (at an average price of $10.89 ranging from $5.48 to $15.40 per share) 1,087 ----935 ----1996 ---1,828 614 (33) (164) ----1995 ---1,565 452 (29) (160) -----

2,245 -----

1,828 -----

NOTE E - LEASES At May 31, 1996, certain property, plant and equipment were leased by the Company under long-term leases. Certain of these leases provide for increased rental based upon an increase in the cost-of-living index. Future minimum lease commitments as of May 31, 1996, for all noncancellable leases are as follows:
MAY 31 (IN THOUSANDS) - --------------------$3,982 3,045 1,753 785 545 478 -----Total minimum lease commitments $10,588 -----1997 1998 1999 2000 2001 Thereafter

Rental expenses for all operating leases totalled $6,614,000 in 1996, $6,290,000 in 1995 and $5,185,000 in 1994. Capitalized leases were insignificant for the three year period ended May 31, 1996. NOTE F - RETIREMENT PLANS To provide uniform retirement income for its non-union employees, the Company has a defined benefit retirement plan in which substantially all non-union employees participate. The Retirement Plan is a non-contributory plan fully paid for by the Company, with accrued benefits vesting after five years of service. This plan provides benefits that are based on years of service and average compensation. Benefits for union employees are provided by separate plans and are generally based on years of service. The Company's funding policy is to contribute annually an amount that can be deducted for federal income tax purposes using a different actuarial cost method and different assumptions from those used for financial reporting. The net periodic pension cost for the three years ended May 31, 1996, included the following components:
MAY 31 (IN THOUSANDS) - --------------------Service cost - Benefits earned during the period Interest cost on projected benefit obligations Actual return on 1996 ---1995 ---1994 ----

$ 3,086 4,428

$ 3,524 2,533

$ 2,750 2,171

Actual return on plan assets Net amortization and deferral Net pension cost

(7,367) 3,946 ----$ 4,093 -----

1,753 (3,540) ----$ 4,270 -----

(1,678) (514) ----$ 2,729 -----

The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations were 7.75% (8.5% for May 31, 1995) and 5%, respectively. The expected long-term rate of return on assets was 8.5%. The plans' assets consist primarily of stocks, bonds and fixed income securities. The following table sets forth the funded status of the Company's pension plans and the amounts reflected in the accompanying balance sheets:
MAY 31 (IN THOUSANDS) - --------------------Actuarial present value of projected benefit obligation: Vested employees Nonvested employees Accumulated benefit obligation Additional amount related to projected salary increases Total projected benefit obligation Funded assets at fair value Projected benefit obligation in excess of assets Unamortized net asset existing at date of adoption Unrecognized prior service cost Unrecognized net loss Accrued pension cost 1996 ---1995 ----

$ 45,706 2,206 -----47,912 10,293 -----58,205 50,154 -----(8,051) (518) 769 4,603 -----$ (3,197) ------

$ 41,970 1,359 -----43,329 7,297 -----50,626 41,542 -----(9,084) (586) 731 3,994 -----$ (4,945) ------

Some subsidiaries contribute to multi-employer defined benefit plans for their collective bargaining groups. Contributions to these plans were immaterial for the three year period ended May 31, 1996. In addition, the Company maintains a non-contributory 401(k) Plan for substantially all non-union employees in the United States. 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MAY 31, 1996, 1995 AND 1994 RPM, Inc. and Subsidiaries NOTE G - POSTRETIREMENT HEALTH CARE BENEFITS In addition to the defined benefit pension plan, the Company also provides health care benefits to certain of its retired employees through unfunded plans. Employees become eligible for these benefits if they meet minimum age and service requirements. The components of this expense for the three years ended May 31, 1996 were as follows:
MAY 31 (IN THOUSANDS) - --------------------Service cost - Benefits earned during the period Interest cost on the accumulated obligation 1996 ---1995 ---1994 ----

$

4 673

$ 47 763

$-199

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MAY 31, 1996, 1995 AND 1994 RPM, Inc. and Subsidiaries NOTE G - POSTRETIREMENT HEALTH CARE BENEFITS In addition to the defined benefit pension plan, the Company also provides health care benefits to certain of its retired employees through unfunded plans. Employees become eligible for these benefits if they meet minimum age and service requirements. The components of this expense for the three years ended May 31, 1996 were as follows:
MAY 31 (IN THOUSANDS) - --------------------Service cost - Benefits earned during the period Interest cost on the accumulated obligation Net amortization Net periodic post-retirement expense 1996 ---1995 ---1994 ----

$

4

$ 47 763 20 --$830 ---

$-199 ---$199 ---

673 (113) --$ 564 ---

The accumulated post-retirement obligation recognized on the May 31, 1996 and May 31, 1995 balance sheets are comprised of the following components:
MAY 31 (IN THOUSANDS) - --------------------Current retirees Future retirees Unrecognized net gain (loss) Accumulated post-retirement benefit obligation 1996 ---$8,231 798 595 ----$9,624 ----1995 ---$ 8,385 1,427 (315) ----$ 9,497 -----

A 7.75% (8.5% at May 31, 1995) discount rate was used in determining the accumulated post-retirement benefit obligation. A 12% increase in the cost of covered health care benefits was assumed for fiscal 1996, except for one subsidiary where a 9% rate was assumed. This trend rate in all cases is assumed to decrease incrementally to 5% after several years and remain at that level thereafter except for various union plans which will cap at alternate benefit levels. A 1% increase in the health care costs trend rate would have increased the accumulated postretirement benefit obligation as of May 31, 1996 by $694,000 and the net post-retirement expense by $54,000. NOTE H - CONTINGENCIES AND LOSS RESERVES Accrued loss reserves consisted of the following classes:
MAY 31 (IN THOUSANDS) - --------------------Accrued product liability reserves Accrued environmental reserves Accrued warranty reserves Other Accrued loss reserves 1996 ---$15,429 5,546 10,364 2,392 -----$33,731 -----1995 ---$13,485 5,554 2,401 2,457 -----$23,897 ------

The Company, through its wholly-owned insurance subsidiary, provides certain insurance coverages, primarily product liability, to the Company's other domestic subsidiaries. Excess coverage is provided by outside carriers. The Company has provided the reserves reflected above to provide for these losses as well as other uninsured

claims. In addition, the Company, like others in similar businesses, is involved in several proceedings relating to environmental matters. It is the Company's policy to accrue remediation costs when it is probable that such efforts will be required and the related costs can be reasonably estimated. These liabilities are undiscounted and do not take into consideration any possible recoveries of future insurance proceeds or claims against third parties. Because of the uncertainty inherent in the estimation process, it is at least reasonably possible that actual costs will differ from estimates, but, based upon information presently available, such future costs are not expected to have a material adverse effect on the Company's competitive or financial position or its ongoing results of operations. However, such costs could be material to results of operations in a future period. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted to reflect actual experience. Included at May 31, 1996 in the amount of $7,761,000 is the warranty reserve of a subsidiary which was acquired during the year. 30

NOTE I - INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION The Company operates principally in one business segment -- the manufacture and sale of protective coatings. In computing net income for foreign subsidiaries, no allocations of general corporate expenses have been made. Information concerning the Company's operations in different geographical areas of the Company's business at May 31, 1996, 1995 and 1994 and for the years then ended is summarized as follows:
Other United European Foreign States Operations Operations --------------- ----------

(In thousands) - -------------Net Sales May 31, 1996 May 31, 1995 May 31, 1994 -----------Gross Profit May 31, 1996 May 31, 1995 May 31, 1994 -----------Interest Expense, Net May 31, 1996 May 31, 1995 May 31, 1994 -----------Income Before Tax May 31, 1996 May 31, 1995 May 31, 1994 -----------Net Income May 31, 1996 May 31, 1995 May 31, 1994 -----------Assets Employed

Total -----

$1,001,706 913,119 724,662 -------

$90,880 85,537 71,912 ------

$ 43,810 32,080 28,718 ------

$1,136,396 1,030,736 825,292 -------

431,493 392,244 304,812 -------

41,366 37,913 32,373 ------

13,718 10,185 5,449 -----

486,577 440,342 342,634 -------

22,785 20,159 10,926 ------

2,738 2,334 2,571 -----

317 288 69 --

25,840 22,781 13,566 ------

108,589 100,721 85,203 ------

8,773 6,665 4,248 -----

2,524 1,106 (244) -----

119,886 108,492 89,207 ------

62,080 59,336 53,171 ------

5,130 2,404 502 ---

1,719 876 80 --

68,929 62,616 53,753 ------

NOTE I - INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION The Company operates principally in one business segment -- the manufacture and sale of protective coatings. In computing net income for foreign subsidiaries, no allocations of general corporate expenses have been made. Information concerning the Company's operations in different geographical areas of the Company's business at May 31, 1996, 1995 and 1994 and for the years then ended is summarized as follows:
Other United European Foreign States Operations Operations --------------- ----------

(In thousands) - -------------Net Sales May 31, 1996 May 31, 1995 May 31, 1994 -----------Gross Profit May 31, 1996 May 31, 1995 May 31, 1994 -----------Interest Expense, Net May 31, 1996 May 31, 1995 May 31, 1994 -----------Income Before Tax May 31, 1996 May 31, 1995 May 31, 1994 -----------Net Income May 31, 1996 May 31, 1995 May 31, 1994 -----------Assets Employed May 31, 1996 May 31, 1995 May 31, 1994 ------------

Total -----

$1,001,706 913,119 724,662 -------

$90,880 85,537 71,912 ------

$ 43,810 32,080 28,718 ------

$1,136,396 1,030,736 825,292 -------

431,493 392,244 304,812 -------

41,366 37,913 32,373 ------

13,718 10,185 5,449 -----

486,577 440,342 342,634 -------

22,785 20,159 10,926 ------

2,738 2,334 2,571 -----

317 288 69 --

25,840 22,781 13,566 ------

108,589 100,721 85,203 ------

8,773 6,665 4,248 -----

2,524 1,106 (244) -----

119,886 108,492 89,207 ------

62,080 59,336 53,171 ------

5,130 2,404 502 ---

1,719 876 80 --

68,929 62,616 53,753 ------

1,041,726 858,257 570,672 -------

86,275 90,340 79,396 ------

27,075 16,926 15,899 ------

1,155,076 965,523 665,967 -------

The above sales do not include sales of Company products by joint ventures and licensees of approximately $104,000,000. The Company reflects income from joint ventures on the equity method and receives royalties from its licensees. Export sales were less than 10% of total consolidated revenue for each of the three years. 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MAY 31, 1996, 1995 AND 1994 RPM, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MAY 31, 1996, 1995 AND 1994 RPM, Inc. and Subsidiaries NOTE J - INTERIM FINANCIAL INFORMATION (UNAUDITED) The following is a summary of the unaudited quarterly results of operations for the years ended May 31, 1996 and 1995:
The Three Months Ended (In thousands, except per share amounts) AUGUST 31 NOVEMBER 30 FEBRUARY 29 MAY 31 - ----------------------------------------------------------------------------------------------1996 Net sales $282,954 $281,402 $255,157 $316,883 - ----------------------------------------------------------------------------------------------Gross profit $119,641 $117,452 $104,966 $144,518 - ----------------------------------------------------------------------------------------------Net income $ 19,993 $ 16,258 $ 8,047 $ 24,631 - ----------------------------------------------------------------------------------------------Primary earnings per share $ .27 $ .22 $ .11 $ .32 - ----------------------------------------------------------------------------------------------Fully diluted earnings per share $ .25 $ .21 $ .11 $ .30 =============================================================================================== Three Months Ended (In thousands, except per share amounts) AUGUST 31 NOVEMBER 30 FEBRUARY 28 MAY 31 - ----------------------------------------------------------------------------------------------1995 Net sales $256,425 $256,719 $233,384 $284,208 - ----------------------------------------------------------------------------------------------Gross profit $107,956 $108,284 $ 96,523 $127,579 - ----------------------------------------------------------------------------------------------Net income $ 18,740 $ 15,686 $ 7,686 $ 20,504 - ----------------------------------------------------------------------------------------------Primary earnings per share $ .26 $ .21 $ .10 $ .28 - ----------------------------------------------------------------------------------------------Fully diluted earnings per share $ .24 $ .20 $ .10 $ .26 ===============================================================================================

The computation of fully diluted earnings per share reflects additional shares issuable assuming conversion of convertible securities. Quarterly earnings per share do not total to the earnings per share due to the weighted average number of shares outstanding in each quarter. NOTE K - SUBSEQUENT EVENTS On June 12, 1996, the Company acquired all the outstanding shares of Okura Holdings, Inc. for $73,000,000 in cash. Okura manufactures and markets fiberglass reinforced plastic grating products. This acquisition will be accounted for by the purchase method of accounting and the difference of approximately $29,000,000 between the fair value of net assets acquired and the purchase consideration will be allocated to goodwill. The Company's financial statements will reflect the assets, liabilities and operating results of Okura from the date of acquisition forward. Pro-forma amounts as if Okura had been acquired on June 1, 1994, are as follows:
Year Ended May 31 - ----------------1996 1995 ------(Unaudited) (In thousands, except per share amounts) $ $ 1,172,193 --------68,280 --------$ $ 1,061,516 --------63,222 ---------

Net sales Net income Earnings per common share and common

share equivalent Earnings per common share assuming full dilution

$

.89 --------.85 ---------

$

.86 --------.81 ---------

$

$

INDEPENDENT AUDITOR'S REPORT THE BOARD OF DIRECTORS AND SHAREHOLDERS RPM, INC. MEDINA, OHIO We have audited the accompanying consolidated balance sheets of RPM, Inc. and Subsidiaries as of May 31, 1996 and 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three year period ended May 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of RPM, Inc. and Subsidiaries at May 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three year period ended May 31, 1996, in conformity with generally accepted accounting principles.
/s/ Ciulla, Smith & Dale, LLP - ----------------------------Cleveland, Ohio July 3, 1996

32 EXHIBIT 21.1 RPM, INC. The following is a list of the direct subsidiaries of RPM, Inc. as of August 15, 1996:
Percentage of Securities Owned By RPM, Inc. ---------------100% 100%

Name - ---Bondex International, Inc. Consolidated Coatings Corporation Day-Glo Color Corp. Kop-Coat, Inc. Mameco International, Inc. Republic Powdered Metals, Inc. RPM of North Carolina, Inc. Talsol Corp.

Jurisdiction of Incorporation --------------Ohio Ohio

Ohio Ohio Ohio Ohio Ohio Ohio

100% 100% 100% 100% 100% 100%

EXHIBIT 21.1 RPM, INC. The following is a list of the direct subsidiaries of RPM, Inc. as of August 15, 1996:
Percentage of Securities Owned By RPM, Inc. ---------------100% 100%

Name - ---Bondex International, Inc. Consolidated Coatings Corporation Day-Glo Color Corp. Kop-Coat, Inc. Mameco International, Inc. Republic Powdered Metals, Inc. RPM of North Carolina, Inc. Talsol Corp. Euchem, Inc. The Testor Corporation Westgate Advertising, Inc. Label Systems Corporation Carboline Company Narragansett/DSI Acquisition Co., Inc. Okura Holdings, Inc. RPM World Trade, Inc. Simian Company, Inc. Stonhard, Inc. Wisconsin Protective Coatings Corp. American Emulsions Co., Inc. Dynatron/Bondo Corporation TCI, Inc. Design/Craft Fabric Corporation

Jurisdiction of Incorporation --------------Ohio Ohio

Ohio Ohio Ohio Ohio Ohio Ohio Ohio Ohio Ohio Connecticut Delaware Delaware

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Delaware Delaware Delaware Delaware Delaware

100% 100% (1) 100% 100% 100%

Georgia Georgia Georgia Illinois

100% 100% 100% 100%

Name - ---Rust-Oleum Corporation Star Finishing Products, Inc. Chemical Specialties Manufacturing Corporation RPM of Mass., Inc.

Jurisdiction of Incorporation --------------Illinois Illinois Maryland

Percentage of Securities Owned By RPM, Inc. ---------------100% 100% 100%

Massachusetts

100%

Name - ---Rust-Oleum Corporation Star Finishing Products, Inc. Chemical Specialties Manufacturing Corporation RPM of Mass., Inc. Craft House Corporation William Zinsser and Co. Incorporated Floquil-Polly S Color Corp. Fopeco, Inc. Mohawk Finishing Products, Inc. Chemical Coatings, Inc. Sentry Polymers, Inc. First Colonial Insurance Company Bondex International (Canada) Ltd. RPM/Belgium N.V. RPOW/France S.A. RPM/Europe B.V. RPM/Luxembourg S.A. RPM Asia Pte. Ltd. - -----------------(1) (2) (3) DISC Corporation

Jurisdiction of Incorporation --------------Illinois Illinois Maryland

Percentage of Securities Owned By RPM, Inc. ---------------100% 100% 100%

Massachusetts Michigan New Jersey

100% 100% 100%

New York New York New York

100% 100% 100%

North Carolina Texas Vermont

100% 100% 100%

Canada

100%

Belgium France Netherlands Luxembourg Singapore

96% (2) 100% 100% 88% (3) 100%

The remaining 4% is owned by an affiliate of RPM, Inc. The remaining 12% is owned by an affiliate of RPM, Inc.

-2-

Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS As independent public accounts, we hereby consent to the incorporation by reference of our report dated July 3, 1996 in this Annual Report on Form 10-K for the year ending May 31, 1996, in RPM, Inc.'s Registration Statements on Form S-3 (Reg. Nos. 33-50868, Liquid Yield Option Notes, 33-61513, Dryvit Systems, Inc. acquisition and 333-08209, TCI, Inc. acquisition) and Registration Statements on Form S-8 (Reg. Nos. 265508, 1979 Stock Option Plan and 33-32794, 1989 Stock Option Plan).
/s/ Ciulla, Smith & Dale, LLP CIULLA, SMITH & DALE, LLP

Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS As independent public accounts, we hereby consent to the incorporation by reference of our report dated July 3, 1996 in this Annual Report on Form 10-K for the year ending May 31, 1996, in RPM, Inc.'s Registration Statements on Form S-3 (Reg. Nos. 33-50868, Liquid Yield Option Notes, 33-61513, Dryvit Systems, Inc. acquisition and 333-08209, TCI, Inc. acquisition) and Registration Statements on Form S-8 (Reg. Nos. 265508, 1979 Stock Option Plan and 33-32794, 1989 Stock Option Plan).
/s/ Ciulla, Smith & Dale, LLP CIULLA, SMITH & DALE, LLP

ARTICLE 5 MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS COMMON PREFERRED MANDATORY PREFERRED OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED

YEAR MAY 31 1996 JUN 01 1995 MAY 31 1996 19,855 14,422 241,553 9,993 178,929 465,126 399,580 174,920 1,155,076 189,404 447,654 1,410 0 0 444,423 1,155,076 1,136,396 1,136,396 649,819 990,670 0 0 25,840 119,886 50,957 68,929 0 0 0 68,929 0.90 0.86

ARTICLE 5 MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS COMMON PREFERRED MANDATORY PREFERRED OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED

YEAR MAY 31 1996 JUN 01 1995 MAY 31 1996 19,855 14,422 241,553 9,993 178,929 465,126 399,580 174,920 1,155,076 189,404 447,654 1,410 0 0 444,423 1,155,076 1,136,396 1,136,396 649,819 990,670 0 0 25,840 119,886 50,957 68,929 0 0 0 68,929 0.90 0.86


								
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