RPM INC/OH/
EXHIBIT 10.4
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>l89965aex10-4.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
<PAGE>   1
                                                                 EXHIBIT 10.4

                                  RPM, INC.

                            1989 STOCK OPTION PLAN


         1.       Purpose of the Plan

         The Plan is intended to provide a method of providing key employees of
RPM, Inc. (the "Company") and its subsidiaries with greater incentive to serve
and promote the interests of the Company and its shareholders. The premise of
the Plan is that, if such key employees acquire a proprietary interest in the
business of the Company or increase such proprietary interest as they may
already hold, then the incentive of such key employees to work toward the
Company's continued success will be commensurately increased. Accordingly, the
Company will, from time to time during the effective period of the Plan, grant
to such employees as may be selected to participate in the Plan options to
purchase Common Shares, without par value ("Shares"), of the Company on the
terms and subject to the conditions set forth in the Plan.

         2.       Administration of the Plan

         The Plan shall be administered by the Compensation Committee of the
Board of Directors or by such other Committee composed of no fewer than three
(3) disinterested members of the Board of Directors of the Company as may be
designated by the Board of Directors (the "Committee"), provided that the
Committee shall not include any person who has been eligible to receive options
under the Plan or under any other plan of the Company entitling the participants
therein to acquire Shares, options to purchase Shares, or stock appreciation
rights of the Company at any time within the twelve (12) month period
immediately preceding the date on which such person becomes a member of the
Committee. A majority of the Committee shall constitute a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by all of the members, shall be the acts of
the Committee.

         Subject to the provisions of the Plan, the Committee shall have full
and final authority, in its absolute discretion, (a) to determine the employees
to be granted options under the Plan, (b) to determine the number of Shares
subject to each option, (c) to determine the time or times at which options will
be granted, (d) to determine the option price of the Shares subject to each
option, which price shall not be less than the minimum specified in Section 6 of
the Plan, (e) to determine the time or times when each option becomes
exercisable and the duration of the exercise period, (f) to determine the terms
and conditions under which the Committee shall accept the surrender of an option
or any portion thereof pursuant to Section 9 of the Plan and to determine the
form in which payment for such surrendered option or portion thereof shall be
made, (g) to prescribe the form or forms of the agreements evidencing any
options granted under the Plan (which forms shall be consistent with the Plan),
(h) to adopt, amend and rescind such rules and


<PAGE>   2



regulations as, in the Committee's opinion, may be advisable in the
administration of the Plan, and (i) to construe and interpret the Plan, the
rules and regulations and the agreements evidencing options granted under the
Plan and to make all other determinations deemed necessary or advisable for the
administration of the Plan. Any decision made or action taken in good faith by
the Committee in connection with the administration, interpretation, and
implementation of the Plan and of its rules and regulations, shall, to the
extent permitted by law, be conclusive and binding upon all optionees under the
Plan and upon any person claiming under or through such an optionee, and no
member of the Board of Directors shall be liable for any such decision made or
action taken by the Committee.

         3.       Shares Available for Options

         Subject to the provisions of Section 10 of the Plan, the aggregate
number of Shares for which options may be granted under the Plan shall not
exceed one million five hundred thousand (1,500,000).

         The Shares to be delivered under exercise of options under the Plan
shall be made available, at the discretion of the Board of Directors, either
from the authorized but unissued Shares of the Company or from Shares held by
the Company as treasury shares, including Shares purchased in the open market.

         If an option granted under the Plan shall expire or terminate
unexercised as to any Shares covered thereby, such Shares shall thereafter be
available for the granting of other options under the Plan. If, however, an
option granted under the Plan shall be accepted for surrender pursuant to terms
and conditions determined by the Committee under Section 9, any Shares covered
thereby shall not thereafter be available for the granting of other options
under the Plan.

         Options granted under the Plan shall constitute either incentive stock
options, as defined in Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), hereinafter referred to as "incentive stock options", or
non-qualified stock options as the Committee shall determine with respect to
each option granted on or after such date.

         4.       Eligibility

         Option will be granted only to persons who are employees of the Company
or of a subsidiary of the Company. The term "subsidiary" as used herein shall
mean any corporation, a majority of the stock of which having normal voting
rights is owned directly or indirectly by the Company. The term "employees"
shall include officers as well as all other employees of the Company and its
subsidiaries and shall include Directors who are also employees of the Company
or of a subsidiary of the Company. Neither the members

                                        2

<PAGE>   3



of the Committee nor any other member of the Board of Directors who is not an
employee of the Company (or of a subsidiary of the Company) shall be eligible to
receive an option under the Plan. Each grant of an option shall be evidenced by
an agreement executed on behalf of the Company by the Chairman of the Board or
another executive officer and delivered to and accepted by the optionee.

         In selecting the persons to whom options shall be granted under the
Plan, as well as in determining the number of Shares subject to and the type and
terms and provisions of each option, the Committee shall weigh such factors as
it shall deem relevant to accomplish the purpose of the Plan, namely, to enhance
the incentive of those key employees of the Company and its subsidiaries who
exert authority over and are responsible for the management and conduct of the
Company's business. A person who has been granted an option under the Plan may
be granted an additional option or options if the Committee shall so determine.

         5.       Term of Options

         The full term of each option granted under the Plan shall be such
period as the Committee shall determine, but shall not be more than ten (10)
years from the date of granting thereof; provided, however, that if an employee
to whom an incentive stock option is granted is at the time of grant of the
incentive stock option an owner as defined in Section 425(d) of the Code of more
than 10 percent of the total combined voting power of all classes of stock of
the Company or any subsidiary corporation, hereinafter referred to as a
"Substantial Shareholder," no incentive stock option granted to such an employee
shall be exercisable after the expiration of five (5) years from the date of
grant of such option.

         Each option shall be subject to earlier termination as provided in
Paragraphs (c) and (d) of Section 8 and in Section 9 of the Plan.

         The Committee may, with the concurrence of the affected optionee,
cancel any option granted under the Plan and authorize the grant of a new option
or options to buy Shares in such number and at such price as the Committee shall
determine, subject to the provisions of the Plan.

         6.       Option Price

         The option price shall be determined by the Committee at the time any
option is granted but shall not be less than 100 per cent of the fair market
value of the Shares covered thereby at the time the option is granted, such fair
market value to be determined in accordance with procedures to be established by
the Committee; provided, however, that if an employee to whom an incentive stock
option is granted is at the time of the grant of the incentive stock option a
Substantial Shareholder, the option price shall be determined by the Committee
from time to time but shall never be

                                        3

<PAGE>   4



less than 110 percent of the fair market value of the Company's Shares on the
date such option is granted.

         7.       Non-transferability of Option

         No option granted under the Plan shall be transferable by the optionee
otherwise than by will or the laws of descent and distribution, and such option
may be exercised during the optionee's lifetime only by the optionee or by his
guardian or legal representative.

         8.       Exercise of Options

         (a) Each option granted under the Plan shall be exercisable on such
date or dates and during such period and for such number of Shares as shall be
set forth in the agreement evidencing such option.

         (b) A person electing to exercise an option shall give written notice
to the Company of such election and the number of Shares such person has elected
to purchase and shall, at the time of exercise, tender the full purchase price
of the Shares such person has elected to purchase. The purchase price may be
paid either in cash or in the Company's Shares (excluding fractional shares), or
a combination thereof; provided, however, that the practice known as
"Pyramiding", which involves successive option exercises using Shares received
from a preceding exercise to immediately exercise another option and so on,
shall not be permitted. Shares delivered in payment of the purchase price shall
be valued at the fair market value of such Shares on the date of exercise of the
option. Until such person has been issued a certificate or certificates for the
Shares so purchased, such person shall possess no rights of a record holder with
respect to any such Shares.

         (c) No option shall be affected by any change of duties or position of
the optionee (including transfer to or from a subsidiary), so long as such
optionee continues to be an employee of the Company or one of its subsidiaries.
If an optionee shall cease to be an employee for any reason other than death,
the options held by such optionee shall thereafter be exercisable only to the
extent of the purchase rights, if any, which had accrued as of the date of such
cessation, provided that the Committee may provide in the agreement evidencing
any option that the Committee may in its absolute discretion, upon any such
cessation of employment, determine (but shall be under no obligation to
determine) that such accrued purchase rights shall be deemed to include
additional Shares covered by such option. Upon any such cessation of employment,
such accrued rights to purchase shall in any event terminate upon the earlier of
(A) the expiration of the full term of the option or (B) the expiration of
thirty (30) days from the date of such cessation of employment if by reason of
discharge or immediately if by reason of voluntary quit. The

                                        4

<PAGE>   5



agreements evidencing options granted under the Plan may contain such provisions
as the Committee shall approve with reference to the effect of approved leaves
of absence. Nothing in the Plan or in any option granted hereunder shall confer
upon any optionee any right to continue in the employ of the Company or any of
its subsidiaries, or to limit or interfere in any way with the right of the
Company or its subsidiaries to terminate such optionee's employment at any time,
with or without cause.

         (d) Should an optionee die while in the employ of the Company or one of
its subsidiaries or within thirty (30) days after cessation of such employment
by reason of discharge, such person as shall have acquired, by will or by the
laws of descent and distribution (the "personal representative"), the right to
exercise any option theretofore granted such optionee may, in either case,
exercise such option at any time prior to expiration of its full term or one (1)
year from the date of death of the optionee, whichever is earlier, provided that
any such exercise shall be limited to the purchase rights which had accrued as
of the date when the optionee ceased to be an employee, whether by death or
otherwise, and provided further, however, that the Committee may provide in the
agreement evidencing any option that all Shares covered by such option shall
become subject to purchase immediately upon the death of the optionee.

         (e) In the case of incentive stock options, the aggregate fair market
value (determined as of the date the option is granted) of the Shares with
respect to which options are exercisable for the first time by any individual
during any calendar year (under this Plan and all such plans of the Company and
any parent or subsidiary corporation) shall not exceed $100,000.

         9.       Surrender of Options - Stock Appreciation Rights

         The Committee may, in its absolute discretion and under such terms and
conditions as it deems appropriate, accept the surrender by an optionee, or the
personal representative of an optionee, of an option, or any portion thereof, to
purchase Shares granted under the Plan and authorize the payment in
consideration for such surrender of an amount equal to the excess of the fair
market value at the date of surrender of the Shares covered by the option, or
portion thereof, surrendered over the aggregate option price of such Shares,
such payment to be in Shares (valued at fair market value on the date of such
surrender) or in cash, or partly in Shares and partly in cash as determined by
the Committee, provided that the Committee determines that such surrender is
consistent with the purpose set forth in Section 1 hereof.

         10.      Adjustment Upon Changes in Capitalization

         In the event of any change in the number of outstanding Shares through
the declaration of share dividends, share splits, or consolidations, through
recapitalizations, or by reason of any

                                        5

<PAGE>   6


other increase or decrease in the number of outstanding Shares effected without
receipt of consideration by the Company, the number of Shares available and
reserved for options which may thereafter be granted, the number of Shares
reserved for and subject to any options outstanding but unexercised, and the
price per share payable on the exercise of any options outstanding but
unexercised, shall be adjusted as the Committee considers appropriate, and all
such adjustments by the Committee shall be conclusive and binding upon all
optionees under the Plan and upon any person claiming under or through such an
optionee.

         11.      Issuance of Substitute Options

         The Committee may also make a determination, subject to approval and
authorization by the Board of Directors, to issue options having terms and
provisions which vary from those specified herein, provided that any options
issued pursuant to this Section are issued in substitution for, or in connection
with the assumption of, existing options issued by another corporation and
assumed or otherwise agreed to be provided for by the Company pursuant to or by
reason of a transaction involving a corporate merger, consolidation, acquisition
of property or stock, separation, reorganization or liquidation in which the
Company or a subsidiary is a party.

         12.      Amendment, Suspension or Termination of Plan

         The Board of Directors may at any time terminate or from time to time
amend or suspend the Plan; provided, however, that no such amendment shall,
without approval of the shareholders of the Company, except as provided in
Section 10 hereof, (a) increase the aggregate number of Shares as to which
options may be granted under the Plan; (b) change the minimum option exercise
price; (c) increase the maximum period during which options may be exercised;
(d) extend the effective period of this Plan; or (e) permit the granting of
options to members of the Committee. No option may be granted during any
suspension of the Plan or after the Plan has been terminated and no amendment,
suspension or termination shall, without the optionee's consent, alter or impair
any of the rights or obligations under any option theretofore granted to such
person under the Plan.

         13.      Effective Date and Duration of Plan

         This Plan shall become effective upon its approval by the affirmative
vote of the holders of a majority of the outstanding Shares present in person or
by proxy and entitled to vote on this Plan at the Annual Meeting of the
Shareholders of the Company on October 20, 1989, or any adjournment thereof. No
options may be granted under this Plan subsequent to October 19, 1999.



                                        6
<PAGE>   7


                                 AMENDMENT NO. 1
                                       TO
                                    RPM, INC.
                             1989 STOCK OPTION PLAN


                  This Amendment No. 1 is made this 19th day of July, 1991
by the Board of Directors of RPM, Inc. (hereinafter referred to as
the "Company");

                                   WITNESSETH:
                                   -----------

                  WHEREAS, the RPM, Inc. 1989 Stock Option Plan (hereinafter
referred to as the "Plan") was established effective October 20, 1989 to provide
officers and other key employees of the Company with greater incentive to serve
and promote the interests of the Company and its shareholders; and

                  WHEREAS, the Board of Directors is empowered under
Section 12 of the Plan to amend and modify the Plan; and

                  WHEREAS, it is the desire of the Board of Directors of the
Company to amend certain provisions of the Plan to conform with the amended
provisions of Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended, by the Securities and Exchange Commission (the "Commission") and
effective May 1, 1991;

                  WHEREAS, the Commission has indicated that such conforming
amendments are not required to be submitted to the shareholders of a company for
authorization and approval;

                  NOW, THEREFORE, pursuant to Section 12 of the Plan, the Board
of Directors of the Company hereby amends the Plan, effective July 19, 1991, as
follows:


<PAGE>   8



                  (1) Section 2 of the Plan is hereby amended by the deletion of
the first paragraph of said Section and the substitution in lieu thereof of a
new first paragraph to read as follows:

                  "The Plan shall be administered by the Compensation Committee
                  of the Board of Directors or by such other Committee composed
                  of no fewer than two (2) disinterested members of the Board of
                  Directors of the Company as may be designated by the Board of
                  Directors (the "Committee"), provided that the Committee shall
                  not include any person who has been granted or awarded equity
                  securities under the Plan or under any other plan of the
                  Company entitling the participants therein to acquire Shares,
                  options to purchase Shares, or stock appreciation rights of
                  the Company at any time within the twelve (12) month period
                  immediately preceding the date on which such person becomes a
                  member of the Committee. A majority of the Committee shall
                  constitute a quorum, and the acts of a majority of the members
                  present at any meeting at which a quorum is present, or acts
                  approved in writing by all of the members, shall be the acts
                  of the Committee."

                  (2) Section 7 of the Plan is hereby amended by the deletion of
said Section and the substitution in lieu thereof of a new Section to read as
follows:

                  "No option granted under the Plan shall be transferrable by
                  the optionee otherwise than by will or the laws of descent and
                  distribution or pursuant to a qualified domestic relations
                  order as defined by the Code; and such option may be exercised
                  during the optionee's lifetime only by the optionee or by his
                  guardian or legal representative."

                  (3) Section 12 of the Plan is hereby amended by the deletion
of said Section and the substitution in lieu thereof a new Section to read as
follows:

                                       -2-

<PAGE>   9


                  "The Board of Directors may at any time terminate or from time
                  to time amend or suspend the Plan; provided, however, that no
                  such amendment shall, without approval of the shareholders of
                  the Company, except as provided in Section 10 hereof, (a)
                  increase the aggregate number of Shares as to which options
                  may be granted under the Plan; (b) change the minimum option
                  exercise price; (c) increase the maximum period during which
                  options may be exercised; (d) extend the effective period of
                  this Plan; (e) modify the requirements for participation in
                  the Plan; (f) increase the benefits to participants who are
                  officers of the Company; or (g) permit the granting of options
                  to members of the Committee. No option may be granted during
                  any suspension of the Plan or after the Plan has been
                  terminated and no amendment, suspension or termination shall,
                  without the optionee's consent, alter or impair any of the
                  rights or obligations under any option theretofore granted to
                  such person under the Plan."



                                           RPM, INC.
                                           BOARD OF DIRECTORS



                                         By /s/ Thomas C. Sullivan
                                            _______________________________
                                                Thomas C. Sullivan
                                                         Chairman






                                       -3-

<PAGE>   10



                                                                         ISO NO.


                        INCENTIVE STOCK OPTION AGREEMENT
                        --------------------------------


                THIS AGREEMENT, entered into this ______ day of _______, 19__ by
and between RPM, Inc., an Ohio corporation (the "Company"), and ((1)) (the
"Optionee").

                              W I T N E S S E T H:
                              --------------------

                WHEREAS, the Board bf Directors of the Company has designated
the Compensation Committee of the Board of Directors (the "Committee") to serve
as the Committee to administer the RPM, Inc. 1989 Stock Option Plan (the
"Plan"), and

                WHEREAS, the Committee has determined that the Optionee, as an
employee of the Company or of one of its subsidiaries (an "Employee"), should be
granted an incentive stock option under the Plan upon the terms and subject to
the conditions and covering the number of Common Shares, without par value
("Shares"), of the Company, set forth hereinafter:

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

         1. Effective as of the date of this Agreement, the Company grants to
the Optionee, upon the terms and subject to the conditions set forth
hereinafter, the right and option to purchase all or any part of an aggregate of
((2)) __________ (__) Shares (such right and option being hereinafter referred
to as the "Option"), at a price of $____ per share (the "Option Price").

         2. The term of the option shall be for a period of ten (10) years from
the date hereof, and the Option shall expire at the close of regular business
hours at the Company's principal office, Medina, Ohio, on the last day of the
term of the Option, or, if earlier, on the applicable expiration date provided
for in paragraphs 4 and 5 hereof.

         3. Except as provided in paragraph 7 hereof, the Option shall not be
exercisable to any extent until one (1) year from the date hereof. The Optionee
shall become entitled to exercise the Option with respect to the number of
Shares indicated below as of the date indicated opposite such number below:

          Number of Shares        Date as of Which
          as to Which Option        Option May be
          May be Exercised            Exercised
          ----------------            ---------



<PAGE>   11

To the extent that the Option has become exercisable with respect to a number of
Shares, as provided above, the Option may thereafter be exercised by the
Optionee either as to all or any part of such Shares at any time or from time to
time prior to expiration of the Option pursuant to paragraph 2 hereof. Except as
provided in paragraphs 4 and 5 hereof, the Option may not be exercised at any
time unless the Optionee shall be an Employee at such time.

        4. So long as the Optionee shall continue to be an Employee, the Option
shall not be affected by (a) any temporary leave of absence approved in writing
by the Company or one of its subsidiaries, or (b) any change of duties or
position (including transfer to or from a subsidiary). If the Optionee ceases to
be an Employee for any reason other than death, the Option may be exercised only
to the extent of the purchase rights, if any, which had accrued as of the date
of such cessation pursuant to paragraph 3 hereof and which have not theretofore
been exercised; provided, however, that upon written request to the Committee it
may in its absolute discretion determine (but shall be under no obligation to
determine) that such accrued purchase rights shall be deemed to include
additional Shares covered by the Option. Upon any such cessation of employment
by reason of discharge, such accrued purchase rights shall in any event
terminate upon the earlier of the date thirty (30) days from the date of such
cessation of employment or the last day of the term of the Option. Upon any such
cessation of employment by reason of a voluntary quit, such accrued purchase
rights shall terminate on the date of such cessation of employment. Nothing
contained in this Agreement shall confer upon the Optionee any right to continue
in the employ of the Company or any of its subsidiaries, or to limit or
interfere in any way with the right of the Company or any such subsidiary to
terminate his or her employment at any time, with or without cause.

        5. If the Optionee dies while an Employee or within thirty (30) days of
the Optionee's having ceased to be an Employee by reason of discharge, such
person or persons as shall have acquired, by will or by the laws of descent and
distribution, the right to exercise the Option (the "Personal Representative")
may exercise the Option to the extent of the purchase rights, if any, which had
accrued as of the date of the Optionee's death pursuant to paragraph 3 hereof
and which have not theretofore been exercised; provided, however, that upon
written request to the Committee it may in its absolute discretion determine
(but shall be under no obligation to determine) that such accrued purchase
rights shall be deemed to include additional Shares covered by the Option. Such
accrued purchase rights shall in any event terminate upon the earlier of the
date one (1) year from the date of the Optionee's death or the last day of the
term of the Option.

        6. Notwithstanding the foregoing, this Option is exercisable only to the
extent that the aggregate fair market value (determined at the time such Option
is granted) of the shares with respect to which such Options first become
exercisable during any calendar year does not exceed $100,000.

        7. Upon the commencement of a "tender offer" for the Company's Common
Shares as provided under Rule 14d-2 promulgated under the Federal Securities
Exchange

                                       2
<PAGE>   12

Act of 1934, as amended, or any subsequent comparable Federal rule or
regulation governing tender offers, or upon the occurrence of a "Control Share
Acquisition" of the Company's Common Shares as defined under Section 1701.01(Z),
Ohio Revised Code, or any subsequent comparable statutes under the laws of the
State of Ohio, whichever first occurs, or within the thirty (30) day period
ending on the date designated by the Board for dissolution or liquidation of the
Company or a merger or consolidation in which the Company is not to be the
surviving corporation, the Optionee shall have the immediate right and option
(notwithstanding the provisions of Section 3 hereof) to exercise the Option with
respect to all Shares covered by the Option, and any such exercise shall be
irrevocable. The Optionee shall be entitled to exercise the Option as provided
in the immediately preceding sentence regardless of whether the "tender offer"
or "control share acquisition" is successful and regardless of whether the other
corporation which is the surviving corporation in a merger or consolidation
shall adopt and maintain the RPM, Inc. 1989 Stock Option Plan.

                8. The Option may be exercised by delivery to the Secretary of
the Company at its principal office, 2628 Pearl Road, P.O. Box 777, Medina, Ohio
44258, of a completed Notice of Exercise of Option (obtainable from the
Secretary of the Company) setting forth the number of Shares with respect to
which the Option is being exercised, together with either a certified or
cashier's check payable to the Company or certificates for RPM, Inc. Common
Shares, properly endorsed for transfer, or a combination thereof, in the amount
of the total purchase price of such Shares.

                9. Upon receipt by the Company prior to expiration of the Option
of a duly completed Notice of Exercise of Option accompanied by a certified or
cashier's check, or properly endorsed certificates for RPM Common Shares, as
provided in paragraph 8 hereof, in full payment for the Shares being purchased
pursuant to such Notice (and, with respect to any Option exercised pursuant to
paragraph 5 hereof by the Personal Representative, accompanied in addition by
proof satisfactory to the Committee of the right of the Personal Representative
to exercise the Option), the Company shall cause to be mailed or otherwise
delivered to the Optionee or the Personal Representative, as the case may be,
within thirty (30) days of such receipt, a certificate or certificates for the
number of Shares so purchased. The Optionee or the Personal Representative shall
not have any of the rights of a shareholder with respect to the Shares covered
by the Option unless and until one or more certificates representing such Shares
shall be issued to the Optionee or the Personal Representative.

                10. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and the heirs, estate and
personal representatives of the Optionee. The Option shall not be transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code, and the Option may be
exercised during the lifetime of the Optionee only by the Optionee or by his
guardian or legal representative.

                11. This Agreement is subject to all of the terms, conditions,
and provisions of the RPM, Inc. 1989 Stock Option Plan, as amended from time to
time, and to such rules,

                                       3
<PAGE>   13

regulations, and interpretations of the Plan as may be adopted by the Committee
and in effect from time to time. A copy of the Plan is attached hereto as
Exhibit "A" and is incorporated herein by reference. In the event and to the
extent that this Agreement conflicts or is inconsistent with the terms,
conditions, and provisions of the Plan, the Plan shall control, and this
Agreement shall be deemed to be modified accordingly.

                                       4
<PAGE>   14



                WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behlaf by its undersigned executive officer thereunto duly
authorized, and the Optionee has hereunto set his hand, ass as of the day and
year first above written.


                                   RPM, INC

                                   By_______________________________
                                     Thomas C. Sullivan, Chairman

                                             ("Company")
                                     _______________________________

                                       5
<PAGE>   15

                      NON-QUALIFIED STOCK OPTION AGREEMENT
                      ------------------------------------


                THIS AGREEMENT, entered into this ___ day of __________, 19 , by
and between RPM, Inc., an Ohio corporation (the "Company"), and
___________________________________ (the "Optionee").

                              W I T N E S S E T H:
                              --------------------

                WHEREAS, the Board of Directors of the Company has designated
the Compensation Committee of the Board of Directors (the "Committee") to serve
as the Committee to administer the RPM, Inc. 1989 Stock Option Plan (the
"Plan"), and

                WHEREAS, the Committee has determined that the Optionee, as an
employee of the Company or of one of its subsidiaries (an "Employee"), should be
granted a non-qualified stock option under the Plan upon the terms and subject
to the conditions and covering the number of Common Shares, without par value
("Shares"), of the Company, set forth hereinafter:

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

                1. Effective as of the date of this Agreement, the Company
grants to the Optionee, upon the terms and subject to the conditions set forth
hereinafter, the right and option to purchase all or any part of an aggregate of
_________________________ ( ) Shares (such right and option being hereinafter
referred to as the "Option"), at a price of $___________ per share (the "Option
Price").

                2. The term of the option shall be for a period of ten (10)
years from the date hereof, and the Option shall expire at the close of regular
business hours at the Company's principal office, Medina, Ohio, on the last day
of the term of the Option, or, if earlier, on the applicable expiration date
provided for in paragraphs 4 and 5 hereof.

                3. Except as provided in paragraph 6 hereof, the Option shall
not be exercisable to any extent until one (1) year from the date hereof. The
Optionee shall become entitled to exercise the Option with respect to the number
of Shares indicated below as of the date indicated opposite such number below:

          Number of Shares        Date as of Which
          as to Which Option       Option May be
          May be Exercised         Exercised
          ----------------         ---------


<PAGE>   16

To the extent that the Option has become exercisable with respect to a number of
Shares, as provided above, the Option may thereafter be exercised by the
Optionee either as to all or any part of such Shares at any time or from time to
time prior to expiration of the Option pursuant to paragraph 2 hereof. Except as
provided in paragraphs 4 and 5 hereof, the Option may not be exercised at any
time unless the Optionee shall be an Employee at such time.

                4. So long as the Optionee shall continue to be an Employee, the
Option shall not be affected by (a) any temporary leave of absence approved in
writing by the Company or one of its subsidiaries, or (b) any change of duties
or position (including transfer to or from a subsidiary). If the Optionee ceases
to be an Employee for any reason other than death, the Option may be exercised
only to the extent of the purchase rights, if any, which had accrued as of the
date of such cessation pursuant to paragraph 3 hereof and which have not
theretofore been exercised; provided, however, that upon written request to the
Committee it may in its absolute discretion determine (but shall be under no
obligation to determine) that such accrued purchase rights shall be deemed to
include additional Shares covered by the Option. Upon any such cessation of
employment by reason of discharge, such accrued purchase rights shall in any
event terminate upon the earlier of the date thirty (30) days from the date of
such cessation of employment or the last day of the term of the Option. Upon any
such cessation of employment by reason of a voluntary quit, such accrued
purchase rights shall terminate on the date of such cessation of employment.
Nothing contained in this Agreement shall confer upon the Optionee any right to
continue in the employ of the Company or any of its subsidiaries, or to limit or
interfere in any way with the right of the Company or any such subsidiary to
terminate his or her employment at any time, with or without cause.

                5. If the Optionee dies while an Employee or within thirty (30)
days of the Optionee's having ceased to be an Employee by reason of discharge,
such person or persons as shall have acquired, by will or by the laws of descent
and distribution, the right to exercise the Option (the "Personal
Representative") may exercise the Option to the extent of the purchase rights,
if any, which had accrued as of the date of the Optionee's death pursuant to
paragraph 3 hereof and which have not theretofore been exercised; provided,
however, that upon written request to the Committee it may in its absolute
discretion determine (but shall be under no obligation to determine) that such
accrued purchase rights shall be deemed to include additional Shares covered by
the Option. Such accrued purchase rights shall in any event terminate upon the
earlier of the date one (1) year from the date of the Optionee's death or the
last day of the term of the Option.

               6. Upon the commencement of a "tender offer" for the Company's
Common Shares as provided under Rule 14d-2 promulgated under the Federal
Securities Exchange Act of 1934, as amended, or any subsequent comparable
Federal rule or regulation governing tender offers, or upon the occurrence of a
"Control Share Acquisition" of the Company's Common Shares as defined under
Section 7101.01(Z), Ohio Revised Code, or any subsequent comparable statutes
under the

                                       2
<PAGE>   17

laws of the State of Ohio, whichever first occurs, or within the thirty (30) day
period ending on the date designated by the Board for dissolution or liquidation
of the Company or a merger or consolidation in which the Company is not to be
the





















                                       3
<PAGE>   18

surviving corporation, the Optionee shall have the immediate right and option
(notwithstanding the provisions of Section 3 hereof) to exercise the Option with
respect to all Shares covered by the Option, and any such exercise shall be
irrevocable. The Optionee shall be entitled to exercise the Option as provided
in the immediately preceding sentence regardless of whether the "tender offer"
or "control share acquisition" is successful and regardless of whether the other
corporation which is the surviving corporation in a merger or consolidation
shall adopt and maintain the RPM, Inc. 1989 Stock Option Plan.

                7. The Option may be exercised by delivery to the Secretary of
the Company at its principal office, 2628 Pearl Road, P.O. Box 777, Medina, Ohio
44258, of a completed Notice of Exercise of Option (obtainable from the
Secretary of the Company) setting forth the number of Shares with respect to
which the Option is being exercised, together with either a certified or
cashier's check payable to the Company or certificates for RPM, Inc. Common
Shares, properly endorsed for transfer, or a combination thereof, in the amount
of the total purchase price of such Shares.

                8. Upon receipt by the Company prior to expiration of the Option
of a duly completed Notice of Exercise of Option accompanied by a certified or
cashier's check or properly endorsed certificates for RPM Common Shares, as
provided in paragraph 7 hereof, in full payment for the Shares being purchased
pursuant to such Notice (and, with respect to any Option exercised pursuant to
paragraph 5 hereof by the Personal Representative, accompanied in addition by
proof satisfactory to the Committee of the right of the Personal Representative
to exercise the Option), the Company shall cause to be mailed or otherwise
delivered to the Optionee or the Personal Representative, as the case may be,
within thirty (30) days of such receipt, a certificate or certificates for the
number of Shares so purchased. The Optionee or the Personal Representative shall
not have any of the rights of a shareholder with respect to the Shares covered
by the Option unless and until one or more certificates representing such Shares
shall be issued to the Optionee or the Personal Representative.

                9. This Agreement shall be binding upon and inure to the benefit
of any successor or successors of the Company and the heirs, estate and personal
representatives of the Optionee. The Option shall not be transferable other than
by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code, and the Option may be exercised
during the lifetime of the Optionee only by the Optionee or by his guardian or
legal representative.

                                       4
<PAGE>   19


                10. This Agreement is subject to all of the terms, conditions,
and provisions of the RPM, Inc. 1989 Stock Option Plan, as amended from time to
time, and to such rules, regulations, and interpretations of the Plan as may be
adopted by the Committee and in effect from time to time. A copy of the Plan is
attached hereto as Exhibit "A" and is incorporated herein by reference. In the
event and to the extent that this Agreement conflicts or is inconsistent with
the terms, conditions, and provisions of the Plan, the Plan shall control, and
this Agreement shall be deemed to be modified accordingly.

                IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its undersigned officer thereunto duly authorized, and
the Optionee has hereunto set his hand, all as of the day and year first above
written.

                                             RPM, INC.

                                             By ____________________________
                                                Thomas C. Sullivan, Chairman

                                                        ("Company")

                                                ____________________________


                                                        ("Optionee")


                                       5

</TEXT>
</DOCUMENT>
