<PAGE>   1
                                                                     Exhibit 4.6

================================================================================

                                 OM GROUP, INC.


                                  $30,000,000



                          6.82% Senior Notes due 2007
                          6.99% Senior Notes due 2009




                           -------------------------

                            NOTE PURCHASE AGREEMENT

                           -------------------------



                             Dated October 24, 1997


================================================================================






<PAGE>   2

                               TABLE OF CONTENTS

SECTION                                                                     PAGE
-------                                                                     ----

1.      AUTHORIZATION OF NOTES ...........................................   1
2.      SALE AND PURCHASE OF NOTES .......................................   1
3.      CLOSING ..........................................................   2
4.      CONDITIONS TO CLOSING ............................................   2
        4.1.    Representations and Warranties ...........................   2
        4.2.    Performance; No Default ..................................   2
        4.3.    Compliance Certificates ..................................   3
        4.4.    Opinions of Counsel ......................................   3
        4.5.    Purchase Permitted By Applicable Law, etc ................   3
        4.6.    Sale to Other Purchaser ..................................   3
        4.7.    Payment of Special Counsel Fees ..........................   4
        4.8.    Private Placement Number .................................   4
        4.9.    Changes in Corporate Structure ...........................   4
        4.10.   Approvals ................................................   4
        4.11.   Guaranty Agreements ......................................   4
        4.12.   Credit Agreement, etc ....................................   5
        4.13.   Debt Repayment ...........................................   5
        4.14.   Amendments to Credit Agreement; Existing Note
                Purchase Agreements ......................................   5
        4.15.   Proceedings and Documents ................................   5
5.      REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....................   5
        5.1.    Organization; Power and Authority ........................   5
        5.2.    Authorization, etc .......................................   6
        5.3.    Disclosure ...............................................   6
        5.4.    Organization, Power and Authority, and Ownership
                of Shares of Subsidiaries; Affiliates ....................   6
        5.5.    Financial Statements .....................................   7
        5.6.    Compliance with Laws, Other Instruments, etc .............   7
        5.7.    Governmental Authorizations, etc .........................   8
        5.8.    Litigation; Observance of Agreements, Statutes
                and Orders ...............................................   8
        5.9.    Taxes ....................................................   8
        5.10.   Title to Property; Leases; Investments ...................   8
        5.11.   Licenses, Permits, etc ...................................   9
        5.12.   Compliance with ERISA, etc ...............................   9
        5.13.   Private Offering by the Company ..........................  10
        5.14.   Use of Proceeds; Margin Regulations ......................  11

                                       i


<PAGE>   3

SECTION                                                                    PAGE
-------                                                                    ----

        5.15.   Existing Indebtedness; Future Liens ......................  11
        5.16.   Foreign Assets Control Regulations, etc ..................  11
        5.17.   Status under Certain Statutes ............................  11
        5.18.   Environmental Matters ....................................  12
6.      REPRESENTATIONS OF THE PURCHASER .................................  12
        6.1.    Purchase for Investment ..................................  12
        6.2.    Source of Funds ..........................................  12
7.      INFORMATION AS TO COMPANY ........................................  13
        7.1.    Financial and Business Information .......................  13
        7.2.    Officer's Certificate ....................................  16
        7.3.    Inspection ...............................................  17
8.      PAYMENT AND PREPAYMENT OF THE NOTES ..............................  17
        8.1.    Payment at Maturity ......................................  17
        8.2.    Optional Prepayments with Make-Whole Amount ..............  18
        8.3.    Allocation of Partial Prepayments ........................  18
        8.4.    Prepayment of Notes Upon Change of Control ...............  18
        8.5.    Maturity; Surrender, etc .................................  18
        8.6.    Purchase of Notes ........................................  19
        8.7.    Make-Whole Amount ........................................  19
9.      AFFIRMATIVE COVENANTS ............................................  20
        9.1.    Compliance with Law ......................................  20
        9.2.    Insurance ................................................  21
        9.3.    Maintenance of Properties ................................  21
        9.4.    Payment of Taxes and Claims ..............................  21
        9.5.    Corporate Existence; Licenses ............................  21
        9.6.    Books and Records ........................................  22
        9.7.    Environmental Matters ....................................  22
        9.8.    Prepayment of Notes Upon Change of Control ...............  22
10.     NEGATIVE COVENANTS ...............................................  23
        10.1.   Maintenance of Certain Financial Conditions ..............  23
        10.2.   Indebtedness; Restricted Subsidiary Indebtedness .........  23
        10.3.   Liens ....................................................  27
        10.4.   Investments, etc .........................................  29
        10.5.   Restricted Payments; Restricted Additional Investments ...  31
        10.6.   Subsidiary Stock and Indebtedness ........................  33
        10.7.   Consolidation, Merger, Sale of Assets, etc ...............  34
        10.8.   Sale Leasebacks ..........................................  37
        10.9.   Lines of Business ........................................  38
        10.10.  Transactions with Affiliates .............................  38

                                       ii

<PAGE>   4

SECTION                                                                     PAGE
-------                                                                     ----

        10.11.  Restrictions on Subsidiary Dividends and Payments ........  38
11.     EVENTS OF DEFAULT ................................................  38
12.     REMEDIES ON DEFAULT, ETC .........................................  41
        12.1.   Acceleration .............................................  41
        12.2.   Other Remedies ...........................................  41
        12.3.   Rescission ...............................................  42
        12.4.   No Waivers or Election of Remedies, Expenses, etc ........  42
13.     REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES ....................  42
        13.1. Registration of Notes 42 13.2. Transfer and Exchange of Notes 43
        13.3. Replacement of Notes .......................................  43
14.     PAYMENTS ON NOTES ................................................  43
        14.1.   Place of Payment .........................................  43
        14.2.   Home Office Payment ......................................  44
15.     EXPENSES, ETC ....................................................  44
        15.1.   Transaction Expenses .....................................  44
        15.2.   Survival .................................................  45
16.     SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
        ENTIRE AGREEMENT .................................................  45
17.     AMENDMENT AND WAIVER .............................................  45
        17.1.   Requirements .............................................  45
        17.2.   Solicitation of Holders of Notes .........................  45
        17.3.   Binding Effect, etc ......................................  46
        17.4.   Notes held by Company, etc ...............................  46
18.     NOTICES ..........................................................  46
19.     REPRODUCTION OF DOCUMENTS ........................................  47
20.     CONFIDENTIAL INFORMATION .........................................  47
21.     SUBSTITUTION OF PURCHASER ........................................  48
22.     MISCELLANEOUS ....................................................  48
        22.1.   Successors and Assigns ...................................  48
        22.2.   Payments Due on Non-Business Days ........................  49
        22.3.   Severability .............................................  49

                                      iii

<PAGE>   5

SECTION                                                                    PAGE
-------                                                                    ----

        22.4.   Construction; Accounting Terms ...........................  49
        22.5.   Counterparts .............................................  50
        22.6.   Governing Law ............................................  50
SCHEDULE A      -- Information Relating to Purchasers
SCHEDULE B      -- Defined Terms
SCHEDULE B-1    -- Form of Subordination Provisions
SCHEDULE 5.4    -- Subsidiaries and Affiliates
SCHEDULE 5.5    -- Financial Statements
SCHEDULE 5.10   -- Investments
SCHEDULE 5.12   -- Covered Contracts and Related Contracts
SCHEDULE 5.14   -- Use of Proceeds
SCHEDULE 5.15   -- Existing Indebtedness

EXHIBIT 1       -- Form of 6.82% Senior Note due 2007
EXHIBIT 1A      -- Form of 6.99% Senior Note due 2009
EXHIBIT 4.4     -- Form of Opinion of Special Counsel to the Company and the 
                   Guarantor
EXHIBIT 4.11    -- Form of Guaranty Agreement














                                       iv

<PAGE>   6


                                 OM GROUP, INC.
                              3800 TERMINAL TOWER
                           CLEVELAND, OHIO 44113-2204

                          6.82% Senior Notes due 2007
                          6.99% Senior Notes due 2009

                                                                October 24, 1997

TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:


Ladies and Gentlemen:

        OM Group, Inc., a Delaware corporation (the "COMPANY"), agrees with you
as follows:

1.      AUTHORIZATION OF NOTES.

        The Company will authorize the issue and sale of $15,000,000 aggregate
principal amount of its 6.82% Senior Notes due October 27, 2007 (the "2007
NOTES") and $15,000,000 of its 6.99% Senior Notes due October 27, 2009 (the
"2009 NOTES") (collectively, the "NOTES", such term to include any such notes
issued in substitution therefor pursuant to Section 13 of this Agreement or the
Other Agreement (as hereinafter defined)). The Notes shall be substantially in
the form set out in Exhibits 1 and 1A, with such changes therefrom, if any, as
may be approved by you and the Company. Certain capitalized terms used in this
Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit"
are, unless otherwise specified, to a Schedule or an Exhibit attached to this
Agreement.

2.      SALE AND PURCHASE OF NOTES.

        Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount and with the maturities
specified opposite your name in Schedule A at the purchase price of 100% of the
principal amount thereof. Contemporaneously with entering into this Agreement,
the Company is entering into a separate Note Purchase Agreement (the "OTHER
AGREEMENT") identical with this Agreement with the other purchaser named in
Schedule A (the "OTHER PURCHASER"), providing for the sale at such Closing to
the Other Purchaser of Notes in the principal amount and with the maturities
specified opposite its name in Schedule A. Your obligations hereunder and the
obligations of the Other Purchaser under the Other Agreement are several and not
joint obligations and you shall have no obligation under the Other Agreement and
no liability to any Person for the performance or non-performance by the Other
Purchaser thereunder.  

<PAGE>   7


3.      CLOSING.

        The sale and purchase of the Notes to be purchased by you and the Other
Purchaser shall occur at the offices of Whitman Breed Abbott & Morgan LLP, 200
Park Avenue, New York, New York 10166, at 10:00 a.m., New York City time, at a
closing (the "CLOSING") on October 24, 1997 or on such other Business Day
thereafter on or prior to October 31, 1997 as may be agreed upon by the Company
and you and the Other Purchaser (the "CLOSING DATE"). At the Closing, the
Company will deliver to you the Notes of the maturity so designated to be
purchased by you in the form of a single Note (or such greater number of Notes
in denominations of at least $500,000 as you may request) dated the Closing Date
and registered in your name (or in the name of your nominee), against delivery
by you to the Company or its order of immediately available funds in the amount
of the purchase price therefor by wire transfer of immediately available funds
for the account of the Company to account number 001-2669111 at National City
Bank, Cleveland, Ohio. If at the Closing the Company shall fail to tender such
Notes to you as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.

4.      CONDITIONS TO CLOSING.

        Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:

4.1.    REPRESENTATIONS AND WARRANTIES.

        The representations and warranties of the Company in this Agreement, and
the representations and warranties of each of OMG Americas, Inc., an Ohio
corporation, OMG Apex, Inc., a Delaware corporation, and SCM Metal Products,
Inc., a Delaware corporation, each a Wholly Owned Restricted Subsidiary
(individually, a "GUARANTOR" and collectively, the "GUARANTORS"), in each
Guaranty Agreement, and all representations and warranties otherwise made in
writing by or on behalf of the Company or each Guarantor in connection with the
transactions contemplated hereby, shall be correct when made and at the time of
the Closing.

4.2.    PERFORMANCE; NO DEFAULT.

        The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing.





                                       -2-

<PAGE>   8

4.3.    COMPLIANCE CERTIFICATES.

        (a) OFFICER'S CERTIFICATE. The Company shall have delivered to you an
Officer's Certificate, dated the Closing Date, certifying that the conditions
specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.

        (b) SECRETARY'S CERTIFICATES. The Company shall have delivered to you a
certificate of the Secretary or an Assistant Secretary of the Company certifying
as to the resolutions attached thereto and other corporate proceedings relating
to the authorization, execution and delivery of the Notes, this Agreement and
the Other Agreement; and each Guarantor shall have delivered to you a
certificate of the Secretary or an Assistant Secretary of such Guarantor
certifying as to the resolutions attached thereto and other corporate
proceedings relating to the authorization, execution and delivery of its
Guaranty Agreement.

4.4.    OPINIONS OF COUNSEL.

        You shall have received opinions in form and substance satisfactory to
you, dated the Closing Date (a) from Squire, Sanders & Dempsey, special counsel
for the Company and the Guarantor in connection with the transactions
contemplated hereby, covering the matters set forth in Exhibit 4.4 and covering
such other matters incident to such transactions as you or your counsel may
reasonably request (and the Company hereby instructs its counsel to deliver such
opinion to you), (b) from Raikkonen & Ramo Ltd., Finnish counsel to OMG
Kokkola Chemicals Oy, a Wholly Owned Restricted Subsidiary, and (c) from Whitman
Breed Abbott & Morgan LLP, your special counsel in connection with such
transactions, covering such matters as you may reasonably request.

4.5.    PURCHASE PERMITTED BY APPLICABLE LAW, ETC.

        On the Closing Date your purchase of Notes shall (i) be permitted by the
laws and regulations of each jurisdiction to which you are subject (without
recourse to basket or leeway provisions of said laws, such as Section 1405(a)(8)
of the New York Insurance Law), (ii) not violate any applicable law or
regulation (including, without limitation, Regulation G, T or X of the Board of
Governors of the Federal Reserve System) and (iii) not subject you to any tax,
penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation is not in effect on the date hereof. If requested by
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine whether
such purchase is so permitted. Approvals, in form, scope and substance
satisfactory to you and your special counsel shall have been delivered to you
and your special counsel.

4.6.    SALE TO OTHER PURCHASER.

        The Other Agreement shall have been duly entered into and,
contemporaneously with the purchase of the Notes to be purchased by you at the
Closing, the Company shall sell to the Other Purchaser and the Other Purchaser
shall purchase the Notes to be purchased by them at the Closing as specified in
Schedule A.

                                      -3-

<PAGE>   9


4.7.    PAYMENT OF SPECIAL COUNSEL FEES.

        Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing Date the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.

4.8.    PRIVATE PLACEMENT NUMBER.

        Private Placement numbers issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the 2007
Notes and the 2009 Notes.

4.9.    CHANGES IN CORPORATE STRUCTURE.

        Neither the Company nor any Restricted Subsidiary shall have changed its
jurisdiction of incorporation or been a party to any merger or consolidation or
shall have succeeded to all or any substantial part of the liabilities of any
other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.

4.10.   APPROVALS.

        All actions, approvals, consents, waivers, exemptions, orders,
authorizations, registrations, declarations, filings and recordings
(collectively, "APPROVALS"), if any, which are required to be taken, given,
obtained, filed or recorded, as the case may be, by or from or with (a) any
Governmental Authority, (b) any trustee or holder of any indebtedness,
obligation or securities of the Company or any of its Subsidiaries or (c) any
other Person, in connection with the legal and valid execution and delivery by
the Company of this Agreement and the Other Agreement and the consummation of
the transactions contemplated hereby, the issuance and sale by the Company of
the Notes and the legal and valid execution and delivery by each Guarantor of
its Guaranty Agreement, shall have been duly taken, given, obtained, filed or
recorded, as the case may be, and all such Approvals shall be final, subsisting
and in full force and effect on the Closing Date, and shall not be subject to
any further proceedings or appeals or any conditions subsequent not approved by
you. Certified copies or other appropriate evidence of all such Approvals, in
form, scope and substance satisfactory to you and your special counsel, shall
have been delivered to you and your special counsel.

4.11.   GUARANTY AGREEMENTS.

        Each Guarantor shall have duly authorized, executed and delivered a
Guaranty Agreement substantially in the form of Exhibit 4.11 (as amended or
otherwise modified and in effect from time to time, the "GUARANTY AGREEMENTS");
the Guaranty Agreements shall be in full force and effect; and you and your
special counsel shall have each received an original fully executed counterpart
thereof.



                                      -4-

<PAGE>   10

4.12.   CREDIT AGREEMENT, ETC.

        You and your special counsel shall have each received copies of the
Credit Agreement and the Bank Guaranty Agreements, certified as true and
complete copies thereof, in each case as in effect on the Closing Date.

4.13.   DEBT REPAYMENT.

        The Indebtedness of the Company identified on Schedule 5.15 as being
repaid on or prior to the Closing Date shall have been repaid to the extent
specified on Schedule 5.15, and all Liens, if any, securing any of such
Indebtedness identified thereon as being repaid in full shall have been released
and discharged (or provision satisfactory to you and your counsel shall have
been made for the simultaneous repayment of such Indebtedness and release and
discharge of such Liens). You and your special counsel shall have each received
appropriate evidence of such repayment, release and discharge.

4.14.   Amendments to Credit Agreement; Existing Note Purchase Agreements.

        The Company and the Banks shall have amended the Credit Agreement and
the 1995 Note Purchasers shall have amended the 1995 Note Purchase Agreements to
allow for the transactions contemplated hereby; and the amendments shall be in
full force and effect.

4.15.   PROCEEDINGS AND DOCUMENTS.

        All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request

5.      REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

        The Company represents and warrants to you that:

5.1.    ORGANIZATION; POWER AND AUTHORITY.

        The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or hold
under lease the properties it purports to own or hold under lease, to transact
the business it transacts and proposes to transact, to execute and deliver this
Agreement and the Other Agreement and the Notes and to perform the provisions
hereof and thereof.


                                      -5-

<PAGE>   11


5.2.    AUTHORIZATION, ETC.

        This Agreement, the Other Agreement and the Notes have been duly
authorized by all necessary corporate action on the part of the Company and the
Guaranty Agreements have been duly authorized by all necessary corporate action
on the part of each Guarantor; and this Agreement constitutes, and upon
execution and delivery thereof by the Company each Note will constitute, and
upon execution and delivery thereof by the Guarantors the Guaranty Agreements
will constitute, a legal, valid and binding obligation of the Company or each
Guarantor, as the case may be, enforceable against the Company or each
Guarantor, as the case may be, in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

5.3.    DISCLOSURE.

        This Agreement, the documents, certificates or other writings delivered
to you by or on behalf of the Company in connection with the transactions
contemplated hereby and the financial statements listed in Schedule 5.5, taken
as a whole, do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading
in light of the circumstances under which they were made. Except as disclosed in
one of the documents, certificates or other writings delivered to you, or in the
financial statements listed in Schedule 5.5, since June 30, 1997, there has been
no change in the financial condition, operations, business, properties or
prospects of the Company or any Subsidiary except changes that individually or
in the aggregate could not reasonably be expected to have a Material Adverse
Effect. There is no fact known to the Company that could reasonably be expected
to have a Material Adverse Effect that has not been set forth herein or in the
other documents, certificates and other writings delivered to you by or on
behalf of the Company specifically for use in connection with the transactions
contemplated hereby.

5.4.    ORGANIZATION, POWER AND AUTHORITY, AND OWNERSHIP OF SHARES OF 
SUBSIDIARIES; AFFILIATES.

        (a) Schedule 5.4 contains complete and correct lists (i) of the
Company's Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, its designation as a Restricted
or Unrestricted Subsidiary, and the percentage of shares of each class of its
capital stock or similar equity interests outstanding owned by the Company and
each other Subsidiary, (ii) of the Company's Affiliates, other than
Subsidiaries, and (iii) of the Company's directors and senior officers.

        (b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary (except for directors'
qualifying shares) free and clear of any Lien.


                                      -6-


<PAGE>   12


        (c) Each Subsidiary identified in Schedule 5.4 is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified as a foreign corporation and
is in good standing in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each such Subsidiary
has the corporate or other power and authority to own or hold under lease the
properties it purports to own or hold under lease, to transact the business it
transacts and proposes to transact and, in the case of each Guarantor, to
execute and deliver the Guaranty Agreement to which it is a party and to perform
the provisions thereof.

        (d) No Subsidiary is a party to, or otherwise subject to, any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.

5.5.    FINANCIAL STATEMENTS.

        The Company has delivered to you and the Other Purchaser copies of the
financial statements of the Company and its Subsidiaries listed on Schedule 5.5.
All of said financial statements (including in each case the related schedules
and notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).

5.6.    COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.

        Neither the execution, delivery and performance by the Company of this
Agreement and the Notes nor the execution, delivery and performance by each
Guarantor of the Guaranty Agreement to which it is a party will (i) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company, any Guarantor or
any other Subsidiary under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-law, or any other
agreement or instrument to which the Company, any Guarantor or any other
Subsidiary is bound or by which the Company, any Guarantor or any other
Subsidiary or any of their respective properties may be bound or affected, (ii)
conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator or
Governmental Authority applicable to the Company, any Guarantor or any other
Subsidiary or (iii) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company, any
Guarantor or any other Subsidiary.



                                      -7-


<PAGE>   13




5.7.    GOVERNMENTAL AUTHORIZATIONS, ETC.

        No Approval by, from or with any Governmental Authority is required in
connection with the execution, delivery or performance by the Company of this
Agreement or the Notes or by the Guarantors of the Guaranty Agreements.

5.8.    LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.

        (a) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or any property of the Company or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

        (b) Neither the Company nor any Subsidiary is in default under any term
of any agreement or instrument to which it is a party or by which it is bound,
or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

5.9.    TAXES.

        The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (i) the amount of which is not
individually or in the aggregate Material or (ii) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended December 31, 1995.

5.10.   TITLE TO PROPERTY; LEASES; INVESTMENTS.

        (a) The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of


                                      -8-


<PAGE>   14


Liens prohibited by this Agreement. All leases that individually or in the
aggregate are Material are valid and subsisting and are in full force and
effect.

        (b) Schedule 5.10 correctly lists all Investments of the Company and
each Subsidiary (other than (i) Investments in Subsidiaries and (ii) investments
of the character described in clause (b) of the definition set forth in Schedule
B of the term "Investment") which are existing on the date hereof.

5.11.   LICENSES, PERMITS, ETC.

        (a) The Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others.

        (b) To the best knowledge of the Company, no product Material to the
Company or any Subsidiary infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, service mark, trademark, trade name
or other right owned by any other Person.

        (c) To the best knowledge of the Company, there is no Material violation
by any Person of any right of the Company or any of its Subsidiaries with
respect to any patent, copyright, service mark, trademark, trade name or other
right owned or used by the Company or any of its Subsidiaries.

5.12.   COMPLIANCE WITH ERISA, ETC.

        (a) The Company and each ERISA Affiliate have operated and administered
each Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the aggregate
Material.

        (b) The present value of the aggregate benefit liabilities under each of
the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "BENEFIT LIABILITIES" has the


                                      -9-

<PAGE>   15


meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE" and
"PRESENT VALUE" have the respective meanings specified in section 3 of ERISA.

        (c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.

        (d) The expected postretirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.

        (e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax could
be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to the accuracy of your representation in Section 6.2 as to the
sources of the funds used to pay the purchase price of the Notes to be purchased
by you.

        (f) Attached hereto as Schedule 5.12 is a complete list (i) of each
covered plan which has an interest as a contractholder in (or as the beneficial
owner of) any insurance or annuity contract (a "Covered Contract") issued by any
of the Purchasers (together with sufficient information to identify such
contract and the Purchaser issuing such contract) and (ii) of each related plan
which has an interest as a contractholder in (or as the beneficial owner of) any
insurance or annuity contract issued by the Purchaser issuing a Covered Contract
(together with a description of such contract (a "Related Contract")). As used
in the immediately preceding sentence, the following terms shall have the
following meanings: "covered plan" shall mean an employee benefit plan as
defined in Section 3(3) of ERISA, or a plan as defined in Section 4975(e)(1) of
the Code, with respect to which the Company is a party in interest (as defined
in Section 3(14) of ERISA) or a disqualified person (as defined in Section
4975(e)(2) of the Code), or with respect to which the Notes could constitute an
employer security (as defined in Section V(c) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")); "related plan" shall mean, with respect to any
Covered Contract, any employee benefit plan maintained by the same employer (or
any affiliate of such employer) or employee organization maintaining the covered
plan identified pursuant to clause (i) with respect to such Covered Contract;
and "affiliate" shall mean an affiliate as defined in Section V(a) of PTCE
95-60.

5.13.   PRIVATE OFFERING BY THE COMPANY.

        Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any Person other than you, the Other Purchaser and not more than 25 other
Institutional Investors, each of which has been offered the Notes at private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or

                                      -10-

<PAGE>   16


will take, any action that would subject the issuance or sale of the Notes to
the registration requirements of Section 5 of the Securities Act.

5.14.   USE OF PROCEEDS; MARGIN REGULATIONS.

        The Company will apply the proceeds of the sale of the Notes as set
forth in Schedule 5.14. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Margin stock does not constitute more than 5% of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does not
have any present intention that margin stock will constitute more than 5% of the
value of such assets. As used in this Section, the terms "MARGIN STOCK" and
"PURPOSE OF BUYING OR CARRYING" shall have the meanings assigned to them in said
Regulation G.

5.15.   EXISTING INDEBTEDNESS; FUTURE LIENS.

        (a) Schedule 5.15 sets forth a complete and correct list of all
outstanding Funded Debt of the Company and its Subsidiaries as of the date
hereof and as of the Closing Date. Neither the Company nor any Subsidiary is in
default in, and no waiver of default is currently in effect relating to, the
payment of any principal or interest on any Indebtedness of the Company or such
Subsidiary and no event or condition exists with respect to any Indebtedness of
the Company or any Subsidiary that would permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before its
regularly scheduled dates of payment.

        (b) Neither the Company nor any Subsidiary has agreed or consented to
cause or permit in the future (upon the happening of a contingency or otherwise)
any of its property, whether now owned or hereafter acquired, to be subject to a
Lien not permitted by Section 10.3.

5.16.   FOREIGN ASSETS CONTROL REGULATIONS, ETC.

        Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.

5.17.   STATUS UNDER CERTAIN STATUTES.

        Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.

                                      -11-

<PAGE>   17

5.18.   ENVIRONMENTAL MATTERS.

        Neither the Company nor any Subsidiary has knowledge of any claim or has
received any notice of any claim, and no proceeding has been instituted raising
any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,

                  (a) neither the Company nor any Subsidiary has knowledge of
     any facts which would give rise to any claim, public or private, of
     violation of Environmental Laws or damage to the environment emanating
     from, occurring on or in any way related to real properties now or formerly
     owned, leased or operated by any of them or to other assets or their use,
     except, in each case, such as could not reasonably be expected to result in
     a Material Adverse Effect;

                  (b) neither the Company nor any of its Subsidiaries has stored
     any Hazardous Materials on real properties now or formerly owned, leased or
     operated by any of them and has not disposed of any Hazardous Materials in
     a manner contrary to any Environmental Laws in each case in any manner that
     could reasonably be expected to result in a Material Adverse Effect; and

                  (c) all buildings on all real properties now owned, leased or
     operated by the Company or any of its Subsidiaries are in compliance with
     applicable Environmental Laws, except where failure to comply could not
     reasonably be expected to result in a Material Adverse Effect.

6.      REPRESENTATIONS OF THE PURCHASER.

6.1.    PURCHASE FOR INVESTMENT.

        You represent that you are purchasing the Notes for your own account or
for one or more separate accounts maintained by you or for the account of one or
more pension or trust funds and not with a view to the distribution thereof,
PROVIDED that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.

6.2.    SOURCE OF FUNDS.

        You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "SOURCE") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:

                                      -12-

<PAGE>   18

                (a) if you are an insurance company, the Source does not include
assets allocated to any separate account maintained by you in which any employee
benefit plan (or its related trust) has any interest, other than a separate
account that is maintained solely in connection with your fixed contractual
obligations under which the amounts payable, or credited, to such plan and to
any participant or beneficiary of such plan (including any annuitant) are not
affected in any manner by the investment performance of the separate account; or

                (b) the Source is either (i) an insurance company pooled
separate account, within the meaning of Prohibited Transaction Exemption ("PTE")
90-1 (issued January 29, 1990), or (ii) a bank collective investment fund,
within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you
have disclosed to the Company in writing pursuant to this paragraph (b), no
employee benefit plan or group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of all assets allocated to
such pooled separate account or collective investment fund; or

                (c) the Source is a governmental plan; or

                (d) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to this
paragraph (d); or

                (e) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.

        Each Purchaser whose source of funds includes assets of its insurance
company general account (as defined in Section V(e) of PTCE 95-60), and with
respect to which a Covered Contract is disclosed by the Company on Schedule
5.12, hereby represents to the Company that the reserves and liabilities with
respect to such general account for such Covered Contract and all Related
Contracts, if any, identified by the Company with respect thereto do not exceed
10% of the sum of all reserves and liabilities of such general account plus the
surplus of such Purchaser, such reserves and liabilities and such surplus in
each case being calculated in accordance with the applicable provisions of PTCE
95-60.

As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.

7.      INFORMATION AS TO COMPANY.

7.1.    FINANCIAL AND BUSINESS INFORMATION.

        The Company shall deliver to each holder of Notes that is an 
Institutional Investor:

                                      -13-

<PAGE>   19

                (a) QUARTERLY STATEMENTS -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), copies of;

                (i) a consolidated balance sheet of the Company and its
Restricted Subsidiaries as at the end of such quarter;

                (ii) consolidated statement of income of the Company and its
Restricted Subsidiaries, for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such quarter; and

                (iii) consolidated statement of cash flows of the Company and
its Restricted Subsidiaries for the portion of the fiscal year ending with such
quarter;

setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments, PROVIDED that delivery within the time period specified above of
copies of the Company's Quarterly Report on Form 10-Q prepared in compliance
with the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section 7.1(a);

                (b) ANNUAL STATEMENTS -- within 105 days after the end of each
fiscal year of the Company, copies of;

                (i) a consolidated balance sheet of the Company and its
Restricted Subsidiaries, as at the end of such year; and

                (ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Restricted Subsidiaries, for such
year,

setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied

                (A) by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that such
financial statements present fairly, in all material respects, the financial
position of the companies being reported upon and their results of operations
and cash flows and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the circumstances,
and

                                      -14-

<PAGE>   20


                (B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their audit, they
have become aware of any condition or event that then constitutes a Default or
an Event of Default, and, if they are aware that any such condition or event
then exists, specifying the nature and period of the existence thereof,

PROVIDED that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3
under the Exchange Act) prepared in accordance with the requirements therefor
and filed with the Securities and Exchange Commission, together with the
accountant's certificate described in clause (B) above, shall be deemed to
satisfy the requirements of this Section 7.1(b);

                (c) SEC AND OTHER REPORTS -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or proxy
statement sent by the Company or any Subsidiary to public securities holders
generally, and (ii) each regular or periodic report, each registration statement
(without exhibits except as expressly requested by such holder), and each
prospectus and all amendments thereto filed by the Company or any Subsidiary
with the Securities and Exchange Commission and of all press releases and other
statements made available generally by the Company or any Subsidiary to the
public concerning developments that are Material;

                (d) NOTICE OF DEFAULT OR EVENT OF DEFAULT __ promptly, and in
any event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given any
notice or taken any action with respect to a claimed default hereunder or that
any Person has given any notice or taken any action with respect to a claimed
default of the type referred to in Section 11(f), a written notice specifying
the nature and period of existence thereof and what action the Company is taking
or proposes to take with respect thereto;

                (e) ERISA MATTERS -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a written
notice setting forth the nature thereof and the action, if any, that the Company
or an ERISA Affiliate proposes to take with respect thereto:

                  (i) with respect to any Plan, any reportable event, as defined
     in section 4043(b) of ERISA and the regulations thereunder; or

                  (ii) the taking by the PBGC of steps to institute, or the
     threatening by the PBGC of the institution of, proceedings under section
     4042 of ERISA for the termination of, or the appointment of a trustee to
     administer, any Plan, or the receipt by the Company or any ERISA Affiliate
     of a notice from a Multiemployer Plan that such action has been taken by
     the PBGC with respect to such Multiemployer Plan; or



                                      -15-

<PAGE>   21

                (iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, or in the imposition of any Lien on any of
the rights, properties or assets of the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or to such penalty or excise tax provisions or to
Section 401(a)(29) or 412 of the Code, if such liability or Lien, taken together
with any other such liabilities or Liens then existing, could reasonably be
expected to have a Material Adverse Effect; or

                (iv) the existence, at any time after the Closing, of any
Covered Contracts or Related Contracts which are not listed on Schedule 5.12 as
of the Closing Date;

                (f) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in any
event within 10 days of receipt thereof, copies of any notice to the Company or
any Subsidiary from any Federal or state Governmental Authority relating to any
order, ruling, statute or other law or regulation that could reasonably be
expected to have a Material Adverse Effect;

                (g) NOTICE OF CHANGE OF CONTROL -- promptly, and in no event
later than 15 days prior to the date of any Change of Control, written notice
thereof in the form of an Officer's Certificate describing in reasonable detail
the facts and circumstances giving rise to such Change of Control, specifying
the date such Change of Control is expected to occur, and making reference to
Section 9.8 of this Agreement and the right of the holders of Notes to require
the prepayment of the Notes on the terms and conditions provided for in such
Section 9.8; and

                (h) REQUESTED INFORMATION -- with reasonable promptness, such
other data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to time may be reasonably
requested in writing by any such holder of Notes.

7.2.    OFFICER'S CERTIFICATE.

        Each set of financial statements delivered to a holder of Notes pursuant
to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate
of a Senior Financial Officer setting forth:

                (a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.11 hereof,
inclusive, during the quarterly or annual period covered by the statements then
being furnished (including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, as the
case may be, permissible under the terms

                                      -16-
<PAGE>   22


of such Sections, and the calculation of the amount, ratio or percentage then in
existence); and

                (b) EVENT OF DEFAULT -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made, under
such officer's supervision, a review of the transactions and conditions of the
Company and its Restricted Subsidiaries from the beginning of the quarterly or
annual period covered by the statements then being furnished to the date of the
certificate and that such review has not disclosed the existence during such
period of any condition or event that constitutes a Default or an Event of
Default or, if any such condition or event existed or exists (including, without
limitation, any such event or condition resulting from the failure of the
Company or any Restricted Subsidiary to comply with any Environmental Law),
specifying the nature and period of existence thereof and what action the
Company has taken or proposes to take with respect thereto.

7.3.    INSPECTION.

        The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:

                (a) NO DEFAULT -- if no Default or Event of Default then exists,
at the expense of such holder and upon reasonable prior notice to the Company,
to visit the principal executive office of the Company, to discuss the affairs,
finances and accounts of the Company and its Restricted Subsidiaries with the
Company's officers, and (with the consent of the Company, which consent will not
be unreasonably withheld) its independent public accountants, and (with the
consent of the Company, which consent will not be unreasonably withheld) to
visit the other offices and properties of the Company and each Restricted
Subsidiary, all at such reasonable times and as often as may be reasonably
requested in writing; and

                (b) DEFAULT -- if a Default or Event of Default then exists, at
the expense of the Company to visit and inspect any of the offices or properties
of the Company or any Subsidiary, to examine all their respective books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the affairs,
finances and accounts of the Company and its Subsidiaries), all at such times
and as often as may be requested.

8.      PAYMENT AND PREPAYMENT OF THE NOTES.

8.1.    PAYMENT AT MATURITY.

        The Company will pay the entire outstanding principal amount of the 2007
Notes, together with all interest accrued thereon, on October 27, 2007, and will
pay the entire

                                      -17-


<PAGE>   23

outstanding principal amount of the 2009 Notes, together with all interest
accrued thereon, on October 27, 2009.

8.2.    OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.

        The Notes shall not be subject to prepayment at the option of the
Company except as provided in this Section 8.2. The Company may, at its option,
at any time on or after October 27, 1998, upon notice as provided below, prepay
the Notes at any time in whole, or from time to time in part (in a minium
principal amount of $500,000 and in integral multiples of $1,000, in excess
thereof), at 100% of the principal amount so prepaid, plus the Make-Whole Amount
determined for the prepayment date with respect to such principal amount. The
Company will give each holder of Notes written notice of each optional
prepayment under this Section 8.2 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
such date, the maturity of Notes and the aggregate principal amount of such
Notes to be prepaid on such date, the principal amount of each Note held by such
holder to be prepaid (determined in accordance with Section 8.3), and the
interest to be paid on the prepayment date with respect to such principal amount
being prepaid, and shall be accompanied by a certificate of a Senior Financial
Officer as to the estimated Make-Whole Amount due in connection with such
prepayment (calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation. Two Business Days
prior to such prepayment, the Company shall deliver to each holder of Notes a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.

8.3.    ALLOCATION OF PARTIAL PREPAYMENTS.

        In the case of each partial prepayment of the Notes (other than any such
prepayment pursuant to Section 8.4), the principal amount of the Notes to be
prepaid shall be allocated between the 2007 Notes and the 2009 Notes in
proportion to the aggregate principal amount of each such Note outstanding
immediately prior to such prepayment.

8.4.    PREPAYMENT OF NOTES UPON CHANGE OF CONTROL.

        The Company shall be required to prepay Notes of each holder thereof
which shall have given notice to the Company of its election to require such
prepayment in connection with a Change of Control, as contemplated by Section
9.8, each such purchase to be made at the price and otherwise upon the terms set
forth and on the date determined in accordance with, and otherwise as provided
in, Section 9.8.

8.5.    MATURITY; SURRENDER, ETC.

        In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and


                                      -18-

<PAGE>   24

Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.

8.6.    PURCHASE OF NOTES.

        The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.

8.7.    MAKE-WHOLE AMOUNT.

        The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, PROVIDED that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:

                "CALLED PRINCIPAL" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2 or has
become or is declared to be immediately due and payable pursuant to Section
12.1, as the context requires.

                "DISCOUNTED VALUE" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.

                "REINVESTMENT YIELD" means, with respect to the Called Principal
of any Note, 0.5% over the yield to maturity implied by (i) the yields reported,
as of 10:00 A.M. (New York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, on the display designated
as "Page 678" on the Telerate Access Service (or such other display as may
replace Page 678 on Telerate Access Service) for actively traded U.S. Treasury
securities having a maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, or (ii) if such yields are not reported as
of such time or the yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the second Business Day preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S.

                                      -19-

<PAGE>   25

Treasury securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the actively traded U.S.
Treasury security with the duration closest to and greater than the Remaining
Average-Life and (2) the actively traded U.S. Treasury security with the
duration closest to and less than the Remaining Average Life.

                "REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining Scheduled
Payment with respect to such Called Principal by (b) the number of years
(calculated to the nearest one-twelfth year) that will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.

                "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such Called
Principal if no payment of such Called Principal were made prior to its
scheduled due date, PROVIDED that if such Settlement Date is not a date on which
interest payments are due to be made under the terms of the Notes, then the
amount of the next succeeding scheduled interest payment will be reduced by the
amount of interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or 12.1.

                "SETTLEMENT DATE" means, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.

9.      AFFIRMATIVE COVENANTS.

        The Company covenants and agrees that from the date of this Agreement
through the Closing Date, and thereafter so long as any Note shall remain
outstanding:

9.1.    COMPLIANCE WITH LAW.

        The Company will, and will cause each of its Restricted Subsidiaries to,
comply with all laws, ordinances or governmental rules or regulations to which
each of them is subject, obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.


                                      -20-

<PAGE>   26

9.2.    INSURANCE.

        The Company will, and will cause each of its Restricted Subsidiaries to,
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.

9.3.    MAINTENANCE OF PROPERTIES.

        The Company will, and will cause each of its Restricted Subsidiaries to,
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, PROVIDED that this Section shall not prevent
the Company or any Restricted Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

9.4.    PAYMENT OF TAXES AND CLAIMS.

        The Company will, and will cause each of its Restricted Subsidiaries to,
file all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Restricted
Subsidiary, PROVIDED that neither the Company nor any Restricted Subsidiary need
pay any such tax or assessment or claims if (i) the amount, applicability or
validity thereof is contested by the Company or such Restricted Subsidiary on a
timely basis in good faith and in appropriate proceedings, and the Company or a
Restricted Subsidiary has established adequate reserves therefor in accordance
with GAAP on the books of the Company or such Restricted Subsidiary or (ii) the
nonpayment of all such taxes and assessments in the aggregate could not
reasonably be expected to have a Material Adverse Effect.

9.5.    CORPORATE EXISTENCE; LICENSES.

        (a) The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Sections 10.6 and 10.7, the Company
will at all times preserve and keep in full force and effect the corporate
existence of each of its Restricted Subsidiaries (unless merged into the Company
or a Wholly Owned Restricted Subsidiary) and all rights and franchises of the
Company and its Restricted Subsidiaries unless, in the good faith judgment of
the Company, the termination of or failure to preserve and keep in full force
and


                                      -21-
<PAGE>   27

effect such corporate existence, right or franchise could not, individually or
in the aggregate, have a Material Adverse Effect.

        (b) The Company will, and will cause each of its Restricted Subsidiaries
to, maintain the validity of all Licenses necessary in any material respect for
the conduct of the Business of the Company and its Restricted Subsidiaries.

9.6.    BOOKS AND RECORDS.

        The Company will, and will cause each of its Restricted Subsidiaries to,
(a) keep proper books of record and account in which full, true and correct
entries will be made of all its material business dealings and transactions in
accordance with GAAP applied on a consistent basis and (b) maintain a system of
accounting established and administered in accordance with GAAP, and set aside
on its books from its earnings for each fiscal period all proper reserves,
accruals and provisions which, in accordance with GAAP, should be set aside from
such earnings in connection with its business, including, without limitation,
provisions for depreciation, obsolescence and/or amortization, and accruals for
taxes for such period.

9.7.    ENVIRONMENTAL MATTERS.

        (a) The Company will, and will cause each of its Restricted Subsidiaries
to, (i) obtain and maintain in full force and effect all Environmental Permits
that may be required from time to time under any Environmental Law for the
conduct of any Material portion of the business of the Company or any Restricted
Subsidiary and (ii) be and remain in compliance in all material respects with
all terms and conditions of all such Environmental Permits and with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in all applicable Environmental
Laws.

        (b) The Company will not, and will not permit any of its Restricted
Subsidiaries to, (i) cause or allow (A) any Hazardous Material to be present at
any time on, in, under or above any real properties owned, leased or operated by
the Company or any Restricted Subsidiary or (B) any such real properties or any
part thereof to be used at any time to manufacture, generate, refine, process,
distribute, use, sell, treat, receive, store, dispose of, transport, arrange for
transport of, handle, or be involved in any other activity involving, any
Hazardous Material, or (ii) conduct any such activities described in the
foregoing clause (i)(B) on any such real properties or anywhere else, except, in
each case referred to in the foregoing clauses (i) and (ii), in a manner that is
in compliance in all material respects with all applicable Environmental Laws
and Environmental Permits and to an extent that will not have a Material Adverse
Effect.

9.8.    PREPAYMENT OF NOTES UPON CHANGE OF CONTROL.

        At any time following the occurrence of a Change of Control (subject to
the next succeeding paragraph of this Section), each holder of a Note shall have
the right at its option exercisable by the giving of notice to the Company (a
"PREPAYMENT ELECTION NOTICE") to elect to require the prepayment by the Company
of all Notes then held by such holder on the

                                      -22-

<PAGE>   28

prepayment date specified by such holder in such Prepayment Election Notice
(which shall not in any event be less than 10 days nor more than 30 days after
the date on which such holder shall have given such Prepayment Election Notice),
such prepayment to be at a price equal to 100% of the principal amount of such
Notes together with interest accrued thereon to such prepayment date. On the
prepayment date specified in any Prepayment Election Notice given by any holder
of a Note, the Company will prepay all Notes held by such holder at the
prepayment price provided for in the first sentence of this Section.

        The right of the holder of a Note to give a Prepayment Election Notice
requiring the prepayment of such Note pursuant to this Section following a
Change of Control shall expire at the close of business in New York City on the
thirtieth day following the later of (x) the date of the occurrence of such
Change of Control and (y) actual receipt by such holder of notice of such Change
of Control pursuant to Section 7.1(g). Notwithstanding any provision hereof to
the contrary, no failure on the part of the holder of any Note to exercise such
holder's right to require the prepayment thereof by the Company pursuant to this
Section following a Change of Control shall be deemed a waiver of or otherwise
impair the rights of such holder pursuant to this Section in respect of all
other events or circumstances that shall constitute a Change of Control.

10.     NEGATIVE COVENANTS.

        The Company covenants and agrees that from the date of this Agreement
through the Closing Date, and thereafter so long as any Note shall remain
outstanding:

10.1.   MAINTENANCE OF CERTAIN FINANCIAL CONDITIONS.

        (a) CONSOLIDATED NET WORTH. The Company will not permit Consolidated Net
Worth to be less than the sum of (i) $110,000,000, PLUS (ii) 25% of Consolidated
Net Income (but only if a positive number) for the period commencing on June 30,
1995 and ending on the then most recent Determination Date.

        (b) COVERAGE RATIO. The Company will not permit the Coverage Ratio as of
any Determination Date to be less than 4.

        (c) FUNDED DEBT RATIO. The Company will not permit the Funded Debt Ratio
as of any Determination Date to be greater than (i) 0.60 through December 31,
1997, and (ii) 0.50 thereafter.

10.2.   INDEBTEDNESS; RESTRICTED SUBSIDIARY INDEBTEDNESS.

        (a) The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume, guarantee, or otherwise
become directly or indirectly liable with respect to, any Indebtedness, except
that the Company and the Guarantors may become and be liable with respect to the
Indebtedness evidenced by the Notes and guaranteed pursuant to the Guaranty
Agreements and except that, subject (to the extent applicable) to the last
sentence of this subdivision (a):

                                      -23-

<PAGE>   29


                (i) any Restricted Subsidiary may incur Indebtedness of such
Restricted Subsidiary owing to the Company or a Wholly Owned Restricted
Subsidiary; and the Company may incur Indebtedness of the Company owing to
Restricted Subsidiaries, but only to the extent permitted by the last sentence
of this Section 10.2;

                (ii) the Company and the Guarantors may incur Indebtedness
represented by revolving credit borrowings made by the Company pursuant to the
Credit Agreement and guaranteed by the Guarantors pursuant to the Bank Guaranty
Agreements, PROVIDED that, on the date of incurrence of any such Indebtedness
and after giving effect thereto and to the application of the proceeds thereof,

                           (A) no Default or Event of Default shall have
                occurred and be continuing, and

                           (B) the aggregate principal amount of all such
                Indebtedness outstanding shall not exceed the Permitted Credit
                Agreement Amount;

                (iii) the Company and (subject to subdivision (b) of this
Section 10.2) any Restricted Subsidiary may incur additional Indebtedness,
PROVIDED that, on the date of incurrence of any such additional Indebtedness and
after giving effect thereto and to the application of the proceeds thereof,

                           (A) no Default or Event of Default shall have
                occurred and be continuing, and

                           (B) the Pro Forma Coverage Ratio shall be greater
                than 4;

                (iv) the Company and (subject to subdivision (b) of this Section
10.2) any Restricted Subsidiary may incur Indebtedness ("REFINANCING
INDEBTEDNESS") solely for the purpose of refinancing its Indebtedness
outstanding on the date hereof and described in Schedule 5.15 or Indebtedness
theretofore incurred by it pursuant to subdivision (a)(ii) or (a)(iii) of this
Section 10.2 (any such currently outstanding or previously incurred Indebtedness
"REFINANCED INDEBTEDNESS"), PROVIDED that, it shall be a condition to the
incurrence of any Refinancing Indebtedness to refinance any Refinanced
Indebtedness that,

                           (A) the principal amount of such Refinancing
                Indebtedness shall not exceed the principal amount of such
                Refinanced Indebtedness,

                           (B) the stated maturity of such Refinancing
                Indebtedness shall not be earlier than the stated maturity of
                such Refinanced Indebtedness,

                           (C) the Weighted Average Life to Maturity of such
                Refinancing Indebtedness shall not be less than the Weighted
                Average Life to Maturity of such Refinanced Indebtedness,


                                      -24-

<PAGE>   30


                           (D) such Refinancing Indebtedness shall not rank
                prior in right of payment to such Refinanced Indebtedness or be
                entitled to the benefits of any collateral or security to which
                such Refinanced Indebtedness is not entitled,

                           (E) such Refinancing Indebtedness shall not bear
                interest at an effective rate per annum higher than that borne
                by such Refinanced Indebtedness unless such Refinanced
                Indebtedness shall constitute Indebtedness incurred under the
                Credit Agreement as permitted by subdivision (a)(ii) of this
                Section 10.2, in which case such Refinancing Indebtedness shall
                not bear interest at a rate exceeding the then prevailing market
                rate for borrowers of similar creditworthiness to the Company,
                and

                           (F) on the date of incurrence of such Refinancing
                Indebtedness and after giving effect thereto and to the
                application of the proceeds thereof, no Default or Event of
                Default shall have occurred or be continuing;

                (v) the Company may incur Indebtedness consisting of (A) Swap
Obligations in respect of interest rate swaps, (B) liabilities of the Company in
respect of performance bonds and commercial bank letters of credit issued in the
ordinary course of business of the Company and not in connection with the
borrowing of money (including, without limitation, letters of credit issued in
connection with the procurement and maintenance by the Company of workers'
compensation insurance), and (C) overdrafts of demand deposit accounts
maintained with commercial banks which are unsecured (other than through
customary rights of set-off), each of which is repaid within three Business Days
of its creation, and the aggregate amount of which does not at any time exceed
$1,000,000; and

                (vi) the Company and (subject to subdivision (b) of this Section
10.2) any Restricted Subsidiary may incur Indebtedness not otherwise permitted
by this subdivision (a), PROVIDED that,

                           (A) on the date of incurrence of any such
                Indebtedness and after giving effect thereto and to the
                application of the proceeds thereof, no Default or Event of
                Default shall have occurred and be continuing, and

                           (B) the aggregate principal amount of all such
                Indebtedness of the Company and its Restricted Subsidiaries at
                any time outstanding shall not exceed $10,000,000.

It shall be a further condition to the incurrence by the Company or any
Restricted Subsidiary of any Indebtedness otherwise permitted to be incurred by
it pursuant to this Section 10(a) (other than (x) Indebtedness permitted to be
incurred pursuant to clause (ii) hereof and, to the extent incurred to refinance
any such Indebtedness permitted pursuant to said clause (ii), and (y)
Refinancing Indebtedness incurred pursuant to clause (iv) hereof), that, on the
date of such

                                      -25-

<PAGE>   31


incurrence and immediately after giving effect thereto and to the substantially
concurrent incurrence of any other Indebtedness by the Company and its
Restricted Subsidiaries, and to the application of the proceeds of all such
Indebtedness (and, if such Indebtedness is proposed to be incurred pursuant to
clause (iii) hereof, assuming, whether or not in fact the case, that the
aggregate principal amount of Indebtedness outstanding under the Credit
Agreement on such date was equal to the Permitted Credit Agreement Amount),
Consolidated Funded Debt shall not exceed an amount equal to (A) 60% of the sum
of (1) Consolidated Funded Debt, plus (2) Consolidated Net Worth at any time
through December 31, 1997, and (B) at any time after December 31, 1997, 50% of
the sum of (1) Consolidated Funded Debt, PLUS (2) Consolidated Net Worth.

        (b) The Company will not permit any Restricted Subsidiary to, directly
or indirectly, create, incur, assume, guarantee, or otherwise become directly or
indirectly liable with respect to, any Indebtedness, except that:

                (i) any Person designated a Restricted Subsidiary on Schedule
     5.4 may incur Indebtedness, PROVIDED that, on the date of incurrence of any
     such Indebtedness and immediately after giving effect thereto and to the
     application of the proceeds thereof, the sum (without duplication) of

                           (A) the aggregate principal amount outstanding of
                Included Restricted Subsidiary Debt, PLUS

                           (B) the aggregate principal amount outstanding of
                Included Secured Debt,

     shall not exceed the greater of (x) $10,000,000 and (y) 7% of Consolidated
     Net Worth, and

                (ii) any Person designated a Restricted Subsidiary at any time
     subsequent to the date of this Agreement may remain liable for Indebtedness
     of such Person existing at such time (and deemed incurred by it at such
     time in accordance with subdivision (c) of this Section 10.2), PROVIDED
     that, the sum of (1) the aggregate principal amount of all such
     Indebtedness of such Person existing on the date it is designated a
     Restricted Subsidiary PLUS (2) the aggregate principal amount of all
     Indebtedness of each other Person theretofore designated a Restricted
     Subsidiary at any time subsequent to the date of this Agreement which
     Indebtedness existed on the date such Person was designated a Restricted
     Subsidiary, shall not exceed the greater of (x) $20,000,000 and (y) 15% of
     Consolidated Net Worth.

Nothing in this subdivision (b) shall be deemed to permit the incurrence on any
date by any Restricted Subsidiary (including any Person designated a Restricted
Subsidiary on such date) of any Indebtedness not permitted to be incurred by it
on such date pursuant to subdivision (a) of this Section 10.2.


                                      -26-

<PAGE>   32

        (c) For purposes of the foregoing subdivisions (a) and (b) of this
Section 10.2, (i) in the event the Company or a Restricted Subsidiary shall
extend, renew, refund or refinance any Indebtedness, the Company or such
Restricted Subsidiary, as the case may be, shall be deemed to have incurred such
Indebtedness at the time of such extension, renewal, refunding or refinancing,
and (ii) any Person designated a Restricted Subsidiary at any time after the
date of this Agreement shall be deemed to have incurred all of its outstanding
Indebtedness at such time. The Company will not in any event create, incur,
assume or permit to exist any Indebtedness of the Company to a Subsidiary,
except that the Company may incur and remain liable with respect to Indebtedness
owing to a Restricted Subsidiary which constitutes Subordinated Intercompany
Indebtedness.

10.3.   LIENS.

        The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any character of
the Company or any such Restricted Subsidiary (whether owned or held on the date
hereof or hereafter acquired) or any interest therein or any income or profits
therefrom except, subject to compliance with the last paragraph of this Section
10.3:

                (a) Liens (other than Liens created or imposed under ERISA) for
     taxes, assessments or governmental charges or levies the payment of which
     is not at the time required by Section 9.4;

                (b) statutory Liens of landlords and Liens of carriers,
     warehousemen, mechanics, materialmen and other similar Persons, in each
     case incurred in the ordinary course of business for sums either not yet
     due or the payment of which is not at the time required by Section 9.4;

                (c) Liens (other than Liens created or imposed under ERISA)
     incurred or deposits made in the ordinary course of business in connection
     with workers' compensation, unemployment insurance and other types of
     social security or retirement benefits, or to secure the performance of
     tenders, statutory obligations, surety bonds, bids, leases (other than
     Capital Leases), government contracts, performance and return-of-money
     bonds and other similar obligations (exclusive in any case of obligations
     incurred in connection with the borrowing of money, the obtaining of
     advances or credit or the payment of the deferred purchase price of
     property);

                (d) Liens incidental to the conduct of business or to the
     ownership or improvement of property of a character which customarily exist
     on properties of corporations engaged in similar activities and similarly
     situated and which were not incurred in connection with the borrowing of
     money, the obtaining of advances of credit or the payment of the deferred
     purchase price of property, and which do not, individually or in the
     aggregate, interfere with the ordinary conduct of the business of the
     Company or any of its Restricted Subsidiaries or detract from the value or
     use of the properties subject to any such Liens;


                                      -27-
<PAGE>   33



                (e) any attachment or judgment Lien arising in connection with
     court proceedings, so long as (i) the execution or other enforcement of
     such Lien is effectively stayed and the claims secured thereby are being
     actively contested in good faith and by appropriate proceedings diligently
     conducted and effective to prevent the forfeiture or sale of any property
     of the Company or any of its Restricted Subsidiaries or any interference
     with the ordinary use thereof by the Company or any of its Restricted
     Subsidiaries, and (ii) such reserve or other appropriate provision, if any,
     in the amount and of the type as shall be required by GAAP shall be
     maintained therefor;

                (f) Liens on property or assets of any Restricted Subsidiary
     securing Indebtedness or other obligations of such Restricted Subsidiary
     owing to the Company or to a Wholly Owned Restricted Subsidiary;

                (g) any Lien created to secure all or any part of the purchase
     price, or to secure Indebtedness incurred or assumed to pay all or any part
     of the purchase price or cost of construction, of property (or any
     improvement thereon) acquired or constructed by the Company or a Restricted
     Subsidiary after the Closing Date, PROVIDED that

                           (i) each such Lien shall extend solely to the item or
            items of such property (or improvement thereon) so acquired or
            constructed and, if required by the terms of the instrument
            originally creating such Lien, other property (or improvement
            thereon) which is an improvement to or is acquired for specific use
            in connection with such acquired or constructed property (or
            improvement thereon) or which is real property being improved by
            such acquired or constructed property (or improvement thereon),

                           (ii) the principal amount of the Debt secured by each
            such Lien shall at no time exceed an amount equal to the lesser of
            (A) the cost to the Company or such Restricted Subsidiary of the
            property (or improvement thereon) so acquired or constructed and (B)
            the fair market value (as determined in good faith by the Board of
            Directors) of such property (or improvement thereon) at the time of
            such acquisition or construction, and

                           (iii) each such Lien shall be created
            contemporaneously with, or within 180 days after, the acquisition or
            construction of such property;

                (h) any Lien existing on property of a Person immediately prior
     to its being consolidated with or merged into the Company or a Restricted
     Subsidiary or its becoming, after the Closing Date, a Restricted
     Subsidiary, or any Lien existing on any property acquired by the Company or
     any Restricted Subsidiary at the time such property is so acquired (whether
     or not the Indebtedness secured thereby shall have been assumed), PROVIDED
     that (i) no such Lien shall have been created or assumed in contemplation
     of such consolidation or merger or such Person's becoming a Restricted
     Subsidiary or such acquisition of property, and (ii) each such Lien shall
     extend solely to the item or items of property so acquired and, if required
     by the terms of the instrument

                                      -28-

<PAGE>   34


     originally creating such Lien, other property which is an improvement to or
     is acquired for specific use in connection with such acquired property;

                (i) other Liens not otherwise permitted by subdivisions (a)
     through (h) of this Section 10.3, PROVIDED that such Liens shall be
     permitted pursuant to the first sentence of the last paragraph of this
     Section 10.3; and

                (j) any Lien renewing, extending or refunding any Lien permitted
     by subdivision (g), (h) or (i) of this Section 10.3, PROVIDED that (i) the
     principal amount of Indebtedness secured by such Lien immediately prior to
     such extension, renewal or refunding is not increased or the maturity
     thereof reduced, and (ii) such Lien is not extended to any other property.

        It shall be a further condition to the creation, incurrence, assumption,
extension, renewal, refunding or refinancing of any Lien otherwise permitted by
subdivision (h), (i) or (j) of this Section that, on the date on which the
Company or any of its Restricted Subsidiaries proposes to take any such action
and immediately after giving effect thereto, to the substantially concurrent
incurrence of any Indebtedness and the substantially concurrent retirement of
any other Indebtedness and to the application of the proceeds of all such
Indebtedness, (A) the Company shall be permitted to incur at least $1.00 of
additional Indebtedness pursuant to subdivision (a)(iii) of Section 10.2 and (B)
the sum (without duplication) of (1) the aggregate principal amount outstanding
of Included Restricted Subsidiary Debt, PLUS (2) the aggregate principal amount
outstanding of Included Secured Debt shall not exceed the greater of (x)
$10,000,000 and (y) 7% of Consolidated Net Worth. For all purposes of this
Section 10.3, (1) Liens existing on or with respect to any property or assets of
any Person at the time it becomes a Restricted Subsidiary shall be deemed to
have been created at such time, (2) any extension, renewal, refunding or
refinancing of any Lien by the Company or any of its Restricted Subsidiaries
shall be deemed to be an incurrence of such Lien at the time of such extension,
renewal, refunding or refinancing, and (3) any Lien existing on any property at
the time it is acquired by the Company or any of its Restricted Subsidiaries
shall be deemed to have been created at the time of such acquisition.

10.4.   INVESTMENTS, ETC.

        The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make or own any Investments except:

                (a) the Company and its Restricted Subsidiaries may make and own
     Investments in (i) readily marketable direct obligations of the United
     States of America or of any agency or instrumentality thereof or readily
     marketable obligations unconditionally guaranteed by the United States of
     America or by any such agency or instrumentality, in each case so long as
     such obligation or guarantee shall have the benefit of the full faith and
     credit of the United States of America and such Investment shall mature
     within 365 days from the date of acquisition thereof, (ii) certificates of
     deposit, time deposits or bankers' acceptances maturing within 365 days
     from the date of acquisition thereof issued by, or demand deposit accounts
     maintained with, any

                                      -29-

<PAGE>   35

     commercial bank or trust company organized under the laws of the United
     States of America or any state thereof or the Republic of Finland, the
     long-term unsecured debt obligations of which bank or trust company are
     rated (or the long-term unsecured debt obligations of the bank holding
     company owning all of the capital stock of such bank or trust company are
     rated) at least "A2" by Moody's Investors Service Inc. ("MOODY'S") or at
     least "A" by Standard & Poor's Rating Group ("S&P"), and which has combined
     capital and surplus of at least $250,000,000 (any such bank or trust
     company, an "ELIGIBLE BANK"), (iii) repurchase agreements with respect to
     securities of the type referred to in the foregoing subdivision (a)(i)
     transacted with Eligible Banks organized under the laws of the United
     States of America or a state thereof, PROVIDED that each such repurchase
     agreement obligates an Eligible Bank to repurchase the securities which are
     the subject thereof no later than 30 days after the acquisition of such
     repurchase agreement; (iv) obligations of any state of the United States of
     America or any municipality of any such state, the interest with respect to
     which is exempt from federal income taxation under Section 103 of the Code,
     in each case rated at least "A2" by Moody's or at least "AA" by S&P and
     maturing within 365 days of the acquisition thereof; and (v) open market
     commercial paper of United States corporations maturing not later than 270
     days from the acquisition thereof and having a rating of at least P-2 by
     Moody's or at least A-2 by S&P;

                (b) the Company and its Restricted Subsidiaries may continue to
     own (i) Investments in Restricted Subsidiaries of the Company existing on
     the date hereof, and (ii) other Investments existing on the date hereof and
     described in Schedule 5.10;

                (c) the Company and its Restricted Subsidiaries may make and own
     Investments in any Restricted Subsidiary or in any Person that concurrently
     with such Investment becomes a Restricted Subsidiary; and Restricted
     Subsidiaries may make and own Investments consisting of Subordinated
     Intercompany Debt incurred by the Company pursuant to and in compliance
     with Section 10.2;

                (d) the Company and its Restricted Subsidiaries may make and own
     Investments in property to be used in the ordinary course of business of
     the Company and its Restricted Subsidiaries, as such business is permitted
     to be conducted pursuant to Section 10.9;

                (e) the Company and each Restricted Subsidiary may make and own
     Investments consisting of travel and other like advances in the ordinary
     course of its business, as permitted to be conducted hereby, to its
     officers and employees;

                (f) the Company and each Restricted Subsidiary may make and own
     Investments consisting of loans to its officers, directors and employees,
     provided that, the aggregate amount that may be so loaned to any one
     individual shall not exceed $500,000 at any time outstanding and the
     aggregate amount of all such loans by the Company and all Restricted
     Subsidiaries shall not exceed $2,000,000 at any time outstanding;


                                      -30-

<PAGE>   36


                (g) the Company and its Restricted Subsidiaries may make and own
     Investments in currency futures contracts, PROVIDED that such contracts are
     entered into in the ordinary course of business in accordance with the
     practices of the Company and its Restricted Subsidiaries prior to the date
     hereof and solely for the purpose of hedging currency fluctuation risk of
     the Company and its Restricted Subsidiaries and not in any event for
     speculative purposes;

                (h) the Company and its Restricted Subsidiaries may make and own
     Investments in interest rate swap contracts, PROVIDED that such contracts
     are entered into in the ordinary course of business and solely for the
     purpose of hedging interest rate fluctuation risk and reducing interest
     rate expense of the Company and its Restricted Subsidiaries and not in any
     event for speculative purposes;

                (i) the Company and its Restricted Subsidiaries may make and own
     Investments consisting of promissory notes or other securities or other
     non-cash consideration received in exchange for assets sold pursuant to and
     in compliance with subdivision (a)(vi) of Section 10.7, PROVIDED that, (i)
     the aggregate unliquidated amount of all such Investments permitted by this
     subdivision (i) shall not at any time exceed $10,000,000 and (ii) in the
     event that any such Investments shall be converted to cash, at maturity,
     upon the disposition thereof or otherwise, and the amount of such cash,
     when taken together with all cash into which any other such Investments
     shall have been converted and not previously applied pursuant to this
     clause (ii), shall equal or exceed $2,000,000, the Company shall, during
     the period of 180 days commencing with the date of such event, apply all
     such cash realized in respect of all such Investments to (x) the purchase
     or acquisition of Alternative Assets, (y) the Retirement of Indebtedness,
     or (z) in part to the purchase or acquisition of Alternative Assets and in
     part to the Retirement of Indebtedness, such application of cash to be made
     in the same manner as if the aggregate amount of such cash constituted the
     Net Sale Proceeds of an Excess Sale effected pursuant to subdivision
     (a)(vi) of Section 10.7;


                (j) the Company and its Restricted Subsidiaries may make and own
     Investments in Unrestricted Subsidiaries, PROVIDED that the aggregate
     amount of all such Investments does not exceed $20,000,000; and

                (k) in addition to the Investments permitted by the foregoing
     subdivisions (a) through (j) of this Section 10.4, the Company and its
     Restricted Subsidiaries may make Restricted Additional Investments to the
     extent permitted by Section 10.5.

For purposes of this Section, Investments owned by any Person or for which it is
obligated at the time it becomes a Restricted Subsidiary shall be deemed to be
made at such time.

10.5.   RESTRICTED PAYMENTS; RESTRICTED ADDITIONAL INVESTMENTS.

        The Company will not, directly or indirectly, declare, order, pay,
distribute, make, or set apart any sum or property for any Restricted Payment,
and the Company will not,

                                      -31-

<PAGE>   37


and will not permit any Restricted Subsidiary to, make or become obligated to
make any Restricted Additional Investment, in each case unless, both at the time
of and immediately after effect has been given to such proposed action:

                (a) no Default or Event of Default shall have occurred and be
     continuing,

                (b) the Company shall be permitted to incur at least $1.00 of
     additional Indebtedness pursuant to subdivision (a)(iii) of Section 10.2,
     and

                (c) the aggregate amount of:

                        (i) all sums and property included in all Restricted
         Payments directly or indirectly declared, ordered, paid, distributed,
         made or set apart by the Company during the period (taken as one
         accounting period) from and including June 30, 1995 (the "BASE DATE")
         to and including the date of such proposed action (the "COMPUTATION
         PERIOD"), PLUS

                        (ii) the aggregate amount of all Restricted Additional
         Investments of the Company and all Restricted Subsidiaries made during
         the Computation Period and all commitments for such Restricted
         Additional Investments made by the Company or any Restricted Subsidiary
         outstanding on the date of such proposed action,

    shall not exceed the sum of

                        (A) $20,000,000, PLUS

                        (B) 50% of Consolidated Net Income for the period (the
         "BASE PERIOD") from and including the Base Date to and including the
         Determination Date occurring on or most recently prior to the date of
         such proposed action (or minus 100% of Consolidated Net Income in the
         case of a deficit); PLUS

                        (C) the aggregate amount of cash proceeds (net of all
         placement, underwriting and brokerage fees and expenses and all other
         costs and out-of-pocket expenses in connection therewith) received by
         the Company during the Base Period from the sale of capital stock
         (other than mandatorily redeemable Preferred Stock) of the Company,
         from the sale of rights and warrants to purchase such capital stock,
         and as consideration for the issuance of debt securities convertible
         into such capital stock (but only to the extent, in the case of any
         such debt securities, the same have been converted into such capital
         stock during the Base Period).

        For all purposes of this Section 10.5, (1) the amount involved in any
Restricted Payment directly or indirectly declared, ordered, paid, distributed,
made or set apart in property, and the amount of any Restricted Additional
Investment made through the transfer of property,

                                      -32-

<PAGE>   38


shall be deemed to be the greater of (x) the fair value of such property (as
determined in good faith by the Board of Directors) and (y) the net book value
thereof on the books of the Company or any of its Restricted Subsidiaries (as
determined in accordance with GAAP), in each case as determined on the date such
Restricted Payment is declared, ordered, paid, distributed, made or set apart,
or the date such Restricted Additional Investment is made or committed to be
made, as the case may be, and (2) all Investments of any Person existing
immediately after such Person becomes a Restricted Subsidiary which would be
Restricted Additional Investments if made by such Person while subject to the
provisions of this Agreement shall be deemed to be Restricted Additional
Investments and to have been made at the time such Person becomes a Restricted
Subsidiary.

        The Company will not pay any dividend which it has not declared or
declare any dividend on any shares of any class of its capital stock which is
payable more than 60 days after the date of declaration thereof.

10.6.   SUBSIDIARY STOCK AND INDEBTEDNESS.

        The Company will not:

                  (a) directly or indirectly, sell, assign, pledge or otherwise
     dispose of any Indebtedness or any shares of stock or other securities of
     (or warrants, rights or options to acquire stock or other securities of)
     any Restricted Subsidiary, except to a Wholly Owned Restricted Subsidiary
     and except as directors' qualifying shares if required by applicable law;
     or

                  (b) permit any Restricted Subsidiary to, directly or
     indirectly, sell, assign, pledge or otherwise dispose of any Indebtedness
     or any shares of stock or other securities of (or warrants, rights or
     options to acquire stock or other securities of) any other Restricted
     Subsidiary, except to the Company or a Wholly Owned Restricted Subsidiary
     and except as directors' qualifying shares if required by applicable law;
     or

                  (c) permit any Restricted Subsidiary to, directly or
     indirectly, issue or sell any shares of its stock (or warrants, rights or
     options to acquire any stock) of such Restricted Subsidiary except to the
     Company or another Restricted Subsidiary and except (i) as directors'
     qualifying shares and (ii) pursuant to a common stock dividend or other
     issuance of common stock after giving effect to which the Company shall own
     (directly or through Restricted Subsidiaries) the same percentage ownership
     of each class of capital stock of such issuing Restricted Subsidiary as it
     owned immediately prior to such issuance;

PROVIDED, HOWEVER, that all shares of stock and all Indebtedness and other
securities of any Restricted Subsidiary owned by the Company and its other
Restricted Subsidiaries may be sold as an entirety to any Person other than an
Unrestricted Subsidiary for a consideration at least equal to the fair market
value thereof (as determined by the Board of Directors) if (i) such Restricted
Subsidiary being sold does not at that time own, directly or indirectly, any
stock, Indebtedness or other security of any other Restricted Subsidiary all of
the stock, Indebtedness

                                      -33-
<PAGE>   39


and other securities of which is not being simultaneously sold as permitted by
this proviso, or any Indebtedness of the Company, (ii) the amount of assets of
such Restricted Subsidiary represented by the equity interest to be so
transferred is such that the sale of such amount of assets would then be
permitted pursuant to subdivision (vi) of Section 10.7 (in which case such
amount of assets shall be considered and deemed a disposition of assets for the
purposes of said subdivision (vi)) and (iii) at the time of the consummation of
such transaction and after giving effect thereto (A) no Default or Event of
Default shall have occurred and be continuing and (B) the Company shall be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
subdivision (a)(iii) of Section 10.2.

10.7.   CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.

        (a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, consolidate or merge with or into any other Person, or permit
any other Person to consolidate with or merge with or into it, or participate in
a share exchange with or sell, lease, transfer, contribute or otherwise dispose
of any of its assets to any other Person, except that, subject in any event to
compliance with subdivision (b) of this Section 10.7:

                  (i) the Company and any Restricted Subsidiary may (i) sell
     inventory held for sale or (ii) sell or otherwise dispose of equipment,
     fixtures, supplies or materials no longer required in the business of the
     Company or such Restricted Subsidiary or that is obsolete, in each case
     referred to in the foregoing clause (i) or (ii), in the ordinary course of
     business as such business is permitted to be conducted hereby;

                  (ii) any Restricted Subsidiary may (i) consolidate with or
     merge into the Company or any Wholly Owned Restricted Subsidiary if the
     Company or such Wholly Owned Restricted Subsidiary shall be the continuing
     or surviving corporation or (ii) consolidate or merge with any other
     corporation if such Restricted Subsidiary shall be the continuing or
     surviving corporation;

                  (iii) any Restricted Subsidiary may sell, lease, transfer,
     contribute or otherwise dispose of its assets in whole or in part to the
     Company or any Wholly Owned Restricted Subsidiary;

                  (iv) the Company may consolidate or merge with any other
     Person if the Company shall be the continuing or surviving corporation;

                  (v) the Company may consolidate with or merge into, or sell,
     transfer or otherwise dispose of its assets as an entirety or substantially
     as an entirety, to any other Person (a "SUCCESSOR"; any such consolidation,
     merger or disposition of assets being hereinafter referred to as a
     "SUCCESSOR TRANSACTION"), but only if such Successor (i) is a solvent
     corporation duly organized, validly existing and in good standing under the
     laws of the United States of America or a state thereof and (ii) expressly
     assumes, not later than the consummation of such Successor Transaction,
     pursuant to a written instrument satisfactory in form, scope and substance
     to the holders of the Notes, the due and punctual payment of the principal
     of, Make-Whole Amount, if any, and interest on

                                      -34-

<PAGE>   40
     the Notes according to their tenor, and the due and punctual performance
     and observance of the obligations of the Company under this Agreement, an
     executed counterpart of which instrument shall have been furnished to each
     holder of Notes together with a favorable opinion of counsel satisfactory
     to each such holder covering such legal matters relating to such Successor,
     the Successor Transaction, such assumption and such instrument as such
     holder may reasonably request; and

                  (vi) the Company or any Restricted Subsidiary, in addition to
     making any sale, lease, transfer or other disposition permitted by the
     foregoing provisions of this Section, may sell any of its assets for a
     consideration at least equal to the fair market value thereof (as
     determined by the Board of Directors) at the time of such sale; PROVIDED
     that, no such proposed sale of any assets shall be permitted under this
     subdivision (a)(vi) unless

                        (A) immediately after giving effect to such sale (1) the
            Disposition Value of all assets sold as permitted by this
            subdivision (a)(vi) (including all deemed dispositions pursuant to
            the proviso to Section 10.6, but excluding all Excess Sales effected
            in compliance with clause (B) of this subdivision (a)(vi)) during
            the period of 365 days ending on the date of such proposed sale
            shall not exceed 10% of Total Assets determined as of the last day
            of the then most recently completed fiscal year of the Company and
            (2) the Disposition Value of all assets sold as permitted by this
            subdivision (a)(vi) (including all such deemed dispositions but
            excluding all such Excess Sales) during the period commencing on the
            date of this Agreement and ending on the date of such proposed sale
            shall not exceed 20% of such Total Assets determined as of the last
            day of such most recently completed fiscal year, or

                        (B) such sale shall not meet the requirements of, and
            shall not be permitted pursuant to, the foregoing clause (A) (any
            such sale, an "EXCESS SALE") but each of the following conditions
            shall be satisfied with respect thereto:

                            (1) the Company shall furnish to each holder of a
                  Note (x) prior to the consummation of such Excess Sale, a
                  notice specifying the anticipated date of such sale, briefly
                  describing the assets to be sold and setting forth the
                  Disposition Value of such assets and the aggregate
                  consideration and Net Sale Proceeds to be received for such
                  assets in connection with such sale and, (y) promptly
                  following the consummation of such sale, a further notice
                  confirming the date of such sale ("SALE DATE") and the other
                  information set forth in the notice in respect thereof given
                  pursuant to the foregoing clause (x) and specifying the manner
                  in which the Company intends to apply (or cause to be applied)
                  the Net Sale Proceeds of such Excess Sale in compliance with
                  the further provisions of this clause (B),

                            (2) the Company shall, during the period of 180 days
                  commencing with the Sale Date (the "APPLICATION PERIOD"),
                  apply (or

                                      -35-

<PAGE>   41
                    cause to be applied) an amount equal to such Net Sale
                    Proceeds from such Excess Sale to (x) the purchase or
                    acquisition of Alternative Assets, (y) the Retirement of
                    Indebtedness or (z) in part to the purchase or acquisition
                    of Alternative Assets and in part to the Retirement of
                    Indebtedness, and

                              (3) pending application of an amount equal to such
                    Net Sale Proceeds from such Excess Sale in accordance with
                    the foregoing clause (B)(2), the Company shall cause an
                    amount equal to such Net Sale Proceeds (or so much thereof
                    as shall not have been theretofore so applied) to be
                    invested in Investments of the character described in
                    subdivision (a) of Section 10.4.

        (b) No consolidation, merger, sale, lease, transfer, contribution or
other disposition referred to in subdivisions (a)(ii) through (a)(vi) of this
Section 10.7 shall be permitted unless (i) immediately after giving effect to
such transaction, (A) no Default or Event of Default shall have occurred and be
continuing and (B) the Company shall be permitted to incur at least $1.00 of
additional Indebtedness pursuant to subdivision (a)(iii) of Section 10.2, and
(ii) if such transaction shall involve or result in a Change of Control, the
Company shall comply with Section 9.8 in connection therewith. Nothing contained
in this Section 10.7 shall permit the disposition of assets consisting of
Indebtedness, stock or other securities (or warrants, rights or options to
acquire stock or other securities) of any Restricted Subsidiary unless such
disposition is also permitted by Section 10.6. No consolidation, merger, sale,
lease, transfer, contribution or other disposition permitted by this Section
10.7 shall release the Company, or any Person which shall have become a
Successor to the Company in the manner permitted hereby, from any of its
liability as obligor in respect of the Notes.

        (c) For purposes of this Section 10.7:

                    (i) "ALTERNATIVE ASSETS" means, in connection with any
          proposed sale of assets constituting an Excess Sale,(A) assets
          (whether new, additional or replacement assets but exclusive of assets
          acquired in the course of regular upkeep and maintenance) which (1)
          are similar in nature to other assets owned or leased by the Company
          and or its Restricted Subsidiaries prior to or at the time of the
          acquisition of such assets and useful in the conduct of the business
          of the Company and its Restricted Subsidiaries as permitted to be
          conducted pursuant to Section 10.9 and (2) have a fair market value at
          least equal to the amount required pursuant to subdivision (vi)(B)(2)
          of Section 10.7(a) to be applied to the purchase thereof, or (B)
          capital stock of a corporation (1) the assets of which consist
          substantially in their entirety of assets of the character described
          in the foregoing clause (A)(1) of this definition and have a fair
          market value satisfying the requirement described in the foregoing
          clause (A)(2) hereof, and (2) which, substantially concurrently with
          the acquisition thereof by the Company or a Restricted Subsidiary,
          shall become a Wholly Owned Restricted Subsidiary.

                    (ii) "DISPOSITION VALUE" of any assets sold or proposed to
          be sold during any period shall mean the aggregate net book value of
          such assets determined as of the date of sale or proposed sale
          thereof.

                                      -36-

<PAGE>   42
                    (iii) "NET SALE PROCEEDS" means, with respect to any sale or
          other disposition by the Company or a Restricted Subsidiary of any
          property or assets, an amount equal to the excess of (x) the aggregate
          amount of the consideration (valued at the fair market value thereof
          at the time of such sale or other disposition as determined by the
          Board of Directors) received by the Company or such Restricted
          Subsidiary in connection with such sale or other disposition over (y)
          the reasonable and customary out-of-pocket expenses actually incurred
          by the Company or such Restricted Subsidiary in connection therewith.

                    (iv) "RETIREMENT OF INDEBTEDNESS" means, in connection with
          the application of the Net Sale Proceeds of any Excess Sale (or any
          part of such Net Sale Proceeds), the application by the Company of an
          amount equal to such Net Sale Proceeds (or such part thereof) to the
          payment or prepayment of an equivalent principal amount of
          Indebtedness of the Company (other than (A) Indebtedness owing to any
          Restricted Subsidiary or any Affiliate of the Company and (B)
          Indebtedness in respect of any revolving credit or similar credit
          facility, including the Credit Agreement, providing the Company with
          the right to obtain loans or other extensions of credit from time to
          time, except to the extent that in connection with such payment or
          prepayment the availability of credit under such credit facility is
          permanently reduced by an amount not less than the amount so paid or
          prepaid).

                    (v) "TOTAL ASSETS" means, as of any date, the aggregate net
          book value of the consolidated assets of the Company and its
          Restricted Subsidiaries (exclusive of assets deemed intangibles in
          accordance with GAAP).

10.8.   SALE LEASEBACKS.

        The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale leaseback, except that the Company or any Restricted
Subsidiary may enter into a Sale leaseback relating solely to property acquired
by it subsequent to the Closing if such Sale Leaseback is entered into within
the period of 180 days commencing with the date of such acquisition and if:

                (a) the sale of such property in connection with such Sale
Leaseback is permitted by, and is effected pursuant to and in compliance with,
Section 10.7;

                (b) if the lease of such property by the Company or a Restricted
Subsidiary as the case may be, in connection with such Sale Leaseback
constitutes a Capital lease, such transaction is permitted pursuant to Section
10.3; and

                (c) at the time of and after giving effect to such Sale
Leaseback no Default or Event of Default shall have occurred and be continuing
and the Company shall be permitted to incur at least $1.00 of additional
Indebtedness pursuant to subdivision (a)(iii) of Section 10.2.

                                      -37-


<PAGE>   43
10.9.   LINES OF BUSINESS.

        The Company will not, and will not permit any of its Restricted
Subsidiaries to, engage to any substantial extent in any business other than the
production and marketing of specialty chemicals (the "Business").

10.10.  TRANSACTIONS WITH AFFILIATES.

        The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into or be a party to any transaction (including,
without limitation, the purchase, lease, sale or exchange of properties of any
kind or the rendering of any service) with any Affiliate unless such transaction
is entered into upon terms that are fair and reasonable and no less favorable to
the Company or such Restricted Subsidiary, as the case may be, than those which
might be obtained at the time in a comparable arm's-length transaction with any
Person which is not such an Affiliate; PROVIDED that, the foregoing restrictions
shall not apply to (i) transactions in the ordinary course of and pursuant to
the reasonable requirements of the Company's or such Restricted Subsidiary's
Business, or (ii) any transaction between the Company and a Restricted
Subsidiary or between one Restricted Subsidiary and another Restricted
Subsidiary.

10.11.  RESTRICTIONS ON SUBSIDIARY DIVIDENDS AND PAYMENTS.

        The Company will not permit any Restricted Subsidiary to enter into or
remain a party to any agreement or arrangement which restricts or has the effect
of restricting such Restricted Subsidiary's ability or right to C)i pay
dividends, (ii) make other distributions with respect to its capital stock, or
(iii) make advances to the Company if such agreement or arrangement can
reasonably be expected to impair in any material respect the ability of the
Company to perform its obligations under this Agreement or the Notes or the
ability of the Guarantors to perform their obligations under the Guaranty
Agreements.

11.     EVENTS OF DEFAULT.

        An "EVENT OF DEFAULT" shall exist if any of the following conditions or
events shall occur and be continuing (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or come about or be
effected by operation of law or judicial or governmental or administrative
action or otherwise):

                    (a) the Company defaults in the payment of any principal or
          Make-Whole Amount, if any, on any Note when the same becomes due and
          payable, whether at maturity or at a date fixed for prepayment or by
          declaration or otherwise; or

                    (b) the Company defaults in the payment of any interest on
          any Note for more than five Business Days after the same becomes due
          and payable; or

                    (c) the Company defaults in the performance of or compliance
          with any term contained in Sections 10.1 through 10.8, inclusive; or

                                      -38-


<PAGE>   44

                (d) the Company defaults in the performance of or compliance
         with any term contained herein (other than those referred to in
         paragraphs (a), (b) and (c) of this Section 11) and such default is
         not remedied within 30 days after the earlier of (i) a Responsible
         Officer obtaining actual knowledge of such default and (ii) the
         Company receiving written notice of such default from any holder of a
         Note (any such written notice to be identified as a "notice of
         default" and to refer specifically to this paragraph (d) of Section
         11); or

                (e) any representation or warranty made in writing by or on
         behalf of the Company or any Guarantor or by any officer of the
         Company or any Guarantor in this Agreement or the Guaranty Agreements
         or in any writing furnished in connection with the transactions
         contemplated hereby proves to have been false or incorrect in any
         material respect on the date as of which made; or

                (f) (i) the Company or any Restricted Subsidiary is in default
         (as principal or as guarantor or other surety) in the payment
         of any principal of or premium or Make-Whole Amount or interest on any
         Indebtedness that is outstanding in an aggregate principal amount of
         at least $5,000,000 beyond any period of grace provided with respect
         thereto, or (ii) the Company or any Restricted Subsidiary is in
         default in the performance of or compliance with any term of any
         evidence of any Indebtedness in an aggregate outstanding principal
         amount of at least $5,000,000 or of any mortgage, indenture or other
         agreement relating thereto or any other condition exists, if the
         effect of any such default or other condition referred to in this
         clause (ii) is to cause or permit any such Indebtedness to become due
         and payable before its stated maturity or before its regularly
         scheduled dates of payment, or (iii) as a consequence of the
         occurrence or continuation of any event or condition (other than the
         passage of time or the right of the holder of Indebtedness to convert
         such Indebtedness into equity interests), (x) the Company or any
         Restricted Subsidiary has become obligated to purchase or repay
         Indebtedness before its regular maturity or before its regularly
         scheduled dates of payment in an aggregate outstanding principal
         amount of at least $5,000,000, or (y) one or more Persons have the
         right to require the Company or any Restricted Subsidiary so to
         purchase or repay such Indebtedness; or

                (g) the Company or any Restricted Subsidiary (i) is generally 
         not paying, or admits in writing its inability to pay, its debts as
         they become due, (ii) files, or consents by answer or otherwise to the
         filing against it of, a petition for relief or reorganization or
         arrangement or any other petition in bankruptcy, for liquidation or to
         take advantage of any bankruptcy, insolvency, reorganization,
         moratorium or other similar law of any jurisdiction, (iii) makes an
         assignment for the benefit of its creditors, (iv) consents to the
         appointment of a custodian, receiver, trustee or other officer with
         similar powers with respect to it or with respect to any substantial
         part of its property, (v) is adjudicated as insolvent or to be
         liquidated, or (vi) takes corporate action for the purpose of any of
         the foregoing; or

                (h) a court or governmental authority of competent jurisdiction
         enters an order appointing, without consent by the Company or any of
         its Restricted

                                      -39-


<PAGE>   45
         Subsidiaries, a custodian, receiver, trustee or other officer
         with similar powers with respect to it or with respect to any
         substantial part of its property, or constituting an order for relief
         or approving a petition for relief or reorganization or any other
         petition in bankruptcy or for liquidation or to take advantage of any
         bankruptcy or insolvency law of any jurisdiction, or ordering the
         dissolution, winding-up or liquidation of the Company or any of its
         Restricted Subsidiaries, or any such petition shall be filed against
         the Company or any of its Restricted Subsidiaries and such petition
         shall not be dismissed within 60 days; or

                (i) a final judgment or judgments for the payment of money
         aggregating in excess of $1,000,000 are rendered against one or
         more of the Company and its Restricted Subsidiaries and which
         judgments are not, within 60 days after entry thereof, bonded,
         discharged or stayed pending appeal, or are not discharged within 60
         days after the expiration of such stay; or

                (j) any "Event of Default" shall occur, and be continuing under
         (and as the term "Event of Default" is defined in) the Credit
         Agreement; or

                (k) any Guaranty Agreement or any material provision thereof

         shall not be, or shall cease to be, valid and enforceable and
         in full force and effect; or any Guarantor shall disaffirm or
         repudiate any of its obligations under the Guaranty Agreement to which
         it is a party; or any Guarantor shall default in the performance or
         observance of any covenant, agreement or condition in the Guaranty
         Agreement to which it is a party and (except in the case of Section 1
         thereof) such default shall have continued for a period of 30 days
         after any Guarantor has knowledge of such default (through notice or
         otherwise); or

                (l) if (i) any Plan shall fail to satisfy the minimum funding
         standards of ERISA or the Code for any plan year or part
         thereof or a waiver of such standards or extension of any amortization
         period is sought or granted under section 412 of the Code, (ii) a
         notice of intent to terminate any Plan shall have been or is
         reasonably expected to be filed with the PBGC or the PBGC shall have
         instituted proceedings under ERISA section 4042 to terminate or
         appoint a trustee to administer any Plan or the PBGC shall have
         notified the Company or any ERISA Affiliate that a Plan may become a
         subject of any such proceedings, (iii) the aggregate "amount of
         unfunded benefit liabilities" (within the meaning of section 
         4001(a)(18) of ERISA) under all Plans with any unfunded benefit
         liabilities, determined in accordance with Title IV of ERISA, shall
         exceed $2,000,000, (iv) the Company or any ERISA Affiliate shall have
         incurred or is reasonably expected to incur any liability pursuant to
         Title I or IV of ERISA or the penalty or excise tax provisions of the
         Code relating to employee benefit plans, (v) the Company or any ERISA
         Affiliate withdraws from any Multiemployer Plan, or (vi) the Company
         or any Subsidiary establishes or amends any employee welfare benefit
         plan that provides post-employment welfare benefits in a manner that
         would increase the liability of the Company or any Subsidiary
         thereunder; and any such event or events described in clauses (i)
         through (vi) above, either individually or together with any other
         such event or events, could reasonably be expected to have a Material
         Adverse Effect.

                                      -40-


<PAGE>   46
As used in Section 11(l), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.

12.     REMEDIES ON DEFAULT, ETC.

12.1.   ACCELERATION.

        (a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default described in
clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.

        (b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 35% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.

        (c) If any Event of Default described in paragraph (a) or (b) of Section
11 has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held by it or
them to be immediately due and payable.

        Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
thereon and (y) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default is intended to provide
compensation for the deprivation of such right under such circumstances.

12.2.   OTHER REMEDIES.

        If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.

                                      -41-


<PAGE>   47
12.3.   RESCISSION.

        At any time after any Notes have been declared due and payable pursuant
to clause (b) or (c) of Section 12.1, the holders of not less than 66 2/3% in
principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.

12.4.   NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.

        No course of dealing and no delay on the part of any holder of any Note
in exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.

13.     REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

13.1.   REGISTRATION OF NOTES.

        The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.


                                      -42-


<PAGE>   48
13.2.   TRANSFER AND EXCHANGE OF NOTES.

        Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $1,000,000, PROVIDED that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $1,000,000. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed to have made the representation set forth in
Section 6.2.

13.3.   REPLACEMENT OF NOTES.

        Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and

                (a) in the case of loss, theft or destruction, of indemnity
         reasonably satisfactory to it (provided that if the holder of
         such Note is, or is a nominee for, an original Purchaser or an
         Institutional Investor, such Person's own unsecured agreement of
         indemnity shall be deemed to be satisfactory), or

                (b) in the case of mutilation, upon surrender and cancellation 
         thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.

14.     PAYMENTS ON NOTES.

14.1.   PLACE OF PAYMENT.

        Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made at the
principal office of the

                                      -43-


<PAGE>   49
Company. The Company may at any time, by notice to each holder of a Note, change
the place of payment of the Notes so long as such place of payment shall be the
principal office of a bank or trust company in such jurisdiction or New York
County, State of New York.

14.2.   HOME OFFICE PAYMENT.

        So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.

15.     EXPENSES, ETC.

15.1.   TRANSACTION EXPENSES.

        Whether or not the transactions contemplated hereby are consummated, the
Company will pay all costs and expenses (including reasonable attorneys' fees of
a special counsel and, if reasonably required, local or other counsel) incurred
by you and the Other Purchaser or holder of a Note in connection with such
transactions and in connection with any amendments, waivers or consents under or
in respect of this Agreement or the Notes (whether or not such amendment, waiver
or consent becomes effective), including, without limitation: (a) the costs and
expenses incurred in enforcing or defending (or determining whether or how to
enforce or defend) any rights under this Agreement or the Notes or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or the Notes, or by reason of being a holder
of any Note, and (b) the costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).

                                      -44-


<PAGE>   50
15.2.   SURVIVAL.

        The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.

16.     SURVIVAL  OF REPRESENTATIONS  AND WARRANTIES;  ENTIRE
AGREEMENT.

        All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.

17.     AMENDMENT AND WAIVER.

17.1.   REQUIREMENTS.

        This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it
is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change percentage of the principal amount
of the Notes the holders of which are required to consent to any such amendment
or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.
               
17.2.   SOLICITATION OF HOLDERS OF NOTES.

        (a) SOLICITATION. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this


                                      -45-


<PAGE>   51
Section 17 to each holder of outstanding Notes promptly following the date on
which it is executed and delivered by, or receives the consent or approval of,
the requisite holders of Notes.

        (b) PAYMENT. The Company will not directly or indirectly pay or cause to
be paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, or grant any security, to any holder of Notes as consideration
for or as an inducement to the entering into by any holder of Notes or any
waiver or amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently granted, on the
same terms, ratably to each holder of Notes then outstanding even if such holder
did not consent to such waiver or amendment.

17.3.   BINDING EFFECT, ETC.

        Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.

17.4.   NOTES HELD BY COMPANY, ETC.

        Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.

18.     NOTICES.

        All notices and communications provided for hereunder shall be in
waiting and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:

                (i) if to you or your nominee, to you or it at the address
        specified for such communications in Schedule A, or at such other
        address as you or it shall have specified to the Company in writing,


                                      -46-


<PAGE>   52
                (ii) if to any other holder of any Note, to such holder at such
          address as such other holder shall have specified to the Company in 
          writing, or

                (iii) if to the Company, to the Company at its address set forth
          at the beginning hereof to the attention of its Chief Financial
          Officer, or at such other address as the Company shall have specified
          to the holder of each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

19.     REPRODUCTION OF DOCUMENTS.

        This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.

20.     CONFIDENTIAL INFORMATION.

        For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, PROVIDED that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose
Confidential Information to (i) your directors, officers, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes), (ii) your
financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any
part thereof or

                                      -47-


<PAGE>   53
any participation therein (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of this
Section 20), (v) any Person from which you offer to purchase any security of the
Company (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20), (vi)
any federal or state regulatory authority having jurisdiction over you, (vii)
the National Association of Insurance Commissioners or any similar organization,
or any nationally recognized rating agency that requires access to information
about your investment portfolio or (viii) any other Person to which such
delivery or disclosure may be necessary or appropriate (w) to effect compliance
with any law, rule, regulation or order applicable to you, (x) in response to
any subpoena or other legal process, (y) in connection with any litigation to
which you are a party or (z) if an Event of Default has occurred and is
continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes and this Agreement. Each
holder of a Note, by its acceptance of a Note, will be deemed to have agreed to
be bound by and to be entitled to the benefits of this Section 20 as though it
were a party to this Agreement. On reasonable request by the Company in
connection with the delivery to any holder of a Note of information required to
be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions
of this Section 20.

21.     SUBSTITUTION OF PURCHASER.

        You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.

22.     MISCELLANEOUS.

22.1.   SUCCESSORS AND ASSIGNS.

        All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.



                                      -48-


<PAGE>   54
22.2.   PAYMENTS DUE ON NON-BUSINESS DAYS.

        Anything in this Agreement or the Notes to the contrary notwithstanding,
any payment of principal of or Make-Whole Amount or interest on any Note that is
due on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day.

22.3.   SEVERABILITY.

        Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.

22.4.   CONSTRUCTION; ACCOUNTING TERMS.

        (a) Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.

        (b) Except as specifically provided herein, all accounting terms used
herein which are not expressly defined in this Agreement have the meanings given
to them in accordance with GAAP and all computations made pursuant to this
Agreement shall be made in accordance with GAAP. All balance sheets and other
financial statements delivered pursuant to Section 7.1 shall be prepared in
accordance with GAAP. If any changes in accounting principles from those used in
the preparation of the most recent financial statements referred to in Section
5.5 are hereafter required by the rules, regulations, pronouncements and
opinions of the Financial Accounting Standards Board or the American Institute
of Certified Public Accountants (or successors thereto) and are adopted by the
Company with the agreement of its independent certified public accountants and
such changes result or could result (for any present or future period) in a
change in the method of calculation of any of the financial covenants, standards
or terms in or relating to Section 10, the parties hereto agree to enter into
discussions with a view to amending such provisions so as to equitably reflect
such changes with the desired result that the criteria for evaluating the
financial condition of the Company and its Restricted Subsidiaries shall be the
same after such changes as if such changes had not been made, provided, that no
change in GAAP that would affect or could affect (for any present or future
period) the method of calculation of any of said financial covenants, standards
or terms shall be given effect in such calculations until such provisions are
amended, in a manner satisfactory to the Company and the Required Holders, to so
reflect such change in GAAP.


                                      -49-



<PAGE>   55

22.5.   COUNTERPARTS.

        This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.

22.6.   GOVERNING LAW.

        This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.

                                      -50-


<PAGE>   56

        If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.

                                           Very truly yours,

                                           OM GROUP, INC.

                                           By /s/
                                             ---------------------------------
                                            Title: CFO


The foregoing is hereby
agreed to as of the
date thereof.


GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

By /s/ Ernie P. Friesen 
  ----------------------------------
        Title:  ERNIE P. FRIESEN
                Assistant Vice President
                Investments


By /s/ James G. Lowery
  ----------------------------------
        Title:  JAMES G. LOWERY
                Assistant Vice President
                Investments

                                      -51-

<PAGE>   57

                                                                      SCHEDULE A
                                                                      ----------

                       INFORMATION RELATING TO PURCHASES

                                     PRINCIPAL AMOUNT        PRINCIPAL AMOUNT
                                     OF 2007 NOTES           OF 2009 NOTES
NAME AND ADDRESS OF PURCHASER        TO BE PURCHASED         TO BE PURCHASED
-----------------------------        ---------------         ---------------

NATIONWIDE LIFE INSURANCE            $15,000,000
 COMPANY

PAYMENTS
--------

All payments on or in respect of such Note
issued in the name of Nationwide Life Insurance
Company to be by bank wire transfer of Federal 
or other immediately available funds to:

The Bank of New York
ABA #021-000-018
BNF:    IOC566
F/A/O Nationwide Life Insurance Company
Attn:   P + I Department
PPN# 670872 A# 7
Security Description: OM Group, Inc.

With notice of each such payment to:

Nationwide Life Insurance Company
c/o The Bank of New York
P.O. Box 19266
Newark, NJ 07195
Attention: P + I Department

With a copy to:

Nationwide Life Insurance Company
Attention:      Investment Accounting
One Nationwide Plaza (1-32-05)
Columbus, OH 43215-2220

<PAGE>   58
Send all notices and communications to:

Nationwide Life Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention:      Corporate Fixed-Income Securities

The Original Note should be registered in the
name of Nationwide Life Insurance Company and
delivered to:

The Bank of New York
One Wall Street
3rd Floor - Window A
New York, New York 10286
F/A/O Nationwide Life Insurance Company
Acct #267829

Tax I.D. #31-4156830

                                       2
<PAGE>   59

                                    PRINCIPAL AMOUNT        PRINCIPAL AMOUNT
                                    OF 2007 NOTES           OF 2009 NOTES
NAME AND ADDRESS OF PURCHASER       TO BE PURCHASED         TO BE PURCHASED
-----------------------------       ---------------         ---------------
GREAT-WEST LIFE & ANNUITY                                   $15,000,000
 INSURANCE COMPANY

Payments
--------

All payments on or in respect of such Note issued in the name of Great-West Life
& Annuity Insurance Company to be by bank wire or intra-bank transfer of
Federal or other immediately available funds (identifying the issue upon which
payment is being made, PPN# 670872 A@ 9, the application of payment as between
interest and principal and a confirmation of the principal balance remaining
after application of such payment to:

       Norwest Bank Minnesota, N.A.
       ABA #091-000-019 (NW MPLS/TRUST
            CLEARING)
       Account No.08-40-245
       Attention:  Account No.12468800

                                       3

<PAGE>   60

Notices
-------

All notices and confirmations in connection with such payments shall be
delivered or mailed to:

       Norwest Bank Minnesota, N.A.
       733 Marquette Avenue, Investors Bldg.,
       5th Floor
       Minneapolis, Minnesota 55479-0047
       Attn:  Income Collections

All other communications shall be delivered or mailed to:

       Great-West Life & Annuity Insurance
         Company
       8515 East Orchard Road
       3rd Floor, Tower 2
       Englewood, Colorado 80111
       Attention:  U.S. Private Placements

       Fax:  (303) 689-6193

       Tax I.D. Number: 84-0467907


The original Note shall be delivered to:

       Norwest Bank Minnesota, N.A.
       733 Marquette Avenue, 5th Floor
       Minneapolis, Minnesota 55479-0047
       Attention:  Security Clearance



                                       4
<PAGE>   61

                                                                      SCHEDULE B
                                                                      ----------
                                 DEFINED TERMS
                                 -------------

        As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:

        "AFFILIATE" means, at any time, and with respect to any Person, any
other Person (a) that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, (b) that beneficially owns or holds 5% or more of the voting
securities or other equity interest of such first Person, or (c) 5% or more of
the voting securities or other equity interests of which are beneficially owned
or held by such first Person. As used in this definition, "CONTROL" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Unless the context
otherwise clearly requires, any reference to an "Affiliate" is a reference to an
Affiliate of the Company.

        "ALTERNATIVE ASSETS" is defined in Section 10.7(c).

        "APPLICATION PERIOD" is defined in Section 10.7(a).

        "APPROVALS" is defined in Section 4.10.

        "BANK GUARANTY AGREEMENTS" means the Guaranty Agreements, dated
January 21, 1997, by OMG Americas, Inc., OMG Apex, Inc. and SCM Metal Products,
Inc. in favor of the Banks, as the same may be amended or otherwise modified and
in effect from time to time.

        "BANKS" means National City Bank, ABN AMRO Bank N.V., Keybank National
Association and Mellon Bank, N.A.

        "BOARD OF DIRECTORS" means the Board of Directors of the Company or any
duly authorized committee of said Board.

        "BUSINESS" is defined in Section 10.9.

        "BUSINESS DAY" means (a) for the purposes of Section 8.7 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in New York, New York or Cleveland, Ohio are
required or authorized to be closed.

        "CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

<PAGE>   62
        "CAPITAL LEASE OBLIGATION" as at any date, with respect to any Capital
Lease, the amount of the obligation the lessee thereunder which would, in
accordance with GAAP, appear as a liability on a balance sheet of such lessee or
in the notes thereto in respect of such Capital Lease.

        "CHANGE OF CONTROL" means any of the following events or circumstances
(whether or not in a transaction permitted by Section 10.7):

                (a) all or substantially all of the assets of the Company are
          sold or otherwise transferred, either in a single transaction or a
          series of related transactions;

                (b) a merger, consolidation or similar transaction (or series of
         related transactions) involving the Company at the completion of and
         after giving effect to which neither (x) the Persons owning the voting
         stock of the Company prior to such transaction (or prior to the first
         of such series of transactions) nor (y) Acceptable Persons own 50% or
         more of the total voting power of all classes of the Company's voting
         stock outstanding immediately after giving effect to such transaction 
         or series of transactions; or

                (c) the acquisition or holding by any person (as such term is

         used in Section 13(d) and Section 14(d)(2) of the Exchange Act as in
         effect on the Closing Date), or related Persons constituting a group
         (as such term is used in Rule 13d-5 under the Exchange Act as in
         effect on the Closing Date), other than an Acceptable Person or such a
         group comprised entirely of Acceptable Persons, of beneficial
         ownership of in excess of 35% of the total voting power of all classes
         of the Company's voting stock then outstanding.

As used in this definition, "ACCEPTABLE PERSON" means, at any time, any Person
who has been a director, officer or full-time employee of the Company for a
continuous period immediately preceding such time of not less than 365 days.

        "CLOSING" is defined in Section 3.

        "CLOSING DATE" is defined in Section 3.

        "CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.

        "COMPANY" means OM Group, Inc., a Delaware corporation.

        "CONFIDENTIAL INFORMATION" is defined in Section 20.

        "CONSOLIDATED FUNDED DEBT" means, as of any date, the aggregate
principal amount of all Funded Debt of the Company and its Restricted
Subsidiaries on such date determined in accordance with GAAP on a consolidated
basis.

                                     -2-
<PAGE>   63

         "CONSOLIDATED INTEREST EXPENSE" means, for any period, the sum (without
duplication) of the following amounts for the Company and its Restricted
Subsidiaries on a consolidated basis after eliminating all intercompany
transactions: (a) the aggregate amount of all interest accrued during such
period (whether or not actually paid) in respect of Indebtedness of the Company
and its Restricted Subsidiaries (including, without limitation, imputed interest
on Capital Lease Obligations), plus (b) amortization of debt discount and
expense during such period, plus (c) all fees and commissions payable in
connection with any letters of credit during such period.

        "CONSOLIDATED NET INCOME" means, for any period, the net income (or
deficit) of the Company and its Restricted Subsidiaries for such period (taken
as a cumulative whole) after deducting, without duplication, operating expenses,
provisions for all taxes and reserves (including reserves for deferred income
taxes) and all other proper deductions, all determined in accordance with GAAP
on a consolidated basis, after eliminating all inter-company items and after
deducting portions of income properly attributable to outside minority interests
in the stock and surplus of any Restricted Subsidiary; PROVIDED, HOWEVER, that
there shall in any event be excluded from Consolidated Net Income (without
duplication):

                    (a) the income (or deficit) of any Person accrued prior to
          the date it becomes a Restricted Subsidiary or is merged into or
          consolidated with the Company or any Restricted Subsidiary;

                    (b) any amount representing the interest of the Company or
          any Restricted Subsidiary in the earnings of any Person other than a
          Restricted Subsidiary, except to the extent that any such earnings
          have been actually received by the Company or such Restricted
          Subsidiary in the form of cash dividends or similar distributions;

                    (c) any portion of the net income of a Restricted Subsidiary
          which for any reason is unavailable for the payment of dividends to
          the Company or another Restricted Subsidiary;

                    (d) any deferred credit (or amortization of a deferred
          credit) representing the excess of the equity in any Person at the
          date of acquisition thereof over the cost of the Investment in such
          Person;

                    (e) any gain during such period arising from (i) the sale,
          exchange or other disposition of capital assets (such term to include
          all fixed assets, whether tangible or intangible, and all securities)
          to the extent the aggregate gains from such transactions exceed losses
          during such period from such transactions, (ii) any reappraisal,
          revaluation or write-up of assets after the date of the most recent
          audited financial statements referred to in Section 5.5, (iii) the
          acquisition of any securities of the Company or a Restricted
          Subsidiary, or (iv) the termination of any Plan;

                (f)     the proceeds of any life insurance policy;

                                      -3-
<PAGE>   64

                    (g) any portion of such net income that cannot be freely
          converted into U.S. Dollars; and

                    (h) any item properly classified as extraordinary in
          accordance with GAAP.

        "CONSOLIDATED NET WORTH" means, as of any date, the sum of the capital
stock (but excluding capital stock subscribed for and unissued, treasury stock
and redeemable Preferred Stock) and surplus (including retained earnings,
additional paid-in capital and the balance of the current profit and loss
account not transferred to surplus) accounts of the Company and its Restricted
Subsidiaries appearing on a consolidated balance sheet of the Company and its
Restricted Subsidiaries prepared in accordance with GAAP as of such date, after
eliminating all intercompany transactions and all amounts properly attributable
to outside minority interests in Restricted Subsidiaries; PROVIDED that, there
shall be excluded therefrom any amounts appearing on such consolidated balance
sheet in respect of (a) any write-up in the book value of any assets resulting
from a revaluation thereof after the date of the most recent audited financial
statements referred to in Section 5.5 and (b) Restricted Additional Investments.

        "COVERED CONTRACT" is defined in Section 5.12(f).

        "COVERAGE RATIO" means, as of any Determination Date, the number
obtained by dividing (a) EBDAIT for the period of four consecutive fiscal
quarters of the Company ended on such Determination Date by (b) Consolidated
Interest Expense for such period.

        "CREDIT AGREEMENT" means the Second Amended and Restated Credit
Agreement, dated January 21, 1997, by and among the Company, the Banks and
National City Bank, as Agent, as the same may be amended or otherwise modified
and in effect from time to time.

        "DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.

        "DEFAULT RATE" means that rate of interest that is the greater of (i) 2%
per annum above the rate of interest stated in clause (a) of the first paragraph
of the Notes or (ii) 2% over the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York, New York as its "base" or
"prime" rate.

        "DETERMINATION DATE" means each date which shall be the last day of a
fiscal quarter of the Company.

        "DISPOSITION VALUE" is defined in Section 10.7(c).

        "EBDAIT" means, for any period, Consolidated Net Income for such period
plus all amounts deducted in the computation of such Consolidated Net Income on
account of (a) depreciation, amortization and other non-cash charges, (b)
Consolidated Interest Expense, and (c) taxes imposed on or measured by income or
excess profits.


                                      -4-
<PAGE>   65

        "ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.

        "ENVIRONMENTAL PERMITS" means, collectively, any and all permits,
consents, licenses, approvals and registrations of any nature at any time
required pursuant to or in order to comply with any Environmental Law.

        "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.

        "ERISA Affiliate" means any trade or business (whether or not
incorporated) that is or was at any relevant time treated as a single employer
together with the Company under section 414 of the Code.

        "EVENT OF DEFAULT" is defined in Section 11.

        "EXCESS SALE" is defined in Section 10.7(a).

        "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

        "FUNDED DEBT" means, with respect to any Person, as of any date, all
Indebtedness of such Person which would be classified upon a balance sheet of
such Person prepared as of such date in accordance with GAAP as long term or
funded debt, including in any event (without duplication) all Indebtedness of
such Person, whether secured or unsecured, having a final maturity (or which,
pursuant to the terms of a revolving credit agreement or otherwise, is renewable
or extendable at the option of such Person for a period ending) one year or more
after the date of creation thereof, notwithstanding the fact that (a) payments
in respect thereof (whether installment, serial maturity or sinking fund
payments or otherwise) are required to be made by such Person on demand or
within one year after the creation thereof or (b) all or any part of the amount
thereof is at the time also included in current liabilities of such Person.

        "FUNDED DEBT RATIO" means, as of any Determination Date, the number
obtained by dividing (a) Consolidated Funded Debt as of such Determination Date
by (b) the sum of (i) Consolidated Funded Debt as of such Determination Date,
plus (ii) Consolidated Net Worth as of such Determination Date.

        "GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.

        "GOVERNMENTAL AUTHORITY" means


                                      -5-
<PAGE>   66

                (a)  the government of

                    (i) the United States of America or any state or other
          political subdivision thereof, or

                    (ii) any jurisdiction in which the Company or any Restricted
          Subsidiary conducts all or any part of its business, or which asserts
          jurisdiction over any properties of the Company or any Restricted
          Subsidiary, or

                (b) any entity exercising executive, legislative, judicial,
    regulatory or administrative functions of, or pertaining to, any such
    government.

        "GUARANTOR" is defined in Section 4.1.

        "Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:

                (a) to purchase such indebtedness or obligation or any property
    constituting security therefor;

                (b) to advance or supply funds (i) for the purchase or payment 
    of such indebtedness or obligation, or (ii) to maintain any working capital 
    or other balance sheet condition or any income statement condition of any 
    other Person or otherwise to advance or make available funds for the 
    purchase or payment of such indebtedness or obligation;

                (c) to lease properties or to purchase properties or services 
    primarily for the purpose of assuring the owner of such indebtedness or 
    obligation of the ability of any other Person to make payment of the
    indebtedness or obligation; or

                (d) otherwise to assure the owner of such indebtedness or
    obligation against loss in respect thereof.

In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.

        "GUARANTY AGREEMENTS" collectively, the Guaranty Agreements, each dated
October 24, 1997 between the Company and each of the Guarantors.

        "HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage,

                                      -6-
<PAGE>   67
handling, transportation, transfer, use, disposal, release, discharge, spillage,
seepage, or filtration of which is or shall be restricted, prohibited or
penalized by any applicable law (including, without limitation, asbestos, urea
formaldehyde foam insulation and polychlorinated biphenyls).

        "HOLDER" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.

        "INCLUDED RESTRICTED SUBSIDIARY DEBT" means, as of any date, the
aggregate principal amount outstanding on such date of all Indebtedness of
Restricted Subsidiaries other than

                (a) Indebtedness of Restricted Subsidiaries incurred pursuant to
    subdivision (a)(i) of Section 10.2,

                (b) Indebtedness of the Guarantors consisting of (i) their
    Guaranty of Indebtedness of the Company incurred pursuant to subdivision 
    (a)(ii) of Section 10.2, (ii) their Guaranty of the Notes pursuant to the 
    Guaranty Agreements, and (iii) Indebtedness outstanding on the date hereof 
    and described on Schedule 5.15 in a principal amount not exceeding 
    $4,000,000, and

                (c) Indebtedness of Restricted Subsidiaries incurred pursuant to
    subdivision (a)(iii) or (a)(vi) of Section 10.2 and secured by Liens 
    permitted by subdivision (g) or (h) of Section 10.3, or consisting of 
    obligations in respect of letters of credit, but only to the extent that all
    Indebtedness described in this clause (c) shall not exceed $500,000 (or the
    equivalent amount of any currency other than United States Dollars) in 
    aggregate principal amount outstanding.

        "INCLUDED SECURED DEBT" means, as of any date, the aggregate principal
amount outstanding on such date of all Indebtedness secured by Liens incurred as
permitted by subdivision (i) of Section 10.3.

        "INDEBTEDNESS" with respect to any Person means, at any time, without
duplication,

                (a) its liabilities for borrowed money and its redemption 
    obligations in respect of mandatorily redeemable Preferred Stock;

                (b) its liabilities for the deferred purchase price of property
    acquired by such Person (excluding accounts payable arising in the ordinary
    course of business but including all liabilities created or arising under 
    any conditional sale or other title retention agreement with respect to any
    such property);

                (c)   all Capital Lease Obligations of such Person;



                                      -7-
<PAGE>   68
                (d) all liabilities for borrowed money secured by any Lien with
    respect to any property owned by such Person (whether or not such Person
    has assumed or otherwise become liable for such liabilities);

                (e) all its liabilities in respect of letters of credit or
    instruments serving a similar function issued or accepted for its account by
    banks and other financial institutions (whether or not representing 
    obligations for borrowed money);

                (f)     Swap Obligations of such Person; and

                (g) any Guaranty of such Person with respect to liabilities of a
    type described in any of clauses (a) through (f) hereof.

Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.

        "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note, (b)
any holder of a Note holding more than 5 % of the aggregate principal amount of
the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.

        "INVESTMENT" as applied to any designated Person, means any direct or
indirect purchase or other acquisition by such designated Person for cash or
other property of (a) stock, debt or other securities of any other Person, or
any direct or indirect loan, advance, extension of credit or capital
contribution by such designated Person to any other Person or any Guaranty by
such designated Person with respect to the Indebtedness of such other Person,
including all Indebtedness of and accounts receivable from any such other Person
which are not current assets or did not arise from sales to such other Person in
the ordinary course of business, or (b) any interest in any kind of property or
assets, whether real, personal or mixed, tangible or intangible. In computing
the amount involved in any Investment, (i) undistributed earnings of, and
interest accrued in respect of Indebtedness owing by, any such other Person
accrued after the date of such Investment shall not be included, (ii) there
shall not be deducted from the amounts invested in any such other Person any
amounts received as earnings (in the form of dividends, interest or otherwise)
on such Investment or as loans or advances from such other Person, and (iii)
unrealized increases or decreases in value, or write-ups, write-downs or
write-offs, of Investments in any such other Person shall be disregarded.

        "LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
Vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).


                                      -8-
<PAGE>   69
        "MAKE-WHOLE AMOUNT" is defined in Section 8.7.

        "MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company 
and its Restricted Subsidiaries taken as a whole.

        "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of
the Company to perform its obligations under this Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the Notes.

        "MEMORANDUM" is defined in Section 5.3.

        "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).

        "NET SALE PROCEEDS" is defined in Section 10.7(c).

        "1995 NOTE PURCHASE AGREEMENTS" means the Note Purchase Agreements,
dated August 30, 1995, between the Company and each of the 1995 Note Purchasers.

        "1995 NOTE PURCHASERS" means the Purchasers named on Schedule A hereto
and The Mutual Life Insurance Company of New York.

        "NOTES" is defined in Section 1.

        "OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.

        "OTHER AGREEMENT" is defined in Section 2.

        "OTHER PURCHASER" is defined in Section 2.

        "PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.

        "PCTE 95-60" is defined in Section 5.12(f).

        "PERMITTED CREDIT AGREEMENT AMOUNT" means, on any date, the maximum
aggregate principal amount of revolving credit borrowings which the Company is
permitted to have outstanding pursuant to the Credit Agreement as originally
executed and delivered (the "Initial Amount"); PROVIDED, HOWEVER, that if, at
any time or from time to time subsequent to the Closing Date:


                                      -9-
<PAGE>   70
                (a) the Company and the banks party thereto shall enter into an
          amendment to the Credit Agreement increasing the principal amount of
          such borrowings which the Company is permitted to have outstanding
          thereunder to an amount (the "Increased Amount") in excess of the
          Initial Amount,

                (b) the Company would be permitted pursuant to subdivision
          (a)(iii) of Section 10.2, on the date the Officer's Certificate
          referred to in clause (c) below is furnished by the Company to the
          holders of the Notes, after giving effect to all Indebtedness
          incurred and all Indebtedness retired on such date by the Company and
          its Restricted Subsidiaries, to incur additional Indebtedness in an
          amount at least equal to the amount by which said Increased Amount
          exceeds the Initial Amount, and

                (c) the Company shall furnish a copy of said amendment to the
          Credit Agreement to each holder of a Note or Notes, accompanied by
          an Officer's Certificate certifying (i) that such copy is true and
          complete and said amendment, and the Credit Agreement as amended
          thereby, is in full force and effect and (ii) to the effect set forth
          in clause (b) above (and setting forth calculations in reasonable
          detail demonstrating compliance with the condition contained in said
          clause (b)),

then, effective from and after the date said Officer's Certificate is so
furnished, the Permitted Credit Agreement Amount shall be increased to an amount
equal to said Increased Amount (subject to further increase thereafter in
accordance with the further operation of the foregoing provisions of this
definition); BUT PROVIDED FURTHER, HOWEVER, that the Permitted Credit Agreement
Amount shall not in any event on any date exceed the maximum aggregate principal
amount of revolving credit borrowings by the Company which would then be
permitted to be outstanding under the Credit Agreement.

        "PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.

        "PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.

        "PREFERRED STOCK" means, in respect of any corporation, shares of
capital stock of such corporation that are entitled to preference or priority
over any other shares of the capital stock of such corporation in respect of
payment of dividends or distribution of assets upon liquidation.

        "PREPAYMENT ELECTION NOTICE" is defined in Section 9.8.

        "PRO FORMA COVERAGE RATIO" means, in connection with the incurrence on
any date of Indebtedness ("INCURRED INDEBTEDNESS") pursuant to subdivision
(a)(iii) of Section 10.2,

                                      -10-
<PAGE>   71

the number obtained by dividing (a) EBDAIT for the period ("COVERAGE PERIOD") of
four consecutive fiscal quarters ended on the Determination Date occurring on or
most recently prior to such date by (b) Consolidated Interest Expense for the
Coverage Period; PROVIDED, HOWEVER, that, in computing EBDAIT and Consolidated
Interest Expense for purposes of determining the Pro Forma Coverage Ratio, it
shall be assumed that the Incurred Indebtedness had been incurred by the Company
or a Restricted Subsidiary on, and all Indebtedness, if any, to be retired with
the proceeds of the Incurred Indebtedness substantially concurrently with the
incurrence thereof had been retired immediately prior to, the first day of the
Coverage Period, and that all such Incurred Indebtedness, and no such retired
Indebtedness, remained outstanding and bore interest during the Coverage Period.

        "PROPERTY" or "PROPERTIES" means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.

        "REFINANCED INDEBTEDNESS" is defined in Section 10.2(a)(vi).

        "REFINANCING INDEBTEDNESS" is defined in Section 10.2(a)(vi).

        "RELATED CONTRACT" is defined in Section 5.12(f).

        "REQUIRED HOLDERS" means, at any time, the holders of at least 66.67% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).

        "RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this agreement.

        "RESTRICTED ADDITIONAL INVESTMENT" means any Investment other than an
Investment permitted by subdivisions (a) through (j) of Section 10.4.

        "RESTRICTED PAYMENT" means any payment or distribution or the incurrence
of any liability to make any payment or distribution, in cash, property or other
assets (other than shares of any class of capital stock of the Company) upon or
in respect of any share of any class of capital stock of the Company or any
warrants, rights or options evidencing a right to purchase or acquire any
securities of the Company, including, without limiting the generality of the
foregoing, payments or distributions as dividends and payments or distributions
for the purpose of purchasing, acquiring, retiring or redeeming any such shares
of stock (or any warrants, rights or options to purchase or acquire any such
securities) or the making of any other distribution in respect of any such
shares of stock (or any warrants, rights or options evidencing a right to
purchase or acquire any such securities).

        "RESTRICTED SUBSIDIARY" means, at any time, a Subsidiary of the Company:


                                      -11-
<PAGE>   72

                (a) more than 50% (by number of votes) of the Voting Stock of
    which shall be owned by the Company and/or one or more of its other 
    Restricted Subsidiaries, and

                (b) which is either (i) designated as a Restricted Subsidiary in
    Schedule 5.4 or (ii) designated as a Restricted Subsidiary subsequent to the
    Closing Date in the manner and subject to the terms and conditions set forth
    below.

The Company may designate any Unrestricted Subsidiary (including any Subsidiary
hereafter acquired or created) as a Restricted Subsidiary by furnishing notice
of such designation, identifying such Subsidiary, to each holder of a Note,
accompanied by an Officer's Certificate, signed by a Senior Financial Officer of
the Company, certifying that the conditions to such designation hereinafter set
forth have been complied with; PROVIDED that, (A) at the time of and after
giving effect to any such designation, no Default or Event of Default shall have
occurred and be continuing and (B) no Subsidiary of a Person which shall
constitute an Unrestricted Subsidiary may be designated a Restricted Subsidiary
for so long as such Person shall remain an Unrestricted Subsidiary. The Company
may not designate any Restricted Subsidiary as an Unrestricted Subsidiary.

        "RETIREMENT OF INDEBTEDNESS" is defined in Section 10.7(c)(iv).


        "SALE DATE" is defined in Section 10.7(a).

        "SALE LEASEBACK" means any transaction or series of transactions
pursuant to which the Company or any Restricted Subsidiary shall sell or
transfer to any Person (other than the Company or a Restricted Subsidiary) any
property, whether now owned or hereafter acquired, and, as part of the same
transaction or series of transactions, the Company or any Restricted Subsidiary
shall rent or lease as lessee, or similarly acquire the right to possession or
use of, such property or one or more properties which it intends to use for the
same purpose or purposes as such property.

        "SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.


        "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.

        "SUBORDINATED INTERCOMPANY INDEBTEDNESS" means unsecured Indebtedness of
the Company incurred and owing to a Restricted Subsidiary which is validly and
effectively made subordinate and junior in right of payment to the Notes
pursuant to subordination provisions (to which the holder of such Indebtedness
shall have agreed in writing to be bound) contained in the instrument evidencing
such Indebtedness or under which the same is outstanding (and to which
appropriate reference shall be made in the instrument evidencing such
Indebtedness), substantially in the form of Schedule B-i.

        "SUBSIDIARY" means, as to any Person, any corporation more than 50% (by
number of votes) of the Voting Stock of which shall be owned by such Person
and/or one or


                                      -12-
<PAGE>   73
more of its other Subsidiaries. Unless the context otherwise clearly requires, 
any reference to a "Subsidiary" is a reference to a Subsidiary of the Company.

        "SUCCESSOR" is defined in Section 10.7(a).

        "SUCCESSOR TRANSACTION" is defined in Section 10.7(a).

        "SWAP OBLIGATIONS" means, with respect to any Person, payment
obligations with respect to interest rate swaps, currency swaps and similar
obligations obligating such Person to make payments, whether periodically or
upon the happening of a contingency. For the purposes of this Agreement, the
amount of any Swap Obligation shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap Obligation had terminated at the end of
such fiscal quarter, and in making such determination, if any agreement relating
to such Swap Obligation provides for the netting of amounts payable by and to
such Person thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case, the amount of
such obligation shall be the net amount so determined.

        "TOTAL ASSETS" is defined in Section 10.7(c).

        "UNRESTRICTED SUBSIDIARY" means any Subsidiary other than a Restricted
Subsidiary.

        "VOTING STOCK" means the capital stock of a corporation the holders of
which are ordinarily, in the absence of contingencies, entitled to elect the
corporate directors (or persons performing similar functions) of such
corporation.

        "WEIGHTED AVERAGE LIFE TO MATURITY" means, as applied to any
indebtedness at any date, the number of years (or portions of years) obtained by
dividing (a) the then outstanding principal amount of such indebtedness into (b)
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the date on which such payment is to be made.

        "WHOLLY OWNED RESTRICTED SUBSIDIARY" means, at any time, any Restricted
Subsidiary one hundred percent (100%) of all of the equity interests (except
directors' qualifying shares) and voting interests of which are owned by any one
or more of the Company and the Company's other Wholly Owned Restricted
Subsidiaries at such time.
                                      -13-
<PAGE>   74
                                                                    SCHEDULE B-1
                                                                              to
                                                        Note Purchase Agreements


                  FORM OF SUBORDINATION PROVISIONS TO BE MADE
              APPLICABLE TO SUBORDINATED INTERCOMPANY INDEBTEDNESS


        In order for any indebtedness to constitute Subordinated Intercompany
Indebtedness under and as defined in the Note Purchase Agreements, such
indebtedness shall be evidenced by an instrument or instruments each containing,
or referring to an agreement governing the provisions of such instrument or
instruments containing, subordination provisions substantially similar to those
set forth below.


                                 SUBORDINATION


        Section [__] SUBORDINATION. (a) SENIOR DEBT; SUBORDINATED DEBT. Payments
of principal, premium, if any, and interest in respect of the indebtedness
[evidenced by] [issued pursuant to) this Subordinated Note [Agreement] (such
indebtedness being hereinafter called "SUBORDINATED DEBT") shall be subordinate
and junior in right of payment, to the extent and in the manner set forth in
this Section [__], to all indebtedness, obligations and liabilities of OM GROUP,
INC., a Delaware corporation (the "COMPANY"), under the Note Purchase Agreements
dated October __, 1997 (the "NOTE AGREEMENTS"), between the Company and the
respective note purchasers named therein, whether now existing or hereafter
arising, due or to become due, direct or indirect, absolute or contingent,
howsoever evidenced, held or acquired, as such indebtedness, obligations and
liabilities may be modified, extended, renewed or replaced from time to time,
and including without limitation, the obligation of the Company to pay the
principal of and the makewhole amount, if any, and interest on the Company's
6.82% Senior Notes due 2007 and on its 6.99% Senior Notes due 2009 issued and
sold pursuant to the Note Agreements (all such indebtedness, obligations and
liabilities being hereinafter called "SENIOR DEBT"), and each holder of
Subordinated Debt, by its acceptance [hereof] [thereof], agrees to be bound by
such subordination.

        (b) PAYMENTS ON ACCOUNT OF SUBORDINATED DEBT. Upon the maturity of any
Senior Debt, whether at stated maturity, by prepayment, acceleration or
otherwise, all principal thereof, makewhole amount, premium, and interest
thereon or any other amounts owing in respect thereof, in each case to the
extent due and owing, shall first be paid in full, or such payment duly provided
for in cash or in a manner satisfactory to the holder or holders of such Senior
Debt, before any payment is made on account of the principal of, premium, if
any, or interest on, or any amount otherwise owing in respect of, the
Subordinated Debt.

        (c) SUBORDINATION UPON EVENT OF DEFAULT UNDER SENIOR DEBT. No payment on
account of the principal of, or interest or premium on, or amounts otherwise
owing in respect of, the Subordinated Debt shall be made at any time that a
Default or Event of Default shall

<PAGE>   75
have occurred and be continuing under the Note Agreements or any other
instrument or agreement evidencing or securing any Senior Debt, or governing the
terms thereof. The holders of Subordinated Debt may not accept or receive any
payment on account of Subordinated Debt if such payment would constitute a
violation of Section 10.5 of the Note Agreements.

        (d) NO PROCEEDINGS. Unless and until all Senior Debt shall have been
paid in full, no holder of Subordinated Debt will commence any proceeding
against the Company, or join with any creditor in any such proceeding, under any
bankruptcy, reorganization, readjustment of debt, arrangement of debt,
receivership, liquidation or insolvency law or statute of the Federal or any
state government, unless the holders of Senior Debt shall also join in bringing
such proceeding.

        (e) SUBORDINATION IN EVENT OF INSOLVENCY, ETC. Upon any distribution of
assets of the Company upon any dissolution, winding up, liquidation or
reorganization of the Company (whether in any bankruptcy or other proceeding
referred to in paragraph (d) or otherwise): (i) the holders of all Senior Debt
shall first be entitled to receive payment in full of the principal thereof,
Make-Whole Amount, premium, and interest due thereon before any holder of
Subordinated Debt is entitled to receive any payment on account of the principal
of or interest or premium on or any other amount owing in respect of the
Subordinated Debt; and (ii) all principal of, premium, if any, and interest on
Subordinated Debt shall forthwith (notwithstanding the terms of paragraphs (b)
and (c)) become due and payable, and any payment or distribution of any
character, whether in cash, securities or other property, which would otherwise
(but for the terms hereof) be payable or deliverable by the Company in respect
of any Subordinated Debt (including any payment or distribution in respect of
any Subordinated Debt by reason of any other indebtedness of the Company being
subordinated to the Subordinated Debt, and any distribution of cash, property,
stock or obligations which are issued pursuant to any order or decree of any
court, or pursuant to reorganization, dissolution or liquidation proceedings,
whether or not purporting to give effect to the subordination of the
Subordinated Debt to the Senior Debt), shall be paid or delivered directly to
the holders of Senior Debt at the time outstanding (or their respective
representatives), ratably according to the respective aggregate amounts
remaining unpaid thereon, until all Senior Debt shall have been paid in full,
and the holders of the Subordinated Debt at the time outstanding irrevocably
authorize, empower and direct all receivers, trustees, liquidators, conservators
and others having authority in the premises to effect all such payment and
deliveries.

        (f) PAYMENTS FOR BENEFIT OF SENIOR DEBT. In the event that any holder of
Subordinated Debt shall receive any payment on account of the Subordinated Debt
which it is not entitled to receive under the provisions of this Section [ ],
such payment shall be held by the holder of the Subordinated Debt in trust for
the benefit of, and shall be paid forthwith over and delivered to, the holders
of Senior Debt for application to the payment of all Senior Debt remaining
unpaid to the extent necessary to pay all Senior Debt then due in full in
accordance with the terms of such Senior Debt.

        (g) SUBROGATION. Each holder of the Subordinated Debt agrees that no
payment or distribution by it directly to the holders of the Senior Debt
pursuant hereto shall

                                      -2-
<PAGE>   76

entitle such holder to any rights of subrogation in respect thereof until all 
Senior Debt shall have been irrevocably paid in full in accordance with the 
respective terms thereof.

        (h) OBLIGATION OF THE COMPANY UNCONDITIONAL. Nothing contained in this
Section [__] or in the Subordinated Debt is intended to or shall impair, as
between the Company and the holder or holders of the Subordinated Debt, the
obligation of the Company, which is absolute and unconditional, to pay to the
holder or holders of the Subordinated Debt the principal of and interest and
premium, if any, on and all other amounts owing in respect of the Subordinated
Debt as and when the same shall become due and payable in accordance with its
terms, subject to the rights under this Section [__] of the holders of Senior
Debt.

        (i) SUBORDINATION NOT AFFECTED, ETC. The terms of this Section [__], the
subordination effected hereby and the rights of the holders of Senior Debt shall
not be affected by (i) any amendment of or addition or supplement to any Senior
Debt or any instrument or agreement relating thereto; (ii) any exercise or
non-exercise of any right, power or remedy under or in respect of any Senior
Debt or any instrument or agreement relating thereto; (iii) any sale, exchange,
release or other transaction affecting all or any part of any property at any
tune pledged or mortgaged to secure, or however securing, Senior Debt; (iv) any
waiver, consent, release, indulgence, extension, renewal, modification, delay or
other action, inaction or omission in respect of any Senior Debt or any
instrument or agreement relating thereto; or (v) any application by any holder
or holders of Senior Debt of any amount or sum (by whomsoever paid or however
realized) to Senior Debt, whether or not any holder of any Subordinated Debt
shall have had notice or knowledge of any of the foregoing.

        (j) CHANGES, WAIVERS, ETC. Neither this Section [__] nor any term hereof
may be changed or waived except with the prior written consent of each holder of
Senior Debt at the time outstanding and affected hereby.

                                     -3-
<PAGE>   77
                                 SCHEDULE 5.4

                          SUBSIDIARIES AND AFFILIATES

                This Schedule contains (except as noted herein) complete and
                correct lists (i) of the Company's Subsidiaries, showing, as to
                each Subsidiary, the correct name thereof, the jurisdiction of
                its organization, its designation as a Restricted or
                Unrestricted Subsidiary, and the percentage of shares of each
                class of its capital stock or similar equity interests
                outstanding owned by the Company and each other Subsidiary, (ii)
                of the Company's Affiliates, other than Subsidiaries, and (iii)
                of the Company's directors and senior officers.


Subsidiaries of the Company
---------------------------
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------
                                                                   Restricted       % of Each Class of
                                                                     ("R") or        Capital Stock Owned
        Name of                                  Jurisdiction of   Unrestricted      by Company or Other
      Subsidiary                                  Organization        ("U")               Subsidiary
<S>                                                  <C>               <C>                   <C>
-----------------------------------------------------------------------------------------------------------
D&O Incorporated                                     Japan              U                     50.00
-----------------------------------------------------------------------------------------------------------
J&O Incorporated                                     Korea              U                     50.00
-----------------------------------------------------------------------------------------------------------
Kokkola Chemicals                                    Finland            R                    100.00
-----------------------------------------------------------------------------------------------------------
OMG Americas, Inc.                                   USA-Ohio           R                    100.00
-----------------------------------------------------------------------------------------------------------
OMG Apex, Inc.                                       USA-Delaware       R                    100.00
-----------------------------------------------------------------------------------------------------------
OMG JETT, Inc.                                       USA-Ohio           R                    100.00
-----------------------------------------------------------------------------------------------------------
OM Group Europe GmbH                                 Germany            R                    100.00
-----------------------------------------------------------------------------------------------------------
OMG Asia Pacific Co., Ltd.                           Taiwan             R                    100.00
-----------------------------------------------------------------------------------------------------------
SCM Metal Products Inc.                              USA-Delaware       R                    100.00
-----------------------------------------------------------------------------------------------------------
Vasset, S.A                                          France             R                    100.00
-----------------------------------------------------------------------------------------------------------
</TABLE>

Affiliates of the Company
-------------------------

None
<PAGE>   78

Directors and Senior Officers of the Company
--------------------------------------------

DIRECTORS

Eugene Bak
Lee R. Brodeur
Frank Butler
Thomas R. Miklich
James P. Mooney
John E. Mooney
Markku Toivanen

SENIOR OFFICERS

James P. Mooney
        Chairman and Chief Executive Officer

Eugene Bak
     President and Chief Operating Officer

Kari Muuraiskangas
     President, OMG Europe GmbH

James M. Materna
     Chief Financial Officer

Antti Aaltonen
     Vice President, Technology
     President (OMG Kokkola Chemicals Oy)

Thomas E. Fleming
     Vice President, Chief Marketing Officer

H. Burnham Tinker
     Vice President, Corporate Development

John R. Holtzhauser
     Corporate Controller

Michael J. Scott
     General Counsel and Secretary

J.R. Hwang
     President, OMG Asia Pacific Co., Ltd.

Terry Guckes,
     Vice President, Planning and Development

David A. Handal,
     Vice President, Information Systems and Technology


<PAGE>   79

                                  SCHEDULE 5.5

                              FINANCIAL STATEMENTS

                The Company has delivered to each Purchaser copies of the
                financial statements of the Company and its Subsidiaries listed
                on this Schedule.


                        1. Consolidated Financial Statements of the Company for
                the year ended December 31, 1996.

                        2. Consolidated Financial Statements of the Company for
                the fiscal quarter ended June 30, 1997. 

<PAGE>   80
                                 SCHEDULE 5.10

                                  INVESTMENTS

                This Schedule correctly lists all investments of the Company
                (other than Investments in Subsidiaries) existing on the date of
                this Agreement.


                                      None
<PAGE>   81
                                 SCHEDULE 5.12

                    COVERED CONTRACTS AND RELATED CONTRACTS

                                      None
<PAGE>   82
                                 SCHEDULE 5.14

                                USE OF PROCEEDS

                The Company will apply the proceeds of the sale of the Notes as
                set forth in this Schedule.

                The proceeds of the sale of the Notes will be used to pay down
                existing bank indebtedness as follows:
<TABLE>
<CAPTION>

                   <S>                                         <C>
                   Repay Bank Indebtedness ................    $29,950,000
                   Fees and Expenses ......................         50,000
                                                               -----------
                                                               $30,000,000
                                                               ===========
</TABLE>

<PAGE>   83

                                 SCHEDULE 5.15

                                  INDEBTEDNESS

                This Schedule sets forth a complete and correct list of all
                Funded Debt of the Company and its Subsidiaries as of October
                16, 1997.

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        Outstanding     Principal
                                                                                         Principal       to be
                                                                                       Amount (as of     Reduced     Description
        Item No./                                                                       September 30.   With Note        of
       Description                  Obligor      Obligee                Guarantor           1997)        Proceeds    Collateral
<S>                                 <C>          <C>                    <C>              <C>            <C>            <C>
-----------------------------------------------------------------------------------------------------------------------------------
1.  $180,000,000 Revolving          Company      National City Bank,    OMG Americas,    $154,000,000   $29,950,000    None
    Credit Agreement                             ABN Amro,              OMG Apex, and
                                                 KeyBank and            SCM Metal
                                                 Mellon Bank            Products
-----------------------------------------------------------------------------------------------------------------------------------
2.  $30,000,000 7.38%               Company      Great-West Life and    OMG Americas,    $ 30,000,000    -0-           None
    Senior Notes Due 2005                        Annuity Insurance      OMG Apex, and
                                                 Company,               SCM Metal
                                                 Nationwide Life        Products
                                                 Insurance
                                                 Company, and
                                                 Mutual Life
                                                 Insurance Company
                                                 of New York
-----------------------------------------------------------------------------------------------------------------------------------
3.  Technology Loan (KCO)           KCO          Government of          None             $    250,000    -0-           None
                                                 Finland
-----------------------------------------------------------------------------------------------------------------------------------
4   Regional Development            OMG          Wenango County,        None             $    250,000    -0-           None
    Loan                            Americas   Pennsylvania
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>   84
                                                                       EXHIBIT 1

                                 [FORM OF NOTE]

                                 OM GROUP, INC.

                           6.82% SENIOR NOTE DUE 2007
No. R-______                                                 [Date]
$[__________]                                                PPN# ___________

        FOR VALUE RECEIVED, the undersigned, OM GROUP, INC. (herein called the
"Company "), a corporation organized and existing under the laws of the State of
Delaware, hereby promises to pay to [________________________________________],
or registered assigns, the principal sum of
[________________________________________] DOLLARS on October __, 2007, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 6.82% per annum from the date
hereof, payable semiannually, on the ___ day of April and the ___day of October
in each year, commencing with April __, 1998, until the principal hereof shall
have become due and payable, the (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreements referred to below), payable semi-annually as
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the greater of (i) 8.82% or (ii) 2%
over the rate of interest publicly announced by Morgan Guaranty Trust Company of
New York from time to time in New York, New York as its "base" or "prime" rate.

        Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office in New York, New York of The Chase Manhattan
Bank or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreements
referred to below.

        This Note is one of a series of Senior Notes (herein called the "Notes")
issued pursuant to separate Note Purchase Agreements dated October ____, 1997
(as from time to time amended, the "Note Purchase Agreements"), between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.

        This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's
<PAGE>   85

attorney duly authorized in writing, a new Note for a like principal amount will
be issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.

        This Note is subject to mandatory and optional prepayments, in whole or
from time to time in part, at the times and on the terms specified in the Note
Purchase Agreements.

        If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
application Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.

        This Note is entitled to the benefits of the Guaranty Agreements, dated
October __, 1997, by OMG Americas, Inc., OMG Apex, Inc. and SCM Metal Products,
Inc.

        THIS NOTE IS MADE AND DELIVERED IN NEW YORK, NEW YORK, AND SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE
OF NEW YORK.

                                       OM GROUP, INC.


                                       By
                                         -------------------------------------
                                       Title:  Chief Financial Officer

                                     - 2 -
<PAGE>   86
                                                                      EXHIBIT lA

                                 [FORM OF NOTE]

                                 OM GROUP, INC.

                           6.99% SENIOR NOTE DUE 2009
No. R-______                                                  [Date)
$[__________]                                                 PPN# __________

        FOR VALUE RECEIVED, the undersigned, OM GROUP, INC. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Delaware, hereby promises to pay to
[_________________________________________________], or registered assigns, the
principal sum of [_________________________________________________] DOLLARS on
October __, 2009, with interest (computed on the basis of a 360-day year of
twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.99% per
annum from the date hereof, payable semiannually, on the ___ day of April and
the ___day of October in each year, commencing with April __, 1998, until the
principal hereof shall have become due and payable, the (b) to the extent
permitted by law on any overdue payment (including any overdue prepayment) of
principal, any overdue payment of interest and any overdue payment of any
Make-Whole Amount (as defined in the Note Purchase Agreements referred to
below), payable semi-annually as aforesaid (or, at the option of the registered
holder hereof, on demand), at a rate per annum from time to time equal to the
greater of (i) 8.99% or (ii) 2% over the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York from time to time in New York, New
York as its "base" or "prime" rate.

        Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office in New York, New York of The Chase Manhattan
Bank or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreements
referred to below.

        This Note is one of a series of Senior Notes (herein called the "Notes")
issued pursuant to separate Note Purchase Agreements dated October , 1997 (as
from time to time amended, the "Note Purchase Agreements"), between the Company
and the respective Purchasers named therein and is entitled to the benefits
thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i)
to have agreed to the confidentiality provisions set forth in Section 20 of the
Note Purchase Agreements and (ii) to have made the representation set forth in
Section 6.2 of the Note Purchase Agreements.

        This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a

<PAGE>   87
written instrument of transfer duly executed, by the registered holder hereof or
such holder's attorney duly authorized in writing, a new Note for a like
principal amount will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the Company
will not be affected by any notice to the contrary.


        This Note is subject to mandatory and optional prepayments, in whole or
from time to time in part, at the times and on the terms specified in the Note
Purchase Agreements.

        If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
application Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.

        This Note is entitled to the benefits of the Guaranty Agreements, dated
October __, 1997, by OMG Americas, Inc. , OMG Apex, Inc. and SCM Metal Products,
Inc.

        THIS NOTE IS MADE AND DELIVERED IN NEW YORK, NEW YORK, AND SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE
OF NEW YORK.

                                      OM GROUP, INC.


                                      By
                                        ---------------------------------------
                                      Title:  Chief Financial Officer

                                      -2-