-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LQ8FrRvyTOwa1wQPk0aWtpuLz1HknkZxLgxUpkeLvHgqop3tvTgLlTOHbAWrVubv LN8Z9bLRUQnkOejjU921pg== 0000950117-98-001108.txt : 19980521 0000950117-98-001108.hdr.sgml : 19980521 ACCESSION NUMBER: 0000950117-98-001108 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 40 FILED AS OF DATE: 19980520 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER INDUSTRIES INC CENTRAL INDEX KEY: 0000030927 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 310268670 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-49957 FILM NUMBER: 98629079 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: 580 WALNUT ST PO BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45201 FORMER COMPANY: FORMER CONFORMED NAME: EAGLE PICHER CO DATE OF NAME CHANGE: 19660921 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER HOLDINGS INC CENTRAL INDEX KEY: 0001059364 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 133989553 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-49957-01 FILM NUMBER: 98629080 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAISY PARTS INC CENTRAL INDEX KEY: 0001059567 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 381406772 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-49957-02 FILM NUMBER: 98629081 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 STREET 2: C/O EAGLE PICHER INDUSTRIES INC CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: C/O EAGLE PICHER INDUSTRIES INC STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER DEVELOPMENT CO INC CENTRAL INDEX KEY: 0001059568 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 311215706 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-49957-03 FILM NUMBER: 98629082 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 STREET 2: C/O EAGLE PICHER INDUSTRIES INC CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: C/O EAGLE PICHER INDUSTRIES INC STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER FAR EAST INC CENTRAL INDEX KEY: 0001059570 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 311235685 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-49957-04 FILM NUMBER: 98629083 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 STREET 2: C/O EAGLE PICHER INDUSTRIES INC CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: C/O EAGLE PICHER INDUSTRIES INC STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER FLUID SYSTEMS INC CENTRAL INDEX KEY: 0001059571 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 311452637 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-49957-05 FILM NUMBER: 98629084 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 STREET 2: C/O EAGLE PICHER INDUSTRIES INC CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: C/O EAGLE PICHER INDUSTRIES INC STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER MINERALS INC CENTRAL INDEX KEY: 0001059572 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 311188662 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-49957-06 FILM NUMBER: 98629085 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 STREET 2: C/O EAGLE PICHER INDUSTRIES INC CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: C/O EAGLE PICHER INDUSTRIES INC STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HILLSIDE TOOL & MANUFACTURING CO CENTRAL INDEX KEY: 0001059573 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 380946293 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-49957-07 FILM NUMBER: 98629086 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 STREET 2: C/O EAGLE PICHER INDUSTRIES INC CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: C/O EAGLE PICHER INDUSTRIES INC STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICHIGAN AUTOMOTIVE RESEARCH CORP CENTRAL INDEX KEY: 0001059575 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 382185909 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-49957-08 FILM NUMBER: 98629087 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 STREET 2: C/O EAGLE PICHER INDUSTRIES INC CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: C/O EAGLE PICHER INDUSTRIES INC STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER TECHNOLOGIES LLC CENTRAL INDEX KEY: 0001059576 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 311587660 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-49957-09 FILM NUMBER: 98629088 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 STREET 2: C/O EAGLE PICHER INDUSTRIES INC CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: C/O EAGLE PICHER INDUSTRIES INC STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45202 S-4/A 1 EAGLE-PICHER INDUSTRIES, INC. ET AL S-4/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 1998 REGISTRATION NO. 333-49957 ________________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ EAGLE-PICHER INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ OHIO -- 31-0268670 (STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ SEE TABLE OF ADDITIONAL REGISTRANTS ------------------------ SUITE 500 250 EAST FIFTH STREET CINCINNATI, OHIO 45202 (513) 721-7010 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ DAVID N. HALL SENIOR VICE PRESIDENT -- FINANCE EAGLE-PICHER INDUSTRIES, INC. 250 EAST FIFTH STREET, SUITE 500 CINCINNATI, OHIO 45202 (513) 721-7010 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ WITH A COPY TO: SCOTT F. SMITH, ESQ. HOWARD, DARBY & LEVIN 1330 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 (212) 841-1000 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. ------------------------ If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] ____________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] ____________ ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ________________________________________________________________________________ TABLE OF ADDITIONAL REGISTRANTS
JURISDICTION OF PRIMARY STANDARD IRS EMPLOYER INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION NAME ORGANIZATION CODE NUMBER NUMBER Eagle-Picher Holdings, Inc............................... Delaware 13-3989553 Daisy Parts, Inc......................................... Michigan 3714 38-1406772 Eagle-Picher Development Company, Inc.................... Delaware 6719 31-1215706 Eagle-Picher Far East, Inc............................... Delaware 5013 31-1235685 Eagle-Picher Fluid Systems, Inc.......................... Michigan 3089 31-1452637 Eagle-Picher Minerals, Inc............................... Nevada 1499 31-1188662 Eagle-Picher Technologies, LLC........................... Delaware 3691 31-1587660 Hillsdale Tool & Manufacturing Co........................ Michigan 3714 38-0946293 Michigan Automotive Research Corporation................. Michigan 8734 38-2185909
CROSS-REFERENCE SHEET PURSUANT TO RULE 404(a) AND ITEM 501 OF REGULATION S-K, SHOWING THE LOCATION IN THE PROSPECTUS OF THE INFORMATION REQUIRED TO BE INCLUDED THEREIN IN ACCORDANCE WITH PART I OF FORM S-4
ITEM NUMBER AND HEADING ON FORM S-4 CAPTION OR LOCATION IN PROSPECTUS ----------------------------------------------------------------- ------------------------------------------ 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus............................................. Facing Page and Outside Front Cover Page of the Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus.......... Inside Front and Outside Back Cover Pages of the Prospectus; Available Information; Table of Contents 3. Risk Factors, Ratio of Earnings to Fixed Charges, and Other Information.................................................... Forepart of Prospectus; Summary; Risk Factors; Summary of Historical and Pro Forma Condensed Consolidated Financial Information; Selected Historical Condensed Consolidated Financial Information; The Notes Exchange Offer 4. Terms of the Transaction......................................... Summary; The Notes Exchange Offer; Description of the Notes; Certain U.S. Federal Income Tax Considerations 5. Pro Forma Financial Information.................................. Summary of Historical and Pro Forma Condensed Consolidated Financial Information; Unaudited Pro Forma Consolidated Financial Statements; Management's Discussion and Analysis of Financial Condition and Results of Operations 6. Material Contacts with Company Being Acquired.................... * 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters.............................. * 8. Interests of Named Experts and Counsel........................... * 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities..................................... * 10. Information with Respect to S-3 Registrants...................... * 11. Incorporation of Certain Information by Reference................ * 12. Information with Respect to S-2 or S-3 Registrants............... * 13. Incorporation of Certain Information by Reference................ *
ITEM NUMBER AND HEADING ON FORM S-4 CAPTION OR LOCATION IN PROSPECTUS ----------------------------------------------------------------- ------------------------------------------ 14. Information with Respect to Registrants Other Than S-3 or S-2 Registrants.................................................... Summary; Risk Factors; Summary of Historical and Pro Forma Condensed Consolidated Financial Information; Selected Historical Condensed Consolidated Financial Information; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Description of Industrial Revenue Bonds; Description of New Credit Agreement; Description of the Notes; Description of Preferred Stock; Description of Exchange Debentures; Financial Statements 15. Information with Respect to S-3 Companies........................ * 16. Information with Respect to S-2 or S-3 Companies................. * 17. Information with Respect to Companies Other Than S-3 or S-2 Companies...................................................... * 18. Information if Proxies, Consents or Authorizations Are to be Solicited...................................................... * 19. Information if Proxies, Consents or Authorizations Are Not to be Solicited, or in an Exchange Offer............................. Management; Executive Compensation; Security Ownership and Certain Beneficial Owners and Management of Parent; Certain Relationships and Related Transactions; The Notes Exchange Offer
- ------------ * Item is inapplicable or response thereto is in the negative. SUBJECT TO COMPLETION, DATED MAY 20, 1998 PROSPECTUS EAGLE-PICHER INDUSTRIES, INC. (AS SUCCESSOR BY MERGER TO E-P ACQUISITION, INC.) OFFER TO EXCHANGE ITS 9 3/8% SENIOR SUBORDINATED NOTES DUE 2008 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR ANY AND ALL OF ITS OUTSTANDING 9 3/8% SENIOR SUBORDINATED NOTES DUE 2008 ------------------------ THE NOTES EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED ------------------------ Eagle-Picher Industries, Inc., an Ohio corporation (the 'Company'), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus (the 'Prospectus') and the accompanying Letter of Transmittal (the 'Letter of Transmittal'), to exchange (the 'Notes Exchange Offer') $1,000 principal amount of its 9 3/8% Senior Subordinated Notes due 2008 (the 'New Notes') which have been registered under the Securities Act of 1933, as amended (the 'Act') for each $1,000 principal amount tendered of its outstanding 9 3/8% Senior Subordinated Notes due 2008 (the 'Old Notes' and, together with the New Notes, the 'Notes'), of which $220 million aggregate principal amount is outstanding. The form and terms of the New Notes are identical in all material respects to the form and terms of the Old Notes, except for certain transfer restrictions and registration and other rights relating to the exchange of Old Notes for New Notes. The New Notes evidence the same debt as the Old Notes and will be issued under the Indenture (as defined herein) governing the Old Notes. See 'The Notes Exchange Offer' and 'Description of the Notes.' Concurrently with the Notes Exchange Offer, Eagle-Picher Holdings, Inc., a Delaware corporation ('Parent'), which owns all of the capital stock of the Company, is offering to exchange (the 'Preferred Stock Exchange Offer' and, together with the Notes Exchange Offer, the 'Exchange Offers') shares of Parent's 11 3/4% Series B Cumulative Redeemable Preferred Stock (the 'Series B Preferred Stock') for any and all of its 14,191 outstanding shares of 11 3/4% Series A Cumulative Redeemable Exchangeable Preferred Stock (the 'Series A Preferred Stock' and, together with the Series B Preferred Stock, the 'Preferred Stock'). The Notes and the Preferred Stock are referred to herein as the 'Securities.' Interest on the New Notes is payable semi-annually on March 1 and September 1 of each year, commencing September 1, 1998. The Notes are redeemable at the option of the Company, in whole or in part, at any time on or after March 1, 2003, at the redemption prices set forth herein. The Company may also redeem up to 35% of the aggregate principal amount of the Notes at its option, at any time on or prior to March 1, 2001, at a redemption price equal to 109.375% of the principal amount thereof, plus accrued and unpaid interest and Special Interest (as defined herein), if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings (as defined herein); provided, that at least $100.0 million aggregate principal amount of Notes remains outstanding after such redemption. Upon the occurrence of a Change of Control (as defined herein), the Company will be required to offer to repurchase all or any part of each holder's Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Special Interest, if any, to the date of purchase. There can be no assurance that the Company will have the financial resources necessary, or be permitted by its debt or other agreements, to purchase the Notes upon a Change of Control. See 'Description of Notes -- Change of Control.' The Notes are general unsecured obligations of the Company, subordinated in right of payment to all existing and future Senior Indebtedness (as defined herein) of the Company, including the borrowings under the New Credit Agreement (as defined herein). The Notes are fully and unconditionally, jointly and severally, guaranteed, on an unsecured senior subordinated basis (the 'Note Guarantees'), by Parent and the Company's domestic subsidiaries. As of February 28, 1998, the Company had approximately $547.0 million of long-term debt and $327.0 million of Senior Indebtedness outstanding (of which approximately $323.8 million was secured). The ratio of long-term debt to total capitalization at February 28, 1998 was 75.2%. The Indenture permits the Company to incur additional indebtedness, including Senior Indebtedness, subject to certain limitations. (cover continued on next page) ------------------------ SEE 'RISK FACTORS' BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BEFORE TENDERING NOTES IN THE NOTES EXCHANGE OFFER. ------------------------ THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURIITES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THE DATE OF THIS PROSPECTUS IS , 1998 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. (cover continued) The Company will accept for exchange any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on , 1998, unless extended (the 'Expiration Date'). Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The Notes Exchange Offer is subject to certain customary conditions. See 'The Notes Exchange Offer.' Prior to this offering, there has been no public market for the Notes. The Company does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system. The Notes are expected to be eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ('PORTAL') market of the National Association of Securities Dealers, Inc. (the 'NASD'). There can be no assurance that an active market for the New Notes will develop. The New Notes are being offered hereunder in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement (as defined herein). Based on interpretations by the staff of the Securities and Exchange Commission (the 'Commission') set forth in no-action letters issued to third parties, the Company believes the New Notes issued pursuant to the Notes Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than Restricted Holders (as defined herein) or Participating Broker-Dealers (as defined herein)) without compliance with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the 'Securities Act'). Any holder who tenders in the Notes Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the New Notes or who is an affiliate of the Company may not rely upon such interpretations by the staff of the Commission and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction. Holders of Notes wishing to accept the Notes Exchange Offer must represent to the Company in the Letter of Transmittal that such conditions have been met. Each broker-dealer (other than a Restricted Holder) that receives New Notes for its own account pursuant to the Notes Exchange Offer (a 'Participating Broker-Dealer') must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an 'underwriter' within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See 'Plan of Distribution.' Any broker-dealer who is an affiliate of the Company may not rely on such no-action letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. The Company will not receive any proceeds from this Notes Exchange Offer. No dealer-manager is being used in connection with this Notes Exchange Offer. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. See 'Plan of Distribution.' Interest on the New Notes shall accrue from the last March 1 or September 1 on which interest was paid on the Old Notes so surrendered. 2 AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-4 (together with any amendments, exhibits, annexes and schedules thereto, the 'Registration Statement,') under the Securities Act of 1933, as amended (the 'Securities Act'), with respect to the New Notes being offered by this Prospectus. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. Statements made in this Prospectus as to the contents of any contract, agreement or other document are not necessarily complete. With respect to each such contract, agreement or other document filed or incorporated by reference as an exhibit to the Registration Statement, reference is made to such exhibit for a more complete description of the matter involved, and each such statement is qualified in its entirety by such reference. The Registration Statement (including the exhibits and schedules thereto) may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will also be available for inspection and copying at the regional offices of the Commission located at Seven World Trade Center, New York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such site is http://www.sec.gov. Upon consummation of the Notes Exchange Offer, the Company will become subject to the information requirements of the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and in accordance therewith will be required to file periodic reports and other information with the Commission. In the event that the Company is not subject to the reporting requirements of the Exchange Act at any time following consummation of the Notes Exchange Offer, the Company will be required under the Indenture, dated as of February 24, 1998, as supplemented by the First Supplemental Indenture, dated February 24, 1998 (as so supplemented, the 'Indenture'), among the Company, Parent, certain subsidiaries of the Company and The Bank of New York, as trustee (the 'Trustee'), pursuant to which the Old Notes were, and the New Notes will be, issued, to continue to file with the Commission, and to furnish holders of the Notes with (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such forms, including a 'Management's Discussion and Analysis of Financial Condition and Results of Operations' with respect to the Company, and, with respect to the annual information only, a report on the financial statements therein by the Company's certified independent accountants, and (ii) all reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, for so long as any of the Old Notes remain outstanding, the Company has agreed to make available to any prospective purchaser of the Old Notes or beneficial owner of the Old Notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act. 3 SUMMARY The following summary is qualified in its entirety and should be read in conjunction with by the more detailed information, including the financial statements and notes thereto, appearing elsewhere in this Prospectus. Except where otherwise indicated, 'Parent' means Eagle-Picher Holdings, Inc., and 'Eagle-Picher' and the 'Company' mean Eagle-Picher Industries, Inc. and its subsidiaries. Except as otherwise indicated, a 'Fiscal Year' means the fiscal year of the Company ended November 30 of the year specified, e.g., '1997 Fiscal Year' and 'Fiscal 1997' mean the fiscal year ended November 30, 1997. THE COMPANY Founded in 1843, Eagle-Picher is a diversified manufacturer of industrial products for the automotive, aerospace, defense, telecommunications, food and beverage and construction industries. The Company's long history of innovation in technology and engineering has helped it become a leader in certain niche markets in which it competes. Eagle-Picher operates more than 50 plants in the U.S., England, Germany, Spain and Mexico, and sells its products in over 60 countries worldwide. The Company has achieved significant internal growth in both sales and EBITDA (as defined herein), with a compounded annual growth rate since 1993 of 8.2% and 10.9%, respectively. For the 1997 Fiscal Year, the Company realized net sales and EBITDA of $906.1 million and $104.0 million, respectively. For the 1997 Fiscal Year, the Company had a net loss of $3.9 million. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations' for a discussion of the Company's net income (loss). The Company's operations are organized under three major business groups: the Automotive Group, the Machinery Group and the Industrial Group, which accounted for 48.1%, 29.8% and 22.1% of the Company's net sales and, after allocation of corporate overhead, accounted for 49.2%, 27.0% and 23.8% of the Company's EBITDA, respectively, for the 1997 Fiscal Year. On February 24, 1998, the Company was acquired (the 'Acquisition') by Granaria Industries BV ('Granaria Industries') from the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust (the 'Trust'). At November 30, 1997 and for the fiscal year then ended, after giving effect to the Acquisition, the pro forma consolidated financial statements of the Company compared to the audited consolidated financial statements for the 1997 Fiscal Year reflected an increase in total debt from $273.4 million to $547.5, an increase in interest expense from $31.3 million to $54.9 million, an increase in the net loss from $3.9 million to $9.3 million, and a decrease in shareholders' equity from $336.1 million to $170.6 million. The Automotive Group. The Automotive Group designs, develops, and manufactures precision machined and rubber coated metal components for the global automotive industry. Its customers include automotive original equipment manufacturers ('OEMs') such as Ford Motor Company ('Ford'), General Motors Corporation ('GM'), Chrysler Corporation ('Chrysler'), Toyota Motor Corporation ('Toyota'), Nissan Motor Manufacturing Corporation U.S.A. ('Nissan'), Honda of America, Inc. ('Honda'), FMA (SPA) ('Fiat'), Bayerische Motoren Werke AG ('BMW') and BMW's subsidiary, Rover Group Limited ('Rover'), as well as direct suppliers to OEMs (referred to herein as 'Tier I' suppliers). The Company pioneered the development of materials and processes for coating metal with elastomer (rubber) compounds, and the Company believes its proprietary technologies in this area give it competitive advantages. The Company's rubber coated metal products consist of highly specialized gaskets and materials for high-temperature and high-pressure applications, including disc brake noise insulators, air conditioning compressor gaskets, and gaskets and coated materials for automotive powertrains. More than 150 precision machined components are produced by the Automotive Group, including vibration dampening devices for engine and drivetrain applications and automatic transmission pump assemblies. The Company believes that it is the only non-OEM in North America manufacturing high volumes of automatic transmission oil pumps and is one of the top three companies worldwide that design and produce torsional crankshaft dampers. The Automotive Group also produces fluid systems assemblies, molded rubber products, aluminum castings, and interior trim products. 4 The Machinery Group. The Machinery Group designs and produces special purpose batteries, construction equipment and can washing and coating machinery. The Company has played a crucial role in the development of power systems for U.S. space flight, and its batteries have powered missions from the back-up system that safely brought Apollo 13 back to Earth 28 years ago, to last year's Mars Pathfinder. The Company's batteries are also used in virtually every U.S. missile system, including the Patriot and Tomahawk missiles. Recognized as one of the world leaders in nickel-hydrogen technology since it powered the first communication satellite launch in 1983, the Company believes it is a world leader in providing power systems for communications and surveillance satellites, including Motorola Inc.'s ('Motorola') Iridium'r' project. Construction equipment produced by the Machinery Group includes elevating wheel tractor scrapers, which are made under a sole-source contract with Caterpillar, Inc. ('Caterpillar'), and a premium line of heavy duty forklift trucks, as well as related replacement parts. The Machinery Group also designs, manufactures and installs specialized high volume can washing and coating machinery for the manufacturers of two-piece cans primarily for the food and beverage industry. The Industrial Group. The Industrial Group is a leading producer of specialty materials, filter aids and absorbents which are used in a wide range of applications. The Company's specialty materials business, which has grown by approximately 60%, as measured by net sales, in the past two years, develops, manufactures and tests high-purity materials including germanium wafers (used in solar cells for the satellite industry), germanium tetrachloride (used in fiber optic cables for the telecommunications industry) and boron (used as a neutron absorber in nuclear power plants and as a semiconductor dopant). With a 30-year history of developing processing techniques, the Company produces the highest purity boron and germanium available in the market. Recent innovations by the Industrial Group have led to development stage production of a zinc selenide crystal that adds blue and green to the existing red color spectrum of light emitting diodes (LEDs), with potential use in flat panel displays and signage. The Industrial Group is also one of the world's largest producers of diatomaceous earth filter aids, which are used for high purity filtration by food and beverage processors and by chemical and pharmaceutical companies. BUSINESS STRATEGY The Company's strategy is to enhance its competitive position as a leading global manufacturer for the automotive, aerospace, defense, telecommunications, food and beverage, and construction industries. To achieve this objective, the Company will continue to build upon the following strengths: Leading Positions in Niche Markets. Eagle-Picher's long history of innovation and reputation for quality have afforded it leading positions in certain niche markets. The Company enjoys leading positions in, among others, the market for rubber coated metal products, the North American non-OEM market for transmission pumps, the market for nickel-hydrogen batteries and the market for two-piece can washers. The Company believes that it has achieved significant market share in these markets because of its customer relationships, engineering excellence, high quality standards and industry reputation. Strong Customer Relationships. The Company has established long-term relationships with many of its customers. It has been supplying its products to each of Ford, GM and Chrysler for more than 45 years; Lockheed Martin Corporation ('Lockheed Martin') for more than 40 years; and Motorola for more than 30 years. The Company believes it has developed strong customer relationships by working closely with customers to design products that meet the customers' specifications. Often, the Company provides innovative and cost-efficient engineering solutions to customer problems. For example, the Industrial Group continuously works with customers to develop lighter and longer-lasting battery systems to complement the latest generations of missiles and satellites. In addition, through the development of a new camshaft damper, the Automotive Group recently solved a significant powertrain vibration problem for certain OEMs. Many of the Company's facilities are located near customer plants, enhancing the Company's ability to respond to its customers' needs. The Automotive Group recently built a new transmission pump 5 production facility in Manchester, Tennessee and a new manufacturing facility in San Luis Potosi, Mexico, in each case to meet the increasing needs of OEMs located nearby. The Company believes that its strong relationships with customers, particularly automotive and capital equipment OEMs, give the Company a competitive advantage and position the Company to capitalize on a growing trend toward outsourcing. Diversified Product Lines; Global Presence. The Company manufactures hundreds of products for the automotive, aerospace, defense, telecommunications, food and beverage and construction industries. The Company sells its products to customers located in over 60 countries through its extensive network, including global manufacturing facilities throughout the U.S. and Europe. The Automotive Group alone serves virtually all major automotive OEMs worldwide. The Company believes that its product diversification and global sales reduce its exposure to any one market segment or customer. Superior Product Quality. The Company believes it has a reputation among its customers for providing technologically advanced, high quality products. The Company has been honored by many of its customers for its commitment to quality and service, and, in the last two years, has earned Ford's 'Supplier of the Year Award' (Ford's Sharonville facility), Hughes Space and Communications Company's ('Hughes SC') 'Performance Excellence Award,' McDonnell Douglas Corporation's ('MD') 'Preferred Supplier Award' and Lockheed Martin's 'Tradition of Excellence Award.' Low Cost Structure. The Company is committed to controlling costs and improving operating efficiencies. The Company believes that it is a low cost producer in many of the markets in which it competes. The Company attributes its low cost position to its leading positions in niche markets, relatively low overhead costs due to the small town locations of many of its facilities, a primarily non-union workforce, advanced proprietary technology and advanced manufacturing processes, including the Toyota Production System at one of the Automotive Group's facilities. Low cost is essential to the Company's ability to continue to remain competitive. The Company's principal executive offices are located at 250 East Fifth Street, Suite 500, Cincinnati, Ohio 45202 and its telephone number is (513) 721-7010. THE ACQUISITION AND USE OF PROCEEDS On February 24, 1998, the Company was acquired by Granaria Industries BV from the Trust. The Trust was established pursuant to the Company's Consolidated Plan of Reorganization upon its emergence from bankruptcy. See 'Company History;' 'Business -- Plan of Reorganization and Related Injunction.' The Acquisition was effected pursuant to the Merger Agreement, dated as of December 23, 1997, as amended by Amendment No. 1, dated February 23, 1998 (the 'Merger Agreement'), among E-P Acquisition, Inc., a Delaware corporation (the 'Issuer'), Parent, the Company and the Trust. In accordance with the Merger Agreement, on February 24, 1998, the Issuer was merged into the Company, with the Company continuing as the surviving corporation (the 'Merger'). At the closing of the Acquisition (the 'Closing'): (i) $100 million (the 'Equity Investment') was contributed to Parent by Granaria Industries and Lange Voorhout Investments B.V. ('LV Investment'), an affiliate of ABN AMRO Bank, N.V. ('ABN AMRO Bank'); (ii) Parent received gross proceeds of approximately $80 million from an offering of its 11 3/4% Cumulative Redeemable Exchangeable Preferred Stock (the 'Preferred Stock Offering'); (iii) Parent contributed to the Issuer in the form of common equity approximately $180 million (the 'Equity Contribution') comprising the Equity Investment and all of the proceeds of the Preferred Stock Offering; (iv) the Issuer borrowed $225 million in term loans and $79.1 million in revolving loans under a syndicated senior secured loan facility (the 'New Credit Agreement') with ABN AMRO Bank, and completed the offering of the Old Notes; (v) the Company (a) terminated the Credit Agreement dated as of November 29, 1996 by and among the Company, certain subsidiaries of the Company, PNC Bank, Ohio, National Association, as Agent, and the banks named as parties therein (the 'PNC Bank Facility,' under which there was no outstanding indebtedness at Closing) and (b) redeemed 660,000 shares of common stock, par value $.01 per share (the 'Common Stock') of the Company from the Trust for an aggregate purchase price of $29 6 million (the 'Redemption Amount'); and (vi) the Issuer was merged into the Company. As a result of these transactions, the Company became a wholly-owned subsidiary of Parent and assumed all of the obligations and liabilities of the Issuer, including the Issuer's obligations and liabilities under the Old Notes, the Indenture, the Registration Rights Agreement and the New Credit Agreement. Simultaneously with the effectiveness of the Merger (the 'Effective Time'), the Company paid the total outstanding amount under the Company's 10% Senior Unsecured Sinking Fund Debentures due November 29, 2006 (the '10% Debentures'). In connection with the Acquisition, the Trust, the sole holder of the 10% Debentures, waived the prepayment penalty on the 10% Debentures. The following table sets forth the approximate cash sources and uses of funds, including the application of the proceeds therefrom, at the Effective Time.
SOURCES OF FUNDS(A) (DOLLARS IN MILLIONS) New Credit Agreement: Revolving Credit Facility(B)............. $ 79.1 Term Loans............................... 225.0 Senior Subordinated Notes(C).................. 219.6 Equity Contribution(D)........................ 180.0 Cash.......................................... 39.5 ------ Total............................... $743.2 ------ ------ USES OF FUNDS(A) (DOLLARS IN MILLIONS) Merger Consideration(E)....................... $417.6 Repayment of Existing Indebtedness(F)......... 255.9 Common Stock Redemption(G).................... 29.0 Estimated Transaction Fees and Expenses(H).... 27.8 Management Compensation(I).................... 12.9 ------ Total............................... $743.2 ------ ------
- ------------ (A) Sources and uses of funds are based on (i) the borrowings of debt outstanding under the Company's existing credit facilities on February 24, 1998 (the 'Closing Date') and (ii) the purchase price paid for the Company in connection with the Acquisition. (B) Immediately following the Acquisition, the Company borrowed approximately $28.6 million under the revolving credit facility under the New Credit Agreement for use as credit support in the form of letters of credit, leaving approximately $52.3 million available for additional borrowings under the revolving credit facility under the New Credit Agreement. (C) Includes original issue discount of $0.4 million. (D) Parent funded the Equity Contribution from the Equity Investment and the Preferred Stock Offering (the fees and expenses of which were paid by the Company). (E) Merger Consideration (the 'Merger Consideration') represents the sum of (i) $410.0 million and (ii) an additional amount equal to 8% on an annual basis on $410.0 million from December 1, 1997 up to and including the Closing Date. (F) Consists of payment of $250.0 million principal amount due under the 10% Debentures and $5.9 million of interest accrued thereon from December 1, 1997 up to and including the Closing Date. (G) The Company redeemed 660,000 shares of Common Stock immediately prior to the Effective Time. (H) Approximately $27.8 million in transaction fees and expenses (including an amount equal to approximately 1% of the transaction value payable to Granaria Holdings (as defined herein)) was paid on the Closing Date. This amount includes $2.6 million in fees and expenses of Parent related to the Preferred Stock Offering. (I) Following the Acquisition, the Company paid approximately $10.0 million to a trust established for the benefit of certain members of senior management of the Company (the 'E-P Management Trust') and $2.9 million for the related tax obligation. The E-P Management Trust used the $10.0 million to satisfy a loan from Granaria Holdings, the proceeds of which were used by the E-P Management Trust to acquire 16% of the common stock of Granaria Industries. See 'Executive Compensation -- Compensation to Senior Management.' The Company made additional payments to certain members of senior management of the Company in the amount of approximately $7.6 million, which consists of $2.7 million in stay-put bonuses and $4.9 million in sales incentive bonuses under the STSP (as defined herein). See 'Executive Compensation -- Short Term Sale Program.' 7 THE NOTES OFFERING The Issuer................................ The Old Notes were sold by the Issuer on February 24, 1998 (i) to 'qualified institutional buyers' (as defined in Rule 144A under the Securities Act) in reliance upon Rule 144A under the Securities Act and (ii) outside the United States to persons other than U.S. persons in reliance upon Regulation S under the Securities Act. Immediately following the sale of the Old Notes, the Issuer was merged into Eagle-Picher Industries, Inc. Upon consummation of the Merger, the Old Notes became obligations of Eagle-Picher Industries, Inc. Registration Rights Agreement............. In connection with the sale of the Old Notes, the Issuer entered into a Registration Rights Agreement, dated February 24, 1998 (the 'Registration Rights Agreement'), providing for, among other things, the Notes Exchange Offer. Upon consummation of the Merger, the Company assumed all of the obligations and liabilities of the Issuer under the Registration Rights Agreement. THE NOTES EXCHANGE OFFER The Notes Exchange Offer.................. The Company is offering to exchange up to $220,000,000 aggregate principal amount of New Notes for up to $220,000,000 aggregate principal amount of Old Notes issued in the Notes Offering in reliance upon an exemption from registration under the Securities Act. Upon consummation of the Notes Exchange Offer, the terms of the New Notes (including principal amount, interest rate, maturity and ranking) will be identical in all material respects to the terms of the Old Notes for which they may be exchanged pursuant to the Notes Exchange Offer, except that the New Notes have been registered under the Securities Act and therefore will not bear legends restricting their transfer and will not contain terms providing for an increase in the interest rate thereon under certain circumstances described in the Registration Rights Agreement. Based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that New Notes issued pursuant to the Notes Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a Restricted Holder or a Participating Broker-Dealer) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and that such holder is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, the distribution of such New Notes. Any Participating Broker-Dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker or dealer as a result of
8 market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an 'underwriter' within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with the resale of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See 'Plan of Distribution.' Any holder who tenders in the Notes Exchange Offer with the intention of participating, or for the purpose of participating, in a distribution of the New Notes may not rely on the position of the staff of the Commission enunciated in no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale. Expiration Date........................... 5:00 p.m., New York City time, on , 1998, unless the Notes Exchange Offer is extended, in which case the term 'Expiration Date' means the latest date and time to which the Notes Exchange Offer is extended. Conditions to the Notes Exchange Offer.......................... The obligation of the Company to consummate the Notes Exchange Offer is subject to certain conditions. See 'The Notes Exchange Offer -- Conditions.' The Company reserves the right to terminate or amend the Notes Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition. Procedures for Tendering Old Notes............................... Each holder of Old Notes wishing to accept the Notes Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, or transmit an Agent's Message (as defined herein) in connection with a book-entry transfer, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, such facsimile or such Agent's Message, together with the Old Notes and any other required documentation to the exchange agent (the 'Exchange Agent') at the address set forth herein. By executing the Letter of Transmittal or Agent's Message, each holder will represent to the Company that, among other things, the New Notes acquired pursuant to the Notes Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder, that neither the holder nor any such other person (i) has any arrangement or
9 understanding with any person to participate in the distribution of such New Notes, (ii) is engaging or intends to engage in the distribution of such New Notes or (iii) is an 'affiliate,' as defined under Rule 405 of the Securities Act, of the Company. See 'The Notes Exchange Offer -- Purpose and Effect of the Notes Exchange Offer,' ' -- Procedures for Tendering' and 'Plan of Distribution.' Special Procedures for Beneficial Owners....................... Any beneficial owner whose Old Notes are registrered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering his Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. See 'The Notes Exchange Offer -- Procedures for Tendering.' Guaranteed Delivery Procedures.............................. Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not entirely available or who cannot deliver their Old Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth in 'The Notes Exchange Offer -- Guaranteed Delivery Procedures.' Withdrawal Rights......................... Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See 'The Notes Exchange Offer -- Withdrawal of Tenders.' Acceptance of Old Notes and Delivery of New Notes................... The Company will accept for exchange any and all Old Notes which are properly tendered in the Notes Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Notes Exchange Offer will be delivered promptly following the Expiration Date. See 'The Notes Exchange Offer -- Terms of the Notes Exchange Offer.' Exchange Agent............................ The Bank of New York is serving as Exchange Agent in connection with the Exchange Offers. See 'The Notes Exchange Offer -- Exchange Agent.'
10 THE NEW NOTES The Notes Exchange Offer applies to $220.0 million aggregate principal amount of Old Notes. The terms of the New Notes are identical in all material respects to the Old Notes, except for certain transfer restrictions and registration and other rights relating to the exchange of the Old Notes for New Notes. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture under which both the Old Notes were, and the New Notes will be, issued. See 'Description of the Notes.' Notes Offered............................. $220,000,000 principal amount of 9 3/8% Senior Subordinated Notes due 2008. Maturity Date............................. March 1, 2008. Interest Payment Dates.................... March 1 and September 1 of each year, commencing September 1, 1998. Sinking Fund.............................. None. Subordination............................. The Notes are general unsecured obligations of the Company, subordinated in right of payment to all existing and future Senior Indebtedness of the Company (including the Company's obligations under the New Credit Agreement). At February 28, 1998, after giving effect to the issuance of the Notes and the related financing transactions, the Company had approximately $327.0 million of Senior Indebtedness outstanding of which approximately $323.8 million was secured. Guarantees................................ The Notes are fully and unconditionally, jointly and severally, guaranteed on an unsecured senior subordinated basis by Parent and all domestic subsidiaries of the Company (the 'Subsidiary Guarantors' and, together with Parent, the 'Guarantors'). Each Note Guarantee is a general unsecured obligation of the Guarantor thereof, subordinated in right of payment to the Guarantor's guarantee of the Company's obligations under the New Credit Agreement and to all Senior Indebtedness of such Guarantor. Optional Redemption....................... The Notes are redeemable at the option of the Company, in whole or in part, at any time on or after March 1, 2003, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the redemption date. The Company may also redeem up to 35% of the aggregate principal amount of the Notes at its option, at any time prior to March 1, 2001, at a redemption price equal to 109.375% of the principal amount thereof, plus accrued and unpaid interest and Special Interest, if any, to the redemption date, with the net proceeds of one or more Equity Offerings (as defined herein); provided, however, that at least $100 million in aggregate principal amount of the Notes remains outstanding following each such redemption. See 'Description of the Notes -- Optional Redemption of the Notes.' Change of Control......................... Upon the occurrence of a Change of Control, the Company will be required to offer to purchase all or any part of each holder's Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Special
11 Interest, if any, to the date of purchase. There can be no assurance that the Company will have the financial resources necessary, or be permitted by its debt or other agreements, to purchase the Notes upon a Change of Control. See 'Description of the Notes -- Change of Control.' Certain Covenants......................... The Indenture (as defined herein) contains certain covenants that, among other things, will limit the ability of the Company and the Restricted Subsidiaries (as defined herein) to incur additional indebtedness; issue capital stock of Restricted Subsidiaries; make restricted payments; pay dividends or make other distributions; incur liens; enter into certain transactions with affiliates; or enter into certain mergers or consolidations or sell all or substantially all of the assets of the Company and its subsidiaries. These covenants are subject to a number of significant exceptions and qualifications. See 'Description of the Notes -- Certain Covenants.' Use of Proceeds........................... There will be no proceeds to the Company from any exchange pursuant to the Notes Exchange Offer.
RISK FACTORS See 'Risk Factors' for a discussion of certain factors that should be considered before tendering Old Notes in the Notes Exchange Offer. 12 SUMMARY OF HISTORICAL AND PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION The following historical condensed consolidated financial information is derived from the Consolidated Financial Statements of the Company. The unaudited pro forma condensed consolidated statement of income (loss) for the year ended November 30, 1997 gives effect to the Acquisition and the application of the proceeds as if it had been consummated on December 1, 1996. Effective November 29, 1996, the Company emerged from bankruptcy and, accordingly, it adopted fresh-start reporting in accordance with Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.' As a result, the condensed consolidated financial information for the periods subsequent to the adoption of fresh-start reporting are presented on a different cost basis than the information for prior periods and, therefore, are not comparable. Accordingly, a vertical black line is shown to separate post-emergence operations. The Company recorded a number of charges in 1995 and 1996 in connection with its reorganization and emergence from bankruptcy as set forth in the financial information herein. Given that the Company has emerged from bankruptcy, there will be no further reorganization charges. The unaudited condensed consolidated financial information presented for the three months ended February 28, 1997 and 1998 and as of February 28, 1998 are derived from the unaudited consolidated financial statements of the Company and include, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial information for such periods. As a result of the Acquisition, which was accounted for as a purchase, the Company's results of operations and financial position for periods after February 24, 1998 are not comparable to prior periods. See Note (A) below. The unaudited pro forma condensed consolidated statement of income (loss) for the three months ended February 28, 1998 gives effect to the Acquisition as if it had been consummated on December 1, 1996. Pro forma balance sheet data as of February 28, 1998 are not included herewith because the effects of the Acquisition have already been reflected in such balance sheet data. Neither the historical condensed consolidated financial data nor the pro forma condensed consolidated financial data are necessarily indicative of either the future results of operations or the results of operations that would have occurred if those events had been consummated on the indicated dates. The following condensed consolidated financial information should be read in conjunction with 'Management's Discussion and Analysis of Financial Condition and Results of Operations,' the Pro Forma Condensed Consolidated Financial Statements (as defined herein) and the historical Consolidated Financial Statements, related notes, and other financial information all included elsewhere herein.
UNAUDITED THREE MONTHS ENDED FEBRUARY 28, FISCAL YEAR ENDED NOVEMBER 30, ------------------------------ ------------------------------------------------- 1998(A) 1997 ------------------ --------------------- PRO PRO ACTUAL FORMA 1997 ACTUAL FORMA 1996 1995 -------- -------- -------- -------- -------- -------- ---------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME (LOSS): Net sales(B).................... $205,842 $205,842 $223,607 $906,077 $906,077 $891,287 $ 848,548 Operating income................ 11,027 11,024 9,040 45,558(C) 29,843 62,106 63,087 Adjustment for asbestos litigation.................... -- -- -- -- -- 502,197 (1,005,511) Fresh start revaluation......... -- -- -- -- -- 118,684(D) -- Reorganization items and claims(E)..................... -- -- -- -- -- (6,593) (2,225) Interest expense................ (6,940) (12,969) (8,927) (31,261) (54,881) (3,083) (1,926) Other income (expense).......... 820 820 1,703 (251) (251) 1,345 11,704(F) Income (loss) before taxes, extraordinary items and accounting changes............ 4,907 (1,125) 1,816 14,046 (25,289) 674,656 (934,871) Income (loss) before extraordinary items and accounting changes............ 807 (1,675) (1,220) (3,854) (15,089) 622,086 (944,171) Extraordinary items and accounting changes............ -- -- 1,524,305(G) -- Net income (loss)............... 807 (1,675) (1,220) (3,854) (15,089) 2,146,391 (944,171) BALANCE SHEET DATA (END OF PERIOD): Working capital................. $162,450 -- $208,373 $187,968 -- $211,808 $ 243,495 Property, plant and equipment, net........................... 239,337 -- 260,850 243,538 -- 256,351 155,818 Total assets.................... 867,139 -- 831,943 746,881 -- 848,880 580,073 Total debt...................... 546,996 -- 372,170 273,397 -- 386,439 20,628 Shareholder's equity (deficit)..................... 180,005 -- 338,642 336,117 -- 341,807 (2,211,308) OTHER DATA: EBITDA(H)....................... $ 25,905 $25,905 $ 23,482 $103,958 $103,958 $ 92,856 $ 91,795 Depreciation and amortization... 12,822 13,221 14,442 55,989 56,749 30,750 28,708 Capital expenditures............ 5,692 5,692 15,857 51,324(I) 51,324 44,957 40,558 Cash provided by (used in) operating activities.......... (9,083) 176 17,914 147,883 107,279 72,861 30,456 Cash used in investing activities.................... (6,734) (6,734) (17,040) (13,827) (13,827) (41,770) (28,713) Cash used in financing activities.................... (18,955) (2,860) (14,223) (113,042) (139,337) (3,198) (1,019) SELECTED RATIOS: EBITDA/interest expense......... 3.73x 1.97x 2.63x 3.33x 1.89x 30.12x 47.66x Total debt/EBITDA............... N/M N/M N/M 2.63 N/M 4.16 0.22 Total debt/capitalization....... 75.2% N/M 52.4% 44.9% N/M 53.1% N/M Earnings/fixed changes(J)....... 1.69x N/M(K) 1.20x 1.43x N/M (K) 173.50x(L) --(L)
(footnotes on next page) 13 NOTES TO HISTORICAL AND PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (Dollars in thousands) (A) The unaudited condensed consolidated financial statements as of and for the three months ended February 28, 1998 include the effects of the Acquisition that result as of February 24, 1998, the Closing Date. Accordingly, the historical condensed consolidated statement of income (loss) for the three months ended February 28, 1998 includes results of operations from (1) December 1, 1997 through February 24, 1998 of the Company prior to the consummation of the Acquisition (for clarity, sometimes referred to herein as the 'Predecessor Company') and (2) February 25 through February 28, 1998 of the Company. (B) In 1997, the Company sold the Plastics division, the Transicoil division and the Fabricon Products division and contributed the Suspension Systems division to the Eagle-Picher-Boge L.L.C. joint venture (collectively, the 'Divested Divisions'). In 1997, 1996, 1995, and the three months ended February 28, 1997, the Divested Divisions contributed net sales of $78,604, $138,116, $145,339 and $29,254, respectively. (C) Operating income in 1997 includes (i) amortization of reorganization value in excess of amounts allocable to identifiable assets in the amount of $16,284, (ii) depreciation of assets written up to fair value in the amount of $9,804 and (iii) loss on sale of divisions of $2,411. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations -- Effects of Reorganization on Operations and Financial Condition.' (D) Fresh-start valuation gain of $118,684 reflects transactions related to emergence from bankruptcy and reorganization in accordance with Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization under the United States Bankruptcy Code.' See 'Management's Discussion and Analysis of Financial Condition and Results of Operations -- Effects of Reorganization on Operations and Financial Condition.' (E) Reflects provision for claims of $4,244 in 1996. Remaining reorganization items is net expense resulting from the Company's bankruptcy filing. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations -- Effects of Reorganization on Operations and Financial Condition.' (F) Other income (expense) reflects a gain of $11,505 in 1995 relating to the sale of an investment in a Canadian mining concern. (G) Reflects (i) a gain of $1,525,540 in 1996 related to emergence from bankruptcy and reorganization in accordance with Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization under the United States Bankruptcy Code' and (ii) a loss of $1,235 in 1996 due to an accounting change of its method of computing LIFO inventories. (H) 'EBITDA' is used as defined in the Indenture and may not be comparable to similarly titled measures reported by other companies. See 'Description of the Notes.' 'EBITDA' is presented because management believes it is an indicator of a company's ability to service and incur debt. EBITDA does not represent net income or cash flows from operations as those terms are defined by generally accepted accounting principles and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. Certain funds depicted by 'EBITDA' are not available for management's discretionary use due to requirements to conserve funds for debt service, interest and dividend payments and other commitments and uncertainties. Under the Indenture, the definition of EBITDA excludes loss on sale of divisions and any other non-cash items affecting Consolidated Net Income (including, without limitation, charges for asbestos litigation and reversal of asbestos litigation reserves). The Divested Divisions contributed $361, $3,615, $7,695 and ($652) of EBITDA in 1997, 1996, 1995, and the three months ended February 28, 1997, respectively. (I) Includes capital expenditures in 1997 of (i) $10,157 in connection with the new facility in Manchester, Tennessee, (ii) $6,495 in connection with the completion of a $13,054 diatomaceous (footnotes continued on next page) 14 (footnotes continued from previous page) earth processing facility in Vale, Oregon and (iii) $4,651 in connection with a new automotive facility in Tamworth, England. (J) For the purpose of determining the ratio of earnings to fixed charges, 'earnings' consist of income before provision (benefit) for income taxes and fixed charges. 'Fixed charges' consist of interest expense (including amortization of deferred financing costs) and approximately 30% of rental expense, representing that portion of rental expense deemed representative of the interest factor. (K) Pro forma earnings were insufficient to cover fixed charges for the three months ended February 28, 1998 by $1,125 and for the year ended November 30, 1997 by $25,289. (L) Such ratio of earnings to fixed charges is not meaningful for 1995 because of significant charges for an asbestos litigation and is not meaningful for 1996 because of significant reversal of asbestos litigation reserves, fresh-start revaluation and extraordinary items. Earnings were inadequate to cover fixed charges by $937,409 for the year ended November 30, 1995. 15 RISK FACTORS In addition to the other information in this Prospectus, holders of the Old Notes should consider carefully the following risk factors before deciding to tender their Old Notes in the Notes Exchange Offer. SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS The Company is highly leveraged and has significant debt service requirements. At November 30, 1997 and for the fiscal year then ended, after giving effect to the Acquisition, the pro forma consolidated financial statements of the Company compared to the audited consolidated financial statements for the 1997 Fiscal Year reflected an increase in total debt from $273.4 million to $547.5, an increase in interest expense from $31.3 million to $54.9 million, an increase in the net loss from $3.9 million to $15.1 million, and a decrease in shareholders' equity from $336.1 million to $164.8 million. At February 28, 1998, after giving effect to the Acquisition, the Company had $547.0 million of long-term debt outstanding, $323.8 million of which was secured, and the Company's ratio of long-term debt to total capitalization was 75.2%. Under the New Credit Agreement, the Company has scheduled principal payments aggregating $5.3 million, $10.4 million and $15.4 million for the years 1998, 1999 and 2000, respectively, increasing to a maximum of $73.9 million in 2006. The degree to which the Company is leveraged could have important consequences to holders of the Notes, including: (i) the Company's ability to obtain additional financing, whether for working capital, acquisitions, capital expenditures, or other purposes, may be impaired; (ii) a substantial portion of the Company's cash flow from operations will be required for debt service, thereby reducing funds available to the Company for its operations; (iii) certain of the Company's indebtedness contains financial and other restrictive covenants which, if breached, would result in an event of default under such indebtedness; (iv) the Company's flexibility in planning for or reacting to changes in market conditions may be limited; (v) the Company may be more vulnerable upon a downturn in its business or in an industry in which it operates; and (vi) to the extent that the Company incurs any indebtedness at variable rates, including under the New Credit Agreement, the Company will be vulnerable to increases in interest rates. Based on the current level of operations (assuming the Company does not incur any material liabilities not presently known to the Company (including any environmental liabilities)) and anticipated future growth, the Company believes that its operating cash flow, together with available borrowings under the New Credit Agreement, will be sufficient to meet the debt service requirements on its indebtedness, meet its working capital needs and fund its capital expenditures and other operating expenses. However, there can be no assurance that the Company's business will generate cash flow at levels sufficient to meet these requirements. If the Company is unable to generate sufficient cash flow from operations to service its debt obligations and to meet other cash requirements, it may be required to sell assets, reduce capital expenditures, refinance all or a portion of its existing debt (including the Notes) or obtain additional financing. There can be no assurance that any such asset sales or refinancing would be possible or that any additional financing would be available, if at all, on terms acceptable to the Company. The Company's ability to meet its debt service obligations will be dependent upon its future performance which, in turn, will be subject to future economic conditions and to financial, business and other factors, many of which are beyond the Company's control. The terms of the New Credit Agreement, the Indenture, and the other agreements governing the Company's indebtedness impose operating and financing restrictions on the Company. Such restrictions affect, and in many respects limit or prohibit, among other things, the ability of the Company to incur additional indebtedness, pay dividends or repurchase stock or make other distributions, create liens, make certain investments, sell assets, or enter into mergers or consolidations. The New Credit Agreement will require the Company to comply with certain financial ratios and tests, under which the Company is required to achieve certain financial and operating results. The restrictions could limit the ability of the Company to plan for or react to market conditions or meet extraordinary capital needs or otherwise could restrict corporate activities. There can be no assurance that such restrictions will not adversely affect the Company's ability to finance its future operations or capital needs or to engage in other business activities that would be in the interest of the Company. Moreover, any default under the documents governing the indebtedness of the Company could have a significant adverse effect on the market value of the Notes. 16 SUBORDINATION OF NOTES; GUARANTEES The payment of principal of and interest on, and any premium or other amounts owing in respect of, the Notes will be subordinated to the prior payment in full of all existing and future Senior Indebtedness of the Company, including all amounts owing or guaranteed under the New Credit Agreement. The Guarantees will be similarly subordinated to all existing and future Senior Indebtedness of the Guarantors. Consequently, in the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding with respect to the Company or a Guarantor, assets of the Company or such Guarantor will be available to pay obligations on the Notes or Subsidiary Guarantees only after all Senior Indebtedness of the Company or the Senior Indebtedness of the Guarantors, as applicable, has been paid in full, and there can be no assurance that there will be sufficient assets to pay amounts due on any or all of the Notes. In addition, upon the occurrence of payment defaults in respect of the Senior Indebtedness, the Company and the Guarantors will be prohibited from paying principal, premium, interest or other amounts on account of the Notes or any Guarantee under certain circumstances. As of February 28, 1998, after giving effect to the Acquisition, the Company had $322.5 million of Senior Indebtedness outstanding (excluding debt of the Company's foreign subsidiaries), all of which was secured, and $4.5 million of debt of the Company's foreign subsidiaries, $1.3 million of which was secured, to which the Notes were structurally subordinated. See 'Description of the Notes -- Ranking.' In Fiscal 1997, the Subsidiary Guarantors accounted for approximately 54%, 58% and 43% of the Company's net sales, EBITDA and total assets, respectively, and the Company's foreign subsidiaries (which are not Subsidiary Guarantors) accounted for approximately 9%, 9% and 10% of the Company's net sales, EBITDA and total assets, respectively. Parent has fully and unconditionally and jointly and severally guaranteed, on a senior subordinated basis, all principal and interest payments on the Notes. However, because Parent's only significant asset following the Acquisition is the capital stock of the Company (and such asset is pledged to the lenders under the New Credit Agreement), should the Company be unable to meet its payment obligations with respect to the Notes, it is unlikely that Parent would be able to do so. FRAUDULENT CONVEYANCE STATUTES The Company, the Issuer, Parent and each Subsidiary Guarantor each believes that Parent's, the Issuer's and the Company's incurrence of indebtedness in connection with the issuance of the Securities and the guarantees by Parent and the Subsidiary Guarantors of indebtedness in connection with the Notes was incurred for proper purposes and in good faith and that, based on present forecasts, asset valuations and other financial information, the Company, the Issuer, Parent and each Subsidiary Guarantor is, and after the issuance of the Securities was, solvent, will have sufficient capital for carrying on its business and will be able to pay its debts as they mature. However, if a court of competent jurisdiction were to find that the Issuer, the Company, Parent or such Subsidiary Guarantor did not receive fair consideration or reasonably equivalent value for incurring such indebtedness or obligation (including any guarantee thereof) and, at the time of such incurrence, the Issuer, the Company, Parent or such Subsidiary Guarantor (i) was insolvent, (ii) was rendered insolvent by reason of such incurrence or the Acquisition, (iii) was engaged in a business or transaction for which the assets remaining in the Issuer, the Company, Parent or such Subsidiary Guarantor, as the case may be, constituted unreasonably small capital, or (iv) intended to incur or believed it would incur debts beyond its ability to pay such debts as they mature, such court, subject to applicable statutes of limitation, could, among other things, (a) invalidate, in whole or in part, such indebtedness and obligation (including any guarantee thereof) as fraudulent conveyances, the effect of which could be that the holders of the Securities may not be repaid in full, and/or (b) subordinate such indebtedness and obligation (including any guarantee thereof) to existing or future creditors of the Issuer, the Company, Parent or such Subsidiary Guarantor, as the case may be, the effect of which would be to entitle such other creditors to be paid in full before any payment could be made on the Securities. If a court were to find that the Issuer, the Company, Parent or any Subsidiary Guarantor, as the case may be, satisfied the measures of insolvency or capital inadequacy described in (i) through (iv) above, such court could avoid any previous distribution by such entity in respect of such indebtedness (including, without limitation, any 17 payment of principal or interest) or obligation, (including any guarantee thereof) and order that it be returned to the Issuer, the Company, Parent or such Subsidiary Guarantor, as the case may be, or to a fund for the benefit of the creditors of such entity. With respect to each Subsidiary Guarantee, a court may compare its estimate of the value received by each Subsidiary Guarantor with the magnitude of its obligation under such Subsidiary Guarantee. If the value received by the Subsidiary Guarantor is found to be disproportionately small as compared with its obligation under such Subsidiary Guarantee, then, to that extent, there would be a lack of fair consideration for the giving of the Subsidiary Guarantee and if the Subsidiary Guarantee came within any of the foregoing clauses (i) through (iv) above, such Subsidiary Guarantee could be held invalid to such extent. The obligation of each Subsidiary Guarantor under its Subsidiary Guarantee will be limited in a manner intended to avoid it being deemed a fraudulent conveyance under applicable law. The measure of insolvency for purposes of the foregoing will vary depending on the law of the jurisdiction being applied. Generally, however, the Issuer, the Company, Parent or any of the Subsidiary Guarantors would be considered insolvent at a particular time if the sum of its debts was then greater than all of its property at a fair valuation or if the present fair saleable value of its assets was then less than the amount that would be required to pay its probable liabilities on its existing debts as they became absolute and matured. The Company believes, based upon the financial information, the recent operating history as discussed in 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and other factors, that, after giving effect to the issuance of the Notes, none of the Issuer, the Company, Parent, or any of the Subsidiary Guarantors will be rendered insolvent, each such entity will have sufficient capital for the businesses in which it is engaged and it will be able to pay its debts as they mature. While the Company believes each of the Issuer, the Company, Parent and each Subsidiary Guarantor is solvent, there can be no assurance as to whether a court would concur with such beliefs. CYCLICALITY OF MARKETS Certain industries in which the Company competes are highly cyclical and can be affected by the strength of the economy generally. In particular, the Company's automotive and construction equipment businesses depend, in large part, on the overall strength of demand for light trucks, passenger cars, forklifts and wheel tractor scrapers. There can be no assurance that the industries for which the Company supplies components will not experience downturns in the future. An economic recession typically impacts substantially leveraged companies such as the Company more than similarly situated companies with less leverage. A decrease in overall demand for light trucks, passenger cars, forklifts and wheel tractor scrapers could have a material adverse effect on the Company's financial condition, results of operations or cash flows. RELIANCE ON PRINCIPAL CUSTOMERS; GOVERNMENT APPROVALS Sales to the Company's three largest customers, Ford, GM and Caterpillar, accounted for approximately 18.8%, 7.1% and 6.1%, respectively, of the Company's net sales for Fiscal 1997. Although the Company has ongoing relationships with Ford, GM and Caterpillar, there can be no assurance that sales to these customers will continue at the same levels. Ford has notified the Company that from December 1997 through March 1999, it will no longer purchase certain product lines of the Company. These product lines contributed approximately $19.4 million, or 2.1%, of the Company's net sales for Fiscal 1997 (which represents 11.4% of the Company's sales to Ford in Fiscal 1997). Although the Company believes that this revenue will be replaced by new programs currently being implemented with other customers, there can be no assurance that Ford or other customers will continue to purchase products for the Company at current levels. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations.' Continuation of the Company's relationships with its principal customers is dependent upon the customers' satisfaction with the price, quality and delivery of the Company's products. While the Company believes its relationships with its customers (including Ford) are satisfactory, if any of its principal customers were to reduce substantially or discontinue its purchases from the Company, the 18 financial condition, results of operations or cash flows of the Company could be materially adversely affected. The Company manufactures certain products for U.S. government agencies (including National Aeronautics and Space Administration ('NASA') and the U.S. Department of Defense ('DOD')), many of which have concerns about doing business with non-U.S. entities and some of which require the Company to maintain special security clearance and other arrangements. Because the Company is controlled by a non-U.S. citizen as a result of the Acquisition, it is required to enter into additional special security clearance and other arrangements with the DOD. The Company is currently in discussions with the DOD regarding the terms of the special security clearance arrangements and a filing under the Exon-Florio provisions of the Defense Production Act. There can be no assurance, however, that the U.S. government will continue as a customer of the Company or will continue to do business with the Company at its current level. Contracts funded, directly or indirectly, by various agencies of the federal government that require security clearance represented approximately 6% of the Company's net sales for Fiscal 1997. THE OEM SUPPLIER INDUSTRY The Company's automotive business competes in the global OEM supplier industry. The automotive industry is characterized by a small number of OEMs that are able to exert considerable pressure on component and system suppliers to reduce costs, improve quality and provide additional design and engineering capabilities. In the past, OEMs have generally demanded and received price reductions and measurable increases in quality by implementing competitive selection processes, rating programs and various other arrangements. Also, through increased partnering on platform work, OEMs have generally required component and system suppliers to provide more design engineering input at earlier stages of the product development process, the costs of which have, in some cases, been absorbed by the suppliers. There can be no assurance that future price reductions, increased quality standards or additional engineering capabilities required by OEMs will not have a material adverse effect on the Company's financial condition, results of operations or cash flows. ENVIRONMENTAL MATTERS Like companies involved in similar manufacturing businesses, the Company's operations and properties are subject to extensive federal, state, local and foreign environmental laws and regulations, including those concerning, among other things, the treatment, storage and disposal of wastes, the investigation and remediation of soil and groundwater affected by hazardous substances, the discharge or emission of substances into the soil, water or air or otherwise relating to environmental protection and various health and safety matters (collectively and as amended, 'Environmental Laws'). Certain Environmental Laws, such as the Comprehensive Environmental Response, Compensation, and Liability Act, as amended ('CERCLA'), impose strict, retroactive and joint and several liability upon persons responsible for releases of hazardous substances. Failure to comply with such Environmental Laws can lead to the imposition of civil or criminal penalties, injunctive relief and denial or loss of, or imposition of significant restrictions on, environmental permits. In addition, the Company could be subject to suit by third parties in connection with violations of or liability under Environmental Laws. The Company currently is undertaking remedial activities at a number of its facilities and properties, and has received notices under CERCLA or analogous state laws of liability or potential liability in connection with the disposal of material from the Company's operations or former operations. See 'Business -- Environmental Matters.' The Company's expenditures related to environmental matters have not had, and are not currently expected to have, a material adverse effect on the Company's financial condition, results of operations or cash flows. However, the Environmental Laws under which the Company's facilities operate are numerous, complicated and often ambiguous. Moreover, the Environmental Laws are constantly changing, historically have become increasingly more stringent, and may be applied retroactively. Accordingly, there can be no assurance that the Company will not be required to make substantial additional expenditures to remain in or to achieve compliance with Environmental Laws in the future or 19 that any such additional expenditures will not have a material adverse effect on the Company's financial condition, results of operations or cash flows. COMPETITION The Company operates in highly competitive industries. The Company competes with major national and international manufacturers in each of its product lines, and its competitors include customers of the Company, such as automotive OEMs, many of which are significantly larger and have greater financial, technical, marketing, distribution and other resources than the Company. The Company competes with such other companies in different product lines to various degrees on the basis of price, technical performance, product features, product system compatibility, customized design, availability, quality and sales and technical support. The Company's ability to compete successfully depends on elements both within and outside of the Company's control, including its product mix, successful and timely development of new technology, products and manufacturing processes, product performance and quality, manufacturing yields and product availability, customer service, pricing, industry trends and general economic trends. The Company believes that its experience in product design and development, design engineering and implementing cost reduction programs and ability to control manufacturing and development costs should allow the Company's products and prices to remain competitive. However, there can be no assurance that the Company will be able to improve or maintain its sales or its profit margins on sales to OEMs or other customers. TECHNOLOGICAL CHANGE AND NEW PRODUCT DEVELOPMENT Certain industries in which the Company competes are subject to rapid technological change resulting in the frequent introduction of new and increasingly complex and powerful products, evolving industry standards, rapid product obsolescence and price erosion, and fluctuations in end user demand. The Company believes that its success depends, in part, on its ability to improve its existing core products, to develop new products, to develop and implement new technologies, to adapt products and processes to technological changes and to adopt emerging industry standards. If the Company is not able to implement new technologies or develop or introduce new products successfully, the Company may lose its position as a market leader and its financial condition, results of operations or cash flows may be adversely affected. The Company must continue to develop and introduce new products that compete effectively on the basis of price and performance and that satisfy customer requirements. In order to attempt to anticipate its customers' needs and market trends, the Company monitors technological changes in the various industries in which it competes and works closely with certain of its customers to develop new products. Because the development process can be time consuming, decisions to undertake development must anticipate both future demand and changes in the technology to supply such demand. There can be no assurance that the Company will be able to identify new product opportunities or that the Company will be able to develop and market new products successfully. Delays in developing new products or achieving volume production of certain new products could have a material adverse effect on the Company's financial condition, results of operations or cash flows. In addition, there can be no assurance that such products, if introduced, will gain market acceptance or that the Company will be able to respond effectively to new technological changes or new product announcements by others. ACCESS TO RAW MATERIALS Certain of the Company's manufacturing operations depend upon obtaining adequate supplies of raw materials such as steel, rubber, germanium, gallium, chemicals and gases and other inputs on a timely basis. The Company purchases such raw materials and other inputs from a limited number of suppliers which the Company believes to be reliable. The Company's financial condition, results of operations or cash flows would be adversely affected if it were unable to obtain adequate supplies of raw materials and other inputs in a timely manner or if there were significant increases in the costs of raw materials and other inputs. 20 RELIANCE ON KEY MANAGEMENT AND PERSONNEL The Company's success depends to a significant extent upon, among other factors, its ability to continue to attract, retain and motivate qualified personnel, including key senior executives and research and development, engineering, marketing, sales, manufacturing, support and other personnel. Although all of the key management employees have employment contracts with the Company and own shares of common stock of Granaria Industries, there can be no assurance that such individuals will remain employed with the Company. If, for any reason, such key personnel do not continue to be active in the Company's management, the Company's financial condition, results of operations or cash flows could be adversely affected. The Company has no key man life insurance policies with respect to any of its senior executives. CONTROL BY PRINCIPAL SHAREHOLDERS Granaria Holdings and LV Investment (the 'Shareholders') beneficially own approximately 90% of the outstanding common stock of Parent and the Company. Circumstances may occur in which the interests of the Shareholders could be in conflict with the interests of the holders of the Securities. In particular, ABN AMRO Bank, an affiliate of LV Investment, acted as agent and arranger for loan facilities of $385 million under the New Credit Agreement. See 'Description of New Credit Agreement.' If the Company encounters financial difficulties, or is unable to pay certain of its debts as they mature, the interests of the Shareholders (whether or not as holders of the Company's equity securities) might conflict with those of the holders of the Securities. In addition, the Shareholders may have an interest in pursuing acquisitions, divestitures or other transactions that, in their judgment, could enhance their equity investment, even though such transactions might involve risks to the holders of the Securities. PLAN OF REORGANIZATION AND RELATED INJUNCTION In January 1991, Eagle-Picher and seven of its U.S. subsidiaries (collectively, the 'Eagle-Picher Group') filed voluntary petitions for reorganization under the United States Bankruptcy Code, as amended (the 'Bankruptcy Code'). The Consolidated Plan of Reorganization (the 'Plan') of the Eagle-Picher Group was jointly confirmed by an order (the 'Order') of the United States Bankruptcy Court for the Southern District of Ohio (the 'Bankruptcy Court') and the United States District Court for the Southern District of Ohio (the 'Ohio District Court') in November 1996. A consolidated appeal of the Order (the 'Appeal') is currently pending before the United States Circuit Court for the Sixth Circuit (the 'Sixth Circuit'); however, the Order was not stayed pending the Appeal and the Plan was consummated and, commencing on November 29, 1996, distributions were made pursuant to the Plan. See 'Business -- Plan of Reorganization and Related Injunction.' Among other things, the Plan discharges all past, present and future asbestos-related and lead-related claims against Eagle-Picher and the Eagle-Picher Group arising out of business operations prior to the date of the bankruptcy petitions by (i) requiring the establishment of the Trust and of a separate Eagle-Picher Industries, Inc. Property Damage Settlement Trust (the 'PD Trust'), (ii) contributing to the Trust assets valued at approximately $730.0 million in the aggregate, consisting of $51.3 million in cash, $250.0 million in 10% Debentures, $69.1 million in Tax Refund Notes (as defined herein), $18.1 million in Divestiture Notes (as defined herein) and 10 million shares of Common Stock (representing all outstanding shares of Common Stock), and an escrow of $3.0 million in cash for use in funding the PD Trust once it is established and (iii) imposing injunctions (collectively, the 'Injunction') prohibiting the assertion of any asbestos-related and lead-related claims against Eagle-Picher and the Eagle-Picher Group and directing that such claims be asserted only against the Trust or the PD Trust. See 'Business -- Plan of Reorganization and Related Injunction.' Although the Injunction has not, to the Company's knowledge, been the subject of any filed legal challenges (other than the Appeal), it is possible that one or more components of the Injunction could be vacated, modified or restricted in applicability pursuant to the Appeal or otherwise. The Company believes that the Injunction is critical to its ability to continue to operate its business. See 'Business -- Plan of Reorganization and Related Injunction.' 21 CHANGE OF CONTROL Upon the occurrence of a Change of Control, the holders of the Notes have the right to require the Company to offer to purchase all of the outstanding Notes at 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of repurchase. There can be no assurance that the Company will have sufficient funds available or will be permitted by its other debt agreements to repurchase the Notes upon the occurrence of a Change of Control. In addition, the occurrence of a Change of Control may require the Company to offer to repurchase other outstanding indebtedness and may cause a default under the New Credit Agreement. The inability to purchase all of the tendered Notes would constitute an Event of Default (as defined herein) under the Indenture. See 'Description of the Notes -- Change of Control.' ABSENCE OF PUBLIC MARKET The New Notes are being offered exclusively to holders of the Old Notes. The Old Notes were issued to a limited number of institutional investors on February 24, 1998. There is currently no established market for the New Notes. There can be no assurance as to the liquidity of any markets that may develop for the New Notes, the ability of the holders of the New Notes to sell their Notes or the price at which holders would be able to sell their Notes. Future trading prices of the New Notes will depend on many factors, including, among other things, prevailing interest rates, the Company's operating results, and the market for similar securities. The Company does not intend to apply for listing of the New Notes on any securities exchange. The liquidity of, and trading market for, the New Notes may also be materially and adversely affected by declines in the market for high yield securities generally. Such a decline may materially and adversely affect such liquidity and trading independent of the financial performance of, and prospects for, the Company and Parent. To the extent Old Notes are tendered and accepted in the Notes Exchange Offer, the principal amount of outstanding Old Notes will decrease with a resulting decrease in the liquidity in the market therefor. Following the consummation of the Notes Exchange Offer, holders of Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for the Old Notes will be adversely affected. CONSEQUENCES OF FAILURE TO EXCHANGE Issuance of the New Notes in exchange for the Old Notes pursuant to the Notes Exchange Offer will be made only after a timely receipt by the Company of such Old Notes, a properly completed and duly executed Letter of Transmittal and all other required documents. Therefore, holders of the Old Notes desiring to tender such Old Notes in exchange for New Notes should allow sufficient time to ensure timely delivery. The Company is under no duty to give notification of defects or irregularities with respect to the tenders of Old Notes for exchange. Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Notes Exchange Offer, including holders of Old Notes whose Old Notes are tendered but not accepted, will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon and, except in certain limited circumstances, will no longer have any registration rights with respect to the Old Notes. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Old Notes under the Securities Act. New Notes issued pursuant to the Notes Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than Restricted Holders or Participating Broker-Dealers) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such holder represents, among other things, that such holder is not an 'affiliate' of the Company or any Guarantor (as defined in Rule 405 of the Securities Act), that such New Notes are acquired in the ordinary course of such holder's business and that such holder is not engaged in, and does not intend to engage in, and has no arrangement or understanding 22 with any person to participate in, the distribution of such New Notes. Any holder unable to make such representations will not be able to participate in the Notes Exchange Offer and may only sell its Old Notes pursuant to a registration statement and prospectus meeting the requirements of the Securities Act, or pursuant to an exemption from the registration requirements of the Securities Act. Each Participating Broker-Dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that, by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an 'underwriter' within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See 'Plan of Distribution.' However, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and is complied with. To the extent that Old Notes are tendered and accepted in the Notes Exchange Offer, the trading market for untendered and tendered but unaccepted Old Notes will be adversely affected. FORWARD-LOOKING STATEMENTS Certain information included in this Prospectus is forward-looking, including statements contained in 'Summary,' 'Risk Factors,' 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and 'Business,' and includes statements regarding the intent, belief and current expectations of the Company and Parent and their directors and officers. Such forward-looking information involves important risks and uncertainties that could materially alter results in the future from those expressed in any forward-looking statements made by, or on behalf of, the Company. These risks and uncertainties include, but are not limited to, the ability of the Company to maintain existing relationships with long-standing customers, the ability of the Company to successfully implement productivity improvements, cost reduction initiatives, facilities expansion and the ability of the Company and Parent to develop, market and sell new products and to continue to comply with environmental laws, rules and regulations. Other risks and uncertainties include uncertainties relating to economic conditions, acquisitions and divestitures, government and regulatory policies, technological developments and changes in the competitive environment in which the Company operates. Persons reading this Prospectus are cautioned that such statements are only predictions and that actual events or results may differ materially. In evaluating such statements, readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward-looking statements, including those discussed in 'Risk Factors.' 23 COMPANY HISTORY The Company was founded in Cincinnati in 1843 and was incorporated in 1867 under the laws of the State of Ohio. The Company evolved into a diversified manufacturer of industrial products, a small portion of which included asbestos-containing insulating cements. In 1971, the Company made the management decision to discontinue operations relating to such products, and ceased production and sale of such products in August of that year, except for filling a few special orders until April 1972. In January 1991, the Eagle-Picher Group filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The filings were precipitated primarily by costs and expenses resulting from litigation arising out of the Eagle-Picher Group's previous asbestos-related business operations. In connection with the bankruptcy proceedings and pursuant to the Plan, which was confirmed by the Bankruptcy Court and the Ohio District Court in November 1996, all of the outstanding shares of Common Stock were transferred to the Trust on November 29, 1996. See 'Risk Factors -- Plan of Reorganization and Related Injunction;' 'Business -- Plan of Reorganization and Related Injunction.' THE ACQUISITION On February 24, 1998, the Company was acquired by Granaria Industries from the Trust. The Acquisition was effected pursuant to the Merger Agreement, in accordance with which, among other things, the Issuer was merged into the Company, with the Company continuing as the surviving corporation. Granaria Industries, which owns all of the voting stock of Parent, is controlled by Granaria Holdings B.V., a private Dutch company ('Granaria Holdings'). See 'Security Ownership and Certain Beneficial Owners and Management of Parent.' Granaria Holdings is a Netherlands-based food processing and investment company, which was founded in 1912 by Louis Wyler. Granaria Holdings' food processing division, which processes and distributes nuts and dried fruits, portion pack and partly-baked bread from its manufacturing facilities in The Netherlands, France, Poland and Russia, has annual net sales in excess of $200.0 million. Granaria Holdings' investment portfolio includes real estate investments in The Netherlands, the United Kingdom and the U.S., and minority holdings in special situation funds and private companies. The principal owner of Granaria Holdings is the Wyler family of The Netherlands. At the Closing the following occurred: (i) the Equity Investment was contributed to Parent by Granaria Industries and LV Investment; (ii) Parent received gross proceeds of approximately $80.0 million from the Preferred Stock Offering; (iii) Parent contributed to the Issuer in the form of common equity approximately $180.0 million comprising the Equity Investment and all of the proceeds of the Preferred Stock Offering; (iv) the Issuer borrowed $225.0 million in term loans and $79.1 million in revolving loans under the New Credit Agreement and completed the Notes Offering; (v) the Company (a) terminated the PNC Credit Facility (under which there was no outstanding indebtedness at Closing) and (b) redeemed 660,000 shares of Common Stock from the Trust for the Redemption Amount; and (vi) the Issuer was merged into the Company. See 'Security Ownership and Certain Beneficial Owners and Management of Parent.' As a result of these transactions, the Company became a wholly-owned subsidiary of Parent and assumed all of the obligations and liabilities of the Issuer, including the Issuer's obligations and liabilities under the Old Notes, the Indenture, the Registration Rights Agreement and the New Credit Agreement. Simultaneously with the Effective Time, the Company paid the total outstanding amount under the 10% Debentures. In connection with the Acquisition, the Trust waived the prepayment penalty on the 10% Debentures. 24 The following table sets forth the approximate cash sources and uses of funds, including the application of the proceeds therefrom, at the Effective Time.
SOURCES OF FUNDS(A) (DOLLARS IN MILLIONS) New Credit Agreement: Revolving Credit Facility(B)................ $ 79.1 Term Loans.................................. 225.0 Senior Subordinated Notes(C).................. 219.6 Equity Contribution(D)........................ 180.0 Cash.......................................... 39.5 ------ Total............................... $743.2 ------ ------ USES OF FUNDS(A) (DOLLARS IN MILLIONS) Merger Consideration(E)....................... $417.6 Repayment of Existing Indebtedness(F)......... 255.9 Common Stock Redemption(G).................... 29.0 Estimated Transaction Fees and Expenses(H).... 27.8 Management Compensation(I).................... 12.9 ------ Total............................... $743.2 ------ ------
- ------------ (A) Sources and uses of funds are based on (i) the borrowings of debt outstanding under the Company's existing credit facilities on the Closing Date and (ii) the purchase price paid for the Company in connection with the Acquisition. (B) Immediately following the Acquisition, the Company borrowed approximately $28.6 million under the revolving credit facility under the New Credit Agreement for use as credit support in the form of letters of credit, leaving approximately $52.3 million available for additional borrowings under such facility. (C) Includes original issue discount of $0.4 million. (D) Parent funded the Equity Contribution from the Equity Investment and the Preferred Stock Offering (the fees and expenses of which were paid by the Company). (E) Merger Consideration represents the sum of (i) $410.0 million and (ii) an additional amount equal to 8.0% on an annual basis on $410.0 million from December 1, 1997 up to and including the Closing Date. (F) Consists of payment of $250.0 million principal amount due under the Company's 10% Debentures and $5.9 million of interest accrued on the 10% Debentures from December 1, 1997 up to and including the Closing Date. (G) The Company redeemed 660,000 shares of Common Stock immediately prior to the Effective Time. (H) Approximately $27.8 million in transaction fees and expenses (including an amount equal to approximately 1% of the transaction value payable to Granaria Holdings) was paid on the Closing Date. This amount includes approximately $2.6 million in fees and expenses of Parent related to the Preferred Stock Offering. (I) Following the Acquisition, the Company paid approximately $10.0 million to the E-P Management Trust and $2.9 million for the related tax obligation. The E-P Management Trust used the $10.0 million to satisfy a loan from Granaria Holdings, the proceeds of which were used by the E-P Management Trust to acquire 16% of the common stock of Granaria Industries. See 'Executive Compensation -- Compensation to Senior Management.' The Company made additional payments to certain members of senior management of the Company shortly after the Acquisition in the amount of approximately $7.6 million, which consists of $2.7 million in stay-put bonuses and $4.9 million in sales incentive bonuses under the STSP. See 'Executive Compensation -- Short Term Sale Program.' USE OF PROCEEDS There will be no proceeds to the Company from any exchange pursuant to the Exchange Offers. 25 THE NOTES EXCHANGE OFFER PURPOSE AND EFFECT OF THE NOTES EXCHANGE OFFER The Old Notes were sold by the Issuer on February 24, 1998 to SBC Warburg/Dillon Read Inc. and ABN AMRO Incorporated (together, the 'Initial Purchasers') who resold the Old Notes (i) to 'qualified institutional buyers' (as defined in Rule 144A under the Securities Act) in reliance upon Rule 144A under the Securities Act and (ii) outside the United States to persons other than U.S. persons in reliance upon Regulation S under the Securities Act. In connection therewith, the Issuer and the Initial Purchasers entered into the Registration Rights Agreement. Pursuant to the Merger, the Company assumed all of the Issuer's obligations and liabilities under the Registration Rights Agreement. The Registration Rights Agreement requires that, among other things, as soon as practicable within 45 days following the original issuance of the Old Notes, the Company file with the Commission a Registration Statement (the 'Notes Exchange Offer Registration Statement,' of which this Prospectus is a part) under the Securities Act with respect to an issue of new notes of the Company identical in all material respects to the Old Notes, use its best efforts to cause such Notes Exchange Offer Registration Statement to be declared effective by the Commission under the Securities Act on or prior to 90 days after the issuance of the Old Notes and, upon the effectiveness of the Notes Exchange Offer Registration Statement, offer to the Holders of the Old Notes the opportunity to exchange their Old Notes for a like principal amount of New Notes, to be issued without a legend restricting their transfer and which may, subject to certain exceptions described below, be reoffered and resold by the holder without restrictions or limitations under the Securities Act. A copy of the Registration Rights Agreement has been filed as an exhibit to the Notes Exchange Offer Registration Statement. The term 'Holder' with respect to any Note means any person in whose name such Note is registered on the books of the Company. Each Holder desiring to participate in the Notes Exchange Offer will be required to represent, among other things, that (i) it is not an 'affiliate' (as defined in Rule 405 of the Securities Act) of the Company or any Guarantor (ii) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the New Notes and (iii) it is acquiring the New Notes in the ordinary course of its business (a Holder unable to make the foregoing representation is referred to as a 'Restricted Holder'). A Restricted Holder will not be able to participate in the Notes Exchange Offer and may only sell its Old Notes pursuant to a registration statement containing the selling security holder information required by Item 507 of Regulation S-K under the Securities Act, or pursuant to an exemption from the registration requirement of the Securities Act. Based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that the New Notes issued pursuant to the Notes Exchange Offer may be offered for resale, resold and otherwise transferred by any holder of such New Notes (other than Restricted Holders or Participating Broker-Dealers) without compliance with the registration and prospectus delivery provisions of the Securities Act. Any Holder who tenders in the Notes Exchange Offer for the purpose of participating in a distribution of the New Notes cannot rely on the staff position enunciated in the no-action letters issued to third parties referred to above and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Each Participating Broker-Dealer must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an 'underwriter' within the meaning of the Securities Act. Based upon interpretations by the staff of the Commission, the Company believes that New Notes issued pursuant to the Notes Exchange Offer to Participating Broker-Dealers may be offered for resale, resold and otherwise transferred by a Participating Broker-Dealer upon compliance with the prospectus delivery requirements, but without compliance with the registration requirements, of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-dealer in 26 connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the date the Notes Exchange Offer Registration Statement is declared effective by the Commission, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. By acceptance of this Notes Exchange Offer, each broker-dealer that receives New Notes pursuant to the Notes Exchange Offer agrees to notify the Company prior to using this Prospectus in connection with the sale or transfer of New Notes. See 'Plan of Distribution.' As a result of the filing and the effectiveness of the Notes Exchange Offer Registration Statement and the consummation of the Notes Exchange Offer, the Company's obligation to make certain semi-annual payments with respect to the Old Notes will be terminated. The Old Notes were issued to a limited number of institutional investors on February 24, 1998 and there is no public market for them at present. To the extent Old Notes are tendered and accepted in the exchange, the principal amount of outstanding Old Notes will decrease with a resulting decrease in the liquidity in the market therefor. Following the consummation of the Notes Exchange Offer, holders of Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for the Old Notes could be adversely affected. The Registration Rights Agreement provides that if (i) the Company is not required to file the Notes Exchange Offer Registration Statement because the Notes Exchange Offer is not permitted by applicable law or Commission policy or (ii) any holder of Transfer Restricted Securities (as defined herein) notifies the Company within 20 days after the commencement of the Notes Exchange Offer that (a) it is prohibited by law or Commission policy from participating in the Notes Exchange Offer or (b) it may not resell the New Notes acquired by it in the Notes Exchange Offer to the public without delivering a prospectus, and the Prospectus contained in the Notes Exchange Offer Registration Statement is not appropriate or available for such resales or (c) it is a broker-dealer and holds Old Notes acquired directly from the Company or an affiliate of the Company, the Company will file with the Commission a shelf registration statement (the 'Shelf Registration Statement') to cover resales of the Notes by the holders thereof who satisfy certain conditions relating to the provision of information in connection with the Shelf Registration Statement. For purposes of the foregoing, 'Transfer Restricted Securities' means each Old Note or New Note until (i) the date on which such Old Note has been exchanged by a person other than a broker-dealer for a New Note in the Notes Exchange Offer, (ii) following the exchange by a broker-dealer in the Notes Exchange Offer of an Old Note for a New Note, the date on which such New Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Notes Exchange Offer Registration Statement, (iii) the date on which such Old Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Old Note could be resold pursuant to Rule 144 under the Act. The Registration Rights Agreement provides that if (a) the Company fails to file within 45 days of the Issue Date, or cause to become effective within 90 days of the Issue Date, the Notes Exchange Offer Registration Statement or (b) the Company is obligated to file the Shelf Registration Statement and such Shelf Registration Statement is not filed within 45 days, or declared effective within 90 days, of the date on which the Company became so obligated or (c) the Company fails to consummate the Notes Exchange Offer within 45 days of the Notes Exchange Offer Effective Date or (d) the Shelf Registration Statement or the Notes Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (d) above a 'Registration Default'), interest ('Special Interest') will accrue on the principal amount of the Old Notes and the New Notes (in addition to the stated interest on the Old Notes and the New Notes) from and including the date on which any such Registration Default shall occur to but excluding the date on which any such Registration Defaults have been cured. Special Interest will accrue at a rate of 0.25% per annum during the 90-day period immediately following the occurrence of any Registration Default and shall increase by 0.25% per annum at the end of each subsequent 90-day period, but in no event shall such rate exceed 1.5% per annum. 27 TERMS OF THE NOTES EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, the Company will accept any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. As of the date of this Prospectus, an aggregate of $220 million principal amount of the Old Notes is outstanding. The Company will issue $1,000 principal amount at maturity of New Notes in exchange for each $1,000 principal amount at maturity of outstanding Old Notes accepted in the Notes Exchange Offer. Holders may tender some or all of their Old Notes pursuant to the Notes Exchange Offer. However, Old Notes may be tendered only in integral multiples of $1,000. The form and terms of the New Notes will be identical in all material respects to the form and terms of the Old Notes, except that the New Notes have been registered under the Securities Act and therefore will not bear legends restricting the transfer thereof. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture under which the Old Notes were, and the New Notes will be, issued. The Company has fixed the close of business on , 1998 as the record date for the Notes Exchange Offer for purposes of determining the persons to whom this Prospectus, together with the Letter of Transmittal, will initially be sent. Holders of the Old Notes do not have any appraisal or dissenters' rights under law or the Indenture in connection with the Notes Exchange Offer. The Company intends to conduct the Notes Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Old Notes when, as and if the Company has given oral (promptly confirmed in writing) or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purpose of receiving the New Notes from the Company. If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Old Notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date. Holders who tender Old Notes in the Notes Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the Notes Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes, in connection with the Notes Exchange Offer. See ' -- Fees and Expenses.' EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term 'Expiration Date' means 5:00 p.m., New York City time, on , 1998, unless the Company, in its sole discretion, extends the Notes Exchange Offer, in which case the term 'Expiration Date' shall mean the latest date and time to which the Notes Exchange Offer is extended. In order to extend the Notes Exchange Offer, the Company will notify the Exchange Agent of any extension by oral (promptly confirmed in writing) or written notice and will make a public announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date unless otherwise required by applicable law or regulation. The Company reserves the right, in its reasonable discretion, (i) to delay accepting any Old Notes, to extend the Notes Exchange Offer or, if any of the conditions set forth below under 'Conditions' shall not have been satisfied, to terminate the Notes Exchange Offer, by giving oral or written notice of such delay, extension or termination to the Exchange Agent, or (ii) to amend the terms of the Notes Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a public announcement thereof. If the Notes Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment by means of a prospectus supplement that will be 28 distributed to the registered holders, and the Company will extend the Notes Exchange Offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to the registered holders, if the Notes Exchange Offer would otherwise expire during such five to ten business day period. Without limiting the manner in which the Company may choose to make public announcement of any delay, extension, termination or amendment of the Notes Exchange Offer, the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement, other than by making a timely release to the Dow Jones News Service. PROCEDURES FOR TENDERING Only a Holder of Old Notes may tender such Old Notes in the Notes Exchange Offer. To tender in the Notes Exchange Offer, a Holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with the Old Notes (or a confirmation of an appropriate book-entry transfer into the Exchange Agent's account at The Depository Trust Company ('DTC' or the 'Depositary') (as described below)) and any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. To be tendered effectively, the Old Notes (or a timely confirmation of a book-entry transfer of such Old Notes into the Exchange Agent's account at DTC as described below), Letter of Transmittal and other required documents must be received by the Exchange Agent at the address set forth below under 'Exchange Agent' prior to 5:00 p.m., New York City time, on the Expiration Date. The tender by a holder will constitute an agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. The Exchange Agent has established an account with respect to the Old Notes at DTC, and any financial institution which is a participant in DTC may make book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's account in accordance with DTC's procedure for such transfer. Although delivery of Old Notes may be effected through book-entry transfer into the Exchange Agent's account at DTC, the Letter of Transmittal, with any required signature guarantees and any other required documents, must in any case be transmitted to and received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date at one of its addresses set forth below under 'Exchange Agent', or the guaranteed delivery procedure described below must be complied with. Delivery of documents to DTC in accordance with its procedures does not constitute delivery to the Exchange Agent. All references in this Prospectus to deposit or delivery of Old Notes shall be deemed to include DTC's book-entry delivery method. The method of delivery of Old Notes and the Letter of Transmittal and all other required documents to the Exchange Agent, including delivery through DTC, is at the election and risk of the holder. Instead of delivery by mail, it is recommended that Holders use an overnight or hand delivery service. If Old Notes are sent by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to assure delivery to the Exchange Agent before the Expiration Date. No Letter of Transmittal or Old Notes should be sent to the Company. Holders may request their respective brokers, dealers, commercial banks, trust companies or nominees to effect the above transactions for such holders. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. 29 Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the Old Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled 'Special Issuance Instructions' or 'Special Delivery Instructions' on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an 'eligible guarantor institution' within the meaning of Rule 17Ad-15 under the Exchange Act (an 'Eligible Institution'). If the Letter of Transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Old Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Old Notes. The Company's interpretation of the terms and conditions of the Notes Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders (or, in the case of Old Notes delivered by book-entry transfer within DTC, will be credited to the account maintained within DTC by the participant in DTC which delivered such Old Notes), unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. In addition, the Company reserves the right in its sole discretion to purchase or make offers for any Old Notes that remain outstanding subsequent to the Expiration Date or, as set forth below under 'Conditions,' to terminate the Notes Exchange Offer and, to the extent permitted by applicable law, purchase Old Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Notes Exchange Offer. By tendering, each Holder will represent to the Company that, among other things, such Holder is not a Restricted Holder. In addition, each Participating Broker-Dealer must acknowledge that it will deliver a prospectus in connection with any resale of New Notes. See 'Plan of Distribution.' BOOK-ENTRY TRANSFER The Exchange Agent will establish a new account or utilize an existing account with respect to the Old Notes at the Depositary promptly after the date of this Prospectus, and any financial institution that is a participant in the Depositary and whose name appears on a security position listing as the owner of Old Notes may make a book-entry tender of Old Notes by causing the Depositary to transfer such Old Notes into the Exchange Agent's account in accordance with the Depositary's procedures for such transfer. However, although tender of Old Notes may be effected through book-entry transfer into the Exchange Agent's account at the Depositary, the Letter of Transmittal (or a manually-signed facsimile thereof), properly completed and validly executed, with any required signature guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must, in any case, be received by the Exchange Agent at its address set forth below under the caption 'Exchange 30 Agent' on or prior to the Expiration Date, or the guaranteed delivery procedures described below must be complied with. The confirmation of book-entry transfer of Old Notes into the Exchange Agent's account at the Depositary as described above is referred to herein as a 'Book-Entry Confirmation.' Delivery of documents to the Depositary in accordance with the Depositary's procedures does not constitute delivery to the Exchange Agent. The term 'Agent's Message' means a message transmitted by the Depositary to, and received by, the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that the Depositary has received an express acknowledgment from the participant in the Depositary tendering Old Notes stating (i) the aggregate principal amount of Old Notes which have been tendered by such participant, (ii) that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and (iii) that the Company may enforce such agreement against the participant. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes (or a confirmation of book-entry transfer of Old Notes into the Exchange Agent's account at DTC), the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date or (iii) who cannot complete the procedure for book-entry transfer on a timely basis, may effect a tender if: (a) the tender is made by or through an Eligible Institution; (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder of such Old Notes and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three (3) New York Stock Exchange, Inc. trading days after the Expiration Date, a duly executed Letter of Transmittal (or facsimile thereof) together with the Old Notes (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at DTC), and any other documents required by the Letter of Transmittal and the instructions thereto, will be deposited by such Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal (or facsimile thereof), and all tendered Old Notes in proper form for transfer (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at DTC) and all other documents required by the Letter of Transmittal are received by the Exchange Agent within three (3) New York Stock Exchange, Inc. trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Old Notes in the Notes Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m.. New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the 'Depositor'), (ii) identify the Old Notes to be withdrawn (including the certificate number or numbers and principal amount of such Old Notes). (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Old Notes register the transfer of such Old Notes into the name of the person withdrawing the tender and (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. If the Old Notes have been delivered pursuant to the book-entry procedure set forth above under ' -- Procedures for Tendering,' any notice of withdrawal must specify the name and number of 31 the participant's account at DTC to be credited with the withdrawn Old Notes. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company in its sole discretion, which determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Notes Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered by following one of the procedures described above under ' -- Procedures for Tendering' at any time prior to the Expiration Date. Any Old Notes which are tendered but which are not accepted due to withdrawal, rejection of tender or termination of the Notes Exchange Offer will be returned as soon as practicable to the holder thereof without cost to such holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Old Notes will be credited to an account maintained with such Book-Entry Transfer Facility for the Old Notes). CONDITIONS Notwithstanding any other term of the Notes Exchange Offer, the Company shall not be required to accept for exchange, or exchange New Notes for, any Old Notes, and may terminate the Notes Exchange Offer as provided herein before the acceptance of such Old Notes, if: (a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Notes Exchange Offer which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Notes Exchange Offer or materially impair the contemplated benefits of the Notes Exchange Offer to the Company, or any material adverse development has occurred in any existing action or proceeding with respect to the Company or any of its subsidiaries, or (b) any change, or any development involving a prospective change, in the business or financial affairs of the Company or any of its subsidiaries has occurred which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Notes Exchange Offer or materially impair the contemplated benefits of the Notes Exchange Offer to the Company; or (c) any law, statute, rule or regulation is proposed, adopted or enacted, which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Notes Exchange Offer or materially impair the contemplated benefits of the Notes Exchange Offer to the Company; or (d) there shall have occurred (i) any general suspension of trading in, or general limitation on prices for, securities on the New York Stock Exchange, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any limitation by any governmental agency or authority that adversely affects the extension of credit to the Company or (iii) a commencement of war, armed hostilities or other similar international calamity directly or indirectly involving the United States; or, in the case any of the foregoing exists at the time of commencement of the Notes Exchange Offer, a material acceleration or worsening thereof; or (e) any governmental approval has not been obtained, which approval the Company shall in its reasonable judgment, deem necessary, for the consummation of the Notes Exchange Offer as contemplated hereby. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to any such condition or may be waived by the Company in whole or in part at any time and from time to time in its reasonable discretion. The failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 32 If the Company determines in its reasonable judgment that any of the conditions are not satisfied, the Company may (i) refuse to accept any Old Notes and return all tendered Old Notes to the tendering Holders (or, in the case of Old Notes delivered by book-entry transfer within DTC, credit such Old Notes to the account maintained within DTC by the participant in DTC which delivered such Notes), (ii) extend the Notes Exchange Offer and retain all Old Notes tendered prior to the expiration of the Notes Exchange Offer, subject, however, to the rights of Holders to withdraw such tenders of Old Notes (see 'Withdrawal of Tenders' above) or (iii) waive such unsatisfied conditions with respect to the Notes Exchange Offer and accept all properly tendered Old Notes which have not been withdrawn. If such waiver constitutes a material change to the Notes Exchange Offer, the Company will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered Holders, and the Company will extend the Notes Exchange Offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered Holders, if the Notes Exchange Offer would otherwise expire during such five to ten business day period. EXCHANGE AGENT The Bank of New York has been appointed as Exchange Agent for the Notes Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: THE BANK OF NEW YORK By Hand or Overnight Delivery: By Facsimile Transmission By Registered or Certified Mail: 101 Barclay Street, (eligible institutions only): 101 Barclay Street, 7E Corporate Trust Service Window (212) 815-6339 New York, New York 10286 Ground Level Attn: Reorganization Section, 7E; New York, New York 10286 Santino Ginocchietti Attn: Reorganization Section, 7E; To Confirm Facsimile Santino Ginocchietti or for Information Call: (212) 815-2963
FEES AND EXPENSES The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by facsimile, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager in connection with the Notes Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptance of the Notes Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith and will pay the reasonable fees and expenses of one firm acting as counsel for the holders of Old Notes should such holders deem it advisable to appoint such counsel. The cash expenses to be incurred in connection with the Notes Exchange Offer will be paid by the Company. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. The Company will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Notes Exchange Offer. If, however, New Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be registered, or are to be issued in the name of, or delivered to, any person other than the registered holder, or if tendered Old Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Notes Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not 33 submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. ACCOUNTING TREATMENT The New Notes will be recorded at the same carrying value as the Old Notes on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized by the Company. The expenses of the Notes Exchange Offer and the unamortized expenses relating to the issuance of the Old Notes will be amortized over the term of the New Notes. 34 CAPITALIZATION COMPANY The following table sets forth, as of November 30, 1997, the consolidated capitalization of (i) the Company and its subsidiaries on a historical basis and (ii) the Company and its subsidiaries on an unaudited pro forma basis to give effect to the Acquisition. This table should be read in conjunction with the Company's Consolidated Financial Statements, including the notes thereto, and 'Management's Discussion and Analysis of Financial Condition and Results of Operations' included elsewhere in this Prospectus.
NOVEMBER 30, 1997 ---------------------------------------- PRO FORMA COMPANY ACTUAL ADJUSTMENTS PRO FORMA -------- ----------------- --------- (DOLLARS IN THOUSANDS) (UNAUDITED) Long-term Debt, including Current Maturities 10% Debentures................................................... $250,000 $(250,000)(A) $ -- New Credit Agreement: Term Loan A................................................. -- 100,000(B) 100,000 Term Loan B................................................. -- 50,000(B) 50,000 Term Loan C................................................. -- 75,000(B) 75,000 Revolving Credit Facility................................... -- 79,100(C) 79,100 9 3/8% Senior Subordinated Notes due 2008........................ -- 220,000(D) 220,000 Industrial Revenue Bonds......................................... 18,400 -- 18,400 Debt of Foreign Subsidiaries..................................... 4,997 -- 4,997 -------- ----------------- --------- Total Long-term Debt, including Current Maturities.......... 273,397 274,100 547,497 -------- ----------------- --------- Shareholder's Equity Old Common Stock................................................. 341,807 (341,807)(E) -- New Common Stock................................................. -- 180,005(F) 180,005 Foreign Currency Translation..................................... (1,836) 1,836(G) -- Retained Earnings (Deficit)...................................... (3,854) (5,571)(H) (9,425) -------- ----------------- --------- Total Shareholder's Equity (Deficit)........................ 336,117 (165,537) 170,580 -------- ----------------- --------- Total Capitalization.................................................. $609,514 $ 108,563 $718,077 -------- ----------------- --------- -------- ----------------- ---------
- ------------ NOTES TO CAPITALIZATION TABLE OF THE COMPANY (Dollars in thousands) (A) Reflects the payment of $250,000 in principal amount of the 10% Debentures to the Trust. (B) Reflects senior secured term loans under the New Credit Agreement of $100,000, $50,000 and $75,000 for Term Loans A, B and C, respectively. (C) Reflects revolving credit loans under the New Credit Agreement of $160,000 of which $79,100 was drawn at Closing, $28,600 was used for credit support in the form of letters of credit and $52,300 was undrawn at Closing. See 'Description of New Credit Agreement.' (D) Reflects senior subordinated notes of $220,000. (E) Reflects the redemption of the common stock, all of which is owned by the Trust, in connection with the Acquisition. (F) Reflects issuance of new common stock to Parent. (G) Reflects elimination of prior foreign currency translation adjustments. (H) Reflects the effects on retained earnings of the reversal of the prior retained deficit of $3,854 and the recognition of management compensation expense, net of taxes, of $9,425. The components of this expense, on a pre-tax basis, are: (i) $6,100, which includes $3,200 of the first year earnings by certain members of senior management of the $10,000 that was paid to the E-P Management Trust and $2,900 for the related tax obligations and (ii) $8,400 for amounts under the STSP, of which $800 has not yet been paid. 35 PARENT The following table sets forth the consolidated capitalization of Parent and its subsidiaries (including the Company) as of November 30, 1997 assuming that Parent had been formed at such date and after giving pro forma effect to the Acquisition. This table should be read in conjunction with the Company's Consolidated Financial Statements, including the notes thereto, and the 'Management's Discussion and Analysis of Financial Condition and Results of Operations' included elsewhere in this Prospectus.
NOVEMBER 30, 1997 ---------------------- PARENT PRO FORMA ---------------------- (DOLLARS IN THOUSANDS) Long-term Debt, including Current Maturities New Credit Agreement: Term Loan A...................................................................... $100,000(A) Term Loan B...................................................................... 50,000(A) Term Loan C...................................................................... 75,000(A) Revolving Credit Facility........................................................ 79,100(B) 9 3/8% Senior Subordinated Notes due 2008............................................. 220,000(C) Industrial Revenue Bonds.............................................................. 18,400 Debt of Foreign Subsidiaries.......................................................... 4,997 ----------- Total Long-term Debt, including Current Maturities............................... 547,497 Cumulative Exchangeable Redeemable Preferred Stock......................................... 80,005(D) Shareholders' Equity Common Stock.......................................................................... 100,000 Retained Earnings (Deficit)........................................................... (9,425) ----------- Total Shareholders' Equity....................................................... 90,575 ----------- Total Capitalization....................................................................... $718,077 ----------- -----------
- ------------ NOTES TO CAPITALIZATION TABLE OF PARENT (Dollars in thousands) (A) Reflects senior secured term loans under the New Credit Agreement of $100,000, $50,000 and $75,000 for Term Loans A, B and C, respectively. (B) Reflects revolving credit loans under the New Credit Agreement of $160,000 of which $79,100 was drawn at Closing, $28,600 was used for credit support in the form of letters of credit and $52,300 was undrawn at Closing. See 'Description of New Credit Agreement.' (C) Reflects senior subordinated notes of $220,000. (D) Reflects gross proceeds of approximately $80,005 from the offering of cumulative redeemable exchangeable preferred stock offered in the Preferred Stock Offering. 36 SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION The following table sets forth the historical condensed consolidated financial data of the Company for the periods indicated. The historical selected financial information is derived from the historical Consolidated Financial Statements of Eagle-Picher. Effective November 29, 1996, the Company emerged from bankruptcy and, accordingly, it adopted fresh-start reporting in accordance with Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.' As a result, the condensed consolidated financial information for the periods subsequent to the adoption of fresh-start reporting are presented on a different cost basis than that for prior periods and, therefore, are not comparable. Accordingly, a vertical black line is shown to separate post-emergence operations. The unaudited condensed consolidated financial information presented for the three months ended February 28, 1997 and 1998 and as of February 28, 1998 are derived from the unaudited consolidated financial statements of the Company and include, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial information for such periods. As a result of the Acquisition of the Company by Granaria Industries from the Trust as of February 24, 1998, which was accounted for as a purchase, the Company's results of operations and financial position for periods after February 24, 1998 are not comparable to prior periods. See Note (A) below. See 'Summary -- The Acquisition and Use of Proceeds'; 'The Acquisition.' The following selected historical consolidated financial information should be read in conjunction with 'Management's Discussion and Analysis of Financial Condition and Results of Operations,' the Pro Forma Consolidated Financial Data and the Consolidated Financial Statements, related notes and other financial information included herein.
UNAUDITED THREE MONTHS ENDED FEBRUARY 28, ------------------------------- (DOLLARS IN THOUSANDS) 1998(A) 1997 ------------------- -------- ACTUAL PRO FORMA -------- --------- STATEMENT OF INCOME (LOSS): Net sales(B).................... $205,842 $205,842 $223,607 Operating income................ 11,027 11,024 9,040 Adjustment for asbestos litigation.................... -- -- -- Fresh-start revaluation......... -- -- -- Reorganization items and claims(E)..................... -- -- -- Interest expense................ (6,940) (12,969) (8,927) Other income (expense).......... 820 820 1,703 Income (loss) before taxes, extraordinary items and accounting changes............ 4,907 (1,125) 1,816 Income (loss) before extraordinary items and accounting changes............ 807 (1,675) (1,220) Extraordinary items and accounting changes............ -- -- -- Net income (loss)............... 807 (1,675) (1,220) BALANCE SHEET DATA (END OF PERIOD): Working capital................. $162,450 -- $208,373 Property, plant and equipment, net........................... 239,337 -- 260,850 Total assets.................... 867,139 -- 831,943 Total debt...................... 546,996 -- 372,170 Shareholders' equity (deficit)..................... 180,005 -- 338,642 OTHER DATA: EBITDA(H)....................... $ 25,905 $ 25,905 $ 23,482 Depreciation and amortization... 12,822 13,221 14,442 Capital expenditures............ 5,692 5,692 15,857 Cash provided by (used in) operating activities.......... (9,083) 176 17,914 Cash used in investing activities.................... (6,734) (6,734) (17,040) Cash used in financing activities.................... (18,955) (2,860) (14,223) SELECTED RATIOS: EBITDA/interest expense......... 3.73x 1.97 x 2.63x Total debt/EBITDA............... N/M N/M N/M Total debt/capitalization....... 75.2% N/M 52.4% Earnings/fixed charges(J)....... 1.69x N/M (K) 1.20x FISCAL YEAR ENDED NOVEMBER 30, ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) 1997 1996 1995 1994 1993 ---------- ---------- ----------- ----------- ----------- STATEMENT OF INCOME (LOSS): Net sales(B).................... $ 906,077 $ 891,287 $ 848,548 $ 756,741 $ 661,452 Operating income................ 45,558(C) 62,106 63,087 58,281 43,754 Adjustment for asbestos litigation.................... -- 502,197 (1,005,511) -- (1,135,500) Fresh-start revaluation......... -- 118,684(D) -- -- -- Reorganization items and claims(E)..................... -- (6,593) (2,225) (3,426) (45,780) Interest expense................ (31,261) (3,083) (1,926) (1,809) (2,070) Other income (expense).......... (251) 1,345 11,704(F) 703 (174) Income (loss) before taxes, extraordinary items and accounting changes............ 14,046 674,656 (934,871) 53,749 (1,139,770) Income (loss) before extraordinary items and accounting changes............ (3,854) 622,086 (944,171) 48,749 (1,144,770) Extraordinary items and accounting changes............ -- 1,524,305(G) -- -- (12,598)(F) Net income (loss)............... (3,854) 2,146,391 (944,171) 48,749 (1,157,368) BALANCE SHEET DATA (END OF PERIOD): Working capital................. $ 187,968 $ 211,808 $ 243,495 $ 210,298 $ 187,224 Property, plant and equipment, net........................... 243,538 256,351 155,818 144,649 134,401 Total assets.................... 746,881 848,880 580,073 521,107 459,360 Total debt...................... 273,397 386,439 20,628 21,622 24,449 Shareholders' equity (deficit)..................... 336,117 341,807 (2,211,308) (1,266,693) (1,317,206) OTHER DATA: EBITDA(H)....................... $ 103,958 $ 92,856 $ 91,795 $ 84,424 $ 68,709 Depreciation and amortization... 55,989 30,750 28,708 26,143 24,955 Capital expenditures............ 51,324(I) 44,957 40,558 35,887 28,512 Cash provided by (used in) operating activities.......... 147,883 72,861 30,456 45,093 37,676 Cash used in investing activities.................... (13,827) (41,770) (28,713) (34,087) (28,177) Cash used in financing activities.................... (113,042) (3,198) (1,019) (2,974) (3,041) SELECTED RATIOS: EBITDA/interest expense......... 3.33x 30.12x 47.66x 46.67x 33.19x Total debt/EBITDA............... 2.63 4.16 0.22 0.26 0.36 Total debt/capitalization....... 44.9% 53.1% N/M N/M N/M Earnings/fixed charges(J)....... 1.43x 173.50x(L) --(L) 24.28x --(L)
(footnotes on next page) 37 NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION (Dollars in thousands) (A) The unaudited condensed consolidated financial statements as of and for the three months ended February 28, 1998 include the effects of the Acquisition that resulted as of February 24, 1998, the Closing Date. Accordingly, the historical condensed consolidated statement of income (loss) for the three months ended February 28, 1998 include results of operations from (1) December 1, 1997 through February 24, 1998 of the Predecessor Company and (2) February 25 through February 28, 1998 of the Company. (B) Includes net sales attributed to the Divested Divisions of $78,604 in 1997, $138,116 in 1996, $145,339 in 1995, $127,229 in 1994, $115,008 in 1993 and $29,254 for the three months ended February 28, 1997. (C) Operating income in 1997 includes (i) amortization of reorganization value in excess of amounts allocable to identifiable assets in the amount of $16,284, (ii) depreciation of assets written-up to fair value in the amount of $9,804 and (iii) loss on sale of divisions of $2,411. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations -- Effects of Reorganization on Operations and Financial Condition.' (D) Fresh-start valuation gain of $118,684 reflects transactions related to emergence from bankruptcy and reorganization in accordance with Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization under the Bankruptcy Code.' See 'Management's Discussion and Analysis of Financial Condition and Results of Operations -- Effects of Reorganization on Operations and Financial Condition.' (E) Reflects provision for claims of $4,244 in 1996 and $41,436 in 1993. Remaining reorganization items are net expense resulting from the Company's bankruptcy filing. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations -- Effects of Reorganization on Operations and Financial Condition.' (F) Other income (expense) reflects a gain of $11,505 in 1995 relating to the sale of an investment in a Canadian mining concern. (G) Reflects (i) a gain of $1,525,540 in 1996 related to emergence from bankruptcy and reorganization in accordance with Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization under the Bankruptcy Code;' (ii) a loss of $1,235 in 1996 due to an accounting change of its method of computing LIFO inventories of boron, germanium and other rare metals; and (iii) a loss of $12,598 in 1993 due to an accounting change to reflect adoption of Statement of Financial Accounting Standards No. 106 'Employers Accounting for Postretirement Benefits.' (H) 'EBITDA' as used herein is defined in the Indenture and may not be comparable to similarly titled measures reported by other companies. See 'Description of the Notes.' 'EBITDA' is presented because management believes it is an indicator of a company's ability to service and incur debt. EBITDA does not represent net income or cash flows from operations as those terms are defined by generally accepted accounting principles and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. Certain funds depicted by 'EBITDA' are not available for management's discretionary use due to requirements to conserve funds for debt service, interest and dividend payments and other commitments and uncertainties. Under the Indenture, the definition of EBITDA excludes loss on sale of divisions and any other non-cash items affecting Consolidated Net Income (including, without limitation, charges for asbestos litigation and reversal of asbestos litigation reserves). Includes EBITDA attributed to the Divested Divisions of $361 in 1997, $3,615 in 1996, $7,695 in 1995, $7,552 in 1994, $7,053 in 1993 and ($652) for the three months ended February 28, 1997. (I) Includes capital expenditures in 1997 of (i) $10,157 in connection with the new facility in Manchester, Tennessee, (ii) $6,495 in connection with a $13,054 diatomaceous earth processing facility in Vale, Oregon and (iii) $4,651 in connection with a new automotive facility in Tamworth, England. (J) For the purpose of determining the ratio of earnings to fixed charges, 'earnings' consist of income before provision (benefit) for income taxes and fixed charges. 'Fixed charges' consist of interest expense (including amortization of deferred financing costs) and approximately 30% of rental expense, representing that portion of rental expense deemed representative of the interest factor. (K) Pro forma earnings were insufficient to cover fixed charges for the three months ended February 28, 1998 by $1,125. (L) Such ratio of earnings to fixed charges is not meaningful for 1995 and 1993 because of significant charges for asbestos litigation and is not meaningful for 1996 because of significant reversal of asbestos litigation reserves, fresh-start revaluation and extraordinary items. Earnings were inadequate to cover fixed charges by $934,871 and $1,139,770 for the years ended November 30, 1995 and 1993, respectively. 38 UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS The following unaudited pro forma statements of operations (the 'Pro Forma Statements of Operations') are based on the historical financial statements of the Company included elsewhere in this Prospectus. The unaudited pro forma statement of operations for the year ended November 30, 1997 and the unaudited pro forma statement of operations for the three months ended February 28, 1998 give effect to the Acquisition as though it were consummated on December 1, 1996. See 'Summary -- The Acquisition and Use of Proceeds'; 'The Acquisition.' The pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable. A pro forma balance sheet as of February 28, 1998 is not included herewith because the effects of the Acquisition have already been reflected in the consolidated balance sheet as of February 28, 1998 included elsewhere in this Prospectus. The acquisition of Eagle-Picher was accounted for using the purchase method of accounting. The preliminary allocation of the purchase price of the Company has been determined based upon estimates of fair value and are subject to change. Appraisals are currently being completed to value property, plant, equipment and identifiable intangible assets. The excess of purchase price over the assessed values of those assets will be allocated to goodwill. The Company expects to finalize the purchase price allocation by November 30, 1998. Adjustments are not expected to be material. The Pro Forma Statements of Operations do not purport to be indicative of the results that would have been obtained had such transactions described above occurred as of the assumed dates. In addition, the Pro Forma Statements of Operations do not purport to project the Company's results of operations for any future period. The Pro Forma Statements of Operations should be read in conjunction with the financial statements of the Company, and the notes thereto, included elsewhere herein. 39 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1997
PRO FORMA ACTUAL ------------------------------------ -------- ACQUISITION AND COMPANY COMPANY OFFERING ADJUSTMENTS PRO FORMA -------- -------------------- --------- (DOLLARS IN THOUSANDS) Net sales...................................................... $906,077 $-- $906,077 Operating costs and expenses: Cost of products sold..................................... 725,010 -- 725,010 Selling and administrative................................ 77,109 -- 77,109 Management compensation expense........................... -- 14,955(A) 14,955 Depreciation.............................................. 39,671 -- 39,671 Amortization of intangibles............................... 16,318 760(B) 17,078 Loss on sale of divisions................................. 2,411 -- 2,411 -------- ----------- --------- 860,519 15,715 876,234 Operating income (loss)........................................ 45,558 (15,715) 29,843 Interest expense.......................................... (31,261) (23,620)(C) (54,881) Other..................................................... (251) -- (251) -------- ----------- --------- Income (loss) before taxes..................................... 14,046 (39,335) (25,289) Income taxes (benefit)......................................... 17,900 (28,100)(D) (10,200) -------- ----------- --------- Net loss....................................................... $ (3,854) $(11,235) (15,089) -------- ----------- --------- -------- ----------- ---------
- ------------ NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in thousands) (A) To record management compensation expense as follows: Compensation earned by certain members of senior management representing the portion of the $10,000 contribution to the E-P Management Trust for the stock that has been earned and vested and the expected tax payments for the same stock............................ $ 6,100 Sales incentive bonus................................................................ 5,828 'Stay-put' bonus..................................................................... 3,027 ------- $14,955 ------- -------
(B) To reflect the difference in the amortization of the reorganization value in excess of amounts allocable to identifiable asset of $16,318 compared to the excess of assets over cost of $17,078. (C) Pro forma interest expense increased $23,620 as follows: Interest expense associated with the redemption of 10% Debentures................... $(25,000) Interest expense on New Credit Facilities and Senior Subordinated Notes............. 45,610 Amortization of debt transaction fees and expenses over weighted average life of 8.18 years........................................................ 2,750 Amortization of Preferred Stock Offering fees and expenses over 10 years.......................................................................... 260 -------- Interest expense adjustment......................................................... $ 23,620 -------- --------
The actual interest expense for the year ended November 30, 1997 included interest expense of $4,417 relating to debt obligations that were paid off in 1997. Such debt obligations primarily consisted of the Divestiture Notes and Tax Refund Notes. The pro forma adjustments do not give effect to the reduction in this interest expense. (D) To record incremental tax benefit. 40 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998
PRO FORMA ACTUAL ------------------------- -------- ACQUISITION COMPANY COMPANY ADJUSTMENTS PRO FORMA -------- ----------- --------- (DOLLARS IN THOUSANDS) Net sales................................................................ $205,842 $ -- $205,842 Operating costs and expenses: Cost of products sold............................................... 162,796 -- 162,796 Selling and administrative.......................................... 17,141 -- 17,141 Management compensation expense..................................... 2,056 (396)(A) 1,660 Depreciation........................................................ 8,983 -- 8,983 Amortization of intangibles......................................... 3,839 399(B) 4,238 -------- ----------- --------- 194,815 3 194,818 Operating income (loss).................................................. 11,027 (3) 11,024 Interest expense.................................................... (6,940) (6,029)(C) (12,969) Other............................................................... 820 -- 820 -------- ----------- --------- Income (loss) before taxes............................................... 4,907 (6,032) (1,125) Income taxes (benefit)................................................... 4,100 (3,550)(D) 550 -------- ----------- --------- Net income (loss)........................................................ $ 807 $ (2,482) $ (1,675) -------- ----------- --------- -------- ----------- ---------
- ------------ NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in thousands) (A) To record management compensation expense as follows: Compensation earned by certain members of senior management representing the portion of the $10,000 contribution to the E-P Management Trust for the stock that has been earned and vested and the expected tax payments for the same stock............................. $ 1,400 'Stay-put' bonus...................................................................... 260 Amounts recognized associated with the 'stay-put' bonus and sales incentive bonus..................................................................... (2,056) ------- $ (396) ------- -------
(B) To reflect the difference in the amortization of the reorganization value in excess of amounts allocable to identifiable assets of $3,839 (4 year amortization) compared to the excess of assets over cost of $4,238 (15 year amortization). (C) Pro forma interest expense increased $6,182 as follows: Interest expense associated with the redemption of 10% Debentures..................................................................... $(5,903) Interest expense on New Credit Facilities and Senior Subordinated Notes................................................................. 11,250 Amortization of debt transaction fees and expenses over weighted average life of the debt............................................. 617 Amortization of Preferred Stock Offering fees and expenses over 10 years............................................................. 65 ------- Interest expense adjustment.......................................................... $ 6,029 ------- -------
(D) To record incremental tax benefit. 41 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless otherwise stated, any reference to a year in this section refers to the Company's fiscal year. RESULTS OF OPERATIONS The following table sets forth certain sales and operating data, net of all inter-segment transactions, for the Company's businesses for the periods indicated:
FISCAL YEAR ENDED NOVEMBER 30, ------------------------------------------------------------ 1997 % 1996 % 1995 % ------ ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS) Net sales and segment sales as percentage of total: Automotive................................... $435.2 48.0% $439.6 49.3% $433.2 51.1% Machinery.................................... 270.8 29.9 257.6 28.9 254.7 30.0 Industrial................................... 200.1 22.1 194.1 21.8 160.6 18.9 ------ ------ ------ ------ ------ ------ Total........................................ $906.1 100.0% $891.3 100.0% $848.5 100.0% ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ EBITDA by segment: Automotive................................... $ 60.1 $ 57.2 $ 59.7 Machinery.................................... 32.0 27.5 28.8 Industrial................................... 30.6 27.5 21.7 Corporate overhead........................... (18.7) (19.3) (18.4) ------ ------ ------ Total........................................ $104.0 $ 92.9 $ 91.8 ------ ------ ------ ------ ------ ------
The Company's international net sales were $198.4 million, or 21.9% of net sales, in 1997; $189.1 million, or 21.2% of net sales, in 1996; and $170.2 million, or 20.1% of net sales, in 1995. The Company's U.S. export sales, which are included in the Company's international net sales, were $113.6 million, $108.5 million and $92.5 million in 1997, 1996 and 1995, respectively. The Company's non-U.S. operations are subject to the usual risks that may affect such operations. Such operations, however, are located in countries where the Company believes the risks to be minimal. Current economic conditions in certain Asian markets have adversely affected the Company's growth in those markets. Historically, sales to such markets have been insignificant to the Company's total net sales and have not had, nor are they expected to have, a material adverse effect on the Company's operations. Despite the economic conditions in Asia, the Company believes the Asia region continues to have solid long-term growth opportunities, and the Company will continue to explore those opportunities. The Company expects strong price pressure to continue across all product lines, especially in the Automotive Group. The Company will continue to pursue productivity improvements and material cost reductions to mitigate such price pressure. Since the 1980's, OEMs such as Ford, GM and Chrysler have been outsourcing an increasing percentage of their production requirements. OEMs benefit from outsourcing because outside suppliers generally have significantly lower cost structures and can assist in shortening development periods for new products. The Company expects to continue to benefit from the trend toward outsourcing. EFFECTS OF REORGANIZATION ON OPERATIONS AND FINANCIAL CONDITION Upon emergence from bankruptcy, the Company applied the 'fresh-start' provisions of the American Institute of Certified Public Accountants Statement of Position No. 90-7 ('SOP 90-7'). In accordance with SOP 90-7, the assets and liabilities of the Company were restated at their fair value and a valuation of equity was made based on the appraised reorganization value of the business. The reorganization value in excess of amounts allocable to identifiable assets was capitalized. Of the $268.8 million increase in total assets for the year ended November 30, 1996 over those at November 30, 1995, $86.6 million and $65.1 million were due to the restatement of property, plant and equipment at their 42 fair value and the reorganization value in excess of amounts allocable to identifiable assets, respectively, and $69.1 million was due to a federal income tax refund receivable. Consequently, results of operations in 1996 and 1997 are not comparable, primarily due to increased depreciation on the property, plant and equipment and amortization of the reorganization value in excess of amounts allocable to identifiable assets. Adjusting the assets and liabilities to fair value resulted in the fresh-start revaluation of $118.7 million in 1996. Other reorganization items in 1996 and 1995 were the costs of the reorganization process, net of the interest income earned on accumulated cash balances. The Plan included a settlement of the Eagle-Picher Group's aggregate liability on account of present and future asbestos-related and lead-related personal injury claims. An adjustment was made to the consolidated financial statements in 1996 to reflect this settlement. The order confirming the Plan contains a permanent injunction which precludes holders of present or future asbestos-related or lead-related personal injury claims from pursuing their claims against the reorganized Eagle-Picher Group. Those claims will be channeled to the Trust, which is an independently administered qualified settlement trust established to resolve and satisfy those claims. The Company's emergence from bankruptcy on November 29, 1996 resulted in an extraordinary gain of $1.5 billion on the discharge of pre-petition liabilities, including the asbestos liability, because the value of consideration distributed and expected to be distributed to the Trust and other unsecured creditors is approximately 37% of the amount of the allowed claims. The Plan and the Order confirming the Plan provide that the pre-petition unsecured claims, including the asbestos-related claims, are thereby discharged and the Eagle-Picher Group has no further liability in connection with such claims. In 1997, the Company received federal tax refunds totaling $69.1 million resulting from net operating losses ('NOLs') carried back to recover taxes paid in prior years. The majority of the NOLs were created when the Company contributed cash and securities to the Trust in the bankruptcy. Losses remaining after the NOL carryback were carried forward to reduce taxable income in future years. NOLs, which were carried forward, along with other items that are deductible in the future, such as the repayment of the debt issued in conjunction with the Company's emergence from bankruptcy, resulted in Deferred Tax Assets of $128.5 million at November 30, 1996. Deductions for debt previously contributed to the Trust are taken when the debt is repaid. The 10% Debentures were repaid in connection with the Acquisition. For tax purposes, the Acquisition was treated like a sale of assets. The gains on the sale of the assets of the Company absorbed most of the NOL carryforwards that the Company had available and any NOL carryforwards that were not absorbed were lost. Interest expense increased by $28.2 million in 1997 primarily due to the debt issued to the Trust and unsecured creditors upon the Company's emergence from bankruptcy. In addition, interest expense was not recorded on unsecured debt or undersecured debt during the duration of the bankruptcy proceedings, which resulted in minimal interest expense in 1996 and 1995. NET INCOME Asbestos-related claims and items related to bankruptcy and emergence therefrom ('Reorganization Items') have significantly affected the Company's net income (loss) since 1995. Reorganization Items increased income by $2,139.8 million in 1996 and reduced income by $1,007.7 million in 1995. Other items affecting the comparability of net income (loss) include interest expense, which increased significantly in 1997 because of debt incurred in connection with the Company's reorganization on November 29, 1996, amortization and depreciation related to the Company's adoption of fresh-start reporting in accordance with Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization Under the Bankruptcy Code' ('Fresh-Start Expenses'), effective November 29, 1996, and income tax expense, which is not comparable due to the effect on income of interest expense, Reorganization Items and Fresh-Start Expenses. Interest expense was $31.3 million, $3.1 million and $1.9 million for 1997, 1996 and 1995, respectively. Fresh-Start Expenses totaled $26.1 million in 1997. Income tax expense totaled $17.9 million, $52.6 million and $9.3 million in 1997, 1996 and 1995, respectively. Net income before Reorganization Items, interest expense, Fresh-Start Expenses and 43 income tax expense totaled $71.4 million, $63.5 million and $74.7 million for 1997, 1996 and 1995, respectively. Three Months Ended February 28, 1998 Compared to Three Months Ended February 28, 1997 As a result of the Acquisition of the Company by Granaria Industries from the Trust as of February 24, 1998, which was accounted for as a purchase, the Company's results of operations and financial position for periods after February 24, 1998 are not comparable to prior periods. The unaudited condensed consolidated statement of income (loss) as of February 28, 1998 includes results of operations from (1) December 1, 1997 through February 24, 1998 of the Predecessor Company and (2) February 25 through February 28, 1998 of the Company. Net Sales. The Company's net sales decreased by approximately $17.8 million, or 8.0%, from $223.6 million in the three months ended February 28, 1997 to $205.8 million in the three months ended February 28, 1998. Included in the results for the first three months of 1997 are $29.3 million of sales of the Divested Divisions which, if excluded, would reflect an increase in the Company's quarterly net sales of approximately 5.9%. First quarter net sales for the Industrial Group, excluding net sales of the Divested Divisions, decreased 8.8% from 1997 to 1998 due primarily to decreased sales of germanium products. Germanium sales have been affected by lower market prices, increased use of recycled germanium by the Company's customers and the completion of a major satellite project. Germanium prices have decreased by as much as half during the last year due to increased supplies. In response to sharp increases in the cost of germanium during 1996, the Company's customers have increasingly been recycling scrap germanium. As a result, its customers supply a larger portion of the Company's raw materials. While the Company has been able to maintain its margins, the sales volume is less as a toll refiner than as a buyer and seller of germanium. Net sales for the Machinery Group in the first three months of 1998, excluding net sales of the Divested Divisions, increased 7.4% from the first three months of 1997 on increased sales of special purpose batteries. Net sales for the Automotive Group, excluding net sales of the Divested Divisions, increased 11.5% on increased sales of precision machined components. Cost of Products Sold. Cost of products sold, excluding depreciation expense, decreased by $17.6 million, or 9.8% from $180.4 million in the three months ended February 28, 1997 to $162.8 million in the three months ended February 28, 1998. Excluding the results of Divested Divisions, as a percentage of sales, cost of products sold remained stable at approximately 79.0%. Selling and Administrative. Selling and administrative expenses decreased by $2.6 million, or 13.1% from $19.7 million for the three months ended February 28, 1997 to $17.1 million for the three months ended February 28, 1998. Excluding the results of Divested Divisions, selling and administrative expenses for the first three months of 1998 decreased by $1.0 million from the first three months of 1997. Depreciation and Amortization. Depreciation and amortization decreased by $1.6 million, or 11.1% from $14.4 million for the three months ended February 28, 1997 to $12.8 million for the three months ended February 28, 1998. Excluding the results of Divested Divisions, depreciation and amortization was $13.0 million for the first three months of 1997. EBITDA. The Company's earnings before interest, taxes, depreciation and amortization ('EBITDA') increased by approximately $2.4 million, or 10.3%, from $23.5 million in 1997 to $25.9 million in 1998. Excluding the $.6 million negative impact of the Divested Divisions on 1997 EBITDA, the EBITDA of the Company increased $1.8 million, or 7.5%. Despite decreased sales, EBITDA of the Industrial Group for the first three months of 1998, exclusive of EBITDA of the Divested Divisions, increased by 1.3% over the first three months of 1997. This increase was due to improved results at the Company's Boron operations and the Company's ability to maintain its margins despite decreased germanium sales. First quarter 1998 EBITDA of the Machinery Group, exclusive of the results of Divested Divisions, was unchanged from the first quarter of 1997. Increased profitability of special-purpose batteries due to higher volumes was offset by startup 44 costs of new construction equipment products. EBITDA of the Automotive Group for the first three months of 1998 increased by 9.6% from the first three months of 1997 due to higher volumes of precision machined components. Interest Expense. Interest expense decreased by $2.0 million, or 22.5%, from $8.9 million for the three months ended February 28, 1997 to $6.9 million for the three months ended February 28, 1998. Most of this decrease was due to the retirement of $125.9 million of debt during 1997, which included $50.0 million of divestiture notes, $69.1 million of tax refund notes and $6.8 million of secured notes bearing interest at 9%, 6.5% and 10%, respectively. Of the total debt that was retired during 1997, only $16.7 million was retired during the first three months of 1997. The decrease in interest expense due to debt retirements was partially offset by interest on an additional $8.0 million of Industrial Revenue Bonds issued during the third quarter of 1997 and revolving lines of credit, for which interest during the first three months of 1998 was $.1 million. Fiscal Year Ended 1997 Compared to Fiscal Year Ended 1996 In addition to the effects of reorganization, another factor affecting comparability of operations is the sale of the Plastics, Transicoil and Fabricon Products divisions in 1997. The Company's aggregate loss on these transactions was $2.4 million. The Company also contributed the assets of its former Suspension Systems division to Eagle-Picher-Boge, L.L.C., a joint venture formed in 1997 in which the Company has a 45% interest. Net Sales. The Company's net sales increased approximately $14.8 million, or 1.7%, from $891.3 million in 1996 to $906.1 million in 1997. Included are net sales of the Divested Divisions which, if excluded for both periods, would reflect an increase in the Company's net sales of approximately 9.9%. In 1996 and 1997, the Divested Divisions contributed net sales of approximately $138.2 million and $78.6 million, respectively. Net sales for the Industrial Group, excluding net sales of the Divested Divisions, increased 10.2% primarily due to increased demand for germanium products used in aerospace applications, such as solar cell substrates for satellites. In the Machinery Group, net sales increased by 7.6% (excluding net sales of the Divested Divisions), which increase was primarily attributable to increased demand for batteries used in satellite applications. Net sales for the Automotive Group (excluding net sales of the Divested Divisions) increased by 11.2% in 1997, which increase was attributable primarily to increased sales volume of precision machined components and interior trim products. Many of the precision machined components are used in light trucks, vans and sport utility vehicles which have recently grown in popularity. Several new programs at the automotive trim operation, which had been delayed by customers, are beginning to reach anticipated production volumes. The Company has been notified by Ford that it will no longer purchase certain product lines from the Automotive Group. The first program was discontinued in December 1997, and other programs will be discontinued at various times through March 1999. The total amount of 1997 net sales contributed by these programs was $19.4 million. The Company anticipates that this revenue will be replaced by new programs currently being implemented. Cost of Products Sold. Cost of products sold (excluding depreciation expense) increased by $8.1 million, or 1.1%, from $716.9 million in 1996 to $725.0 million in 1997. As a percentage of net sales, cost of products sold remained constant at 80.0% excluding the cost of products sold of the Divested Divisions. Selling and Administrative. Selling and administrative expenses decreased by $4.4 million, or 5.4%, from $81.5 million in 1996 to $77.1 million in 1997. Excluding expenses of the Divested Divisions, the selling and administrative expenses remained constant from 1996 to 1997. Depreciation and Amortization. See comments above regarding the effects of reorganization. Loss on Sale of Divisions. In 1997, the Company sold the Plastics, Transicoil and Fabricon Products divisions for approximately $30.7 million, $8.3 million and $3.1 million, respectively. The aggregate loss on the sales of the Divested Divisions (excluding Suspension Systems) in 1997 was $2.4 million. 45 EBITDA. Due to the increased depreciation and amortization in connection with the Company's emergence from bankruptcy, a comparison of 1997 and 1996 operating income is not meaningful. The Company's EBITDA increased by $11.1 million, or 11.9%, from $92.9 million in 1996 to $104.0 million in 1997. In 1996 and 1997, the EBITDA of the Divested Divisions was $3.6 million and $0.4 million, respectively. The Company's EBITDA, excluding EBITDA of the Divested Divisions, increased 17.7%. The Industrial Group's EBITDA, excluding EBITDA of the Divested Divisions, increased by 13.5%, primarily as a result of increased demand for germanium products. Also, the Industrial Group's diatomaceous earth product processing operation contributed to the increase in EBITDA for 1997 due to non-recurring charges taken in 1996. The Machinery Group's EBITDA, excluding EBITDA of the Divested Divisions, increased 18.9% as a result of increases in battery sales and an increase in the margins of the operations that manufacture wheel tractor scrapers and heavy duty forklift trucks. Despite flat sales in those product lines, EBITDA increased for wheel tractor scrapers and heavy duty forklift trucks as a result of increased efficiencies and lower costs associated primarily with expansion of the Machinery Group's operations in Mexico. The Automotive Group's EBITDA, excluding EBITDA of the Divested Divisions, increased 11.7% as a result of increased sales and a better absorption of fixed costs. Currency exchange differences offset volume gains in the European operations, and therefore, results of these operations were relatively flat. Interest Expense. Interest expense increased by $28.2 million, or 909.7%, from $3.1 million in 1996 to $31.3 million in 1997, for reasons discussed above related to the effects of reorganization on the Company's results. Fiscal Year Ended 1996 Compared to Fiscal Year Ended 1995 Net Sales. The Company's net sales increased by approximately $42.8 million, or 5.0%, from $848.5 million in 1995 to $891.3 million in 1996. The Industrial Group's net sales increased 20.9% due primarily to increased sales of germanium products. Approximately one-third of the increase was due to increases in the market price of germanium itself, which increased significantly during the year. In the Machinery Group, net sales were relatively flat. Increases in sales of special-purpose batteries were offset by declines in volume of wheel tractor scrapers and forklift trucks of 15.6% and 11.1%, respectively. The Machinery Group's sales were unusually high in 1995 because a significant order backlog of forklift trucks was worked off during 1995 and because demand for wheel tractor scrapers was high. Net sales for the Automotive Group were relatively flat from 1995 to 1996. Two factors which offset increases in volumes in the Automotive Group by approximately $14.5 million were the sale of an injection molding business in the first quarter of 1996 and the loss of sales volume at the Plastics Division, most of which resulted when GM discontinued production of its all-purpose van during 1996. Cost of Products Sold. Cost of products sold (excluding depreciation), increased by $35.5 million, or 5.2%, from $681.4 million in 1995 to $716.9 million in 1996. As a percentage of net sales, cost of products sold remained constant at 80.0%. Selling and Administrative. Selling and administrative expenses increased by $6.1 million, or 8.1%, from $75.4 million in 1995 to $81.5 million in 1996 in part as a result of start-up costs associated with establishing European administrative and sales offices for the Automotive Group. EBITDA. The Company's EBITDA increased by $1.1 million, or 1.2%, from $91.8 million in 1995 to $92.9 million in 1996. The increase in sales of germanium products contributed to a 26.7% increase in EBITDA in the Industrial Group. The decline in back orders and demand in the Machinery Group, described above, as well as start-up costs of certain satellite battery programs, resulted in a decrease in the Machinery Group's EBITDA of 4.5% for 1996 as compared to 1995. The decreased volume at the Plastics Division was also a primary reason for the decrease in EBITDA from $59.7 million in 1995 to $57.2 million in 1996 in the Automotive Group. Other contributing factors to this decrease include a new plant in Brighton, Michigan that produces extruded nylon parts for fuel and brake systems. Adjustment for Asbestos Litigation and Provision for Other Claims. In December 1995, the Bankruptcy Court estimated the Company's aggregate liability for asbestos-related personal injury 46 claims to be $2.5 billion. The Company adjusted the 1995 consolidated financial statements by $1.0 billion to increase the asbestos liability subject to compromise to $2.5 billion. In 1996, the consolidated financial statements were adjusted by $502.2 million to $2.0 billion to reflect the amount of the settlement on which the Plan was based. A provision for other claims related to the bankruptcy proceedings of $4.2 million was also made in Fiscal 1996. Interest Expense. Interest expense increased by $1.2 million, or 63.2%, from $1.9 million in 1995 to $3.1 million in 1996. The principal reason for the increase was the settlement of certain secured tax claims in the bankruptcy for which the claimants were entitled to interest. Gain on Sale of Investment. In 1995, the Company sold an investment in stock of a Canadian mining concern which resulted in a gain of $11.5 million. OPERATING ACTIVITIES Cash and cash equivalents were $53.7 million at November 30, 1997 compared to $32.7 million and $93.3 million at November 30, 1996 and 1995, respectively. Cash flows from operations in 1997, excluding a tax refund of $69.1 million, were $78.8 million, despite the small net loss of $3.9 million, and in 1996 and 1995 were $72.9 million and $30.5 million, respectively. In 1997, the repayment of the Divestiture Notes and the Tax Refund Notes resulted in deductions in excess of income, so that the Company's current federal income tax liability was minimal. Income taxes were paid primarily to foreign, state and local jurisdictions in 1997 and amounted to, net of miscellaneous small refunds, $4.3 million. In 1996 and 1995, the Company paid income taxes, including federal income taxes, of $17.3 million and $28.8 million, respectively. Cash and cash equivalents were $19.0 million at February 28, 1998. As previously discussed, depreciation and amortization increased significantly in 1997 to $56.0 million as compared to $30.8 million in 1996 and $28.7 million in 1995. The reorganization value in excess of amounts allocable to identifiable assets is being amortized over four years. Changes in working capital and other items provided approximately $6.9 million in cash in 1997. Certain divisions have been able to negotiate better terms on their accounts payable following the Company's emergence from bankruptcy. Decreases in certain working capital components have more than offset increases in receivables and inventories which have resulted from increased sales volumes. Working capital provided approximately $4.0 million in 1996, but $27.0 million was used for working capital items in 1995. In 1995 into 1996, the Company commenced several new programs in the Automotive Group that required investment in customer tooling. It is common practice in the Automotive Industry for suppliers such as the Company to accumulate customer tooling costs while the tooling is under construction and to bill the customer upon its completion. In 1995, an $11.5 million increase in the amount of tooling carried on the Company's consolidated balance sheet brought the total of such amount to $26.5 million at November 30, 1995. Tooling costs recorded on the Company's consolidated balance sheet were $10.6 million and $11.5 million at November 30, 1997 and 1996, respectively. The accumulation of tooling costs was on top of 'normal' growth of working capital due to revenue growth. In 1996, as the new programs were instituted, amounts for tooling were collected from customers; however, revenue growth from these new programs resulted in 'normal' working capital growth that partially offset the decrease in working capital resulting from decreases in tooling activity. Another factor contributing to the less than expected decrease in working capital in 1996 was the increase in the price of germanium which resulted in increased inventories and receivables. INVESTING ACTIVITIES Capital expenditures were $51.3 million in 1997. Major additions included two new plants to manufacture precision machined parts, one in Manchester, Tennessee and the other in Tamworth, England. Construction on the new diatomaceous earth processing unit in Vale, Oregon, which commenced in 1996, was completed in 1997. Capital expenditures were $45.0 million and $40.6 million in 1996 and 1995, respectively. In addition to amounts spent on construction of the facility in Vale, Oregon in 1996 and the addition of a new coating line for the manufacture of rubber coated metal products in 1995, significant expenditures were made to increase machine capacity at existing facilities 47 or improve processes, particularly in the Automotive Group. The Company does not have any plans for major expansions in the near future. The Company anticipates capital expenditures of $35.0 million for 1998. The Company believes that its minimum capital expenditure level is approximately $15.0 million. The Company sold the Plastics, Transicoil and Fabricon Products divisions in 1997. The net cash proceeds of these transactions totaled $39.0 million. The injection molding operations of the Orthane Division were sold in 1996 for $4.2 million. No other divestitures have been announced or committed to at this time; however, the possibility of future divestitures of certain businesses exists, particularly if the Company needs cash to fund future expansions. In 1995, the Company sold an investment in stock of a Canadian mining concern which had no book value for $11.5 million. The stock, which had been received in settlement of certain indebtedness, was deemed by the Company to be impaired and was written down to zero. The Company generally does not invest in marketable securities of this nature. Any available cash is generally invested in cash equivalent instruments. FINANCING ACTIVITIES The Company used the proceeds of tax refunds totaling $69.1 million received in 1997 to redeem the $69.1 million Tax Refund Notes (the 'Tax Refund Notes') which were issued by the Company to the Trust in conjunction with the Company's emergence from bankruptcy. The Divestiture Notes were issued to the Trust and other unsecured creditors on the Consummation Date (as defined herein). A total of $45.3 million of the Divestiture Notes was prepaid in August 1997 with the proceeds of the divestiture of the Divested Divisions; the remaining obligation of $4.7 million was reclassified to accrued liabilities as a reserve for the final bankruptcy distribution. The Divestiture Notes bore interest at 9% and had a maturity date of November 29, 1999. In addition, secured notes totaling $6.8 million at November 30, 1996 were repaid in full in 1997 due, in certain cases, to the sale of the assets which secured the notes. In 1997, the Company issued an $8.0 million Industrial Revenue Bond to finance the new facility in Manchester, Tennessee. Debt totaling $5.0 million was incurred in Europe to finance the expansion activities. Following the Acquisition, the Company has a $160.0 million revolving credit facility available to finance short-term borrowings and letters of credit. In connection with the Acquisition, $79.1 million was drawn against the revolving credit facility, approximately $52.3 million was available for additional borrowings and $28.6 million was used for credit support in the form of letters of credit. See 'Description of the New Credit Agreement.' The Company's European operations also had several lines of credit totaling $20.2 million at November 30, 1997, of which, at the Closing Date, $5.0 million was borrowed. At Closing, the Company had $15.7 million available under the European operations' lines of credit. The European operations' lines of credit contain financial covenants, with which the Company is in compliance. The Company believes that the European operations should generate enough cash through operations and borrowings on lines of credit to finance growth in the near-term. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity needs are primarily for debt service and capital maintenance. The Company believes that its cash flows from operations and available borrowings under its bank credit facilities will be sufficient to fund its anticipated liquidity requirements for the next twelve months. In the event that the foregoing sources are not sufficient to fund the Company's expenditures and service its indebtedness, the Company would be required to raise additional funds. See 'Description of New Credit Agreement.' Because the Company is highly leveraged and has significant debt service requirements, the financial results of prior periods will not be indicative of future results. On February 28, 1998, after giving effect to the Acquisition, the Company had $547.0 million of long-term debt outstanding, $323.8 million of which was secured. Under the New Credit Agreement, the Company has scheduled principal payments aggregating $5.3 million, $10.4 million and $15.4 million for the years 1998, 1999 and 2000, respectively, increasing to a maximum of $73.9 million in 2006. For the year ended November 30, 1997, after giving effect to the Acquisition, pro forma interest expense would have been $54.9 million 48 compared to the actual interest expense of $31.3 million, $3.1 million and $1.9 million for 1997, 1996 and 1995, respectively. Future financial results will also differ from prior periods because of the increased depreciation and amortization of assets that were restated to their fair values upon the Company's emergence from bankruptcy and again at the date of the Acquisition. See 'Effects of Reorganization on Operations and Financial Condition.' For the year ended November 30, 1997, after giving effect to the acquisition, the pro forma depreciation and amortization would have been $56.7 million compared to actual depreciation and amortization of $30.8 million and $28.7 million for 1996 and 1995, respectively. YEAR 2000 The Company is performing a comprehensive review to identify the systems affected by the Year 2000 issue. A project committee meets regularly to review the status of the investigation into and resolution of Year 2000 issues. As a result of the committee's progress to date, the Company expects to modify or upgrade existing systems and, in some cases, replace systems. The Company does not expect to spend any significant incremental amounts with outside contractors to complete any necessary modifications or conversions, but is redeploying existing internal resources. The Company presently believes that through the planned modification to existing systems and conversion to new systems, as well as ongoing correspondence with suppliers and customers, the Year 2000 issue will be resolved on a timely basis, and any related costs will not have a material impact on the results of operations, cash flows or financial condition of the Company. RECENTLY ISSUED ACCOUNTING STANDARDS In 1997, the FASB issued Statement of Financial Accounting Standards No. 128, 'Earnings per share' ('SFAS 128'), Statement of Financial Accounting Standards No. 130, 'Reporting Comprehensive Income' ('SFAS 130') and Statement of Financial Accounting Standards No. 131, 'Disclosures About Segments of an Enterprise and Related Information' ('SFAS 131'). SFAS 128 establishes standards for computing and presenting earnings per share ('EPS') and applies to entities with publicly held common stock or potential common stock. This statement requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. SFAS 130 establishes standards to measure all changes in equity that result from transactions and other economic events other than transactions with owners. Comprehensive income is the total of net income and all other nonowner changes in equity. SFAS 131 introduces a new segment reporting model called the 'management approach.' The management approach is based on the manner in which management organizes segments within a company for making operating decisions and assessing performance. The management approach replaces the notion of industry and geographic segments. The Company will adopt SFAS 128 in the fiscal year ending November 30, 1998, including interim periods. The Company does not expect to adopt SFAS 130 and SFAS 131 until the end of its fiscal year ending November 30, 1999. The Company believes that the adoption of SFAS 128, SFAS 130 and SFAS 131 will not significantly affect the Company's financial condition, results of operations or cash flows. 49 BUSINESS The Company operates in certain self-defined markets for which public market share information is not readily available. The market share information and description of the markets contained in this Prospectus are based on management's good faith estimates. Management's estimates are based on, among other things, the following factors: (i) management's knowledge of the market based on its historical business and industry experience; (ii) discussions with customers and competitors in the various niche markets in which the Company competes; and (iii) the Company's product sales compared to management's calculated estimates of the total product sales in each particular market. The Company has not independently verified this market share data and makes no representation as to its accuracy. GENERAL Founded in 1843, Eagle-Picher is a diversified manufacturer of industrial products for the automotive, aerospace, defense, telecommunications, food and beverage and construction industries. The Company's long history of innovation in technology and engineering has helped it become a leader in certain niche markets in which it competes. Eagle-Picher operates more than 50 plants in the U.S., England, Germany, Spain and Mexico, and sells its products in over 60 countries worldwide. The Company has achieved significant internal growth in both sales and EBITDA, with a compounded annual growth rate since 1993 of 8.2% and 10.9%, respectively. For the 1997 Fiscal Year, the Company realized net sales and EBITDA of $906.1 million and $104.0 million, respectively. See 'Management's Discussion and Analysis of Financial Condition and Results of Operations' for a discussion of the Company's net income (loss). The Company's operations are organized under three major business groups: the Automotive Group, the Machinery Group and the Industrial Group, which accounted for 48.0%, 29.9% and 22.1% of the Company's net sales and, after allocation of corporate overhead, accounted for 49.2%, 27.0% and 23.8% of the Company's EBITDA, respectively, for the 1997 Fiscal Year. The Automotive Group. The Automotive Group designs, develops, and manufactures precision machined and rubber coated metal components for the global automotive industry. Its customers include OEMs such as Ford, GM, Chrysler, Toyota, Nissan, Honda, Fiat, BMW and Rover, as well as Tier I suppliers. The Company pioneered the development of materials and processes for coating metal with elastomer (rubber) compounds, and the Company believes its proprietary technologies in this area give it competitive advantages. The Company's rubber coated metal products consist of highly specialized gaskets and materials for high-temperature and high-pressure applications, including disc brake noise insulators, air conditioning compressor gaskets, and gaskets and coated materials for automotive powertrains. More than 150 precision machined components are produced by the Automotive Group, including vibration dampening devices for engine and drivetrain applications and automatic transmission pump assemblies. The Company believes that it is the only non-OEM in North America manufacturing high volumes of automatic transmission oil pumps and is one of the top three companies worldwide that design and produce torsional crankshaft dampers. The Automotive Group also produces fluid systems assemblies, molded rubber products, aluminum castings, and interior trim products. The Machinery Group. The Machinery Group designs and produces special purpose batteries, construction equipment and can washing and coating machinery. The Company has played a crucial role in the development of power systems for U.S. space flight, and its batteries have powered missions from the back-up system that safely brought Apollo 13 back to Earth 28 years ago, to last year's Mars Pathfinder. The Company's batteries are also used in virtually every U.S. missile system, including the Patriot and Tomahawk missiles. Recognized as one of the world leaders in nickel-hydrogen technology since it powered the first communication satellite launch in 1983, the Company believes it is a world leader in providing power systems for communications and surveillance satellites, including Motorola's Iridium'r' project. Construction equipment produced by the Machinery Group includes elevating wheel tractor scrapers, which are made under a sole-source contract with Caterpillar, and a premium line of heavy duty forklift trucks, as well as related replacement parts. The Machinery Group also designs, manufactures and installs specialized high volume can washing and coating machinery primarily for the manufacturers of two-piece cans primarily for the food and beverage industry. 50 The Industrial Group. The Industrial Group is a leading producer of specialty materials, filter aids and absorbents which are used in a wide range of applications. The Company's specialty materials business, which has grown by approximately 60%, as measured by net sales, in the past two years, develops, manufactures and tests high-purity materials including germanium wafers (used in solar cells for the satellite industry), germanium tetrachloride (used in fiber optic cables for the telecommunications industry) and boron (used as a neutron absorber in nuclear power plants and as a semiconductor dopant). With a 30-year history of developing processing techniques, the Company produces the highest purity boron and germanium available in the market. Recent innovations by the Industrial Group have led to development stage production of a zinc selenide crystal that adds blue and true-green to the existing red color spectrum of LEDs, with potential use in flat panel displays and signage. The Industrial Group is also one of the world's largest producers of diatomaceous earth and perlite filter aids, which are used for high purity filtration by food and beverage processors and by chemical and pharmaceutical companies. BUSINESS STRATEGY The Company's strategy is to enhance its competitive position as a leading global manufacturer for the automotive, aerospace, defense, telecommunications, food and beverage, and construction industries. To achieve this objective, the Company will continue to build upon the following strengths: Leading Positions in Niche Markets. Eagle-Picher's long history of innovation and reputation for quality have afforded it leading positions in certain niche markets. The Company enjoys leading positions in, among others, the market for rubber coated metal products, the North American non-OEM market for transmission pumps, the market for nickel-hydrogen batteries and the market for two-piece can washers. The Company believes that it has achieved significant market share in these markets because of its customer relationships, engineering excellence, high quality standards and industry reputation. Strong Customer Relationships. The Company has established long-term relationships with many of its customers. It has been supplying its products to each of Ford, GM and Chrysler for more than 45 years; Lockheed Martin for more than 40 years; and Motorola for more than 30 years. The Company believes it has developed strong customer relationships by working closely with customers to design products that meet the customers' specifications. Often, the Company provides innovative and cost-efficient engineering solutions to customer problems. For example, the Industrial Group continuously works with customers to develop lighter and longer-lasting battery systems to complement the latest generations of missiles and satellites. In addition, through the development of a new camshaft damper, the Automotive Group recently solved a significant powertrain vibration problem for certain OEMs. Many of the Company's facilities are located near customer plants, enhancing the Company's ability to respond to its customers' needs. The Automotive Group recently built a new transmission pump production facility in Manchester, Tennessee and a new manufacturing facility in San Luis Potosi, Mexico, in each case to meet the increasing needs of OEMs located nearby. The Company believes that its strong relationships with customers, particularly automotive and capital equipment OEMs, give the Company a competitive advantage and position the Company to capitalize on a growing trend toward outsourcing. Diversified Product Lines; Global Presence. The Company manufactures hundreds of products for the automotive, aerospace, defense, telecommunications, food and beverage and construction industries. The Company sells its products to customers located in over 60 countries through its extensive network, including global manufacturing facilities throughout the U.S. and Europe. The Automotive Group alone serves virtually all major automotive OEMs worldwide. The Company believes that its product diversification and global sales reduce its exposure to any one market segment or customer. Superior Product Quality. The Company believes it has a reputation among its customers for providing technologically advanced, high quality products. The Company has been honored by many of its customers for its commitment to quality and service, and, in the last two years, has earned Ford's 'Supplier of the Year Award' (Ford's Sharonville facility), Hughes SC's 'Performance Excellence Award,' MD's 'Preferred Supplier Award' and Lockheed Martin's 'Tradition of Excellence Award.' 51 Low Cost Structure. The Company is committed to controlling costs and improving operating efficiencies. The Company believes that it is a low cost producer in many of the markets in which it competes. The Company attributes its low cost position to its leading positions in niche markets, relatively low overhead costs due to the small town locations of many of its facilities, a primarily non-union workforce, advanced proprietary technology and advanced manufacturing processes, including the Toyota Production System at one of the Automotive Group's facilities. Low cost is essential to the Company's ability to continue to remain competitive. INDUSTRY OVERVIEW AUTOMOTIVE The Automotive Group's performance, growth and strategic plan are directly related to certain trends within the OEM and Tier I markets, including the OEMs' increasing reliance on outsourcing, the expansion of OEM supplier responsibilities and the shift by OEMs to the purchase of 'systems' (several components assembled together) rather than individual components, all of which have contributed to a consolidation of OEM suppliers. Since the 1980's, OEMs such as Ford, GM and Chrysler have been outsourcing an increasing percentage of their production requirements. OEMs benefit from outsourcing because outside suppliers generally have significantly lower cost structures and can assist in shortening development periods for new products. Consistent with the trend toward outsourcing, OEMs have focused on developing long-term, sole source relationships with suppliers that accept significant responsibility for product management and meet increasingly strict standards for product quality, on-time delivery and lower manufacturing costs. These suppliers are expected to control all aspects of the production of system components, including design, development, component sourcing, manufacturing, quality assurance, testing and delivery to the customer's assembly plant. Many suppliers do not have the resources to meet these requirements and the Company believes that, as a result, the automotive OEM supplier market will be divided among a smaller group of high quality key suppliers. While the OEMs' focus today is on quality, cost and service, the Company believes that their focus for the future will be on global capabilities, innovation and ability to provide value-added products and systems. The OEMs have been very successful in making high quality and low cost a minimum requirement to remain in the industry, rather than a competitive advantage for certain suppliers. These evolving requirements can best be addressed by suppliers with sufficient resources to meet such demands. For suppliers such as the Company, this environment provides an opportunity to grow by obtaining business previously provided by other suppliers who can no longer meet the current or future requirements and expectations of the OEMs and by acquisitions that further enhance product manufacturing and service capabilities. INDUSTRIAL AND MACHINERY Defense and Space Power Systems. The defense and space power systems markets to which the Industrial and Machinery Groups sell their products design, develop, produce and sell components or systems for use in a variety of military applications (including missiles, smart weapons and aircraft) and space power applications (including satellites, spacecraft and launch vehicles). In recent years, the defense industry in the U.S. has been characterized by steadily declining defense budgets primarily as a result of a change in the nature of perceived threats to U.S. national security interests since the dissolution of the Soviet Union in 1991 and growing political pressure to balance the federal budget. Industry sales to the DOD declined for eight consecutive years through 1995. As a result, many U.S. spacepower and defense-related companies have focused on a strategy of downsizing and consolidation. Although the defense budget is shrinking, the U.S. government is still the largest consumer of space power. However, propelled by rapid growth in telecommunications, broadcast, aircraft navigation, and imaging applications, worldwide non-governmental spending in the space power market is growing. If 52 this trend continues, non-governmental space power spending could surpass government space power spending within a decade. Significant markets in the commercial space segment include satellites, satellite launchers and supporting ground equipment. U.S.-based companies manufacture of satellites worldwide, led by Hughes and other U.S. satellite manufacturers including Lockheed Martin, Loral Space and Communication Ltd., TRW Inc. and Ball Corporation. Despite their lead in satellite technology and production, U.S. companies command only about one-third of the worldwide satellite launch business. Market participants include Paris-based Arianespace, an affiliate of The European Space Union, as well as U.S.-based Lockheed Martin and The Boeing Company ('Boeing'). In addition, NASA's Space Shuttle is used to launch commercial as well as government satellites, and U.S. companies are developing next-generation reusable launch vehicles. Several other countries, including China, India, Israel, Brazil and Japan, are also developing satellite launch capabilities, and certain Russian and Ukrainian companies have entered into joint ventures with U.S. companies. The rapid growth in satellite launch demand has been furthered by the development of an array of satellite services companies and the development of new services such as satellite broadcast cable television and global mobile telephone services and high-volume data transfer. In the military space power market, satellite reconnaissance and communications capabilities are becoming more important. For example, the U.S. Air Force has a number of important space programs including DSP (Defense Support Program), Milstar satellite communications, and Navstar Global Positioning System, and continues to provide funding for the production of medium launch vehicles and Titan heavy launch vehicles. The primary Army space program provides ground systems for the Defense Satellite Communications System, while the Navy operates its Fleet Satellite Communications System. Telecommunications. A number of trends within the telecommunications industry have had and will continue to have a fundamental impact on the satellite market. Advances in cellular and satellite technologies have made possible mobile satellite systems that could link the entire world in a single, seamless wireless communication system. Owners and operators of communication satellites, which continually need space access, have fueled the growth in this industry and now account for virtually all of the private sector market for commercial launch services. Six new services planned for implementation between 1998 and 2000 will rely on large low earth orbiting ('LEO') satellite systems to offer global mobile telephone, television, internet and other information services. LEO satellites, with orbits of approximately 1,500 nautical miles, are typically smaller and lighter than their geostationary ('GEO') counterparts, which orbit at a distance of approximately 22,300 nautical miles, and mid-earth orbit satellite systems, which orbit the Earth at distances between the orbits of LEOs and GEOs. The demand for these services is expected to result in the production and launch of hundreds of satellites between 1998 and 2000. The Company believes that these satellite constellations will increase future demand because the satellites are expected to be replaced every five years. The primary customers of satellite components are the satellite manufacturers such as Hughes and Lockheed Martin, and satellite owners such as Iridium World Communications Ltd. (30% of which is owned by Motorola), Globalstar Telecommunications Limited ('Globalstar') (which is owned by Loral/Qualcomm Incorporated) and Orbital Sciences Corporation. The increased demand for satellites has attracted several small companies and several larger satellite manufacturers to become satellite owners. Semiconductors. Semiconductors are the basic building blocks used to create a variety of components and systems used in satellites, spacecraft and aircraft as well as a broad array of other communications, computer and computer peripheral and consumer electronics applications. Continual improvements in semiconductor processes and design technologies have enabled the production of complex, highly integrated circuits which provide faster execution, increased functionality and greater reliability at lower cost. As a result, semiconductor demand has grown substantially in its primary markets of computing and communications, and has experienced increased growth in additional markets such as consumer electronic devices, automotive products and industrial automation and control systems. 53 Construction Equipment. The construction equipment industry in which the Machinery Group competes has a broad spectrum of participants that specialize in various product lines. The principal factors affecting the market are distribution strength, market share objectives, profit objectives, unique product or service advantages and product support. The construction industry in the Midwest and Northeast is highly seasonal. Construction activity slows down, especially in these regions, beginning in November and continuing through the first quarter. North American retail demand for construction equipment is strongest in the second and fourth quarters. In the construction equipment market, the Company is the sole producer of elevating wheel tractor scrapers for Caterpillar. The other major participant in this market is Deere & Company. The primary participants in the vertical mast rough-terrain forklift truck market, in addition to the Company, are Case Corporation, JCB Inc. and Sellick Equipment Limited. The materials handling industry to which the Machinery Group supplies its cushion-tire forklift trucks, which are primarily used in the paper, metals and automotive markets, is a mature industry which historically has been cyclical. Fluctuations in the rate of orders for forklift trucks reflect the capital investment decisions of the customers, which in turn depend upon the general level of economic activity in the various industries served by such customers. In the most recent business cycle, the North American market for forklift trucks reached its lowest level in 1991 and has increased in all but one year thereafter. Can Washing Equipment. The U.S. metal beverage container industry in which the Machinery Group also competes has experienced slow demand growth at a compounded annual rate of approximately 2% over the last decade, with much of that growth in the soft drink market. As a result, capital spending on can manufacturing equipment has been minimal and the Company has focused on servicing and providing replacement parts for existing equipment. The demand for can manufacturing equipment is primarily from emerging markets such as China, Vietnam, Thailand, Poland, Russia, India and Brazil. The majority of the Company's sales of new two-piece can washers is expected to be in these emerging markets for the foreseeable future. DESCRIPTION OF BUSINESSES THE AUTOMOTIVE GROUP The Automotive Group is a supplier in the global automotive market offering a diverse range of products to three primary geographic markets -- North America, Europe and Asia. The Automotive Group is primarily engaged in the production and sale of mechanical and structural parts for passenger cars, trucks, vans and recreational and utility vehicles. Their offerings include state-of-the-art products based on proprietary technologies and staple products within different markets. Manufacturing plants, largely in the U.S., but also in England, Germany, Mexico and Spain, and sales and engineering offices in the U.S., Japan and Europe serve automotive markets around the world. The operating strategy of the Automotive Group is to identify and target niche markets and then to create substantial market positions within these niche markets. The Company believes that the Automotive Group is positioned to capitalize on the recent trend by OEMs to outsource their products. The Automotive Group distributes its products primarily to Ford, GM, Chrysler, Toyota, Nissan and Honda, and to Tier I suppliers of those manufacturers, directly through its internal sales personnel. With respect to the hundreds of products manufactured by the Automotive Group, competition varies widely as to the number and type of competitors, the methods of competition, and the Automotive Group's competitive positions. Generally, competitive conditions for the Automotive Group are characterized by a decrease in the number of competitors while at the same time an increase in the size of existing competitors, increased foreign competition (particularly from Asia), increased emphasis on quality and intense pricing pressures from major customers. 54 The Automotive Group is composed of two major product groups: Precision Machined Components and Rubber Coated Metal Products. The following table sets forth, for the last three fiscal years, the net sales and the percentage of the Company's total net sales contributed by each product group.
1997 1996 1995 ---------------------- ---------------------- ---------------------- % OF TOTAL % OF TOTAL % OF TOTAL NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES --------- ---------- --------- ---------- --------- ---------- (DOLLARS IN MILLIONS) Precision Machined Components................. $ 205.6 22.7% $ 182.1 20.4% $ 168.9 20.0% Rubber Coated Metal Products.................. 80.8 8.9 83.9 9.4 77.9 9.2 Other Automotive Products..................... 112.5 12.5 92.8 10.4 92.1 10.8 Divested Automotive Products.................. 36.3 4.0 80.8 9.1 94.3 11.1 --------- ----- --------- ----- --------- ----- Total............................... $ 435.2 48.1% $ 439.6 49.3% $ 433.2 51.1% --------- ----- --------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Precision Machined Components. The Automotive Group's Hillsdale division specializes in the design, manufacture and distribution of a full line of precision machined aluminum and steel parts for the worldwide automotive market. Precision machined components include vibration dampening devices and precision machined castings and forgings which are designed and engineered for engine, transmission and driveline applications. The Automotive Group's transmission products include pump assemblies for use in automatic transmissions. The Company believes that it is the only non-OEM in North America manufacturing high volumes of automatic transmission oil pumps. The Hillsdale division produces the entire pump assembly for Ford's electronic four-speed overdrive transmission, which is used on pick-up trucks, vans and sport utility vehicles. Each pump contains over 50 components which are machined, assembled and tested by Hillsdale. The Automotive Group also produces torsional vibration dampening devices for use in engine and drivetrain applications. A damper is a vibration control device which reduces the torsional stress vibrations caused by internal combustion engine systems, thereby alleviating the stress on shafts and relaxing the flex points. Dampers reduce fatigue and prevent cracking thereby enhancing the durability of engines and their components. The Company believes it is one of the top three companies worldwide which designs and produces torsional crankshaft dampers. The Automotive Group recently expanded its international operations by opening a new facility in Tamworth, England to service existing and new customer needs. The Automotive Group also produces nearly 150 different machined castings and forgings for power steering, drivetrain and transmission applications from numerous metals. Each part is specially designed to meet a customer's specifications. Once a product is designed for a customer, the Company believes it becomes the sole source provider of such products to that customer. The Automotive Group also produces its own rubber compounds which enables it to consistently maintain high quality and to manipulate the composition of the rubber for its different products. By controlling the quality and composition of its rubber, the Automotive Group is better able to manufacture components to critical tolerances, giving it an advantage over its competitors. Hillsdale continues to diversify its customer base, application and product range, as well as its international presence, most notably in Mexico. Hillsdale has experienced growth within the expanding Japanese plant operations in the U.S. with such products as torsional vibration dampers and transmission pumps. As a result of such business, and consistent with its strategy to remain close to its customer base, Hillsdale recently completed a new manufacturing facility in Manchester, Tennessee to supply the nearby Nissan assembly plant's transmission pump needs, which were approximately 271,000 for the year ended December 31, 1997. The Company believes that its Manchester facility will have the capacity to produce 300,000 transmission pumps annually by the end of 1998. The market for precision machined components tends to have a few strong and well-positioned competitors including the OEMs, as well as Simpson Industries, Inc. and Freudenberg-NOK General Partnership ('Freudenberg'). The Automotive Group competes in this market primarily on the basis of price, delivery, quality and service. 55 Rubber Coated Metal Products. The Automotive Group's rubber coated metal products, which are manufactured by its Wolverine Gasket division, consist of highly specialized gaskets and materials for high-temperature and high-pressure applications in the automotive industry using proprietary processes and formulations. Generally, gaskets are compressible, lightweight material placed between metal parts to act as a seal and prevent fluids and gases from leaking. Rubber coated metal products are composed of three principal product lines: disc brake noise insulators, compressor gaskets for air conditioning units and gaskets and coated materials for powertrain applications (including head gaskets). Wolverine Gasket pioneered the development of materials to manufacture the high-torque sealing products needed to withstand intense heat and pressure. Wolverine Gasket also invented the process of coating materials with a thin elastomer to render them impervious to fluid penetration and able to withstand high-torque loads. This technology makes possible the coating of the wide range of substrate materials necessary to operate a complex machine such as a car, which generates intense heat and pressure. The Automotive Group's widely used compounds include Wolverine Steel N'r', a steel base with an oil-resistant specialty compounded rubber; Foamet'r', a temperature-resistant compound which is bonded to steel or aluminum; Alum-N'r', an aluminum alloy-based product coated with nitrile synthetic rubber which is particularly effective where corrosion or weight is a factor; and Vulkol'r', a coated rubber-to-vulcanized fiber sealing material. Wolverine Gasket, which is currently a supplier to OEMs including Ford, Toyota and GM, plans to expand its sales to Tier I suppliers in the future. The trend in the auto industry toward high-temperature, high-compression and longer-lasting engines requires that engine gaskets meet more stringent specifications for durability and sealing. Wolverine Gasket's coated metal products provide the most significant component of multilayer steel head gaskets, which the Company believes will become the gasket of choice for future engine designs. A multilayer steel head gasket is a sealing material which is better able to withstand intense heat and pressure, such as those which are common in diesel engines. In addition, Wolverine Gasket expects the brake insulator market to grow as more cars are equipped with four-wheel disc brakes. Wolverine Gasket's coating expertise, combined with its recent major investment in a state-of-the-art coating line, gives the Company the opportunity to sell its material to a new customer base throughout the world. The Automotive Group's new 50,000 square foot facility in Blacksburg, Virginia contains a technically- advanced liquid rubber-to-steel coil coating line which enables the Company to produce rubber coated metal to closer tolerances. The market for rubber coated metal products is highly fragmented. The Automotive Group competes against a variety of different companies in the geographical markets it supplies, and has no primary competitor. The Company believes that it is the sole supplier to the U.S. automotive compressor gasket market. The Company also believes that it has 70% of the U.S. market for disc brake noise insulators. THE MACHINERY GROUP The Machinery Group is composed of two major product groups: special purpose batteries and construction equipment. The following table sets forth, for the last three fiscal years, the net sales and percentage of the Company's total net sales contributed by each product group:
1997 1996 1995 ---------------------- ---------------------- ---------------------- % OF TOTAL % OF TOTAL % OF TOTAL NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES --------- ---------- --------- ---------- --------- ---------- (DOLLARS IN MILLIONS) Special Purpose Batteries..................... $ 131.0 14.4% $ 108.8 12.2% $ 99.3 11.7% Construction Equipment........................ 96.8 10.7 95.1 10.7 108.4 12.8 Other Machinery Products...................... 30.2 3.3 35.7 4.0 32.2 3.8 Divested Machinery Products................... 12.8 1.4 18.0 2.0 14.8 1.7 --------- ----- --------- ----- --------- ----- Total............................... $ 270.8 29.8% $ 257.6 28.9% $ 254.7 30.0% --------- ----- --------- ----- --------- ----- --------- ----- --------- ----- --------- -----
56 Special Purpose Batteries The Machinery Group, primarily through its Federal Systems, Power Systems and Power Subsystems departments, designs, manufactures and tests special purpose batteries for advanced value-added products for three markets: telecommunications, aerospace and the U.S. government. The Company is the leading supplier of special purpose batteries for aerospace and defense applications. The Company's broad line of specialty batteries includes: (i) thermal batteries (used primarily in missiles, smart weapons and other defense systems); (ii) silver-zinc batteries (used primarily in military applications and in launch vehicles); (iii) nickel-hydrogen cells and batteries (used in military, scientific and commercial aerospace and telecommunications satellites); (iv) lead acid batteries (used in emergency lighting, uninterruptible power systems, telecommunications, handheld power tools and ride-on toys); and (v) nickel-cadmium batteries (used in aircraft and aerospace applications). The Company believes that its special purpose batteries have been used in virtually every U.S. missile system, including the Patriot and Tomahawk missiles used in the Persian Gulf war, and in all spacecrafts used in the principal U.S. space missions, including the space shuttle and the Mercury, Gemini and Apollo spacecrafts. Thermal Batteries and Silver-Zinc Batteries. Thermal batteries, unlike most other batteries, can remain dormant for long periods of time prior to their use. The Company is the leading supplier of batteries for missiles, submunitions, mines, sonobuoys, fuses and aerospace power backup. The Company has supplied batteries for virtually every U.S. missile system and accounts for 70% of all thermal battery sales for U.S. military applications and 50% of all such sales for military applications for the U.S. and its allies combined. It was the Company's silver-zinc batteries that provided the essential back-up power systems for the life support, guidance and communications that safely brought the Apollo 13 spacecraft back to Earth 28 years ago, as well as the batteries used to power the Mars Pathfinder in the exploration of Mars last year. The Company believes that it is the market leader in thermal and silver-zinc batteries on the basis of quality, customer satisfaction, technological innovation and cost structure. The Machinery Group's primary competitor for thermal batteries is (ASB) Aerospatiale Batteries, which has a large share of the European market. The Machinery Group's primary competitor for silver-zinc batteries is Yardney Technical Products, Inc. in the U.S. and SAFT in Europe. The Company believes that its higher quality and lower cost have enabled it to maintain its market share. Nickel-Hydrogen Batteries. The Machinery Group's Power Subsystems department is recognized as the world leader in nickel-hydrogen technology as well as being the most diversified manufacturer of special purpose NiH2 power systems. The nickel-hydrogen battery system, which is the most widely-used power source for weather, communications and military satellites, is recognized for its long-life (typically greater than 15 years), reliability and durability. The NiH2 power system, which is designed to outlast most systems in which it is installed, powered the first communication satellite launch in 1983 and is currently part of the Hubble Space Telescope. The Company believes that more than 90% of the communications and surveillance satellites manufactured in the U.S. are powered by Eagle-Picher nickel-hydrogen batteries, including all major global telecommunications systems. The Company believes that it is the primary or sole source supplier to such customers as Lockheed Martin, SS/Loral, Hughes and Boeing. The Company has several contracts for satellite components with several of these satellite projects including Motorola's Iridium'r' system consisting of 66 LEO satellites and offering digital communications (voice, data, fax and paging capability) to subscribers and Globalstar's system consisting of 48 LEO satellites to provide fixed and mobile telecommunication services by 1999. Lead-Acid Batteries. The Machinery Group manufactures an extensive line of rechargeable valve regulated lead-acid ('VRLA') batteries under the Carefree'r' brand. Carefree'r' sealed lead-acid batteries are typically small rechargeable batteries used in emergency lighting, uninterruptible power systems, telecommunications, handheld power tools and ride-on toys. The Carefree'r' line has approximately 6% of the $250 million market for less-than-60-ampere-hour VRLA batteries. Major customers of the Carefree'r' line include Peg Perego, Simplex, C.E.A. and Lithonia. The Company competes with companies that have a significantly larger market share. The Company believes that it offers the shortest lead times of any manufacturer, superior telecommunications product performance and the ability to provide unique battery shapes and sizes to adapt to a customer's needs. 57 Nickel Cadmium Batteries. The Company supplies its nickel cadmium batteries for space and satellite programs to NASA and U.S. satellite builders, such as Hughes and TRW. They also sell to the DOD and aircraft manufacturers, such as Lockheed Martin and Bell Helicopter, for use in airplanes and helicopters. The Company competes primarily on the basis of quality, performance and cost. Construction Equipment The Machinery Group's Construction Equipment division manufactures primarily two construction equipment products: elevating wheel tractor scrapers and heavy-duty industrial forklift trucks. Wheel tractor scrapers are used for removal of overburden in open-pit mining and site preparation on highway, commercial, municipal and industrial projects. The Company is the exclusive source of elevating wheel tractor scrapers to Caterpillar, which the Company believes has 85% of the U.S. market for elevating wheel tractor scrapers. In 1996, the Company received Caterpillar's 'Certified Supplier' designation. The Machinery Group manufactures several different models of heavy duty forklifts. Through its Construction Equipment division, the Machinery Group utilizes Caterpillar's dealer network to sell its own branded products, including cushion-tire forklift trucks, which are sold primarily to paper, metal and automotive manufacturers, and its R-Series, which are sold primarily to independent rental fleets such as The Hertz Corporation and U.S. Rentals. The division recently introduced a lower cost truckmounted forklift called 'TrailerMate' which is also sold to a variety of customers through the Caterpillar dealer network. The industrial forklift market is highly fragmented and many of the Company's competitors have a greater market share. However, in the niche markets in which the Company competes, such as in the heavy duty rough terrain market, the Company has a significant market share. The Company also sells to the replacement parts market, which accounts for 12% of the sales of the Company's Construction Equipment division. The Construction Equipment division recently expanded its facility in Mexico, which now has more than 300 employees. THE INDUSTRIAL GROUP The Industrial Group is composed of two product groups: specialty materials and filter aids and absorbent products. The following table sets forth, for the periods indicated, the net sales and percentage of the Company's total net sales contributed by each product line:
1997 1996 1995 ---------------------- ---------------------- ---------------------- % OF TOTAL % OF TOTAL % OF TOTAL NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES --------- ---------- --------- ---------- --------- ---------- (DOLLARS IN MILLIONS) Specialty Materials............................ $ 101.9 11.3% $ 88.4 9.9% $ 62.2 7.3% Filter Aids/Absorbent Products................. 63.6 7.0 61.8 7.0 58.1 6.8 Other Industrial Products...................... 5.1 0.5 4.6 0.5 4.1 0.5 Divested Industrial Products................... 29.5 3.3 39.3 4.4 36.2 4.3 --------- ----- --------- ----- --------- ----- Total................................ $ 200.1 22.1% $ 194.1 21.8% $ 160.6 18.9% --------- ----- --------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Specialty Materials The Industrial Group, primarily through its Environmental Science and Technology ('ESAT'), Electro-Optic Materials ('EOM') and Boron departments, develops, manufactures and tests high-purity specialty materials for a wide range of services and products. The Industrial Group's significant specialty materials products include germanium and boron. Germanium. The Industrial Group is one of the world's leading manufacturers of germanium products. With over 50% of the market, the Industrial Group is one of the leading suppliers of thin polished germanium substrates (known as wafers) for solar cells on space satellites. The wafers are used in the production of solar cells which power satellites and recharge their batteries. The Industrial Group's germanium wafers are used on the Hubble Space Telescope, satellite systems including Panamsat, Indiasat, the Lockheed Martin A-2100 Buss and the Iridium'r' network. The Industrial Group also produces germanium tetrachloride, which is used as a dopant in the manufacture of fiber optic 58 cable. Germanium tetrachloride, when added to glass fiber, changes the light guiding properties of the fiber, enabling light signals to travel for over 60 miles. The Industrial Group also supplies germanium metal for use in infrared optics (such as night vision lenses) and germanium dioxide, which is used as a catalyst in the production of polyethylene terephthalate (PET) bottles in the Asian market. Boron. The Industrial Group's Boron department developed the sophisticated manufacturing processes necessary to produce isotopically pure boron, which involves the separation of boron into its isotopes, and to produce high purity enriched boron compounds. One of its primary products is enriched boric acid, which is used as a neutron absorber in nuclear power plants. The nuclear power plants that use enriched boron are primarily those that use mixed oxide ('MOX') fuels, which create a more intense reaction. Other plants that have not converted to the use of MOX fuels can use non-enriched boron, which is not manufactured by the Company, as a control material. Boron isotopes can also be used in the manufacture of nuclear control rod pellets and in storage casks used to transport and store spent nuclear fuel and other materials. The Industrial Group supplies over 90% of the world's demand for 10B and 11B isotopes. Although there are few competitors in the enriched boron markets, the Industrial Group's primary competition is manufacturers of alternate materials made of non-enriched boron compounds. The Industrial group competes in the boron market primarily on the basis of a facility's overall operating cost. Semiconductor Dopants and Crystal Growth. The Industrial Group, through its ESAT, EOM and Boron departments, also manufactures semiconductor dopants. Semiconductors which are the 'brains' of the modern computer, are tiny powerful devices that control electrical currents. In recent years, the trend in the semiconductor market has been toward producing smaller and more powerful chips which are more sensitive to impurities in the production process. The Industrial Group, through its patented 'Chromacut' purification process, purifies semiconductor dopants beyond current standards. The Industrial Group has pioneered certain development stage products including a zinc selenide crystal that adds blue and green to the existing red color spectrum of light emitting diodes (LEDs). This development provides increased brightness and definition for a variety of applications including flat panel displays (personal computers), signage (athletic facilities), aircraft cockpit display, traffic lights and automotive instrumentation. Filter Aids and Absorbent Products The Industrial Group produces diatomaceous earth (diatomite) filter aids and perlite filter aids which are used primarily by the food and beverage industry and for general industrial applications. Diatomite is an odorless and tasteless non-metallic mineral, derived from the skeletal remains of aquatic plants, with a honeycomb structure that is ideal for filtration. Perlite is a non-metallic mineral of volcanic origin that expands like popcorn when heated to elevated temperatures. The diatomite and the expanded perlite are milled and classified into appropriate particle size ranges, producing low density, efficient filter aids. Examples of diatomite and perlite filtration applications include corn sweeteners, vegetable oils, cane and beet sugar, fruit juices, beer, wine, chemicals, pharmaceuticals, and water purification. The Industrial Group also produces diatomite granular absorbents and functional fillers. These products are used as industrial absorbents, soil amendments, fillers, catalyst carriers, and for agricultural applications. The diatomite and perlite filter aids are marketed worldwide under the brand name Celatom'r' and the absorbents are marketed under the brand name Floor Dry'r'. The Industrial Group competes globally in the market for diatomaceous earth and perlite filter aids and in North America for industrial absorbents. The Company believes that it has the second largest market share in the worldwide filter aids market. The largest market share is held by World Minerals, a division of Alleghany Corporation. In the North American market for industrial absorbents, the Industrial Group has a variety of competitors, some of which have a larger market share. RESEARCH AND DEVELOPMENT In fiscal 1997, Eagle-Picher spent approximately $14.8 million for research and development and related activities, primarily for the development of new products or the improvement of existing products. Comparable costs were $18.0 million and $17.3 million for 1996 and 1995, respectively. 59 RAW MATERIALS The prices of raw materials are subject to volatility. The Company's principal raw materials are rubber, steel, zinc, nickel, germanium, gallium and boron. These raw materials are commodities that are widely available. Although the Company has alternate sources for most of its raw materials, the Company's policy is to establish arrangements with select vendors, based upon price, quality, and delivery terms. By limiting the number of its suppliers, the Company believes that it obtains materials of consistently high quality at favorable prices. BACKLOG At November 30, 1997 and 1996, the Company's order backlog was approximately $250.0 million. The Company expects the order backlog outstanding at November 30, 1997 to be filled within the 1998 Fiscal Year. Approximately $13.2 million of the Company's order backlog at November 30, 1996 was attributable to sales of the Transicoil business, which was sold by the Company in July 1997. As customary in the automotive industry, the Company enters into blanket purchase orders with their customers with respect to specific product orders. From time to time, the customer, depending on its needs, will provide the Company with releases on a blanket purchase order for a specified amount of products. As a result, the Automotive Group has virtually no order backlog. The Company's Industrial and Machinery Groups have contracts with the U.S. Government which have standard termination provisions. The U.S. Government retains the right to terminate contracts at its convenience. However, if contracts are terminated, the Company is entitled to be reimbursed for allowable costs and profits to the date of termination relating to authorized work performed to such date. U.S. Government contracts are also subject to reduction or modification in the event of changes in Government requirements or budgetary constraints. INTELLECTUAL PROPERTY The Company holds more than 50 patents, primarily in the United States and Canada. Many of the Company's products incorporate a wide variety of technological innovations, some of which are protected by individual patents. Many of these innovations are treated as trade secrets with programs in place to protect these trade secrets. Accordingly, no one patent or group of related patents is material to the Company's business. The Company also has numerous trademarks, including the Eagle-Picher name, and considers the Eagle-Picher name to be material to its business. PLAN OF REORGANIZATION AND RELATED INJUNCTION In January 1991, the Eagle-Picher Group filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. The filings were not precipitated by any fundamental business problems. Rather, the filings were caused by contingent liabilities, settlement costs and legal expenses resulting from more than two decades of litigation arising out of tens of thousands of claims asserted against the Eagle-Picher Group in connection with its asbestos-related business operations, which ceased by 1974. In August 1996, the Eagle-Picher Group, together with the Injury Claimants' Committee and the Representative for Future Claimants who was appointed by the Bankruptcy Court, proposed the Plan to the Bankruptcy Court. The Bankruptcy Court and the Ohio District Court jointly issued the Order confirming the Plan in November 1996, and the Plan was consummated on November 29, 1996 (the 'Consummation Date'). The major component of the Plan was a settlement of the Eagle-Picher Group's liability for present and future asbestos-related personal injury claims arising out of business operations prior to the date of the bankruptcy petitions under which it was agreed that these claims had a total value of $2 billion. Pursuant to the Plan, (i) the Trust was established and the Company contributed assets to the Trust valued at approximately $730 million in the aggregate (representing the approximately 37% distribution upon the $2 billion allowed claim of the asbestos claimants, as unsecured creditors), consisting of $51.3 million in cash, $250 million in the 10% Debentures, $69.1 million in Tax Refund Notes, $18.1 million in Divestiture Notes and 10,000,000 shares of Common Stock (representing all outstanding shares of Common Stock), and (ii) the PD Trust is to be established and funded with $3 million in cash (which is currently held in escrow by the Company). Pursuant to the 60 Plan, the asbestos-related claims are discharged and the Eagle-Picher Group has no further liability in connection with such claims. Pursuant to the Plan, the Eagle-Picher Group is discharged of the burden of defending more than 150,000 asbestos-related, as well as any lead-related, claims that had been, as well as any such claims that may in the future be, filed against the Eagle-Picher Group. This relief has been accomplished through the establishment of the independent trusts under the Plan to assume, administer, settle and pay such claims. In addition, the Order includes the Injunction, which prohibits claimants with asbestos-related or lead related claims from bringing actions against the Eagle-Picher Group, and instead requires these claimants to assert such claims only against the Trust or, as to asbestos-related property damage claims, against the PD Trust, each of which was, or in the case of the PD Trust, will be, funded by the Company pursuant to the Plan. Under the Plan the Trust assumed all liability and responsibility for asbestos-related and lead-related personal injury claims against the Eagle-Picher Group, and the PD Trust assumed all liability and responsibility for asbestos-related property damage claims. The Company believes that the Plan, the Injunction and the Bankruptcy Code together will enjoin any claims against the Company or the Eagle-Picher Group with respect to any past, present, or future asbestos-related or lead-related liabilities arising from or based upon business operations prior to the date of the bankruptcy petition. Following confirmation of the Plan, notices of appeal of the Order were filed by one general unsecured creditor (the 'Creditor Appellant') and the Unofficial Committee of Co-Defendants (the 'Co-Defendants'), a group of former manufacturers and distributors of asbestos-containing products that have been named as co-defendants with one or more members of the Eagle-Picher Group in asbestos personal injury lawsuits and have asserted claims against the Eagle-Picher Group for contribution, indemnity and subrogation. The allowance of contribution claims against the Eagle-Picher Group is subject to Section 502(e) of the Bankruptcy Code which states that a claim for contribution asserted by an entity that is liable with a Chapter 11 debtor shall be disallowed to the extent such contribution claim is contingent as of the time of allowance or disallowance of such claim. Neither the Creditor Appellant nor the Co-Defendants requested that the Order be stayed pending appeal. The Creditor Appellant withdrew its notice of appeal by a stipulation dated January 24, 1997. The Co-Defendants appealed the Order directly to the Sixth Circuit (the 'Confirmation Order Appeal'), raising a variety of objections to the Plan and to the Trust's procedures for processing, allowing and paying the Co-Defendants' claims. The Co-Defendants also asserted, among other things, that Section 524(g) of the Bankruptcy Code, which authorizes courts to issue injunctions to channel asbestos claims away from a reorganized company to a personal injury trust established by such company (as discussed below), is unconstitutional. The Co-Defendants did not, however, contend that the Bankruptcy Court and Ohio District Court lacked jurisdiction to enter the Injunction or that Section 524(g) of the Bankruptcy Code had not been satisfied. The Co-Defendants did not raise their objections in the bankruptcy case until after the deadline for filing objections to the Plan. The Co-Defendants also appealed to the Ohio District Court the Bankruptcy Court's denial of the Co-Defendants' motion for leave to file their late objection to the Plan discussed above (the 'Objection Appeal'). The Ohio District Court affirmed the Bankruptcy Court's denial of the Co-Defendants' motion to file a late objection to the Plan and the Co-Defendants appealed that judgment to the Sixth Circuit. The Objection Appeal, which was briefed in early 1998, was consolidated with the Confirmation Order Appeal by the Sixth Circuit. The Company anticipates that oral argument will be held on the consolidated appeals by the third quarter of 1998. The Company has argued to the Sixth Circuit that the Confirmation Order Appeal is moot in light of (i) the substantial consummation of the Plan, (ii) the fact that the Co-Defendants did not seek a stay of the Order pending appeal and (iii) the adverse effects that vacation of the Order would have on creditors and non-creditor third parties who have acted in reliance on the Order. Even if the Sixth Circuit were willing to consider the substance of the Co-Defendants' objections to the confirmation of the Plan, the Co-Defendants have represented in their court papers that they do not object to the amount of money that was transferred to the Trust, and that their objections relate to the internal Trust procedures and the identity of the trustees and members of the advisory committee for the Trust. 61 The Company believes that the Injunction is critical to its ability to continue to operate its business. Indeed, the Bankruptcy Court and the Ohio District Court found that the Injunction was 'essential' to the viability of the business operations of the Company and to the successful implementation of the Plan. Notwithstanding that the Bankruptcy Court and Ohio District Court determined that they had authority to issue the Injunction, it is possible that the Injunction could be dissolved in connection with the Co-Defendants' appeals discussed above or a later challenge. The Bankruptcy Court and Ohio District Court entered the Injunction pursuant to Section 524(g) of the Bankruptcy Code. Section 524(g) of the Bankruptcy Code was enacted by Congress in 1994 to provide a statutory safe-harbor for asbestos manufacturing companies faced with numerous asbestos- related personal injury claims. Section 524(g) grants bankruptcy courts express statutory authority to issue injunctions that prohibit present and future asbestos claimants from suing a reorganized debtor; provided that a trust is established and funded to pay asbestos-related claims through procedures that reasonably assure that claimants with similar injuries will receive similar payments and other specific statutory requirements are satisfied. Under Section 524(g), if the injunction is issued or affirmed by a district court with jurisdiction over the reorganization, the injunction will be permanent and not subject to modification by any court once the injunction becomes final and nonappealable. In confirming the Plan and issuing the Injunction, the Bankruptcy Court and Ohio District Court determined that the Trust and the PD Trust each satisfied the requirements of Section 524(g) and that they had jurisdiction to issue the Injunction under both Section 524(g) of the Bankruptcy Code and their more general powers under the Bankruptcy Code to issue orders that are necessary or appropriate in bankruptcy cases. The Order has not yet become final, however, due to the Co-Defendants' appeal to the Sixth Circuit discussed above. While Section 524(g) specifically addresses trusts created to resolve asbestos-related litigation and injunctions issued in connection therewith, it does not specifically address whether an injunction directing claims to a trust that will pay both asbestos-related and non-asbestos-related claims, as in this case, is protected under Section 524(g). While there is a risk that the Injunction would not apply to future lead-related claimants because lead-related claims are not addressed in Section 524(g), the Company believes that the Injunction would be upheld and enforced against lead-related claimants if challenged. That belief is based on the fact that the Bankruptcy Court and Ohio District Court, in confirming the Plan and entering the Injunction, specifically ruled that Section 524(g) does not prohibit channeling of non-asbestos related claims along with asbestos-related claims. In the event that Section 524(g) does not operate to protect the Injunction's channeling of lead-related claims, such channeling could be upheld as a necessary or appropriate order under Section 105(a) of the Bankruptcy Code. Although the filing of future lead-related lawsuits cannot be predicted, the Company believes that this risk is limited because to date, only approximately 125 lead-related claims have been asserted against the Eagle-Picher Group (as compared to the tens of thousands of asbestos-related claims asserted against the Eagle-Picher Group). On and shortly after the Consummation Date, the Eagle-Picher Group made distributions (the 'Initial Distribution') under the Plan totaling approximately $800 million in cash, common stock and debt securities (including the approximately $730 million contributed to the Trust, $3.0 million to the PD Trust escrow and the remainder in connection with various other allowed claims including the environmental claims described below). Final distributions under the Plan will not be made until all remaining unresolved claims (other than asbestos-related and lead-related claims) are resolved. Approximately twelve unresolved claims remain (seven of which are subject to the Liberty Mutual Settlement discussed below, three of which relate to environmental liability claims discussed below and the others are product liability claims in connection with products manufactured prior to the filing of the bankruptcy petitions). As of February 28, 1998, the Company has recorded a reserve on the Company's balance sheet in the amount of approximately $13.5 million for the payment of such claims, as well as any other allowed or resolved claims that were not paid in the Initial Distribution, and administrative expenses (the 'Final Distribution Reserve'). Although there can be no assurance as to the amount required to resolve the remaining claims, the Company expects those claims, together with any other claims not paid in the Initial Distribution, and administrative expenses, to be resolved for an amount not in excess of the Final Distribution Reserve. 62 On February 12, 1997, the Eagle-Picher Group commenced an adversary proceeding in the Bankruptcy Court to obtain approval of a settlement agreement between the Eagle-Picher Group and the Liberty Mutual Insurance Company and certain of its affiliates (together, 'Liberty Mutual'), a provider of the Eagle-Picher Group's primary insurance coverage, with respect to disputed coverage claims that had been asserted by the Eagle-Picher Group against Liberty Mutual and by Liberty Mutual against the Eagle-Picher Group (the 'Liberty Mutual Settlement'). The Bankruptcy Court has not yet made any ruling in connection with the Liberty Mutual Settlement. Pursuant to the Liberty Mutual Settlement, upon an order of approval of the Bankruptcy Court becoming final, and subject to certain conditions, including a permanent injunction against all other parties that might claim an interest in specified Liberty Mutual policies from taking any action or asserting any claim against such Liberty Mutual policies, Liberty Mutual would be required to remit to the Company approximately $13.8 million. The Company believes that the Liberty Mutual Settlement is fair and equitable, and, together with the other members of the Eagle-Picher Group, intends to move in the Bankruptcy Court for approval of the Liberty Mutual Settlement. Although a bankruptcy plan of reorganization generally serves to resolve all claims that arose prior to the bankruptcy proceedings, courts in a number of cases have limited the types of environmental obligations that can be discharged by bankruptcy (concluding, for example, that an order to conduct an environmental clean-up of a site may not be a 'claim' or that an environmental claim did not 'arise' before the bankruptcy). The Eagle-Picher Group has entered into the Environmental Settlement, discussed below, which is intended to relieve the Eagle-Picher Group of the burden of defending against certain claims asserted under Environmental Laws relating to conditions occurring prior to the date of the bankruptcy petition and governs certain environmentally related claims that may be asserted against the Company or the Eagle-Picher Group after the Consummation Date relating to conditions occurring prior to the date of the bankruptcy petition. See ' -- Environmental Matters.' Nevertheless, due to the limitations on the types of environmental obligations that can be discharged by bankruptcy, the Eagle-Picher Group may have obligations relating to historical noncompliance with environmental laws with respect to sites owned by the Company as of the Confirmation Date that were not asserted in the bankruptcy proceedings. See ' -- Environmental Matters.' If, regardless of the settlements, decisions, proceedings and legislation discussed herein, the Order were to be vacated, modified or restricted in applicability in a way that permits a substantial number of claims to be asserted against the Company, the successful assertion of such claims would materially adversely effect the Company's financial condition, results of operations or cash flows and could render the Company insolvent. ENVIRONMENTAL MATTERS Like companies involved in similar manufacturing businesses, the Company's operations and properties are subject to extensive Environmental Laws. The Clean Air Act and Clean Water Act, each as amended, impose stringent standards on air emissions and water discharges, respectively. Under the Resource Conservation and Recovery Act, as amended ('RCRA'), a facility that generates hazardous wastes must manage those wastes in accordance with strict standards, and a facility that treats, stores or disposes of hazardous waste on-site may be liable for corrective action costs. A facility that holds a RCRA permit may have to incur costs relating to the closure of certain 'hazardous' or 'solid' waste management units. Under CERCLA and similar state laws, an owner or operator of property at which releases of hazardous substances have occurred, or the generator of hazardous substances disposed of offsite, may be jointly and severally liable for costs of investigation and remediation of any resulting contamination and related natural resource damages, regardless of fault. Failure to comply with such Environmental Laws, which are frequently amended, can lead to the imposition of civil or criminal penalties, injunctive relief and denial or loss of, or imposition of significant restrictions on, environmental permits. In addition, the Company could be subject to suit by third parties in connection with violations of or liability under Environmental Laws. The Company has established a number of programs to facilitate compliance with Environmental Laws. In addition, from time to time, the Company has undertaken remedial activities or incurred compliance costs at or around the Company's operations or former operations, both voluntarily and as a 63 result of federal and state agency orders, permit requirements or other notices. Further, from time to time the Company receives notice of liability or potential liability under CERCLA or analogous state laws in connection with the disposal of materials from the Company's operations. It is also possible that there are areas in which the Company's facilities have not been, are not currently, or may in the future not be, in compliance with Environmental Laws. For the last three fiscal years, the Company's average capital expenditures and operating expenses (including expenses for remedial activities) for environmental matters were $1.1 million and $7.3 million per year, respectively (excluding depreciation). Such amounts do not include payments made by the Company under the Plan to settle or otherwise resolve certain environmental claims asserted in the bankruptcy proceedings. See ' -- Environmental Settlement.' The Company estimates that capital expenditures and operating expenses (including expenses for remedial activities) for environmental matters will be approximately $1.9 million and $8.3 million, respectively, for fiscal year 1998 and approximately $1.2 million and $9.2 million, respectively, for fiscal year 1999. However, because Environmental Laws have historically become more stringent, costs and expenses relating to environmental control and compliance may increase in the future. In addition, the Company may have to incur additional capital expenditures and compliance costs (which it is unable to estimate at this time) in connection with the remedial activities discussed below. Accordingly, there can be no assurance that costs of compliance with existing and future Environmental Laws will not exceed current estimates and will not have a material adverse effect on the Company's financial condition, results of operations or cash flows. The Merger Agreement provides for indemnification for costs and expenses from certain environmental exposures in connection with the operations of the Company in excess of agreed upon thresholds for specific properties, which totals approximately $24 million in the aggregate. The indemnity applies only to certain environmental claims arising out of the business or operations of the Company prior to the Closing of which the Trust is notified within three years after the Closing. The Trust's indemnity obligations are subject to a deductible of $10.0 million and the Trust is only obligated to pay $50.0 million above the deductible for all indemnity claims, including those relating to environmental matters. In addition, indemnification is unavailable in connection with certain sites specified in the Merger Agreement and, in connection with other sites, may be asserted only for the amount by which such claim exceeds the Company's projected remediation or compliance costs. The Company has recorded a reserve as of November 30, 1997 of approximately $6.1 million in connection with environmental matters, and believes such reserves to be adequate. Certain Compliance and Remedial Activities Joplin, Missouri and Colorado Springs, Colorado. The Company is undertaking closure and corrective actions under RCRA at two of its permitted hazardous waste facilities. At the Joplin, Missouri, facility, consistent with the requirements of its RCRA permit, the Company is investigating the nature and extent of contamination from two closed hazardous waste impoundments and over 100 former solid waste management units formerly in use during the 130-year operating history of this property. The Company's investigation has identified areas of soil and groundwater contamination or suspected contamination, certain of which likely will require the Company to undertake remedial activities. Following completion of its investigation, the Company, in conjunction with federal and state regulators, will determine what, if any, corrective actions are appropriate at this property. At the Colorado Springs, Colorado, facility, the closure of four former hazardous waste impoundments is being completed. Materials formerly stored in the impoundments have contaminated groundwater and soil at and around the facility. A groundwater remediation system was placed in service in 1995 and continues in operation. It is anticipated that corrective actions for soils will be implemented in 1998. The Company does not believe that it will be assessed any penalty in connection with the remediation of these sites, although there can be no assurance that one will not be imposed. Galena, Kansas. The Company owned and operated a lead and zinc smelting facility, which was dismantled in 1982, on the Galena property. The Galena property is located within the Tri-State mining district, formerly one of the largest lead and zinc fields in the world. The Tri-State mining district was actively worked from the mid-1800s until the 1960s and, as a result, soil, groundwater and surface waters 64 have been significantly and adversely impacted. In the 1980s and early 1990s, the United States Environmental Protection Agency (the 'US EPA') addressed both surface contamination (including residential soil contamination) and groundwater contamination issues in the Tri-State mining district in the immediate vicinity of the Galena property. Under the Environmental Settlement (as defined below), while the Company resolved all of its other liability under CERCLA associated with the Tri-State mining district, it specifically retained liability for the Galena property. Environmental impacts are likely at the Galena property as a result of the former smelter operation and from historic materials management practices on the Galena property. US EPA has not required remediation of the Galena property and the Company has no current expenses in connection with remedial activities at this property. However, the Company anticipates that certain investigations and remediation may be required at some point in the future. The Company does not believe that it will be assessed any penalty in connection with the remediation of this site, although there can be no assurance that one will not be imposed. The Company is undertaking other remedial actions at a number of its facilities and properties. The Company does not anticipate that such expenses, including expenses in connection with the specific sites discussed above, will have a material adverse effect on the Company's financial condition, results of operations or cash flows. However, there can be no assurance that, in the future, the Company's expenditures in connection with remedial activities will not exceed current expenditures and will not have a material adverse effect on the Company's financial condition, results of operations or cash flows. In addition, in connection with certain sales of its assets, including the Plastics and Transicoil divisions sold in 1997, the Company has agreed to undertake remedial actions and/or to indemnify the respective purchasers of particular assets for certain liabilities under the Environmental Laws relating to that asset's operations or activities prior to the sale. The Company believes that claims under these indemnity provisions will not have a material adverse effect on the Company's financial condition, results of operations or cash flows. Environmental Settlement During the pendency of the bankruptcy proceedings, the Eagle-Picher Group entered into a settlement agreement (the 'Environmental Settlement') with the US EPA, the United States Department of the Interior and the states of Arizona, Michigan and Oklahoma (together, the 'Settling Parties'), addressing all known and unknown environmentally-related claims that were or could have been asserted by those entities against the Eagle-Picher Group in the bankruptcy proceeding. The Environmental Settlement was approved by the Bankruptcy Court on June 6, 1996, affirmed by the Ohio District Court on July 14, 1997, and became final 30 days later. The Environmental Settlement resolved the majority of the approximately 1,100 environmental liability-related claims filed against the Eagle-Picher Group in the bankruptcy proceedings by allowing the Settling Parties general unsecured claims totaling approximately $43.8 million (pursuant to the Plan, general unsecured claims are paid at 37% of the allowed amount). All environmental claims filed in the bankruptcy proceedings not subject to the Environmental Settlement were either disallowed by the Bankruptcy Court or resolved as general unsecured claims, with the exception of three claims, none of which the Company believes is material and all of which will be paid, if at all, from the Final Distribution Reserve. In addition, the Environmental Settlement provides that any additional claims by the Settling Parties against the Eagle-Picher Group in connection with pre-petition activities at any site not owned by the Company (the 'Additional Sites'), shall be resolved as if they had been asserted during the bankruptcy proceedings. Accordingly, if any member of the Eagle-Picher Group is found liable or settles any Additional Site claim, such member's liability is limited to 37% of the liability or settlement amount. The Environmental Settlement also provides that any liability, whether alleged to arise before or after the Consummation Date, relating to a site owned by the Eagle-Picher Group on or after the Consummation Date (the 'Owned Sites'), or relating to post-petition conduct by the Eagle-Picher Group, is not discharged in the bankruptcy proceedings, and will be resolved as if the Eagle-Picher Group had never filed for reorganization. Accordingly, the Eagle-Picher Group is responsible for 100% of any liability (including, if required, the performance of remedial activities) or settlement amount in 65 connection with Owned Sites or post-petition conduct. See ' -- Certain Compliance and Remedial Activities.' Additional Sites. The Company has received notice from one or more of the Settling Parties that the Company may have liability in connection with 19 Additional Sites. The Company may be insured for a portion of these claims. The Company believes that its potential liability at 16 of these Additional Sites is not material to the Company's financial condition, results of operations or cash flows. The remaining three Additional Sites may require significant expenditures by the Company: the Henryetta Smelter Site at Henryetta, Oklahoma, the RSR Smelter Site at Dallas, Texas, and the Witter Drum Site at Asbury, Missouri. Of the $6.1 million total reserves recorded by the Company in connection with environmental matters, $1.2 million is for its anticipated costs in resolving these three claims: Henryetta Smelter Site. The Company received a notice from the US EPA in 1997, alleging liability for remediation expenses at the site of a former zinc smelting facility owned and operated by the Company at Henryetta, Oklahoma, and for the removal and disposal from surrounding residential locations of contaminated soil and gravel that originated from the facility and from other companies operating in the area. The Company operated the facility for approximately 50 years, until it was shut down in 1968. The US EPA performed remedial activities at the site at a cost of approximately $4 million to $5 million. The Company expects to settle this claim with the US EPA for some portion of that amount. RSR Smelter Site. The Company received a notice from the US EPA in 1996, alleging that it may be a Potentially Responsible Party ('PRP') regarding liability for remediation expenses at a secondary lead smelting facility in Dallas, Texas. The Company allegedly leased the facility, which was in operation until in or about 1984, for a period of at least one year in the early 1950s. The US EPA has conducted and continues to conduct extensive remedial activities at this site, and the US EPA's total expenses may amount to $60 million or more. The Company is one of more than 1,000 PRPs identified by the US EPA in connection with this site and is not identified by the US EPA as one of the 14 significant PRPs. However, the Company believes that it may be required to make some expenditure to resolve its potential liability for remediation expenses in connection with this site. Witter Drum Site. The Company received a notice from the US EPA in 1997, alleging liability in connection with a third-party facility that had provided drum reclamation services for the Company. The US EPA has investigated the site and estimates that approximately $400,000 in remedial activities will be undertaken at this site. The Company expects to settle this claim with the US EPA for some portion of that amount. The Company does not expect that its total costs associated with these sites will have a material adverse effect on the Company's financial condition, results of operations or cash flows. Because each site is an Additional Site under the Environmental Settlement, the Company will be required to pay only 37% of any amount for which it may be found liable or settle the claim. While the Company does not believe, based on current information and taking into account reserves established for environmental matters, that costs associated with compliance with and remediation under Environmental Laws will have a material adverse effect on its financial condition, results of operations or cash flows, the Environmental Laws under which the Company's facilities operate are numerous, complicated and often ambiguous and historically have become increasingly more stringent. In addition, costs related to remediation of Company-owned sites may exceed current estimates. Accordingly, there can be no assurance that future events, such as changes in existing laws, the promulgation of new laws or the development of new facts or conditions, will not cause the Company to incur substantial additional expenditures or that any such additional expenditures will not have a material adverse effect on the Company's financial condition, results of operations, or cash flows. LEGAL PROCEEDINGS On January 25, 1996, Richard Darrell Peoples, a former employee of the Company, filed a Qui Tam suit under seal in United States District Court for the Western District of Missouri (the 'Missouri Court'). A Qui Tam suit is a lawsuit brought by a private individual pursuant to federal statute, 66 allegedly on behalf of the U.S. Government. The U.S. Government, which has the opportunity to intervene in, and take control of, a Qui Tam suit, has declined to intervene or take control of the Qui Tam suit filed against the Company. The Company became aware of the suit on October 20, 1997, when it was served on the Company, after it had been unsealed. The suit involves allegations of irregularities in expense accounts and testing procedures in connection with certain U.S. Government contracts. The allegations are substantially the same as allegations made by the former employee, and investigated by outside counsel for the Company, prior to the filing of the Qui Tam suit. Outside counsel's investigation found no evidence to support any of the employee's allegations, except for some inconsequential expense account mistakes. The Company, which believes that the U.S. Government did not incur any expense as a result of the mistakes, reported to the U.S. Government the employee's allegations and the results of outside counsel's investigation. The employee also initiated a different action against the Company in 1996 for wrongful termination, in which he alleged many of the same acts complained of in the Qui Tam suit. That action was dismissed with prejudice by the Missouri Court in October 1996. The Company intends to contest this suit vigorously. The Company does not believe that resolution of this suit will have a material adverse effect on the Company's financial condition, results of operations or cash flows. The Company is also involved in various other proceedings incidental to the ordinary conduct of its business. The Company believes that none of these other proceedings will have a material adverse effect on the Company's financial condition, results of operations or cash flows. EMPLOYEES AND EMPLOYEE RELATIONS As of November 30, 1997, the Company employed 1,825 salaried employees and 4,871 hourly employees. Following is a breakdown of foreign and United States employees:
SALARIED NON-SALARIED TOTAL -------- ------------ ----- United States employees....................................... 1,581 4,175 5,756 Foreign employees............................................. 244 696 940 Total employees..................................... 1,825 4,871 6,696
Approximately 20.5% of the Company's non-salaried employees (approximately 14.9% of the Company's total employees) are represented by six different labor unions under seven separate labor contracts. The International Union of Operating Engineers Local Union No. 351 represents the largest bargaining unit with approximately 400 employees. Another significant affiliation is the United Steelworkers of America, Local No. 812, representing approximately 335 employees at two facilities. Labor negotiations are conducted on a plant-by-plant basis with two to three of the outstanding contracts renegotiated in any one year. In the last five years the Company has had no work stoppages due to strikes. However, there can be no assurance that there will not be work stoppages due to strikes in the future, or that the Company would be able to continue operating at affected facilities in the event of any work stoppage or union dispute in the future. 67 PROPERTIES The principal fixed assets of the Company consist of its manufacturing, processing and storage facilities and its transportation and plant vehicles. As of November 30, 1997, properties, facilities and equipment (net of depreciation) represented approximately 33% of the Company's total assets, as reflected in its consolidated balance sheet. The following chart sets forth selected information regarding the Company's manufacturing and processing facilities:
DESCRIPTION OF BUSINESS GROUP LOCATION PROPERTY INTEREST - --------------------------------------- ------------------------------------------------------ ----------------- AUTOMOTIVE Domestic Ann Arbor, Michigan leased Blacksburg, Virginia (2 properties) owned Brighton, Michigan leased Hillsdale, Michigan (6 properties)(1) owned Hamilton, Indiana owned Inkster, Michigan owned Jonesville, Michigan owned Kalkaska, Michigan leased(2) Leesburg, Florida owned Manchester, Tennessee leased(2) Norwich, Connecticut owned Paris, Illinois owned(3) Pine Bluff, Arkansas owned Sidney, Ohio (2 properties) owned Stratford, Connecticut owned Vassar, Michigan leased International Market Harborough, England owned Ohringen, Germany owned San Luis Potosi, Mexico owned Soria, Spain owned Tamworth, England owned MACHINERY Domestic Colorado Springs, Colorado owned Colorado Springs, Colorado (2 properties) leased Galena, Kansas owned Grove, Oklahoma owned Hamilton, Ohio leased Harrisonville, Missouri owned Joplin, Missouri (6 properties) owned Joplin, Missouri (2 properties) leased Lenexa, Kansas owned Lubbock, Texas owned Seneca, Missouri owned Sharonville, Ohio owned Socorro, New Mexico(1) leased Stella, Missouri owned International Acuna, Coahuila, Mexico owned Rothenbach, Germany leased(3) INDUSTRIAL(4) Domestic Clark Station, Nevada owned Lovelock, Nevada owned Miami, Oklahoma (2 properties) owned Miami, Oklahoma (3 properties) leased Quapaw, Oklahoma (2 properties) owned Vale, Oregon leased(2) International Kyoto, Japan leased(3)
- ------------ (1) There is little, if any, activity at this time at the Socorro, New Mexico property and two of the Hillsdale, Michigan properties. (2) The Company will become owner of each property upon payment in full of all existing obligations under the respective IRB Obligations (as defined herein) in connection with such property. See 'Description of Industrial Revenue Bonds.' (3) These properties are owned or leased by certain of the Company's joint ventures. Accordingly, the Company has a 45% interest in the Paris, Illinois property through the Eagle-Picher-Boge, L.L.C. joint venture; a 35% interest in the Kyoto, Japan property though the Yamanaka EP Corporation joint venture and a 45% interest in the Rothenbach, Germany property through the Diehl & Eagle-Picher GmbH joint venture. (4) In addition, the Company's Minerals division has mining locations and numerous claims in Nevada, Oregon and California (discussed below), leases office space in Reno, Nevada and leases 14 warehouses in the United States and Canada. 68 The Company owns or leases additional office space, including sales offices in Europe and Asia, and warehouse space for certain of its operations. The Company's properties are adequate and suitable for the business of the Company, and substantially all of its buildings have been well maintained and are in sound operating condition and regular use. The Company's corporate headquarters are located in approximately 19,420 square feet of leased office space in the Chiquita Center building in Cincinnati, Ohio. The office space is leased from YCP Cincinnati, L.P. pursuant to a six-year lease, with the initial term expiring February 29, 2004. The lease provides renewal options for two additional periods of five years each. The Company believes that its existing and planned facilities are adequate for its current needs. Mining. The Industrial Group's Minerals division owns and leases diatomaceous earth and perlite mining locations as well as numerous claims in Nevada, Oregon and California (collectively, 'mining properties'). The Company's owned and leased mining properties, including those not currently being mined, comprise a total of approximately 7,000 acres in Storey, Lyon, Pershing, and Churchill Counties in Nevada and 3,600 acres in Malheur and Harney Counties in Oregon, as well as rights on 1,040 acres not currently being mined in Siskiyou County in California. The Company continually evaluates potential mining properties, and additional mining properties may be acquired in the future. The Minerals division extracts diatomaceous earth and perlite through open-pit mining using bulldozers and wheel tractor scrapers. The extracted materials are carried by truck to separate processing facilities. A total of approximately 506,000 tons of diatomaceous earth and perlite were extracted from the Company's mining properties in Nevada and Oregon during Fiscal 1997. On average, the Company has extracted a total of approximately 402,000 tons of diatomaceous earth and perlite from its Nevada and Oregon properties each year for the past three years. As ore deposits are depleted, the Company reclaims the land in accordance with reclamation plans approved by the relevant federal, state and local regulators. The following mining properties are of major significance to the Company's mining operations: Nevada. The Company's diatomaceous earth mining operations in Nevada commenced more than 50 years ago in Storey County. The Company commenced perlite mining operations in Churchill County in 1993. The Company extracted a total of approximately 380,000 tons of diatomaceous earth and perlite from its Nevada mining properties in Fiscal 1997 and, on average, extracted a total of approximately 306,000 tons of diatomaceous earth and perlite from its Nevada mining properties each year for the past three years, or approximately 76% of the Company's total diatomaceous earth and perlite production (and including 100% of its perlite production). Approximately 265 acres in Storey, where active mining activities commenced over 50 years ago, and approximately 62 acres in the Lyon/Churchill area are actively being mined by the Company for diatomaceous earth. Diatomaceous earth from the Storey, Churchill and Lyon mining properties is processed at the Clark Station, Nevada facility. The Company believes its diatomaceous earth reserves in Storey, Churchill and Lyon, including mining properties not actively being mined, to be in excess of 40 years at current levels of extraction based upon estimates prepared by its mining and exploration personnel. Diatomaceous earth extractions from the Pershing mining properties, which commenced more than 40 years ago, are processed at the Lovelock, Nevada facility. Approximately 975 acres are actively being mined for diatomaceous earth in Pershing. The Company believes its diatomaceous earth reserves in Pershing, including mining properties not actively being mined, to be in excess of 15 years at the current level of extraction based upon estimates prepared by its mining and exploration personnel. Beginning in 1993, the Company has actively mined approximately 25 acres in Churchill for perlite, which is processed at the Lovelock, Nevada facility. The Company believes its perlite reserves in Churchill, including mining properties not actively being mined, to be in excess of 50 years at the current level of extraction based upon estimates prepared by its mining and exploration personnel. Oregon. The Company commenced mining diatomaceous earth in Oregon approximately 13 years ago at its mining properties in Harney and Malheur Counties. Approximately 88 acres and 80 acres, respectively, are actively being mined in Harney and Malheur; diatomaceous earth extracted from these mines is processed at the Company's Vale, Oregon facility. The Company extracted approximately 126,000 tons of diatomaceous earth from the Harney and Malheur mining properties 69 during Fiscal Year 1997 and, on average, has extracted approximately 96,000 tons of diatomaceous earth each year for the past three years from these mining properties, or approximately 24% of the Company's total diatomaceous earth production. The Company believes its diatomaceous earth reserves in Harney and Malheur, including mining properties not actively being mined, to be in excess of 75 years at the current level of extraction based upon estimates prepared by its mining and exploration personnel. Substantially all of the Company's owned properties and assets are pledged as collateral under the New Credit Agreement. See 'Description of New Credit Agreement.' CHANGE IN INDEPENDENT AUDITORS Following the Company's emergence from bankruptcy in November 1996, the Company appointed Deloitte & Touche LLP to replace KPMG Peat Marwick LLP as the independent auditors for the Company. The Company's Board of Directors approved the dismissal of KPMG Peat Marwick LLP and their replacement with Deloitte & Touche LLP as the new independent auditors upon recommendation of the Company's Audit committee. The Company did not consult with Deloitte & Touche LLP regarding matters of accounting principles, practices or financial statement disclosure prior to the firm being engaged as auditors. In connection with the audits of the Company's financial statements for each of the two fiscal years preceding the change in accountants, there were no disagreements with KPMG Peat Marwick LLP on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of KPMG Peat Marwick LLP, would have caused KPMG Peat Marwick LLP to make reference to the matter in their report on the consolidated financial statements for such years. KPMG Peat Marwick LLP's opinion was qualified as of and for the year ended November 30, 1995, in that the consolidated financial statements were prepared assuming the Company would continue as a going concern. The filing under Chapter 11 of the Bankruptcy Code and the uncertainty associated with the Company's sale of asbestos products and certain other litigation, raised substantial doubt about the Company's ability to continue as a going concern. KPMG Peat Marwick LLP's opinion was unqualified as of and for the year ended November 30, 1996, except for consistency in the application of accounting principles as a result of the Company's change in its method of computing LIFO for certain inventories. 70 MANAGEMENT THE COMPANY The following table sets forth the name, age and position with the Company of the directors and executive officers of the Company as of the consummation of the Acquisition. Directors will hold their positions until the annual meeting of the stockholders at which their term expires or until their respective successors are elected and qualified. Executive officers will hold their positions until the annual meeting of the Board of Directors or until their respective successors are elected and qualified.
NAME AGE POSITION - ------------------------------------ ---- ---------------------------------------------------------- Joel P. Wyler....................... 48 Chairman of the Board Thomas E. Petry..................... 58 Director Andries Ruijssenaars................ 55 Director, President and Chief Executive Officer David N. Hall....................... 58 Senior Vice President - Finance Wayne R. Wickens.................... 51 Senior Vice President - Automotive
Mr. Wyler became a Director of the Company upon consummation of the Acquisition. Mr. Wyler has been the Chairman of the Board of Directors of Granaria Holdings since 1982. Mr. Petry has been a Director of the Company since 1981. Following consummation of the Acquisition, Mr. Petry resigned as Chairman of the Board of Directors, a position he held since 1989, and as Chief Executive Officer, a position he held since 1982. Mr. Petry was first employed by the Company in 1968 as assistant to the Treasurer and subsequently served as Assistant Treasurer; Treasurer; Vice President and Treasurer; President of the Akron Standard Division; and Group Vice President. Mr. Petry was elected a Director, President and Chief Operating Officer of the Company in 1981, and President and Chief Executive Officer in 1982. He served as President from 1981-89 and from 1992-94. Mr. Petry is also a director of Cinergy Corp., Star Banc Corp., Union Central Life Insurance Co., Insilco Corp. and The Wm. Powell Company. Upon consummation of the Acquisition, Mr. Ruijssenaars became Chief Executive Officer and continued as President and a Director of the Company, positions he has held since 1994. Prior to the Acquisition, Mr. Ruijssenaars was President and Chief Operating Officer of the Company from December 1994 until 1998 and Senior Vice President of the Company from 1989 until December 1994. Mr. Ruijssenaars was first employed by the Company in 1980 as General Manager of Eagle-Picher Industries GmbH in Ohringen, Germany, and has also served as Executive Vice President and then President of the Company's Ohio Rubber Company division. Mr. Hall joined the Company as Treasurer in 1977 and became Vice President and Treasurer in 1979. He has been Senior Vice President -- Finance since 1987. Mr. Wickens has been Senior Vice President -- Automotive of the Company since December 1994. From 1990 until December 1994, he was Division President of the Company's Hillsdale Tool & Manufacturing Co. Mr. Wickens joined the Company in 1976 as a management trainee with the Company's former Fabricon Automotive division, and was promoted to Plant Manager, Vice President and then President of Fabricon Automotive. Subsequently, Mr. Wickens served as President of the Wolverine Gasket division and then as Vice President of the Automotive Group. PARENT The following table sets forth the name, age and position with Parent of the directors and executive officers of Parent as of the consummation of the Acquisition. Directors will hold their positions until the annual meeting of the stockholders at which time their terms expire or until their respective successors are elected and qualified. Executive officers will hold their positions until the annual meeting of the Board of Directors or until their respective successors are elected and qualified.
NAME AGE POSITION - ------------------------------------ ---- ---------------------------------------------------------- Joel P. Wyler....................... 48 Chairman of the Board Thomas E. Petry..................... 58 Director Andries Ruijssenaars................ 55 Director, President and Chief Executive Officer David N. Hall....................... 58 Senior Vice President - Finance Wayne R. Wickens.................... 51 Senior Vice President - Automotive
71 EXECUTIVE COMPENSATION SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION The following table sets forth information concerning the compensation for services in all capacities to the Company for the years ended November 30, 1997, 1996 and 1995, of those persons who (i) served during the fiscal year ended November 30, 1997, as the Chief Executive Officer of the Company and (ii) were, at November 30, 1997, the other five most highly compensated officers of the Company who earned more than $100,000 in salary and bonus in fiscal 1997 (collectively, the 'Named Executive Officers'). SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ------------------------------------------------------------------- FISCAL OTHER ANNUAL ALL OTHER YEAR COMPENSATION COMPENSATION NAME AND PRINCIPAL POSITION ENDED SALARY ($) BONUS ($) ($)(1) ($)(2) - ----------------------------------------------- --------- ---------- --------- ------------ ------------ Thomas E. Petry................................ 11/30/97 $ 625,000 $ 278,000 $232,737 $260,103 Chairman and Chief Executive 11/30/96 625,000 239,000 218,919 245,073 Officer 11/30/95 575,000 244,000 255,296 285,611 Andries Ruijssenaars........................... 11/30/97 525,000 205,000 179,244 206,206 President and Chief Operating 11/30/96 425,000 160,000 174,171 200,081 Officer 11/30/95 390,000 145,000 87,298 102,571 David N. Hall.................................. 11/30/97 375,000 126,000 166,629 188,163 Senior Vice President -- Finance 11/30/96 360,000 107,000 146,980 165,986 11/30/95 345,000 110,000 120,284 136,415 Wayne R. Wickens............................... 11/30/97 325,000 109,000 77,942 91,919 Senior Vice President -- Automotive 11/30/96 295,000 72,000 99,564 116,357 11/30/95 280,000 85,000 24,377 31,109 James A. Ralston............................... 11/30/97 240,000 67,000 41,069 49,762 Vice President, General 11/30/96 230,000 86,000 40,106 48,966 Counsel and Secretary 11/30/95 215,000 58,000 11,475 18,292 Carroll D. Curless............................. 11/30/97 240,000 67,000 116,456 132,211 Vice President and Controller 11/30/96 230,000 86,000 78,715 91,470 11/30/95 215,000 56,000 50,616 60,304
- ------------ (1) This column includes nothing for perquisites since in no case did perquisites exceed the reporting thresholds (the lesser of 10% of salary plus bonuses or $50,000), but includes amounts for the payment of taxes on purchases of annuities under the Supplemental Executive Retirement Plan (as defined herein). (2) All other compensation is made up entirely of the cost of annuity under the Supplemental Executive Retirement Plan and the Company's contributions to the Eagle-Picher Salaried 401(k) Plan. See ' -- Retirement Benefits.' EXECUTIVE STOCK OPTIONS On the Consummation Date, all stock option plans and any unexercised or unexercisable stock options were terminated. The Company had no other benefit plans calling for the issuance of stock by the Company. Accordingly, none of the Named Executive Officers had any unexercised stock options or SARS as of November 30, 1997. No options were issued by the Company and no options were exercised by the Named Executive Officers during the fiscal year ended November 30, 1997. RETIREMENT BENEFITS The following table shows the Named Executive Officers' Fiscal 1997 compensation relating to the cost of the annuity under the Supplemental Executive Retirement Plan and the Company's contributions to the Eagle-Picher Salaried 401(k) Plan. 72
COST OF ANNUITY UNDER COMPANY SUPPLEMENTAL CONTRIBUTIONS FISCAL EXECUTIVE TO EAGLE-PICHER YEAR RETIREMENT SALARIED 401(K) TOTAL ENDED PLAN ($) PLAN ($) ($) --------- ------------ --------------- -------- Thomas E. Petry................................. 11/30/97 $255,353 $ 4,750 $260,103 11/30/96 240,323 4,750 245,073 11/30/95 280,991 4,620 285,611 Andries Ruijssenaars............................ 11/30/97 201,456 4,750 206,206 11/30/96 195,331 4,750 200,081 11/30/95 97,951 4,620 102,571 David N. Hall................................... 11/30/97 183,413 4,750 188,163 11/30/96 161,236 4,750 165,986 11/30/95 131,795 4,620 136,415 Wayne R. Wickens................................ 11/30/97 87,169 4,750 91,919 11/30/96 111,607 4,750 116,357 11/30/95 26,489 4,620 31,109 James A. Ralston................................ 11/30/97 45,012 4,750 49,762 11/30/96 44,216 4,750 48,966 11/30/95 13,672 4,620 18,292 Carroll D. Curless.............................. 11/30/97 127,461 4,750 132,211 11/30/96 86,720 4,750 91,470 11/30/95 55,684 4,620 60,304
The following table shows the estimated total combined annual benefits to the Named Executive Officers upon retirement at age 62 payable under Social Security, the Salaried Plan (as defined herein), and the Supplemental Executive Retirement Plan:
YEARS OF SERVICE -------------------------------------------------------- RENUMERATION 15 20 25 30 35 - ------------------------------------------- -------- -------- -------- -------- -------- $ 250,000.................................. $ 90,000 $120,000 $150,000 $150,000 $150,000 300,000................................. 108,000 144,000 180,000 180,000 180,000 350,000................................. 126,000 168,000 210,000 210,000 210,000 400,000................................. 144,000 192,000 240,000 240,000 240,000 450,000................................. 162,000 216,000 270,000 270,000 270,000 500,000................................. 180,000 240,000 300,000 300,000 300,000 550,000................................. 198,000 264,000 330,000 330,000 330,000 600,000................................. 216,000 288,000 360,000 360,000 360,000 650,000................................. 234,000 312,000 390,000 390,000 390,000 700,000................................. 252,000 336,000 420,000 420,000 420,000 750,000................................. 270,000 360,000 450,000 450,000 450,000 800,000................................. 288,000 384,000 480,000 480,000 480,000 850,000................................. 306,000 408,000 510,000 510,000 510,000 900,000................................. 324,000 432,000 540,000 540,000 540,000 950,000................................. 342,000 456,000 570,000 570,000 570,000 1,000,000................................. 360,000 480,000 600,000 600,000 600,000
The Eagle-Picher Salaried Plan (the 'Salaried Plan') is a non-contributory defined benefit pension plan in which the Named Executive Officers are participants. The Supplemental Executive Retirement Plan (the 'SERP' and, together with the Salaried Plan, the 'Retirement Plans'), in which the Named Executive Officers are also participants, provides retirement benefits in addition to the benefits available under the Salaried Plan. The Retirement Plans provide benefits after retirement based on the highest average monthly compensation during five consecutive years of the last ten years preceding retirement. For purposes of the Retirement Plans, compensation includes base salary, bonuses, commissions, and severance payments; salary and bonus payments that would be included in the Retirement Plans are as reported in the Summary Compensation Table, and commissions or severance payments, if there had been any, would have been included in that Table. The benefits shown by the 73 Pension Plan Table above include amounts payable under Social Security as well as those payable under the Salaried Plan and the SERP. Benefits are computed on the basis of straight-life annuity amounts. The estimated credited years of service with the Company for the Named Executive Officers at age 62 will be: Thomas E. Petry................................................................ 33 David N. Hall.................................................................. 24 Andries Ruijssenaars........................................................... 24 Wayne R. Wickens............................................................... 32 James A. Ralston............................................................... 29 Carroll D. Curless............................................................. 36
COMPENSATION OF DIRECTORS The Company does not pay director retainers or attendance fees, or committee retainers or attendance fees, to directors who are also employees of the Company. During the 1997 Fiscal Year, until April 14, 1997, directors who were not employees of the Company were paid an annual retainer of $24,000, a fee of $1,000 for each Board meeting attended and a fee of $1,000 for each Board committee meeting attended. In addition, Board committee members, other than committee chairmen, were paid an annual retainer of $3,000 for each committee on which they served; the chairman of each Board committee was paid an annual retainer of $5,000. Effective April 14, 1997, directors who are not employees of the Company are paid an annual retainer of $50,000, with no additional attendance or committee membership fees. The Company intends to continue these compensation policies for directors following the Acquisition. Directors who were not also employees of the Company who retired with ten or more years of service as members of the Board and who were elected or appointed members of the Board prior to April 14, 1997, are paid an annual advisory fee for life in the amount equal to the annual retainer paid to active directors immediately prior to the time of their retirement. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During the 1997 Fiscal Year, until April 14, 1997, Daniel W. LeBlond (Committee Chairman), Paul W. Christensen, V. Anderson Coombe and Roger L. Howe, directors of the Company during that time, constituted the Stock Option/Compensation Committee. Since May 28, 1997, Darius W. Gaskins (Committee Chairman), Robert B. Steinberg and Will M. Storey, directors of the Company until the Effective Date, constituted the Compensation Committee. None of the members of the Compensation Committee or Stock Option/Compensation Committee have ever been an employee of the Company or any of its subsidiaries. During the 1997 Fiscal Year, Mr. Petry, Chairman and Chief Executive Officer of the Company, served as a director and as a member of the compensation committee of The Wm. Powell Company. During the 1997 Fiscal Year, Mr. Coombe, a director of the Company until April 14, 1997, was Chairman of the Board of The Wm. Powell Company. INDEMNIFICATION PROVISIONS FOR OFFICERS AND DIRECTORS Pursuant to Article 5 of the Company's Regulations, the Company will indemnify its officers and directors to the fullest extent permitted by law against all expenses, liability, loss or costs (including attorneys fees) in connection with any action, lawsuit or other proceeding brought or threatened against such officer or director by reason of the fact that he or she is or was an officer or director of the Company. The Company has purchased directors and officers liability insurance in favor of the Company and its officers and directors covering up to $15.0 million in losses, including any indemnity payment made by the Company to an officer or director, for a wrongful act of an officer or director. In addition, under the Merger Agreement, Parent and the Company have agreed to indemnify all pre-Effective Date officers and directors of the Company, and to purchase directors and officers liability insurance in their favor, for a period of six years after the Effective Date. 74 EMPLOYMENT AGREEMENTS; SEVERANCE The Company has entered into employment agreements (the 'Employment Agreements') with each of the Named Executive Officers which became effective on November 29, 1996 (the Consummation Date of the Company's Consolidated Plan of Reorganization) and each of which was amended in August 1997. The purpose of the employment agreements was to provide the Company with continuity of management following its emergence from bankruptcy. Other than the description of the duties of each Named Executive Officer, the Employment Agreements are substantially identical in their terms. The Employment Agreements terminate on the earlier of (i) the second anniversary of any change of control (as defined in the Employment Agreements) occurring prior to December 31, 1998 or (ii) May 18, 1999. The consummation of the Acquisition constituted a change of control under the Employment Agreements. The Employment Agreements provide that each Named Executive Officer will maintain his current duties and responsibilities and will not be relocated from his current geographical location. The Employment Agreements provide for salary continuation at the Named Executive Officer's then-current rate plus customary annual increases and bonuses and discretionary bonuses, as determined by the Board of Directors of the Company (as shown in the Summary Compensation Table, above). In addition, the Employment Agreements provide that each Named Executive Officer will participate in the Company's employee and executive benefit and short-term and long-term incentive plans as may be in effect from time to time (including retirement or pension plans, health plans, death or disability plans and the STSP). If the employment of a Named Executive Officer is terminated by the Company for good Cause (defined as the Commission of (i) a felony or (ii) a fraud upon the Company or willful failure to perform job duties in all material respects) or by such Named Executive Officer without good reason (as defined below), the Named Executive Officer will receive accrued and unpaid salary, payment in lieu of unused vacation and accrued benefits, if any (including the right to receive pension or retirement benefits in accordance with the Company's retirement and pension benefit plans as set forth in ' -- Retirement Benefits') (all such payments, including salary, the 'Accrued Benefits'). If the employment of a Named Executive Officer is terminated due to death or long term disability, such Named Executive Officer or his dependents or estate will receive, in addition to the Accrued Benefits, certain continuing health care benefits for a period of 30 months. If the employment of a Named Executive Officer is terminated by the Company other than for Cause, or by such officer for Good Reason (defined as material diminution of duties, diminution of salary or benefits, relocation, substantial increase in travel requirements or material breach by the Company of such Named Executive Officer's Employment Agreement) such Named Executive Officer is entitled to receive, in addition to the Accrued Benefits, a lump-sum severance benefit equivalent to two years' current base salary. Mr. Petry, who resigned as Chairman of the Board and Chief Executive Officer following consummation of the Acquisition, received in connection with his resignation a lump-sum severance benefit of $1,250,000. In addition, Mr. Petry received a payment in cash pursuant to the SERP of $742,000 in lieu of the Company's purchase of an annuity; the Company expects to make additional payments for the benefit of Mr. Petry in the amount of approximately $676,000 for related tax obligations. SHORT TERM SALE PROGRAM The Company adopted a Short Term Sale Program (the 'STSP') pursuant to the terms of which the Company has made payments to certain members of senior management (the 'eligible individuals'), in connection with a change in control of the Company. The consummation of the Acquisition constituted such a change in control. The STSP provides for (i) a 'stay-put' bonus equal to an eligible individual's Fiscal 1997 base salary and (ii) a sales incentive bonus based on a multiple (ranging from 50% to 200%) of an eligible individual's Fiscal 1997 base salary ('Sales Incentive'). The stay-put bonus is payable in two equal parts, the first ('First Stay-Put') payable shortly after the change in control, and the second ('Second Stay-Put') payable on the second anniversary of such change in control, provided that the individual has remained employed by the Company or, if the individual was terminated by the Company other than for cause, payable upon such termination. The Sales Incentive is 75 payable only if the present value of the after-tax proceeds to the Trust in connection with the change in control meets a threshold amount set forth in the STSP. In the event that the Trust's after-tax proceeds exceed a specified target amount, the multiple will increase on a straight line basis. Based upon estimates of the present value of after-tax proceeds to the Trust in connection with the Acquisition, the Company made payments under the STSP shortly after consummation of the Acquisition in the aggregate amount of approximately $7.6 million. The Company expects to make an additional payment of approximately $2.1 million on the second anniversary of the Closing Date for the Second Stay-Put. The Company may make additional payments under the STSP in connection with the Sales Incentive depending on the final determination of the present value of the after-tax proceeds to the Trust. The Company does not expect such payment, if any, to exceed $1.3 million. See 'Certain Relationships and Related Transactions.' Payments made pursuant to the STSP are not included in compensation for purposes of the Salaried Plan and the SERP. In addition, the STSP provides that any severance protection that an eligible individual may have will continue for two years following a change in control. Upon adoption of the STSP in August 1997, the Company began to accrue an expense for the First Stay-Put, which, according to its terms, was earned from the date of adoption of the STSP until the earlier of (i) 30 days after a change in control of the Company, or (ii) June 30, 1998. The total expense recorded in 1997 was $.7 million. No accrual was made for the Sales Incentive in 1997 because, according to the terms of the STSP, the Sales Incentive was earned from the date of the Acquisition through 30 days thereafter. As of February 28, 1998, the Company had recorded (i) the pro rata portion of the First Stay-Put relating to the period from adoption of the STSP through February 28, 1998, and (ii) the pro rata portion (i.e. four days out of thirty) of the expense earned pursuant to the Sales Incentive relating to the period from the date of the Acquisition to February 28, 1998. The expense related to the Second Stay-Put and the remainder of the First Stay-Put will be earned and recorded in the second quarter of 1998. The remainder of the expense related to the Sales Incentive will be recorded upon the final determination of the present value of the after-tax proceeds to the Trust. The Company anticipates that it will revise its estimate of the expense related to the Sales Incentive by recording a $.9 million charge in the second quarter of 1998. The following table shows the payments to the Named Executive Officers under the STSP shortly after consummation of the Acquisition:
NAMED EXECUTIVE OFFICER SALES INCENTIVE FIRST STAY-PUT - ---------------------------------------------------------------------- --------------- -------------- Thomas E. Petry....................................................... $ 1,000,000 $625,000(A) Andries Ruijssenaars.................................................. 840,000 262,500 David N. Hall......................................................... 600,000 187,500 Wayne R Wickens....................................................... 520,000 162,500 James A. Ralston...................................................... 192,000 120,000 Carroll D. Curless.................................................... 288,000 120,000
- ------------ (A) This amount represents 100% of Mr. Petry's stay-put bonus, which he received at the time of his resignation from the Company. The Company expects to pay to each of the Named Executive Officers, other than Mr. Petry, on the second anniversary of the Closing Date the Second Stay-Put in an amount equal to the First Stay-Put indicated in the above table. Mr. Petry received 100% of his stay-put bonus at the time of his resignation from the Company and, accordingly, he will not receive any additional payment in connection with the stay-put bonus. COMPENSATION TO SENIOR MANAGEMENT Shortly after the Acquisition, the Company paid approximately $10.0 million to the E-P Management Trust for the benefit of certain members of senior management of the Company. The $10.0 million payment was used by the E-P Management Trust to satisfy a loan from Granaria Holdings, the proceeds of which were used by E-P Management Trust to acquire 16% of the common stock of Granaria Industries. Pursuant to the Incentive Stock Plan adopted by the Company, the shares of Granaria Industries held by the E-P Management Trust were allocated to certain members of senior 76 management of the Company (including certain of the Named Executive Officers) shortly after the Acquisition, which shares are subject to periods of vesting up to four years. The receipt of such shares will be taxable to the holders as income in an amount equal to the value of the shares at the time of vesting. The Incentive Stock Plan requires the Company to reimburse the holders of the shares for their tax obligations associated with the receipt of such shares. The initial amount of such taxes, which the Company paid shortly after the Acquisition, was approximately $2.9 million. The Company expects to make additional tax payments over the four years following the Acquisition in accordance with the applicable vesting periods. The payment by the Company of the $10.0 million and the tax payments to the holders of the shares will result in an income tax deduction to the Company. 77 SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF PARENT The following table sets forth certain information regarding the beneficial ownership of the Common Stock after giving effect to the Offerings of (i) each person known by the Company to own beneficially 5% or more of the voting Common Stock, (ii) each anticipated director of the Company, (iii) each executive officer of the Company and (iv) all current directors and executive officers as a group.
SHARES BENEFICIALLY OWNED -------------------------------- NUMBER OF PERCENTAGE OF NAME CLASS A SHARES CLASS A SHARES - ----------------------------------------------------------------------- -------------- -------------- Granaria Holdings N.V. ................................................ 625,001 100% Lange Voorhout 16 P.O. Box 233 2501 CE The Hague The Netherlands(1) Joel P. Wyler ......................................................... 625,001 100% Lange Voorhout 16 P.O. Box 233 2501 CE The Hague The Netherlands(2) Daniel C. Wyler(1) .................................................... 625,001 100% Lange Voorhout 16 P.O. Box 233 2501 CE The Hague The Netherlands(2) All directors and executive officers as a group ....................... 625,001 100% (five persons)(3)
- ------------ (1) Granaria Holdings N.V. is 100% owned by Wijler Holding N.V., a Dutch Antilles company, 50.1% of which is owned by Joel P. Wyler and 49.9% of which is owned by Daniel C. Wyler. (2) Includes shares held by Granaria Holdings B.V. (3) Shortly after the Acquisition, pursuant to the Incentive Stock Plan certain members of senior management of the Company received interests in the E-P Management Trust, which beneficially owns 10% of the equity of Parent. The trustees of the E-P Management Trust are Andries Ruijssenaars, Thomas E. Petry and Joel P. Wyler. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS As part of the arrangements made prior to the negotiation and execution of the Merger Agreement, the Company will make bonus payments to certain of its executive officers in connection with the consummation of any merger, acquisition, recapitalization or other transaction resulting in a change of control of the Company. The Acquisition resulted in such a change of control. The Company made special bonus payments shortly after consummation of the Acquisition in the aggregate amount of $7.6 million to certain members of senior management of the Company and expects to make an additional special bonus payment of approximately $2.1 million on the second anniversary of the Acquisition. Such payments were made pursuant to the STSP. See 'Executive Compensation -- Short Term Sale Program.' In connection with the Acquisition, the Company paid a transaction fee of $7.3 million (approximately 1% of the transaction value) to Granaria Holdings in consideration for advisory services related to the structuring and financing of the Acquisition. The Company believes that such transaction fee is on terms no less favorable to the Company than could have been obtained from an independent third party. The Company has entered into an advisory and consulting agreement with Granaria Holdings pursuant to which the Company will pay an annual management fee of $1.75 million to Granaria Holdings. The Company believes that such management agreement is on terms no less favorable to the Company than could have been obtained from an independent third party. 78 DESCRIPTION OF INDUSTRIAL REVENUE BONDS The Company has incurred obligations under certain tax-exempt industrial revenue bond financings (the 'IRB Obligations') totaling $18.4 million at November 30, 1997 for development projects relating to the Company's facilities at its Vale, Oregon, Manchester, Tennessee and Kalkaska, Michigan facilities. The IRB Obligations for the Kalkaska, Michigan facility are collateralized by real property and equipment and bears interest at 6.0%. The industrial revenue bonds for the Vale, Oregon and Manchester, Tennessee facilities are floating rate notes that are collateralized by letters of credit. The IRB Obligations mature at various dates ranging from 2002 to 2012. DESCRIPTION OF NEW CREDIT AGREEMENT On the Closing Date, the Company entered into the New Credit Agreement with ABN AMRO Bank, providing for the establishment of $385 million aggregate principal amount of new credit facilities (the 'New Credit Facilities'). The Company drew down approximately $304.1 million on the Closing Date in connection with the Acquisition, including $225.0 million in term loan facilities and approximately $79.1 million under the revolving credit facility. In addition, $28.6 million of the revolving credit facility was used as credit support in the form of letters of credit on the Closing Date. The New Credit Facilities have been syndicated among several lenders who are parties thereto (collectively, the 'Lenders'), with ABN AMRO Bank, as Agent and Arranger, and PNC Bank, National Association, as Documentation Agent (together, the 'Agents'). The following is a summary description of the principal terms of the New Credit Agreement. The description set forth below does not purport to be complete and is qualified in its entirety by reference to the agreements setting forth the principal terms and conditions of the New Credit Facilities, which have been filed as exhibits to the Notes Exchange Offer Registration Statement of which this Prospectus constitutes a part. New Credit Facilities. The New Credit Agreement provides for (i) a senior secured revolving credit facility (the 'Revolving Credit Facility') and (ii) a senior secured term loan facility (the 'Term Loan Facility'). The Revolving Credit Facility may be borrowed in the aggregate principal amount of up to $160.0 million (of which up to $50.0 million may be utilized in the form of commercial and standby letters of credit). In connection with the Revolving Credit Facility, the Lenders will make available to the Company a swing-line facility under which the Company may make short-term borrowings up to $10.0 million, each of which reduces the availability under the Revolving Credit Facility on a dollar-for-dollar basis. The Term Loan Facility, in the aggregate principal amount of $225.0 million, consists of: (i) Tranche A Term Loan in the principal amount of $100.0 million (the 'Tranche A Term Loan'), (ii) Tranche B Term Loan in the principal amount of $50.0 million (the 'Tranche B Term Loan'), and (iii) Tranche C Term Loan in the principal amount of $75.0 million (the 'Tranche C Term Loan' and together with the Tranche A Term Loan and the Tranche B Term Loan, the 'Term Loans'). Availability. The entire amount of the Term Loans was required to be drawn in a single drawing at consummation of the Acquisition. Amounts borrowed under the Term Loan Facility that are repaid may not be reborrowed. Loans under the Revolving Credit Facility are available at any time on or after the Closing and prior to the final maturity date of the Revolving Credit Facility, in principal amounts to be agreed upon. Amounts repaid under the Revolving Credit Facility during such availability period may be reborrowed provided no event of default has occurred and is continuing and the other conditions to borrowing specified therein have been satisfied. Guarantees and Security. All obligations under the New Credit Facilities are guaranteed by Parent and the Subsidiary Guarantors. The Company's obligations under the New Credit Facilities, and Parent's and the Subsidiary Guarantors' obligations under their respective Guarantees, are secured by (i) with respect to the Company, substantially all of its U.S. property and assets (tangible and intangible), a pledge of all capital stock of its U.S. subsidiaries and up to 65% of the capital stock of its directly held non-U.S. subsidiaries, (ii) with respect to Parent, all of the capital stock of the Company (until the Company's leverage ratio falls below a certain level) and (iii) with respect to the Subsidiary Guarantors, substantially all of its U.S. property and assets (tangible and intangible) (collectively, the 'Collateral'). If at any time the Company can pledge more than 65% of the capital stock of a non-U.S. subsidiary without creating adverse tax consequences to the Company, the Company is required to pledge such stock. 79 Interest. The Senior Indebtedness Facility provides for interest rates, at the Company's option, equal to the following: (i) Revolving Credit Facility -- Adjusted LIBOR plus 2.25% or ABR plus 1.25%, (ii) Tranche A Term Loan -- Adjusted LIBOR plus 2.25% or ABR plus 1.25%, (iii) Tranche B Term Loan -- Adjusted LIBOR plus 2.625% or ABR plus 1.625%, and (iv) Tranche C Term Loan -- Adjusted LIBOR plus 2.875% or ABR plus 1.875%. The default interest rate shall be the applicable rate plus 2% per annum. 'ABR' is the higher of ABN AMRO Bank's prime rate and the Federal Funds Effective Rate plus 0.5%. 'Adjusted LIBOR' is the applicable London interbank offered rate adjusted for reserves (if any). Maturity, Amortization and Prepayments. The Revolving Credit Facility matures and shall be due and payable on the last business day of February 2004. The Term Loan Facility maturity dates are as follows: (i) the Tranche A Term Loan matures nine months after the fifth anniversary of the Closing, (ii) the Tranche B Term Loan matures six months after the seventh anniversary of the Closing, and (iii) the Tranche C Term Loan matures six months after the eighth anniversary of the Closing. Amortization of the Tranche A Term Loan commences on the last business day in August 1998 in the following quarterly payment amounts: in 1998 and 1999, $2.5 million; in 2000, $3.75 million; in 2001, $5.0 million; in 2002 through maturity, $6.25 million. Amortization of the Tranche B Term Loan commences on the last business day in November 1998 in the following annual payment amounts: in 1998, $100,000, in 1999 through 2004, $150,000 and the remaining amount due at maturity. Amortization of the Tranche C Term Loan commences on the last business day in November 1998 in the following annual payment amounts: in 1998, $100,000, in 1999 through 2005, $150,000 and the remaining amount due at maturity. Borrowings may be prepaid, and voluntary reductions of the unutilized portion of the Revolving Credit Facility made, at any time, in certain agreed upon minimum amounts, without premium or penalty, subject to LIBOR breakage costs. Any voluntary prepayments of the Term Loan Facility will be applied pro rata to the remaining amortization payments under the Term Loans. The Company will be required to make mandatory prepayments on the New Credit Facilities equal to (a) 60% of annual excess cash flow, (b) 100% of the net proceeds from the sale of assets (including insurance proceeds), subject to certain reinvestment provisions, (c) 100% of the net proceeds from the issuance of debt obligations, and (d) 50% of the net proceeds from the issuance by the Company or its subsidiaries of equity securities. Any Lender of Tranche B Term Loans or Tranche C Term Loans will have the right to decline to have such loans prepaid with the amounts set forth above, in which case such amounts shall instead be applied as a prepayment of the Tranche A Term Loan (until paid in full), and then to permanently reduce the Revolving Credit Facility to an amount not less than $100 million. For purposes of the mandatory prepayments, the term 'excess cash flow' means cash flows from the Company's operating activities as reduced by (i) certain capital expenditures, (ii) amounts expended with respect to certain permitted acquisitions, (iii) permanent principal payments and interest payments of indebtedness for borrowed money of the Company and its subsidiaries subject to certain exceptions, and (iv) unusual or non-recurring charges that decrease the Company's working capital. Certain Covenants. The New Credit Agreement contains covenants restricting the ability of the Company and its subsidiaries to, among other things, (i) declare dividends or redeem or repurchase capital stock, (ii) issue stock of a subsidiary, (iii) incur liens, (iv) make loans and investments, (v) issue additional debt, (vi) amend or otherwise alter debt agreements, (vii) create subsidiaries, (viii) engage in mergers, acquisitions and assets sales, (ix) transact with affiliates and (x) alter the business it conducts. In addition, the New Credit Agreement provides that the Company cannot make certain payments including: (i) lending money to any person, (ii) purchasing any stock, securities of or any other interest in, or making any capital contribution to, any other person, and (iii) purchasing any futures contract or otherwise becoming liable for the purchase or sale of currency or other commodities at a future date; provided that the Company and its subsidiaries may (a) acquire and hold accounts receivable acquired in the ordinary course of business, (b) hold certain cash equivalents, (c) make inter-company loans and advances to wholly-owned subsidiaries for working capital purposes and cash management, (d) hold stock of its subsidiaries, (e) enter into certain interest rate protection agreements, (f) own investments received in connection with the bankruptcy or reorganization of suppliers and customers, and (g) make loans and advances to employees for certain moving and travel expenses. The New Credit Agreement will not permit the Company and its subsidiaries to make any capital expenditures except for such expenditures which do not exceed $40.0 million in any fiscal year. The Company will also be required to 80 comply with the following financial covenants (i) a maximum leverage ratio, (ii) a minimum interest coverage ratio and (iii) a minimum fixed charge coverage ratio which ratios are set forth below:
1998 1999 2000 2001 2002 2003 2004 ---- ---- ---- ---- ---- ---- ---- Maximum leverage..................................... 5.60 5.60 4.50 3.50 3.50 3.50 3.50 Interest coverage.................................... 1.85 1.85 2.25 2.50 3.00 3.00 3.00 Fixed charge coverage................................ 1.50 1.50 1.75 1.75 1.75 1.75 1.75
DESCRIPTION OF THE NOTES The New Notes will be issued pursuant to the Indenture among the Company, the Guarantors and The Bank of New York, as trustee (the 'Trustee'), which has been filed as an exhibit to the Notes Exchange Offer Registration Statement of which this Prospectus constitutes a part. The following is a summary of the material terms and provisions of the Notes. The terms of the New Notes include those set forth in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the 'Trust Indenture Act'). The Notes are subject to all such terms, and holders of the Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summary does not purport to be a complete description of the Notes and is subject to the detailed provisions of, and qualified in its entirety by reference to, the Indenture. Capitalized terms that are used but not otherwise defined herein have the meanings assigned to them in the Indenture and such definitions are incorporated herein by reference. GENERAL On February 24, 1998, the Issuer issued $220.0 million aggregate principal amount of Old Notes under the Indenture. Pursuant to the merger of the Issuer into the Company, the Company assumed all of the Issuer's obligations and liabilities under the Old Notes and the Indenture. The terms of the New Notes are identical in all material respects to the Old Notes, except for certain transfer restrictions and registration and other rights relating to the exchange of the Old Notes for New Notes. The Trustee will authenticate and deliver New Notes for original issue only in exchange for a like principal amount of Old Notes. Any Old Notes that remain outstanding after the consummation of the Notes Exchange Offer, together with the New Notes, will be treated as a single class of securities under the Indenture. The Notes represent senior subordinated unsecured obligations of the Company limited to an aggregate principal amount of $220 million, subordinated in right of payment to all existing and future Senior Indebtedness of the Company (including the Company's obligations under the New Credit Agreement) as described below under ' -- Subordination.' The Notes are unconditionally guaranteed by each Guarantor on a senior subordinated basis, with each such guarantee subordinated to the Guarantor's guarantee of the obligations of the Company under the New Credit Agreement and to all other Senior Indebtedness of such Guarantor. The Notes bear interest at the rate shown on the cover page of this Prospectus, payable on March 1 and September 1 of each year, commencing on March 1, 1998, to holders of record at the close of business on February 15 or August 15, as the case may be, immediately preceding the relevant interest payment date. The Notes will mature on March 1, 2008 and will be issued in registered form, without coupons, and in denominations of $1,000 and integral multiples thereof. The Notes will be payable as to principal, premium, if any, and interest at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, by wire transfer of immediately available funds or, in the case of certificated securities only, by mailing a check to the registered address of the holder. See ' -- Book Entry, Delivery and Form of Securities.' Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. SUBORDINATION The payment by the Company of principal of, and premium (if any) and interest (including Special Interest) on the Notes, and by each Guarantor of such amounts under its Note Guarantee (collectively, 81 the 'Note Indebtedness'), will be subordinated to the prior payment in full in cash when due of the principal of, and premium, if any, and accrued and unpaid interest on and all other amounts owing in respect of, all existing and future Senior Indebtedness of the Company and of each Guarantor, as the case may be. The Company has agreed in the Indenture that it will not incur, directly or indirectly, any Indebtedness that is subordinate or junior in ranking in right of payment to its Senior Indebtedness unless such Indebtedness is pari passu with or is expressly subordinated in right of payment to the Notes. In addition, each Guarantor has agreed that it will not incur, directly or indirectly, any Indebtedness that is subordinate or junior in ranking in right of payment to its Senior Indebtedness unless such Indebtedness is pari passu with or is expressly subordinated in right of payment to the Notes. At February 28, 1998, the Company and the Subsidiary Guarantors had approximately $327.0 million of Indebtedness outstanding other than the Notes, of which approximately $323.8 million was secured and $322.5 million of which was Senior Indebtedness. Subject to certain limitations, the Company and its Subsidiaries (including the Subsidiary Guarantors) may incur additional Indebtedness in the future. See ' -- Certain Covenants -- Limitations on Additional Indebtedness.' The Indenture provides that, upon any payment or distribution to creditors of the Company or any Guarantor of the assets of the Company or the Guarantors of any kind or character in a total or partial liquidation or dissolution of the Company or the Guarantors or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or any Guarantor, whether voluntary or involuntary (including any assignment for the benefit of creditors and proceedings for marshaling of assets and liabilities of the Company or any Guarantor), the holders of all Senior Indebtedness of the Company or any Guarantor then outstanding will be entitled to payment in full in cash (including interest accruing subsequent to the filing of petition of bankruptcy or insolvency at the rate specified in the document relating to the applicable Senior Indebtedness, whether or not such interest is an allowed claim enforceable against the Company or any Guarantor under applicable law) before the holders of Notes are entitled to receive any payment (other than payments made from a trust previously established pursuant to provisions described under ' -- Satisfaction and Discharge of Indenture; Defeasance') on or with respect to the Note Indebtedness and until all Senior Indebtedness receives payment in full in cash, any distribution to which the holders of Notes would be entitled will be made to holders of Senior Indebtedness. Upon the occurrence of any default in the payment of any principal of or interest on or other amounts due on any Designated Senior Indebtedness (as defined below) of the Company or any Guarantor (a 'Payment Default'), no payment of any kind or character shall be made by the Company or a Guarantor (or by any other Person on its or their behalf) with respect to the Note Indebtedness unless and until (i) such Payment Default shall have been cured or waived in accordance with the instruments governing such Indebtedness or shall have ceased to exist, (ii) such Designated Senior Indebtedness has been discharged or paid in full in cash in accordance with the instruments governing such Indebtedness or (iii) the benefits of this sentence have been waived by the holders of such Designated Senior Indebtedness or their representative, including, if applicable, the Agents, immediately after which the Company must resume making any and all required payments, including missed payments, in respect of its obligations under the Notes. Upon (1) the occurrence and continuance of an event of default (other than a Payment Default) relating to Designated Senior Indebtedness, as such event of default is defined therein or in the instrument or agreement under which it is outstanding, which event of default, pursuant to the instruments governing such Designated Senior Indebtedness, entitles the holders (or a specified portion of the holders) of such Designated Senior Indebtedness or their designated representative to immediately accelerate without further notice (except such notice as may be required to effect such acceleration) the maturity of such Designated Senior Indebtedness (whether or not such acceleration has actually occurred) (a 'Non-payment Default') and (2) the receipt by the Trustee and the Company from the trustee or other representative of holders of such Designated Senior Indebtedness of written notice (a 'Payment Blockage Notice') of such occurrence, no payment is permitted to be made by the Company or any Guarantor (or by any other Person on its or their behalf) in respect of the Note Indebtedness for a period (a 'Payment Blockage Period') commencing on the date of receipt by the Trustee of such notice and ending on the earliest to occur of the following events (subject to any blockage of payments that may then be in effect due to a Payment Default on Designated Senior 82 Indebtedness): (w) such Non-payment Default has been cured or waived or has ceased to exist; (x) a 179-consecutive-day period commencing on the date such written notice is received by the Trustee has elapsed; (y) such Payment Blockage Period has been terminated by written notice to the Trustee from the Trustee or other representative of holders of such Designated Senior Indebtedness, whether or not such Non-payment Default has been cured or waived or has ceased to exist; and (z) such Designated Senior Indebtedness has been discharged or paid in full in cash, immediately after which, in the case of clause (w), (x), (y) or (z), the Company must resume making any and all required payments, including missed payments, in respect of its obligations under the Notes. Notwithstanding the foregoing, (a) not more than one Payment Blockage Period may be commenced in any period of 365 consecutive days and (b) no default or event of default with respect to the Designated Senior Indebtedness of the Company that was the subject of a Payment Blockage Notice which existed or was continuing on the date of the giving of any Payment Blockage Notice shall be or serve as the basis for the giving of a subsequent Payment Blockage Notice whether or not within a period of 365 consecutive days unless such default or event of default shall have been cured or waived for a period of at least 90 consecutive days after such date. Notwithstanding anything in the Indenture to the contrary, there must be 180 consecutive days in any 365-day period in which no Payment Blockage Period is in effect. Notwithstanding the foregoing, holders of Notes may receive and retain Permitted Junior Securities and payment from the money or the proceeds held in any defeasance trust described under ' -- Satisfaction and Discharge of Indenture; Defeasance' below, and no such receipt or retention will be contractually subordinated in right of payment to any Senior Indebtedness or subject to the restrictions described in this 'Subordination' section. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company or any Guarantor, whether in cash, property or securities, shall be received by the Trustee or the holders of Notes at a time when such payment or distribution is prohibited by the foregoing provisions, such payment or distribution shall be segregated from other funds or assets and held in trust for the benefit of the holders of Senior Indebtedness of the Company or such Guarantor, as the case may be, and shall be paid or delivered by the Trustee or such holders, as the case may be, to the holders of the Senior Indebtedness of the Company or such Guarantor, as the case may be, remaining unpaid or unprovided for or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness of the Company or such Guarantor, as the case may be, may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness of the Company or such Guarantor, as the case may be, held or represented by each, for application to the payment of all Senior Indebtedness of the Company or such Guarantor, as the case may be, remaining unpaid, to the extent necessary to pay or to provide for the payment in full in cash of all such Senior Indebtedness after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness. If the Company fails to make any payment on the Notes when due or within any applicable grace period, whether or not such failure is on account of the subordination provisions referred to above, such failure would constitute an Event of Default under the Indenture and would enable the holders of Notes to accelerate the maturity of the Notes. See ' -- Events of Default.' By reason of the subordination provisions contained in the Indenture, in the event of bankruptcy, liquidation, insolvency or other similar proceedings, creditors of the Company who are holders of Senior Indebtedness may recover more, ratably, than the holders of the Notes, and creditors of the Company who are not holders of Senior Indebtedness may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than the holders of the Notes. GUARANTEES The Company's payment obligations under the Notes will fully and unconditionally, jointly and severally guaranteed (the 'Note Guarantees') by Parent and by each Subsidiary Guarantor. Each Note Guarantee will be an unsecured senior subordinated obligation of the Guarantor providing it, and will rank junior in right of payment to all existing and future Senior Indebtedness of such Guarantor, including such Guarantor's guarantee of the Company's obligations under the New Credit Agreement. 83 The obligations of each Guarantor under its Note Guarantee will be limited so as not to constitute a fraudulent conveyance under applicable law. The Indenture provides that no Subsidiary Guarantor may consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person) another Person whether or not affiliated with such Subsidiary Guarantor unless (i) the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) assumes all of the obligations of such Subsidiary Guarantor pursuant to a supplemental indenture, in form and substance satisfactory to the Trustee, under the Notes and the Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) immediately after giving effect to such transaction, the Coverage Ratio Incurrence Condition would be met. OPTIONAL REDEMPTION OF THE NOTES The Notes may not be redeemed prior to March 1, 2003, but will be redeemable at the option of the Company, in whole or in part, at any time on or after March 1, 2003, at the following redemption prices (expressed as percentages of principal amount), together with accrued and unpaid interest, if any, thereon to the redemption date, if redeemed during the twelve-month period beginning March 1:
OPTIONAL YEAR REDEMPTION PRICE - --------------------------------------------------------------------------- ---------------- 2003....................................................................... 104.688% 2004....................................................................... 103.125% 2005....................................................................... 101.563% 2006 and thereafter........................................................ 100.000%
Notwithstanding the foregoing, at any time prior to March 1, 2001, the Company may redeem up to 35% of the aggregate principal amount of the Notes outstanding on the Closing Date with the net cash proceeds of one or more Equity Offerings at a redemption price equal to 109.375% of the principal amount thereof, plus accrued and unpaid interest and Special Interest, if any, to the redemption date; provided that (a) at least $100 million aggregate principal amount of the Notes remains outstanding immediately after the occurrence of such redemption and (b) such redemption occurs within 60 days of the date of the closing of any such Equity Offering. If less than all of the Notes are to be redeemed at any time, selection of the Notes to be redeemed will be made by the Trustee from among the outstanding Notes on a pro rata basis, by lot or by any other method permitted in the Indenture. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder whose Notes are to be redeemed at the registered address of such holder. On and after the redemption date, interest will cease to accrue on the Notes or portions thereof called for redemption. CHANGE OF CONTROL Upon the occurrence of a Change of Control, each holder of the Notes will have the right to require that the Company repurchase such holder's Notes for a cash price (the 'Change of Control Purchase Price') equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest and Special Interest, if any, to the date of repurchase, all in accordance with the following paragraph. Within 30 days following any Change of Control, the Company will mail to the Trustee (who shall mail to each holder at the Company's expense) a notice (i) describing the transaction or transactions that constitute the Change of Control, (ii) offering to repurchase, pursuant to the procedures required by the Indenture and described in such notice (a 'Change of Control Offer'), on a date specified in such notice (which shall be a business day not earlier than 30 days or later than 60 days from the date such notice is mailed) and for the Change of Control Purchase Price, all Notes properly tendered by such holder pursuant to such offer to purchase for the Change of Control Purchase Price and (iii) describing the procedures that holders must follow to accept the Change of Control Offer. The Change of Control Offer is required to remain open for at least 20 business days or for such longer period as is required by law. 84 The occurrence of the events constituting a Change of Control under the Indenture may result in an event of default in respect of other Indebtedness (including the Senior Indebtedness) of the Company and its Subsidiaries and, consequently, the lenders thereof may have the right to require repayment of such Indebtedness in full. If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay for all or any of the Notes that might be delivered by holders of Notes seeking to accept the Change of Control Offer. There can be no assurance that in the event of a Change of Control the Company will be able to obtain the consents necessary to consummate a Change of Control Offer from the lenders under agreements governing outstanding Indebtedness which may prohibit such an offer. The Company's obligation to make a Change of Control Offer will be satisfied if a third party makes the Change of Control Offer in the manner and at the times and otherwise in compliance with the requirements applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under such Change of Control Offer. The definition of Change of Control includes the sale of 'all or substantially all' of the assets of the Company or Parent and their Subsidiaries, in either case taken as a whole, the determination of which depends upon the circumstances of any such sale and is subject to interpretation under applicable legal precedent. The Change of Control feature of the Notes, by requiring a Change of Control Offer, may in certain circumstances make more difficult or discourage a sale or takeover of the Company, and, thus, the removal of incumbent management. The Change of Control feature, however, is not part of a plan by management to adopt a series of antitakeover provisions. Instead, the Change of Control feature is a result of negotiations between the Company and the Initial Purchasers. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of Indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings. The Company will comply with the applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act and any other applicable laws and regulations in connection with the purchase of Notes pursuant to a Change of Control Offer. CERTAIN COVENANTS Limitations on Additional Indebtedness. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, incur any Indebtedness (including without limitation Acquired Indebtedness); provided that (i) the Company and its Restricted Subsidiaries may incur Permitted Indebtedness and (ii) the Company may incur additional Indebtedness if, after giving effect thereto, the Company's Consolidated Interest Coverage Ratio on the date thereof would be at least 2.0 to 1, determined on a pro forma basis as if the incurrence of such additional Indebtedness, and the application of the net proceeds therefrom, had occurred at the beginning of the four-quarter period used to calculate the Company's Consolidated Interest Coverage Ratio. Limitation on the Issuance of Capital Stock of Restricted Subsidiaries. The Indenture provides that the Company will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of its Capital Stock (including options, warrants or other rights to purchase shares of such Capital Stock) except (i) to the Company or a Wholly-Owned Restricted Subsidiary, (ii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary or (iii) to the extent such shares represent directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Wholly-Owned Restricted Subsidiary. The proceeds of any sale of Capital Stock permitted hereunder and referred to in clauses (ii) and (iii) above will be treated as Net Available Proceeds and must be applied in a manner consistent with the provisions of the covenant described under ' -- Limitations on Asset Sales.' Limitations on Layering Debt. The Indenture provides that the Company will not, and will not permit any Subsidiary Guarantor to, incur any Indebtedness that is subordinate or junior in right of payment to any Senior Indebtedness of the Company or such Subsidiary Guarantor unless such Indebtedness by its terms is pari passu with, or subordinated to, the Notes or the Note Guarantee of such Subsidiary Guarantor, as the case may be. 85 Limitations on Restricted Payments. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment (except as permitted below) if at the time of such Restricted Payment: (i) a Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof; (ii) the Company would be unable to meet the Coverage Ratio Incurrence Condition; or (iii) the amount of such Restricted Payment, when added to the aggregate amount of all other Restricted Payments (except as expressly provided in the second following paragraph) made after the Issue Date, exceeds the sum of (A) 50% of the Company's Consolidated Net Income (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Issue Date to the end of the Company's most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment (or, if such aggregate Consolidated Net Income shall be a deficit, minus 100% of such aggregate deficit) plus (B) the net cash proceeds from the issuance and sale (other than to a Subsidiary of the Company) after the Issue Date of (1) the Company's Capital Stock that is not Disqualified Capital Stock or (2) debt securities of the Company that have been converted into the Company's Capital Stock that is not Disqualified Capital Stock and that is not then held by a Subsidiary of the Company, plus (C) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (x) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (y) the initial amount of such Restricted Investment plus (D) the amount of Restricted Investment outstanding in an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary of the Company in accordance with the definition of 'Unrestricted Subsidiary.' The foregoing provisions do not prohibit (1) the payment of any dividend by the Company or any Restricted Subsidiary within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (2) the redemption, repurchase, retirement or other acquisition of any Capital Stock of the Company in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary of the Company) of other Capital Stock of the Company (other than any Disqualified Capital Stock); (3) the defeasance, redemption, repurchase or other retirement of Subordinated Indebtedness in exchange for, or out of the proceeds of, the substantially concurrent issue and sale of Capital Stock of the Company (other than (x) Disqualified Capital Stock, (y) Capital Stock sold to a Subsidiary of the Company and (z) Capital Stock purchased with the proceeds of loans from the Company or any of its Subsidiaries); (4) the making of a Related Business Investment in joint ventures or Unrestricted Subsidiaries out of the proceeds of the substantially concurrent issue and sale of Capital Stock of the Company (other than (x) Disqualified Capital Stock, (y) Capital Stock sold to a Subsidiary of the Company and (z) Capital Stock purchased with the proceeds of loans from the Company or any of its Subsidiaries); (5) Specified Transaction Payments; (6) payments of up to $1.75 million to Granaria Holdings or any of its Affiliates in the aggregate in any fiscal year pursuant to any Related Party Agreement entered into between Granaria Holdings or any of its Affiliates and the Company or its Subsidiaries to provide management and similar services to any such Persons or to Parent; (7) the payments of dividends or distributions to Parent solely in amounts and at the times necessary to permit Parent to purchase, redeem, acquire, cancel or otherwise retire for value Capital Stock of Parent, or permit payments of dividends or distributions by Parent to its shareholders solely in amounts and at the times necessary to permit such shareholders to (or permit subsequent distributions to permit their respective shareholders to) purchase, redeem, acquire, cancel or otherwise retire for value Capital Stock of such shareholders, in each case held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates), or a trust established for the benefit of any of the foregoing of Parent, the Company or its Subsidiaries, upon death, disability, retirement, severance or termination of employment or service or pursuant to any agreement under which such Capital Stock or related rights were issued; provided that the amount of such payments under this clause (7) after the Issue Date does not exceed in the aggregate $5.0 million; (8) the payment of dividends or distributions of amounts to Parent in amounts and at such times as are sufficient to pay the scheduled interest or dividends owed 86 by Parent on the Parent Preferred Stock or Exchange Debentures so long as (x) Parent is the direct Parent of the Company owning 100% of the Capital Stock of the Company and (y) such Parent Preferred Stock or Exchange Debentures contains no scheduled requirement for the payment of cash interest or dividends, as applicable, until at least five years from the date of their original issuance, provided that at the time of such Restricted Payment and after giving effect thereto, either (A) the Company would be able to meet the Coverage Ratio Incurrence Condition or (B) the amount of such Restricted Payment, when added to the aggregate amount of all other Restricted Payments made after the Issue Date, does not exceed the sum referred to in clause (iii) of the next preceding paragraph; (9) Restricted Investments the amount of which, together with the amount of all other Restricted Investments made pursuant to this clause (9) after the Issue Date, does not exceed $10.0 million, provided that, in the case of clauses (8) and (9), no Default or Event of Default shall have occurred and be continuing or occur as a consequence of the actions or payments set forth therein; or (10) during any period in which Parent files consolidated income tax returns that include the Company, payments to Parent in amounts not in excess of the amount that the Company would have paid if it had filed consolidated tax returns on a separate-company basis, in each case solely in amounts and at the times necessary to permit Parent to pay its consolidated income taxes. Each Restricted Payment permitted pursuant to the preceding paragraph (other than the Restricted Payments referred to in clauses (2) through (5) or (10) thereof, and, to the extent deducted in determining Consolidated Net Income in any period, the Restricted Payments referred to in clauses (6) and (7) thereof) shall be included once in calculating whether the conditions of clause (iii) of the second preceding paragraph have been met with respect to any subsequent Restricted Payments. For purposes of determining compliance with this 'Limitation on Restricted Payments' covenant, in the event that a transaction meets the criteria of more than one of the types of Restricted Payments described in the clauses of the immediately preceding paragraph or of the clauses of the definition of 'Restricted Payment,' the Company, in its sole discretion, shall classify such transaction and only be required to include the amount and type of such transaction in one of such clauses. If an issuance of Capital Stock of the Company is applied to make a Restricted Payment pursuant to clause (2), (3) or (4) above, then, in calculating whether the conditions of clause (iii) of the second preceding paragraph have been met with respect to any subsequent Restricted Payments, the proceeds of any such issuance shall be included under such clause (iii) only to the extent such proceeds are not applied as so described in this sentence. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant 'Limitations on Restricted Payments' were computed, which calculations shall be based upon the Company's latest available financial statements. Limitations on Restrictions on Distributions from Restricted Subsidiaries. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual Payment Restriction with respect to any of its Restricted Subsidiaries, except for (a) any such Payment Restriction in effect on the Issue Date under the New Credit Agreement or the Parent Preferred Stock or any similar Payment Restriction under any similar credit facility, or any amendment, restatement, renewal, replacement or refinancing of any of the foregoing, provided that such similar Payment Restrictions are not, taken as a whole, materially more restrictive than the Payment Restrictions in effect on the Issue Date under the New Credit Agreement or the Parent Preferred Stock, (b) any such Payment Restriction in effect on the Issue Date consisting of customary net worth or leverage tests in effect on the Issue Date under any credit facility of any Foreign Subsidiary, or any amendment, restatement, renewal, replacement or refinancing of any of the foregoing (including for purposes of this clause (b), any increase in the principal amount available thereunder) (a 'Replacement Facility'), provided that such Payment Restrictions in any such Replacement Facility are not, taken as a whole, materially more restrictive than the Payment Restrictions in effect on the Issue Date under the facility amended, restated, renewed, replaced or refinanced, (c) any such Payment Restriction under any agreement evidencing any Acquired Indebtedness that was permitted to be incurred pursuant to the Indenture in effect at the time of such incurrence and not created in contemplation of such event, provided that such Payment Restriction is not extended to apply to any of the assets of the entities not previously subject thereto, (d) any such Payment Restriction arising in connection with Refinancing Indebtedness; provided that any such 87 Payment Restrictions that arise under such Refinancing Indebtedness are not, taken as a whole, materially more restrictive than those under the agreement creating or evidencing the Indebtedness being refunded or refinanced and (e) any such restriction by reason of customary provisions restricting assignments, subletting or other transfers contained in leases, licenses and similar agreements entered into in the ordinary course of business. Limitations on Transactions with Affiliates. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an 'Affiliate Transaction'), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction (or series of related transactions) involving aggregate payments in excess of $1.0 million, an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and a Secretary's Certificate which sets forth and authenticates a resolution that has been adopted by a vote of a majority of the Independent Directors approving such Affiliate Transaction or, if at the time fewer than three Independent Directors are then in office, a Secretary's Certificate which sets forth and authenticates a resolution that has been adopted unanimously by the Company's Board of Directors and (b) with respect to any Affiliate Transaction (or series of related transactions) involving aggregate payments of $5.0 million or more, the certificates described in the preceding clause (a) and an opinion as to the fairness to the Company or such Subsidiary from a financial point of view issued by an Independent Financial Advisor; provided, however, that the following shall not be deemed to be Affiliate Transactions: (i) transactions exclusively between or among (1) the Company and one or more Restricted Subsidiaries or (2) Restricted Subsidiaries, provided, in each case, that no Affiliate of the Company (other than another Restricted Subsidiary) owns Capital Stock of any such Restricted Subsidiary; (ii) transactions between the Company or any Restricted Subsidiary and any qualified employee stock ownership plan established for the benefit of the Company's employees, or the establishment or maintenance of any such plan; (iii) reasonable director, officer and employee compensation and other benefit, and indemnification arrangements approved by a majority of the Independent Directors on the Board of Directors; (iv) transactions permitted by the 'Limitations on Restricted Payments' covenant; (v) the pledge of Capital Stock of Unrestricted Subsidiaries to support the Indebtedness thereof; (vi) the entering into of any Tax Sharing Agreement, and any payment pursuant thereto; (vii) the payment on behalf of Parent of ministerial administrative and operating fees and expenses in the ordinary course to Persons other than to Affiliates of Parent or the Company, provided that the aggregate amount thereof in any fiscal year of the Company does not exceed $750,000; (viii) arrangements with ABN AMRO Bank or any of its Affiliates or their respective successors (x) under the New Credit Agreement or the Notes or in connection therewith, (y) in connection with the offering of the Notes or the Series A Senior Preferred Stock or (z) pursuant to other banking, financing or underwriting activity entered into in the ordinary course of business; (ix) transactions between the Company or any Restricted Subsidiary and any Affiliate of the Company or such Restricted Subsidiary that is a joint venture, provided that no direct or indirect holder of an equity interest in such joint venture (other than the Company or a Restricted Subsidiary) is an Affiliate of the Company or such Restricted Subsidiary; and (x) Specified Transaction Payments. Limitations on Liens. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, incur or permit to exist any Lien of any nature whatsoever on any property of the Company or any Restricted Subsidiary (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, which secures Indebtedness that is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Notes equally and ratably with (or if such Lien secures Indebtedness that is subordinated to the Notes, prior to) such Indebtedness for so long as such Indebtedness is secured by a Lien. The foregoing restrictions shall not apply to (i) Liens existing on the Issue Date securing Indebtedness outstanding on the Issue Date; (ii) Liens in favor of the Company or a Subsidiary 88 Guarantor; (iii) Liens to secure Indebtedness that is non-recourse to the Company or any of its Subsidiaries or any of their respective assets other than the assets acquired or improved with such Indebtedness; (iv) Liens securing Acquired Indebtedness permitted to be incurred under the Indenture, provided that the Liens do not extend to property or assets not subject to such Lien at the time of acquisition (other than improvements thereon); (v) Liens on property of a Person existing at the time such Person is acquired or merged with or into or consolidated with the Company or any such Restricted Subsidiary (and not created in anticipation or contemplation thereof); (vi) Liens to secure Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (iv) and (v), provided that in each case such Liens do not extend to any additional property or assets (other than improvements thereon). Limitations on Asset Sales. (a) The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets included in such Asset Sale (evidenced by the delivery by the Company to the Trustee of an Officers' Certificate certifying that such Asset Sale complies with this clause (i)), (ii) immediately before and immediately giving effect to such Asset Sale, no Default or Event of Default shall have occurred and be continuing, and (iii) at least 80% of the consideration received by the Company or such Restricted Subsidiary therefor is in the form of cash paid at the closing thereof. The amount (without duplication) of any (x) Indebtedness (other than Subordinated Indebtedness) of the Company or such Restricted Subsidiary that is expressly assumed by the transferee in such Asset Sale and with respect to which the Company or such Restricted Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness, and (y) any Cash Equivalents, or other notes, securities or items of property received from such transferee that are promptly (but in any event within 15 days) converted by the Company or such Restricted Subsidiary to cash (to the extent of the cash actually so received), shall be deemed to be cash for purposes of clause (ii) and, in the case of clause (x) above, shall also be deemed to constitute a repayment of, and a permanent reduction in, the amount of such Indebtedness for purposes of the following paragraph (b). If at any time any non-cash consideration received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then the date of such conversion or disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this covenant. A transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to a Restricted Subsidiary will not be deemed to be an Asset Sale and a transfer of assets that constitutes a Restricted Investment and that is permitted under ' -- Limitations on Restricted Payments' will not be deemed to be an Asset Sale. (b) If the Company or any Restricted Subsidiary engages in an Asset Sale, the Company or any Restricted Subsidiary shall, no later than 360 days after such Asset Sale (i) apply all or any of the Net Available Proceeds therefrom to repay amounts outstanding under the New Credit Agreement or any other Senior Indebtedness; provided, in each case, that the related loan commitment (if any) of any Indebtedness constituting revolving credit debt is thereby permanently reduced by the amount of such Indebtedness so repaid and/or (ii) invest all or any part of the Net Available Proceeds thereof in the purchase of fixed assets to be used by the Company and its Restricted Subsidiaries in a Related Business (together with any short-term assets incidental thereto), or the making of a Related Business Investment. The amount of such Net Available Proceeds not applied or invested as provided in this paragraph will constitute 'Excess Proceeds.' (c) When the aggregate amount of Excess Proceeds equals or exceed $5.0 million, the Company will be required to make an offer to purchase, from all holders of the Notes, an aggregate principal amount of Notes equal to the amount of such Excess Proceeds as follows: (i) The Company will make an offer to purchase (a 'Net Proceeds Offer') from all holders of the Notes in accordance with the procedures set forth in the Indenture the maximum principal amount (expressed as a multiple of $10,000) of Notes that may be purchased out of the amount (the 'Payment Amount') of such Excess Proceeds. 89 (ii) The offer price for the Notes will be payable in cash in an amount equal to 100% of the principal amount of the Notes tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid interest and Special Interest, if any, to the date such Net Proceeds Offer is consummated (the 'Offered Price'), in accordance with the procedures set forth in the Indenture. To the extent that the aggregate Offered Price of Notes tendered pursuant to a Net Proceeds Offer is less than the Payment Amount relating thereto (such shortfall constituting a 'Net Proceeds Deficiency'), the Company may use such Net Proceeds Deficiency, or a portion thereof, for general corporate purposes, subject to the limitations of the 'Limitations on Restricted Payments' covenant. (iii) If the aggregate Offered Price of Notes validly tendered and not withdrawn by holders thereof exceeds the Payment Amount, Notes to be purchased will be selected on a pro rata basis. (iv) Upon completion of such Net Proceeds Offer in accordance with the foregoing provisions, the amount of Excess Proceeds with respect to which such Net Proceeds Offer was made shall be deemed to be zero. The Company will not permit any Subsidiary to enter into or suffer to exist any agreement that would place any restriction of any kind (other than pursuant to law or regulation) on the ability of the Company to make a Net Proceeds Offer following any Asset Sale. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder, if applicable, in the event that an Asset Sale occurs and the Company is required to purchase Notes as described above. Limitations on Mergers and Certain Other Transactions. The Indenture provides that the Company will not, in a single transaction or a series of related transactions, (i) consolidate or merge with or into (other than a merger with a Wholly-Owned Restricted Subsidiary solely for the purpose of changing the Company's jurisdiction of incorporation to another State of the United States), or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of the Company or the Company and its Subsidiaries (taken as a whole), or assign any of its obligations under the Notes and the Indenture, to any Person or (ii) adopt a Plan of Liquidation unless, in either case: (a) the Person formed by or surviving such consolidation or merger (if other than the Company) or to which such sale, lease, conveyance or other disposition or assignment shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the 'Successor'), is a corporation organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Successor assumes by supplemental indenture in a form satisfactory to the Trustee all of the obligations of the Company under the Notes and the Indenture; (b) immediately prior to and immediately after giving effect to such transaction and the assumption of the obligations as set forth in clause (a) above and the incurrence of any Indebtedness to be incurred in connection therewith, no Default or Event of Default shall have occurred and be continuing; and (c) immediately after and giving effect to such transaction and the assumption of the obligations set forth in clause (a) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, (1) the Consolidated Net Worth of the Company or the Successor, as the case may be, would be at least equal to the Consolidated Net Worth of the Company immediately prior to such transaction and (2) the Company or the Successor, as the case may be, could meet the Coverage Ratio Incurrence Condition; and (d) each Subsidiary Guarantor, unless it is the other party to the transactions described above, shall have by amendment to its guarantee confirmed that its guarantee of the Notes shall apply to the obligations of the Company or the Successor under the Notes and the Indenture. For purposes of this covenant, any Indebtedness of the Successor which was not Indebtedness of the Company immediately prior to the transaction shall be deemed to have been incurred in connection with such transaction. Additional Note Guarantees. The Indenture provides that if the Company or any of its Subsidiaries shall acquire or create another Subsidiary (other than (x) any Foreign Subsidiary or (y) a Subsidiary that has been designated as an Unrestricted Subsidiary or (z) an Immaterial Subsidiary), then such newly acquired or created Subsidiary will be required to execute a Note Guarantee, in accordance with the terms of the Indenture. Reports. Whether or not required by the rules and regulations of the Securities and Exchange Commission (the 'Commission'), so long as any Notes are outstanding, the Company and the Guarantors will file with the Commission, to the extent such filings are accepted by the Commission, 90 and will furnish (within 15 days after such filing) to the Trustee and to the holders of Notes all quarterly and annual reports and other information, documents and reports that would be required to be filed with the Commission pursuant to Section 13 of the Exchange Act if the Company and the Guarantors were required to file under such section. In addition, the Company and the Guarantors will make such information available to prospective purchasers of the Notes, securities analysts and broker-dealers who request it in writing. The Company and the Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the holders and beneficial holders of Notes and to prospective purchasers of Notes designated by the holders of Transfer Restricted Securities and to broker dealers, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. EVENTS OF DEFAULT An 'Event of Default' is defined in the Indenture as (i) failure by the Company to pay interest on any of the Notes when it becomes due and payable and the continuance of any such failure for 30 days; (ii) failure by the Company to pay the principal or premium, if any, on any of the Notes when it becomes due and payable, whether at stated maturity, upon redemption, upon acceleration or otherwise; (iii) failure by the Company to comply with any of its agreements or covenants described above under 'Certain Covenants -- Limitations on Mergers and Certain Other Transactions', or in respect of its obligations to make a Change of Control Offer or a Net Proceeds Offer described in 'Change of Control' and 'Certain Covenants -- Limitations on Asset Sales', respectively; (iv) failure by the Company to comply with any other covenant in the Indenture and continuance of such failure for 60 days after notice of such failure has been given to the Company by the Trustee or by the holders of at least 25% of the aggregate principal amount of the Notes then outstanding; (v) failure by either the Company or any of its Restricted Subsidiaries to make any payment when due after the expiration of any applicable grace period, in respect of any Indebtedness of the Company or any of such Restricted Subsidiaries, or the acceleration of the maturity of such Indebtedness by the holders thereof because of a default, with an aggregate outstanding principal amount for all such Indebtedness under this clause (v) of $10.0 million or more (but excluding in any event any such Indebtedness that is paid when so due after expiration of any applicable grace period, or upon acceleration of the maturity thereof, pursuant to any letter of credit); (vi) one or more final, non-appealable judgments or orders that exceed $10.0 million in the aggregate for the payment of money have been entered by a court or courts of competent jurisdiction against the Company or any Subsidiary of the Company and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered; (vii) certain events of bankruptcy, insolvency or reorganization involving the Parent, the Company or any Significant Subsidiary; and (viii) except as permitted by the Indenture, any Note Guarantee ceases to be in full force and effect or any Guarantor repudiates its obligations under any Note Guarantee. In the case of an Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, upon the acceleration of the Notes. If an Event of Default occurs prior to March 1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to March 1, 2003, then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable, to the extent permitted by law, in an amount equal to 10.0%. If an Event of Default (other than an Event of Default specified in clause (vii) above with respect to the Company), shall have occurred and be continuing under the Indenture, the Trustee, by written notice to the Company, or the holders of at least 25% in aggregate principal amount of the Notes then outstanding by written notice to the Company and the Trustee may declare all amounts owing under the Notes to be due and payable immediately. Upon such declaration of acceleration, the aggregate principal of, premium, if any, and interest on the outstanding Notes shall immediately become due and payable. If an Event of Default results from bankruptcy, insolvency or reorganization with respect to the Company, all outstanding Notes shall become due and payable without any further action or notice. 91 In certain cases, the holders of a majority in aggregate principal amount of the Notes then outstanding may waive an existing Default or Event of Default and its consequences, except a default in the payment of principal of, premium, if any, and interest on the Notes. The holders may not enforce the provisions of the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, holders of a majority in principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power; provided however, that such direction does not conflict with the terms of the Indenture. The Trustee may withhold from the holders notice of any continuing Default or Event of Default (except any Default or Event of Default in payment of principal of, premium, if any, or interest on the Notes) if the Trustee determines that withholding such notice is in the holders' interest. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture and, upon any Officer of the Company becoming aware of any Default or Event of Default, a statement specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE The Company may terminate its obligations under the Indenture at any time by delivering all outstanding Notes to the Trustee for cancellation and paying all sums payable by it thereunder. The Company, at its option, (i) will be discharged from any and all obligations with respect to the Notes (except for certain obligations of the Company to register the transfer or exchange of such Notes, replace stolen, lost or mutilated Notes, maintain paying agencies and hold moneys for payment in trust) or (ii) need not comply with certain of the restrictive covenants with respect to the Indenture, if the Company deposits with the Trustee, in trust, U.S. Legal Tender or U.S. Government Obligations or a combination thereof that, through the payment of interest and premium thereon and principal amount at maturity in respect thereof in accordance with their terms, will be sufficient to pay all the principal amount at maturity of and interest and premium on the Notes on the dates such payments are due in accordance with the terms of such Notes as well as the Trustee's fees and expenses. To exercise either such option, the Company is required to deliver to the Trustee (A) an Opinion of Counsel and, in connection with a discharge pursuant to clause (i) above, confirmation of such counsel that (I) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (II) since the date of the Indenture there has been a change in the applicable federal income tax law, in either case to the effect that the holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of the deposit and related defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised, (B) subject to certain qualifications, an Opinion of Counsel to the effect that funds so deposited will not violate the Investment Company Act of 1940 and will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law and (C) an Officers' Certificate and an Opinion of Counsel to the effect that the Company has complied with all conditions precedent to the defeasance. TRANSFER AND EXCHANGE A holder will be able to register the transfer of or exchange Notes only in accordance with the provisions of the Indenture. The Registrar may require a holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Without the prior consent of the Company, the Registrar is not required (i) to register the transfer of or exchange any Note selected for redemption, (ii) to register the transfer of or exchange any Note for a period of 15 days before the mailing of a notice of redemption and ending on the date of such mailing or (iii) to register the transfer or exchange of a Note between a record date and the next succeeding interest payment date. The registered holder of a Note will be treated as the owner of such Note for all purposes. 92 AMENDMENT, SUPPLEMENT AND WAIVER Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent (which may include consents obtained in connection with a tender offer or exchange offer for Notes) of the holders of at least a majority in principal amount of the Notes then outstanding, and any existing Default under, or compliance with any provision of, the Indenture may be waived (other than any continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes) with the consent (which may include consents obtained in connection with a tender offer or exchange offer for Notes) of the holders of a majority in principal amount of the Notes then outstanding; provided that: (A) no such modification or amendment may, without the consent of the holders of 75% in aggregate principal amount of Notes then outstanding, amend or modify the obligation of the Company under the caption 'Change of Control' or the definitions related thereto that could adversely affect the rights of any holder of the Notes; and (B) without the consent of each holder affected, the Company and the Trustee may not: (i) extend the maturity of any Note; (ii) affect the terms of any scheduled payment of interest on or principal of the Notes (including without limitation any redemption provisions); (iii) take any action that would subordinate the Notes or the Note Guarantees to any other Indebtedness of the Company or any of Guarantors, respectively (except as provided under 'Subordination' above), or otherwise affect the ranking of the Notes or the Note Guarantees; or (iv) reduce the percentage of holders necessary to consent to an amendment, supplement or waiver to the Indenture. Without the consent of any holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to holders in the case of a merger or acquisition, or to make any change that does not adversely affect the rights of any holder. CONCERNING THE TRUSTEE The Bank of New York is the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the Notes. The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee is permitted to engage in other transactions; however, if it acquires any conflicting interest (as defined in the Indenture), it must eliminate such conflict or resign. The holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that, in case an Event of Default occurs and is not cured, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in similar circumstances in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any holder, unless such holder shall have offered to the Trustee security and indemnity satisfactory to the Trustee. GOVERNING LAW Each of the Indenture, the Notes and the Note Guarantees provides that it will be governed by, and construed in accordance with, the laws of the State of New York. BOOK-ENTRY, DELIVERY AND FORM OF SECURITIES The Old Notes were initially issued in the form of one or more Global Notes (collectively, the 'Old Global Note'). The New Notes will initially be issued in the form of one or more Global Notes (collectively, the 'New Global Note'). The Old Global Note was deposited on the date of closing of the sale of the Old Notes, and the New Global Note will be deposited on the date of closing of the Notes 93 Exchange Offer, with or on behalf of the Depositary and registered in the name of Cede & Co., as nominee of the Depositary (such nominee being referred to herein as the 'Global Note Holder'). The Depositary is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the 'Participants' or the 'Depositary's Participants') and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Depositary's Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to the Depositary's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the 'Indirect Participants' or the 'Depositary's Indirect Participants') that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of the Depositary only through the Depositary's Participants or the Depositary's Indirect Participants. Pursuant to procedures established by the Depositary (i) upon deposit of the Global Note, the Depositary will credit the accounts of Participants in connection with the Notes with portions of the principal amount of the Global Note and (ii) ownership of the Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to the interests of the Depositary's Participants), the Depositary's Participants and the Depositary's Indirect Participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer the Notes will be limited to such extent. So long as the Depositary or its nominee is the registered owner of a Global Note, the Depositary or its nominee, as the case may be, will be considered the sole owner or holder of outstanding Notes represented by such Global Note for all purposes under the Indenture and the New Notes. Except as provided below, owners of Notes will not be entitled to have Notes registered in their names and will not be considered the owners or holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. None of the Company, the Guarantors or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of Notes by the Depositary, or for maintaining, supervising or reviewing any records of the Depositary relating to such Notes. Payments in respect of the principal of, premium, if any, and interest on any Notes registered in the name of a Global Note Holder on the applicable record date will be payable by the Trustee to or at the direction of such Global Note Holder in its capacity as the registered holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the persons in whose names any Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, none of the Company or the Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Notes (including principal, premium, if any, and interest). The Company believes, however, that it is currently the policy of the Depositary immediately to credit the accounts of the relevant Participants with such payments, in amounts proportionate to their respective beneficial interests in the relevant security as shown on the records of the Depositary. Payments by the Depositary's Participants and the Depositary's Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practice and will be the responsibility of the Depositary's Participants or the Depositary's Indirect Participants. Subject to certain conditions, any person having a beneficial interest in the Global Notes may, upon request to the Trustee, exchange such beneficial interest for Notes in definitive form. Upon any such issuance, the Trustee is required to register such Notes in the name of, and cause the same to be delivered to, such person or persons (or the nominee of any thereof). In addition, if (i) the Company notifies the Trustee in writing that the Depositary is no longer willing or able to act as a depositary and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in definitive form under the Indenture, then, upon surrender by the relevant Global Note Holder of its Global Note, Notes in such 94 form will be issued to each person that such Global Note Holder and the Depositary identifies as being the beneficial owner of the related Notes. Neither the Company nor the Trustee will be liable for any delay by the Global Note Holder or the Depositary in identifying the beneficial owners of Notes and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Note Holder or the Depositary for all purposes. REGISTRATION RIGHTS Holders of New Notes are not entitled to any registration rights with respect to the New Notes. The Company has agreed for a period of 180 days from the consummation of the Notes Exchange Offer to make available a prospectus meeting the requirements of the Securities Act to any broker-dealer for use in connection with any resale of any New Notes. The Registration Statement of which this Prospectus is a part constitutes the registration statement for the Notes Exchange Offer which is the subject of the Registration Rights Agreement. Upon the closing of the Notes Exchange Offer, subject to certain limited exceptions, Holders of untendered Old Notes will not retain any rights under the Registration Rights Agreement. ADDITIONAL INFORMATION Anyone who receives this Prospectus may obtain a copy of the Indenture without charge by contacting the Company at 250 East Fifth Street, Suite 500, Cincinnati, Ohio 45202 or by telephone at (513) 721-7010. CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms. 'Acquired Indebtedness' means (a) with respect to any Person that becomes a Restricted Subsidiary after the date of the Indenture, Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary that was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary and (b) with respect to the Company or any of its Restricted Subsidiaries, any Indebtedness of a Person (other than the Company or a Restricted Subsidiary) existing at the time such Person is merged with or into the Company or a Restricted Subsidiary, or Indebtedness assumed by the Company or any of its Restricted Subsidiaries in connection with the acquisition of an asset or assets from another Person, which Indebtedness was not, in any case, incurred by such other Person in connection with, or in contemplation of, such merger or acquisition. 'Affiliate' of any Person means any Person (i) which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referent Person, (ii) which beneficially owns or holds, directly or indirectly, 10% or more of any class of the Voting Stock, or more than 20% of all classes of Capital Stock (other than preferred stock) in the aggregate, of the referent Person, (iii) of which 10% or more of the Voting Stock, or more than 20% of all classes of Capital Stock (other than preferred stock) in the aggregate, is beneficially owned or held, directly or indirectly, by the referent Person or (iv) with respect to an individual, any immediate family member of such Person. For purposes of this definition, control of a Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. 'Asset Sale' means any sale, issuance, conveyance, transfer, lease, assignment or other disposition to any Person other than the Company or any of its Restricted Subsidiaries (including, without limitation, by means of a Sale and Leaseback Transaction or a merger or consolidation) (collectively, for purposes of this definition, a 'transfer'), directly or indirectly, in one transaction or a series of related transactions, of (a) any Capital Stock of any Subsidiary or (b) any other properties or assets of the Company or any of its Subsidiaries other than transfers of cash, Cash Equivalents, accounts receivable, 95 inventory or other properties or assets in the ordinary course of business. For the purposes of this definition, the term 'Asset Sale' shall not include any of the following: (i) any transfer of properties or assets (including Capital Stock) that is governed by, and made in accordance with, the provisions described under 'Covenants -- Limitations on Mergers and Certain Other Transactions'; (ii) any transfer of properties or assets to an Unrestricted Subsidiary, if permitted under the 'Limitations on Restricted Payments' covenant; (iii) sales of damaged, worn-out or obsolete equipment or assets that, in the Company's reasonable judgment, are either no longer used or useful in the business of the Company or its Subsidiaries, provided that the proceeds thereof are used to purchase replacement or similar assets for use in the business of the Company and its Subsidiaries; and (iv) any transfers that, but for this clause (iv), would be Asset Sales, if after giving effect to such transfers, the aggregate Fair Market Value of the properties or assets transferred in such transaction or any such series of related transactions does not exceed $500,000. 'Attributable Indebtedness,' when used with respect to any Sale and Leaseback Transaction, means, as at the time of determination, property subject to such Sale and Leaseback Transaction and the present value (discounted at a rate equivalent to the Company's then-current weighted average cost of funds for borrowed money as at the time of determination, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments during the remaining term of the lease included in any such Sale and Leaseback Transaction. 'Board Resolution' means a duly adopted resolution of the Board of Directors of the Company. 'Capital Stock' of any Person means (i) any and all shares or other equity interests (including without limitation common stock, preferred stock and partnership interests) in such Person and (ii) all rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) such shares or other interests in such Person. 'Capitalized Lease Obligations' of any Person means the obligations of such Person to pay rent or other amounts under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP. 'Cash Equivalents' means (i) marketable obligations with a maturity of 360 days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) U.S. dollar denominated time deposits and certificates of deposit of any financial institution (a) that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million or (b) whose short-term commercial paper rating or that of its parent company is at least A-1 or the equivalent thereof from S&P or P-1 or the equivalent thereof from Moody's (any such bank, an 'Approved Bank'), in each case with a maturity of 360 days or less from the date of acquisition; (iii) commercial paper issued by any Approved Bank or by the parent company of any Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be, and in each case maturing no more than 360 days from the date of acquisition; (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any commercial bank meeting the specifications of clause (ii)(a) above; (v) investments in money market or other mutual funds substantially all of whose assets comprise securities of the types described in clauses (i) through (iv) above; and (vi) time deposits and certificates of deposit of any commercial bank of recognized standing having capital and surplus in excess of the local currency equivalent of $100,000,000 incorporated in a country where the Company has one or more locally operating Foreign Subsidiaries, and that is, as of the Issue Date, providing banking services to the Company or any of its Foreign Subsidiaries. 'Change of Control' means the occurrence of any of the following: (i) the consummation of any transaction the result of which is (x) if such transaction occurs prior to the first sale of Voting Stock of Parent or the Company pursuant to a registration statement under the Securities Act that results in at 96 least 20% of the then outstanding Voting Stock of Parent or the Company having been sold to the public, that either (A) Control Group Members beneficially own, directly or indirectly, less than 51% of the Voting Stock of the Company or Parent (such percentage determined, for purposes of this definition, as a percentage of the total voting power of all Voting Stock of the relevant Person) or (B) any other Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of 51% of the Voting Stock of the Company or Parent (including in any event through direct or indirect beneficial ownership of Capital Stock of Control Group Members referred to in clause (ii) of the definition thereof) and (y) if such transaction occured thereafter, that any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other than Control Group Members), is or becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of 40% of the Voting Stock of the Company or Parent at any time at which Control Group Members do not beneficially own, directly or indirectly, at least 51% of the Voting Stock of the Company and Parent, (ii) the Company or Parent consolidates with, or merges with or into, another Person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the assets of the Company or Parent and their Subsidiaries, in either case taken as a whole, to any Person, or any Person consolidates with, or merges with or into, the Company or Parent, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company or Parent, as the case may be, is converted into or exchanged for cash, securities or other property, other than any such transaction where the outstanding Voting Stock of the Company or Parent, as the case may be, is converted into or exchanged for Voting Stock (other than Disqualified Capital Stock) of the surviving or transferee corporation and the beneficial owners of the Voting Stock of the Company or Parent, as the case may be, immediately prior to such transaction own, directly or indirectly, not less than a majority of the Voting Stock of the surviving or transferee corporation immediately after such transaction, or (iii) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company or Parent (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company or Parent, as the case may be, was approved by either (i) a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved or (ii) a Control Group Member) cease for any reason to constitute a majority of the Board of Directors of the Company or Parent, as the case may be, then in office. 'Consolidated Amortization Expense' for any period means the amortization expense of the Company and its Restricted Subsidiaries for such period (to the extent included in the computation of Consolidated Net Income), determined on a consolidated basis in accordance with GAAP. 'Consolidated Depreciation Expense' for any period means the depreciation expense of the Company and its Restricted Subsidiaries for such period (to the extent included in the computation of Consolidated Net Income), determined on a consolidated basis in accordance with GAAP. 'Consolidated Income Tax Expense' for any period means the provision for taxes based on income and profits of the Company and its Restricted Subsidiaries to the extent such income or profits were included in computing Consolidated Net Income for such period. 'Consolidated Interest Coverage Ratio' means, with respect to any determination date, the ratio of (a) EBITDA for the four full fiscal quarters immediately preceding the determination date (for any determination, the 'Reference Period'), to (b) Consolidated Interest Expense for such Reference Period. In making such computations, (i) EBITDA and Consolidated Interest Expense shall be calculated on a pro forma basis assuming that (A) the Indebtedness to be incurred or the Disqualified Capital Stock to be issued (and all other Indebtedness incurred or Disqualified Capital Stock issued after the first day of such Reference Period referred to in the covenant described under ' -- Certain Covenants Limitations on Additional Indebtedness' through and including the date of determination), and (if applicable) the application of the net proceeds therefrom (and from any other such Indebtedness or Disqualified Capital Stock), including the refinancing of other Indebtedness, had been incurred on the first day of such Reference Period and, in the case of Acquired Indebtedness, on the assumption that the related transaction (whether by means of purchase, merger or otherwise) also had occurred on such date with the appropriate adjustments with respect to such acquisition being included in such pro 97 forma calculation and (B) any acquisition or disposition by the Company or any Restricted Subsidiary of any properties or assets outside the ordinary course of business or any repayment of any principal amount of any Indebtedness of the Company or any Restricted Subsidiary prior to the stated maturity thereof, in either case since the first day of such Reference Period through and including the date of determination, had been consummated on such first day of such Reference Period; (ii) the Consolidated Interest Expense attributable to interest on any Indebtedness required to be computed on a pro forma basis in accordance with the covenant described under ' -- Certain Covenants -- Limitations on Additional Indebtedness' and (A) bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period and (B) which was not outstanding during the period for which the computation is being made but which bears, at the option of the Company, a fixed or floating rate of interest, shall be computed by applying, at the option of the Company, either the fixed or floating rate; (iii) the Consolidated Interest Expense attributable to interest on any Indebtedness under a revolving credit facility required to be computed on a pro forma basis in accordance with the covenant described under ' -- Certain Covenants -- Limitations on Additional Indebtedness' shall be computed based upon the average daily balance of such Indebtedness during the applicable period, provided that such average daily balance shall be reduced by the amount of any repayment of Indebtedness under a revolving credit facility during the applicable period, which repayment permanently reduced the commitments or amounts available to be reborrowed under such facility; (iv) notwithstanding the foregoing clauses (ii) and (iii), interest on Indebtedness determined on a floating rate basis, to the extent such interest is covered by agreements relating to Hedging Obligations, shall be deemed to have accrued at the rate per annum resulting after giving effect to the operation of such agreements; and (v) if after the first day of the applicable Reference Period and before the date of determination, the Company has permanently retired any Indebtedness out of the net proceeds of the issuance and sale of shares of Capital Stock (other than Disqualified Capital Stock) of the Company within 60 days of such issuance and sale, Consolidated Interest Expense shall be calculated on a pro forma basis as if such Indebtedness had been retired on the first day of such period. 'Consolidated Interest Expense' for any period means the sum, without duplication, of the total interest expense of the Company and its consolidated Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including, without limitation (i) imputed interest on Capitalized Lease Obligations and Attributable Indebtedness, (ii) commissions, discounts and other fees and charges owed with respect to letters of credit securing financial obligations and bankers' acceptance financing, (iii) the net costs associated with Hedging Obligations, (iv) amortization of other financing fees and expenses, (v) the interest portion of any deferred payment obligations, (vi) amortization of debt discount or premium, if any, (vii) all other non-cash interest expense, (viii) capitalized interest, (ix) all cash dividend payments (and non-cash dividend payments in the case of a Restricted Subsidiary) on any series of preferred stock of the Company or any Restricted Subsidiary, (x) all interest payable with respect to discontinued operations, and (xi) all interest on any Indebtedness of any other Person guaranteed by the Company or any Restricted Subsidiary. 'Consolidated Net Income' for any period means the net income (or loss) of the Company and its consolidated Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein), without duplication (i) the net income (or loss) of any Person (other than a Restricted Subsidiary) in which any Person other than the Company and its Restricted Subsidiaries has an ownership interest, except to the extent that any such income has actually been received by the Company and its Restricted Subsidiaries in the form of cash dividends during such period; (ii) except to the extent includible in the consolidated net income of the Company pursuant to the foregoing clause (i), the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any Restricted Subsidiary or (b) the assets of such Person are acquired by the Company or any Restricted Subsidiary; (iii) the net income of any Restricted Subsidiary during such period to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of that income (a) is not permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary during such period or (b) would be subject to 98 any taxes payable on such dividend or distribution; (iv) any gain (or, only in the case of a determination of Consolidated Net Income as used in EBITDA, any loss), together with any related provisions for taxes on any such gain (or, if applicable, the tax effects of such loss), realized during such period by the Company or any Restricted Subsidiary upon (a) the acquisition of any securities, or the extinguishment of any Indebtedness, of the Company or any Restricted Subsidiary or (b) any Asset Sale by the Company or any of its Restricted Subsidiary; (v) any extraordinary gain (or, only in the case of a determination of Consolidated Net Income as used in EBITDA, any extraordinary loss), together with any related provision for taxes on any such extraordinary gain (or, if applicable, the tax effects of such extraordinary loss), realized by the Company or any Restricted Subsidiary during such period; (vi) any non-cash loss during Fiscal 1998 reflecting the decrease in deferred tax assets resulting from the Acquisition and transactions consummated in connection therewith; and (vii) in the case of a successor to the Company by consolidation, merger or transfer of its assets, any earnings of the successor prior to such merger, consolidation or transfer of assets; and provided, further, that (A) any gain referred to in clauses (iv) and (v) above that relates to a Restricted Investment and which is received in cash by the Company or a Restricted Subsidiary during such period shall be included in the consolidated net income of the Company, (B) to the extent deducted in determining consolidated net income for such period and not otherwise added back pursuant to the foregoing clauses of this definition, the amount of expenses in respect of Specified Transaction Payments attributable to such period shall be added back in determining Consolidated Net Income for such period, and (C) to the extent not otherwise deducted in determining such consolidated net income for any period, all payments made to Parent pursuant to any Tax Sharing Agreement or otherwise (including pursuant to the 'Certain Covenants -- Limitations on Restricted Payments') in respect of taxes for such period shall be deducted from the consolidated net income of the Company. 'Consolidated Net Worth' means, with respect to any Person as of any date, the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date, less all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within twelve months after the acquisition of such business) subsequent to the date of the Indenture in the book value of any asset owned by such Person or a Subsidiary of such Person. 'Control Group Members' means (i) the natural person or persons who are the ultimate beneficial owners of Granaria Holdings N.V. on the Issue Date, as disclosed under 'Security Ownership and Certain Beneficial Owners and Management of Parent' and members of their immediate families and any spouse, parent or descendant of any such person, or a trust the beneficiaries of which include only any of the foregoing, and any corporation or other entity all of the Capital Stock of which (other than directors' qualifying shares) is owned by any of the foregoing or (ii) any corporation or other entity at least 51% of the Voting Stock of which is owned by any of the Persons referred to in clause (i). 'Coverage Ratio Incurrence Condition' would be met at any specified time only if the Company (or its Successor, as the case may be) would be able to incur $1.00 of additional Indebtedness at such specified time pursuant to the Consolidated Interest Coverage Ratio test set forth in the covenant described under ' -- Certain Covenants -- Limitations on Additional Indebtedness.' 'Default' means any event, act or condition that is, or after notice or the passage of time or both would be, an Event of Default. 'Designated Senior Indebtedness' means (i) Indebtedness under the New Credit Agreement (whether incurred pursuant to the definition of Permitted Indebtedness or pursuant to the covenant described under ' -- Limitations on Additional Indebtedness' covenant) and (ii) any other Indebtedness constituting Senior Indebtedness that at the date of determination, has an aggregate principal amount outstanding of at least $25.0 million and that is specifically designated by the Company, in the instrument creating or evidencing such Senior Indebtedness or in an Officer's Certificate delivered to the Trustee, as 'Designated Senior Indebtedness.' 'Disqualified Capital Stock' means any Capital Stock of such Person or any of its Subsidiaries that, by its terms, by the terms of any agreement related thereto or by the terms of any security into which it is convertible, putable or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed or repurchased by such Person or any to its Subsidiaries, whether or 99 not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to the final maturity date of the Notes; provided, however, that any class of Capital Stock of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Capital Stock that is not Disqualified Capital Stock, and that is not convertible, puttable or exchangeable for Disqualified Capital Stock or Indebtedness, shall not be deemed to be Disqualified Capital Stock so long as such Person satisfies its obligations with respect thereto solely by the delivery of Capital Stock that is not Disqualified Capital Stock. 'EBITDA' for any period mean without duplication, the sum of the amounts for such period of (i) Consolidated Net Income plus (ii) in each case to the extent deducted in determining Consolidated Net Income for such period (and without duplication), (A) Consolidated Income Tax Expense, (B) Consolidated Amortization Expense (but only to the extent not included in Consolidated Interest Expense), (C) Consolidated Depreciation Expense, (D) Consolidated Interest Expense and (E) all other non-cash items reducing the Consolidated Net Income (excluding any such non-cash charge that results in an accrual of a reserve for cash charges in any future period) for such period, in each case determined on a consolidated basis in accordance with GAAP and minus (iii) the aggregate amount of all non-cash items, determined on a consolidated basis, to the extent such items increased Consolidated Net Income for such Period. 'Eligible Junior Securities' means (a) the common stock of Parent and (b) any preferred stock of Parent that (i) has a maturity date or mandatory redemption date not earlier than March 1, 2009, (ii) has no remedies for missed dividends other than accrual on a cumulative basis and appointment of not more than two directors to the Board of Directors of Parent, (iii) is not convertible, puttable or exchangeable into any other security of Parent other than common stock and (iv) is not, by its terms, by the terms of any agreement related thereto or by the terms of any security into which it is convertible, puttable or exchangeable, and upon the happening of any event or the passage of time would not be, required to be redeemed or repurchased by such Person or any of its Subsidiaries, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to March 1, 2009. 'Equity Offering' means an underwritten primary offering of Eligible Junior Securities of Parent pursuant to a registration statement filed with the Commission in accordance with the Securities Act, or pursuant to a private placement pursuant to an available exemption from registration and, in the case of any such private placement, a majority of such placement of which is sold to Persons that are not then and were not at the Issue Date Affiliates of Granaria Holdings. 'Exchange Act' means the Securities Exchange Act of 1934, as amended. 'Exchange Debentures' means the 11 3/4% Exchange Debentures due 2008 of Parent. 'Existing Indebtedness' means all of the Indebtedness of the Company and its Subsidiaries that is outstanding on the Issue Date. 'Fair Market Value' of any asset or items means the fair market value of such asset or items as determined in good faith by the Board of Directors and evidenced by a Board Resolution. 'Foreign Subsidiary' means any Subsidiary of the Company that is not incorporated or organized in the United States or in any State thereof. 'GAAP' means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the Issue Date. 'Granaria Holdings' means Granaria Holdings N.V., a Dutch corporation, and its successors. 'Guarantee' means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without 100 limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. 'Guarantors' means each of the Subsidiary Guarantors and Parent, and 'Guarantor' means any one of the foregoing. 'Hedging Obligations' of any Person means the obligations of such Person pursuant to (i) any interest rate swap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in interest rates, (ii) agreements or arrangements designed to protect such Person against fluctuations in foreign currency exchange rates in the conduct of its operations, or (iii) any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in commodity prices, in each case, entered into in the ordinary course of business for bona fide hedging purposes and not for the purpose of speculation. 'Immaterial Subsidiary' means (i) any Subsidiary of the Company which does not own assets in excess of $50,000, (ii) any Name Holder Subsidiary, and (iii) Eagle-Picher Inc., a Virgin Island foreign sales corporation. 'incur' means, with respect to any Indebtedness or Obligation, incur, create, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to such Indebtedness or Obligation; provided that (i) the Indebtedness of a Person existing at the time such Person became a Restricted Subsidiary shall be deemed to have been incurred by such Restricted Subsidiary and (ii) neither the accrual of interest nor the accretion of accreted value shall be deemed to be an incurrence of Indebtedness. 'Indebtedness' of any Person at any date means, without duplication: (i) all liabilities, contingent or otherwise, of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such person or only to a portion thereof); (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all obligations of such Person in respect of letters of credit or other similar instruments (or reimbursement obligations with respect thereto); (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables and accrued expenses incurred by such Person in the ordinary course of business in connection with obtaining goods, materials or services, which payable is not overdue by more than 60 days according to the original terms of sale unless such payable is being contested in good faith; (v) the maximum fixed redemption or repurchase price of all Disqualified Capital Stock of such Person; (vi) all Capitalized Lease Obligations of such Person; (vii) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; (viii) all Indebtedness of others guaranteed by such Person to the extent of such guarantee; provided that Indebtedness of the Company or its Subsidiaries that is guaranteed by the Company or the Company's Subsidiaries shall only be counted once in the calculation of the amount of Indebtedness of the Company and its Subsidiaries on a consolidated basis; (ix) all Attributable Indebtedness; and (x) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (vii), the lesser of (A) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of others on the date that the Lien attaches and (B) the amount of the Indebtedness secured. For purposes of the preceding sentence, the 'maximum fixed redemption or repurchase price' of any Disqualified Capital Stock that does not have a fixed redemption or repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased or redeemed on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock (or any equity security for which it may be exchanged or converted), such fair market value shall be determined in good faith by the Board of Directors of such Person, which determination shall be evidenced by a Board Resolution. 'Independent Director' means a director of the Company who has not and whose Affiliates have not, at any time during the twelve months prior to the taking of any action hereunder, directly or 101 indirectly, received, or entered into any understanding or agreement to receive, any compensation, payment or other benefit, of any type or form, from the Company or any of its Affiliates, other than customary directors fees for serving on the Board of Directors of the Company or any Affiliate and reimbursement of out-of-pocket expenses for attendance at the Company's or Affiliate's board and board committee meetings. 'Independent Financial Advisor' means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Company's Board of Directors, qualified to perform the task for which it has been engaged and disinterested and independent with respect to the Company and its Affiliates. 'Investments' of any Person means (i) all investments by such Person in any other Person in the form of loans, advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business) or similar credit extensions constituting Indebtedness of such Person, and any guarantee of Indebtedness of any other Person, (ii) all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Capital Stock or other securities of any other Person and (iii) all other items that would be classified as investments (including without limitation purchases of assets outside the ordinary course of business) on a balance sheet of such Person prepared in accordance with GAAP. 'Issue Date' means the date the Notes are initially issued. 'Lien' means, with respect to any asset or property, any mortgage, deed of trust, lien (statutory or other), pledge, lease, easement, restriction, covenant, charge, security interest or other encumbrance of any kind or nature in respect of such asset or property, whether or not filed, recorded or otherwise perfected under applicable law, including without limitation any conditional sale or other title retention agreement, and any lease in the nature thereof, any option or other agreement to sell, and any filing of, or agreement to give, any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction (other than cautionary filings in respect of operating leases). 'Moody's' means Moody's Investors Service, Inc., and its successors. 'Name Holder Subsidiary' means any Subsidiary of the Company incorporated and existing solely for the purpose of reserving the corporate name of such Subsidiary and which does not conduct any business or hold any assets other than shares of another Name Holder Subsidiary. 'Net Available Proceeds' means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel, accountants and investment banks) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the properties or assets subject to the Asset Sale or having a Lien therein and (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pensions and other postemployment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers' Certificate delivered to the Trustee; provided, however, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Available Proceeds. 'New Credit Agreement' means the Credit Agreement dated as of February 24, 1998 by and among ABN AMRO Bank N.V., as agent, PNC Bank, National Association, as documentation agent, the banks party thereto, the Company and the Guarantors, together with any additional guarantees by the Guarantors and security agreements, as any of the foregoing may be subsequently amended, restated, refinanced, or replaced from time to time, and shall include agreements in respect of Hedging 102 Obligations designed to protect against fluctuations in interest rates and entered into with respect to loans thereunder. 'Non-Recourse Purchase Money Indebtedness' means Indebtedness of the Company or any of its Subsidiaries incurred (a) to finance the purchase of any assets of the Company or any of its Subsidiaries within 90 days of such purchase, (b) to the extent the amount of Indebtedness thereunder does not exceed 100% of the purchase cost of such assets, (c) to the extent the purchase cost of such assets is or should be included in 'additions to property, plant and equipment' in accordance with GAAP, and (d) to the extent that such Indebtedness is non-recourse to the Company or any of its Subsidiaries or any of their respective assets other than the assets so purchased. 'Obligation' means any principal, interest (including, in the case of Senior Indebtedness, interest accruing subsequent to the filing of a petition in bankruptcy or insolvency at the rate specified in the document relating to such Indebtedness, whether or not such interest is an allowed claim permitted to be enforced against the obligor under applicable law), penalties, fees, indemnification, reimbursements, costs, expenses, damages and other liabilities payable under the documentation governing any Indebtedness. 'Officer' means any of the following of the Company: the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary. 'Officers' Certificate' means a certificate signed by any two Officers. 'Opinion of Counsel' means a written opinion from legal counsel (such counsel may be an employee of or counsel to the Company or the Trustee) that complies with the requirements of this Indenture. 'Parent' means Eagle-Picher Holdings, Inc., a Delaware corporation, and its successors. 'Parent Preferred Stock' means collectively the Series A 11 3/4% Cumulative Redeemable Exchangeable Preferred Stock of Parent and Series B 11 3/4% Cumulative Redeemable Exchangeable Preferred Stock of Parent. 'Payment Restriction' with respect to a Subsidiary of any Person, means any encumbrance, restriction of limitation, whether by operation of the terms of its charter or by reason of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation, on the ability of (i) such Subsidiary to (a) pay dividends or make other distributions on its Capital Stock or make payments on any obligation, liability or Indebtedness owed to such Person or any other Subsidiary of such Person, (b) make loans or advances to such Person or any other Subsidiary or such Person, (c) guarantee any Indebtedness of the Company or any Restricted Subsidiary or (d) transfer any of its properties or assets to such Person or any other Subsidiary of such Person (other than customary restrictions on transfers of property subject to a Lien permitted under the Indenture) or (ii) such Person or any other Subsidiary of such Person to receive or retain any such dividends, distributions or payments, loans or advances, guarantee, or transfer of properties or assets. 'Permitted Indebtedness' means any of the following: (i) Indebtedness of the Company and any Subsidiary Guarantor under the New Credit Agreement in an aggregate principal amount at any time outstanding not to exceed (a) under the Senior Secured Term Loan Facility, $225 million, less the amount thereof that has been repaid under the covenant described under ' -- Limitations on Asset Sales' and (b) under the Revolving Loan Facility the greater of (x) $175 million and (y) the sum of 80% of the book value of the eligible accounts receivable and 50% of inventory of the Company and its Subsidiaries, calculated on a consolidated basis and in accordance with GAAP; (ii) Indebtedness under the Notes, the Note Guarantees and the Indenture; (iii) Existing Indebtedness; (iv) Indebtedness under Hedging Obligations, provided that (1) such Hedging Obligations are related to payment obligations on Permitted Indebtedness or Indebtedness otherwise permitted by the 'Limitations on Additional Indebtedness' covenant, and (2) the notional principal amount of 103 such Hedging Obligations at the time incurred does not exceed the principal amount of such Indebtedness to which such Hedging Obligations relate; (v) Indebtedness of the Company to a Subsidiary Guarantor and Indebtedness of any Subsidiary Guarantor to the Company or any other Subsidiary Guarantor; provided, however, that upon either (1) the subsequent issuance (other than directors' qualifying shares), sale, transfer or other disposition of any Capital Stock or any other event which results in any such Subsidiary Guarantor ceasing to be a Subsidiary Guarantor or (2) the transfer or other disposition of any such Indebtedness (except to the Company or a Subsidiary Guarantor), the provisions of this clause (v) shall no longer be applicable to such Indebtedness and such Indebtedness shall be deemed, in each case, to be incurred and shall be treated as an incurrence for purposes of the 'Limitations on Additional Indebtedness' covenant at the time the Subsidiary Guarantor in question ceased to be a Subsidiary Guarantor or the time such transfer or other disposition occurred; (vi) Indebtedness in respect of bid, performance or surety bonds issued for the account of the Company in the ordinary course of business, including guarantees or obligations of the Company with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed); (vii) Indebtedness in respect of Non-Recourse Purchase Money Indebtedness incurred by the Company or any Restricted Subsidiary; (viii) Refinancing Indebtedness; and (ix) Indebtedness, in addition to Indebtedness incurred pursuant to the foregoing clauses of this definition, with an aggregate principal face or stated amount (as applicable) at any time outstanding for all such Indebtedness incurred pursuant to this clause not in excess of $35.0 million; provided, however, that (A) Indebtedness under letters of credit and performance bonds issued for the account of a Foreign Subsidiary pursuant to this clause to finance trade activities or otherwise in the ordinary course of business, and not to support borrowed money or the obtaining of advances or credit, may not exceed $10.0 million in an aggregate stated or face amount for all such letters of credit and performance bonds and (B) the aggregate principal amount at any time outstanding for all other Indebtedness incurred by all Foreign Subsidiaries pursuant to this clause may not exceed $25.0 million. 'Permitted Junior Securities' means any securities of the Company provided for by a plan of reorganization or readjustment that are subordinated in right of payment to all Senior Indebtedness that may at the time be outstanding to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Indebtedness. 'Person' means any individual, corporation, partnership, limited liability company, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind. 'Plan of Liquidation' with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (i) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such Person otherwise than as an entirety or substantially as an entirety; and (ii) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition and all or substantially all of the remaining assets of such Person to holders of Capital Stock of such Person. 'Refinancing Indebtedness' means Indebtedness of the Company or a Restricted Subsidiary issued in exchange for, or the proceeds from the issuance and sale or disbursement of which are used substantially concurrently to repay, redeem, refund, refinance, discharge or otherwise retire for value, in whole or in part (collectively, 'repay'), or constituting an amendment, modification or supplement to or a deferral or renewal of (collectively, an 'amendment'), any Indebtedness of the Company or any Restricted Subsidiary (the 'Refinanced Indebtedness') in a principal amount not in excess of the principal amount of the Refinanced Indebtedness (or, if such Refinancing Indebtedness refinances Indebtedness under a revolving credit facility or other agreement providing a commitment for subsequent borrowings, with a maximum commitment not to exceed the maximum commitment under 104 such revolving credit facility or other agreement); provided that: (i) the Refinancing Indebtedness is the obligation of the same Person as that of the Refinanced Indebtedness, (ii) if the Refinanced Indebtedness was subordinated to or pari passu with the Note Indebtedness, then such Refinancing Indebtedness, by its terms, is expressly pari passu with (in the case of Refinanced Indebtedness that was pari passu with) the Note Indebtedness, or subordinate in right of payment to (in the case of Refinanced Indebtedness that was subordinated to) the Note Indebtedness at least to the same extent as the Refinanced Indebtedness; (iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness being repaid that is scheduled to mature on or prior to the maturity date of the Notes; and (iv) the Refinancing Indebtedness is secured only to the extent, if at all, and by the assets (which may include after-acquired assets), that the Refinanced Indebtedness is secured. 'Related Business' means any business in which the Company and its Subsidiaries operate on the Issue Date, or that is closely related to or complements the business of the Company and its Subsidiaries, as such business exists on the Issue Date. 'Related Business Investment' means any Investment directly by the Company or its Subsidiaries in any Related Business. 'Related Party Agreement' means any management or advisory agreements or other arrangements with any Affiliate of the Company or with any other direct or indirect holder of more than 10% of any class of the Company's or Parent's capital stock (except, in any such case, Parent, the Company or any Restricted Subsidiary), but excluding in any event arrangements with ABN AMRO Bank N.V. and its Affiliates of their respective successors (i) under the New Credit Agreement or in connection therewith, (ii) in connection with the offering of the Notes or the Series A Senior Preferred Stock or (iii) pursuant to other banking, financing or underwriting activity entered into in the ordinary course of business. 'Restricted Debt Payment' means any purchase, redemption, defeasance (including without limitation in substance or legal defeasance) or other acquisition or retirement for value, directly or indirectly, by the Company or a Restricted Subsidiary, prior to the scheduled maturity or prior to any scheduled repayment of principal or sinking fund payment, as the case may be, in respect of Subordinated Indebtedness. 'Restricted Investment' means any Investment by the Company or any Restricted Subsidiary (other than investments in Cash Equivalents) in any Person that is not the Company or a Restricted Subsidiary, including in any Unrestricted Subsidiary. 'Restricted Payment' means with respect to any Person: (i) the declaration or payment of any dividend (other than a dividend declared and paid (x) by a Wholly-Owned Restricted Subsidiary to holders of its Capital Stock, or (y) by a Subsidiary (other than a Wholly-Owned Restricted Subsidiary) to its shareholders on a pro rata basis, but only to the extent of the dividends actually received by the Company or a Restricted Subsidiary) or the making of any other payment or distribution of cash, securities or other property or assets in respect of such Person's Capital Stock (except that a dividend payable solely in Capital Stock (other than Disqualified Capital Stock) of such Person shall not constitute a Restricted Payment); (ii) any payment on account of the purchase, redemption, retirement or other acquisition for value of (A) the Capital Stock of the Company or (B) the Capital Stock of any Restricted Subsidiary, or any other payment or distribution made in respect thereof, either directly or indirectly (other than a payment solely in Capital Stock that is not Disqualified Capital Stock, and excluding any such payment to the extent actually received by the Company or a Restricted Subsidiary); (iii) any Restricted Investment; (iv) any Restricted Debt Payment; or (v) payments by the Company or its Restricted Subsidiaries in respect of any Related Party Agreement. 'Restricted Subsidiary' means any Subsidiary of the Company other than an Unrestricted Subsidiary. 'Revolving Loan Facility' means the revolving loan facility provided under the New Credit Agreement. 105 'S&P' means Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc., and its successors. 'Sale and Leaseback Transactions' means with respect to any Person an arrangement with any bank, insurance company or other lender or investor or to which such lender or investor is a party, providing for the leasing by such Person of any property or asset of such Person which has been or is being sold or transferred by such Person to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. 'Securities Act' means the U.S. Securities Act of 1933, as amended. 'Senior Indebtedness' means all Indebtedness and other Obligations specified below payable directly or indirectly by the Company or any Guarantor, as the case may be, whether outstanding on the Issue Date or thereafter created, incurred or assumed by the Company or such Guarantor: (i) the principal of and interest on and all other Indebtedness and Obligations related to the New Credit Agreement (including, without limitation, all loans, letters of credit and unpaid drawings with respect thereto and other extensions of credit under the New Credit Agreement, and all expenses, fees, reimbursements, indemnities and other amounts owing pursuant to the New Credit Agreement), (ii) amounts payable in respect of any Hedging Obligations, (iii) in addition to the amounts described in (i) and (ii), all Indebtedness not prohibited by the 'Limitations on Additional Indebtedness' covenant that is not expressly pari passu with, or subordinated to, the Notes or the Note Guarantees, as the case may be, (iv) all Capital Lease Obligations outstanding on the Issue Date, and (v) all Refinancing Indebtedness permitted under the Indenture. Notwithstanding anything to the contrary in the foregoing Senior Indebtedness will not include (a) any Indebtedness which by the express terms of the agreement or instrument creating, evidencing or governing the same is junior or subordinate in right of payment to any item of Senior Indebtedness, (b) any trade payable arising from the purchase of goods or materials or for services obtained in the ordinary course of business, (c) Indebtedness incurred (but only to the extent incurred) in violation of the Indenture as in effect at the time of the respective incurrence, (d) any Indebtedness of the Company that, when incurred, was without recourse to the Company, (e) any Indebtedness to any employee of the Company or any of its respective Subsidiaries or (f) any liability for taxes owned or owing by the Company. 'Senior Preferred Stock' means, collectively, the Series A Senior Preferred Stock and the Series B Senior Preferred Stock. 'Senior Secured Term Loan Facility' means the term loan facility providing for the senior secured Tranche A, Tranche B and Tranche C term loans. 'Senior Subordinated Indebtedness' of the Company means the Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. 'Senior Subordinated Indebtedness' of any Guarantor has a correlative meaning. 'Series A Senior Preferred Stock' means the 11 3/4% Series A Cumulative Redeemable Exchangeable Preferred Stock of Parent. 'Series B Senior Preferred Stock' means the 11 3/4% Series B Cumulative Redeemable Exchangeable Preferred Stock of Parent. 'Significant Subsidiary' means any Subsidiary of the Company that would be a 'Significant Subsidiary' as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date, except all references to '10 percent' in such definition shall be changed to '2 percent.' 'Specified Transaction Payments' means the following payments made to or for the benefit of present or future officers and employees of the Company and its Affiliates, or to Granaria Holdings and its Affiliates, in each case in connection with the Acquisition and on terms (including without limitation the amount thereof) substantially as described in the Prospectus, but only to the extent that the aggregate amount thereof does not exceed $43.2 million for all periods from and after the Issue Date: (i) payments to finance or refinance the purchase by such officers and employees (or a trust for their 106 benefit) of capital stock of Parent or its parent company, the grant or vesting of any award of such capital stock and the payment by such officers and employees of income taxes in respect thereof, (ii) stay put and other incentive bonuses, (iii) severance payments and (iv) transaction fees paid to Granaria Holdings. 'Subordinated Indebtedness' means Indebtedness of the Company or any Restricted Subsidiary that is subordinated in right of payment to the Notes or the Note Guarantee of such Restricted Subsidiary, respectively. 'Subsidiary' of any Person means (i) any corporation of which at least a majority of the aggregate voting power of all classes of the Voting Stock is owned by such Person directly or through one or more other Subsidiaries of such Person and (ii) any entity other than a corporation in which such Person, directly or indirectly, owns at least a majority of the Voting Stock of such entity entitling the holder thereof to vote or otherwise participate in the selection of the governing body, partners, managers or others that control the management and policies of such entity. Unless otherwise specified, 'Subsidiary' means a Subsidiary of the Company. 'Subsidiary Guarantor' means each domestic Restricted Subsidiary of the Company (other than an Immaterial Subsidiary) and each other person who is required to become (or whom the Company otherwise causes to become) a Subsidiary Guarantor by the terms of the Indenture. 'Tax Sharing Agreement' means any tax sharing agreement or arrangement entered or to be entered into by Parent, the Company and its Subsidiaries, providing for payments by or to Parent, the Company and its Subsidiaries that, in each case, are not in excess of the tax liabilities that would have been payable by such Person on a stand-alone basis. 'Unrestricted Subsidiary' means (i) any Subsidiary that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Company in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary, and any such designation shall be deemed to be a Restricted Investment at the time of and immediately upon such designation by the Company and its Restricted Subsidiaries in the amount of the Consolidated Net Worth of such designated Subsidiary and its consolidated Subsidiaries at such time, provided that such designation shall be permitted only if (A) the Company and its Restricted Subsidiaries would be able to make the Restricted Investment deemed made pursuant to such designation at such time, (B) no portion of the Indebtedness or any other obligation (contingent or otherwise) of such Subsidiary (x) is Guaranteed by the Company or any Restricted Subsidiary, (y) is recourse to the Company or any Restricted Subsidiary or (z) subjects any property or asset of the Company or any Restricted Subsidiary, directly or indirectly, contingently or otherwise, to the satisfaction thereof and (C) no default or event of default with respect to any Indebtedness of such Subsidiary would permit any holder of any Indebtedness of the Company or any Restricted Subsidiary to declare such Indebtedness of the Company or any restricted Subsidiary due and payable prior to its maturity. The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary, and any such designation shall be deemed to be an incurrence by the Company and its Subsidiaries of the Indebtedness (if any) of such Subsidiary so designated for purposes of the ' -- Limitations on Additional Indebtedness' covenant as of the date of such designation, provided that such designation shall be permitted only if immediately after giving effect to such designation and the incurrence of any such additional Indebtedness deemed to have been incurred thereby (x) the Company would meet the Coverage Ratio Incurrence Condition and (y) no Default or Event of Default shall be continuing. Any such designation by the Board of Directors described in the two preceding sentences shall be evidenced to the Trustee by the filing with the Trustee of a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and setting forth the underlying calculations of such certificate. 'Voting Stock' with respect to any Person, means securities of any class of Capital Stock of such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock or other relevant equity interest has voting power by reason of any contingency) to vote in the election of members of the board of directors of such Person. 107 'Weighted Average Life to Maturity', when applied to any Indebtedness at any date, means the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) 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 (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (ii) the then outstanding principal amount of such Indebtedness. 'Wholly-Owned Restricted Subsidiary' means a Restricted Subsidiary of which 100% of the Capital Stock (except for directors' qualifying shares or certain minority interests owned by other Persons solely due to local law requirements that there be more than one stockholder, but which interest is not in excess of what is required for such purpose) is owned directly by the Company or through one or more Wholly-Owned Restricted Subsidiaries. DESCRIPTION OF PREFERRED STOCK The Series A Preferred Stock was offered and sold by Parent pursuant to a Certificate of Designation and the By-laws of Parent. The Series A Preferred Stock was issued in a private transaction that was not subject to the registration requirements of the Securities Act. Concurrently with the Notes Exchange Offer, Parent is offering to exchange its Series B Preferred Stock for Series A Preferred Stock in the Preferred Stock Exchange Offer. GENERAL The Certificate of Incorporation of Parent authorizes 50,000 shares of preferred stock, of which 14,191 shares of Preferred Stock are outstanding, and the same number will be outstanding after giving effect to the Preferred Stock Exchange Offer. The liquidation preference of the Preferred Stock was initially $5,637.7 per share and accretes from March 1, 1998 to March 1, 2003, on a daily basis, at the rate of 11.75% per annum, compounded semi-annually, to a liquidation preference of $10,000 per share on March 1, 2003. The accreted value of the Preferred Stock, at any date of determination, will hereinafter be referred to as the 'Liquidation Preference.' RANK The Preferred Stock, with respect to dividend distributions and distributions upon the liquidation, winding-up and dissolution of Parent, ranks (i) senior to all classes of common stock of Parent and each other class of capital stock or series of preferred stock established after February 20, 1998 (the date of the Offering Memorandum in connection with the offer of the Series A Preferred Stock (the 'Preferred Stock Offering Memorandum')) by the Board of Directors of Parent (the 'Board') the terms of which do not expressly provide that it ranks on a parity with the Preferred Stock as to dividend distributions and distributions upon the liquidation, winding-up and dissolution of Parent (collectively referred to as 'Junior Securities') and (ii) subject to certain conditions, on a parity with any class of capital stock or series of preferred stock established the Board of Directors of Parent, the terms of which expressly provide that such class or series will rank on a parity with the Preferred Stock as to dividend distributions and distributions upon the liquidation, winding-up and dissolution of Parent (collectively referred to as 'Parity Securities'). Creditors of Parent will have priority over the Preferred Stock with respect to claims on the assets of Parent. Parent has provided guarantees under the New Credit Agreement and the Notes, and pledged the capital stock of the Company in support of its guarantee under the New Credit Agreement. In addition, creditors and stockholders of Parent's Subsidiaries will have priority over the holders of Preferred Stock with respect to claims on the assets of such Subsidiaries. DIVIDENDS No dividends will accrue on the Preferred Stock prior to March 1, 2003. After March 1, 2003, holders of Preferred Stock will be entitled to receive, when, as and if declared by the Board, out of funds legally available therefor, dividends on the Preferred Stock at a rate per annum equal to 11.75% of the Liquidation Preference per share of Preferred Stock. All dividends will be cumulative whether or 108 not earned or declared on a daily basis from March 1, 2003 and will be payable on March 1 and September 1 of each year, commencing on September 1, 2003. The terms of certain debt instruments of Parent and the Company, including the New Credit Agreement and the Indenture, restrict the payment of cash dividends by Parent and the payment to Parent of cash dividends by the Company, and future agreements may provide the same. See 'Description of New Credit Agreement' and 'Description of the Notes -- Certain Covenants.' OPTIONAL REDEMPTION The Preferred Stock is redeemable at the option of Parent, in whole or in part, at any time (subject to contractual and other restrictions with respect thereto and to the legal availability of funds therefor) on or after March 1, 2003, at certain redemption prices set forth in the Preferred Stock Exchange Offer Prospectus, together with accrued and unpaid dividends, and Special Accretion, if any. Notwithstanding the foregoing, at any time prior to March 1, 2001, Parent may redeem up to 35% of shares of Preferred Stock outstanding on the Issue Date out of the proceeds of one or more Equity Offerings, at any time or from time to time in part, at a redemption price equal to 111.75% of the Liquidation Preference (excluding any Special Accretion) at the time of redemption, together with the amount of any Special Accretion to the date of redemption; provided, that (a) at least $50 million aggregate amount of Liquidation Preference remains outstanding after each such redemption and (b) such redemption occurs within 60 days of the date of the closing of any such Equity Offering. MANDATORY REDEMPTION The Preferred Stock is mandatorily redeemable by Parent on the earlier of March 1, 2008 and making of a Mandatory Redemption Demand upon the occurrence of certain Mandatory Redemption Events at a price equal to the then effective Liquidation Preference, together with all accrued and unpaid dividends, and Special Interest, if any, to the redemption date. CHANGE OF CONTROL Upon the occurrence of a Change of Control, each holder of Preferred Stock will have the right to require that Parent repurchase such holder's shares of Preferred Stock for a cash price equal to 101% of the aggregate Liquidation Preference (excluding any Special Accretion) of the Preferred Stock at the time of the occurrence of the Change of Control, plus all accumulated and unpaid dividends and the amount of Special Accretion, if any, to the date of repurchase. VOTING RIGHTS Holders of the Preferred Stock have no voting rights with respect to general corporate matters except as provided by law or as set forth in the Certificate. The Certificate provides that in certain circumstances, holders of Preferred Stock will be entitled to elect a majority of Parent's Board of Directors or to vote for certain mergers, consolidations or sales of all or substantially all of the assets of Parent. EARLY MANDATORY REDEMPTION EVENTS It will be considered an Early Mandatory Redemption Event under the Certificate if Parent does not comply with specific limitations on its ability: (a) to incur additional indebtedness, issue capital stock, engage in any activities other than the performance of its guarantees under the New Credit Agreement and the Notes Indenture, or merge or consolidate with any other person or (b) to permit the Company or its Restricted Subsidiaries to incur additional indebtedness, issue capital stock, make restricted payments, pay dividends or make other distributions, enter into certain transactions with affiliates, or enter into certain mergers or consolidations or sell all or substantially all of the assets of the Company and the Restricted Subsidiaries. These Early Mandatory Redemption Events are subject to a number of significant exceptions and qualifications. The Certificate also requires Parent to deliver certain reports and information to holders of the Preferred Stock. 109 EXCHANGE FEATURE On March 1, 2003 or any subsequent dividend payment date, Parent may, at its option, but subject to certain conditions, exchange all, but not less than all of the shares of Preferred Stock then outstanding for the Exchange Debentures. REGISTRATION RIGHTS Parent and the Initial Purchasers have entered into a Registration Rights Agreement (the 'Preferred Stock Registration Rights Agreement'). Pursuant to the Preferred Stock Registration Rights Agreement, Parent has agreed to file with the Commission a registration statement on an appropriate form under the Securities Act with respect to an offer to exchange the Series A Preferred Stock for a new issue of Series B Preferred Stock of Parent registered under the Securities Act, with terms identical in all material respects to those of the Series A Preferred Stock (the 'Preferred Stock Exchange Offer'). Parent is making the Preferred Stock Exchange Offer concurrently with the Company's Notes Exchange Offer. In certain circumstances, Parent or an affiliate of Parent will be required to file with the Commission a shelf registration statement to cover resales of the shares of Preferred Stock by holders thereof. If Parent fails to satisfy these registration obligations, the Preferred Stock will be subject to Special Accretion until all such registration defaults are cured. DESCRIPTION OF EXCHANGE DEBENTURES The Exchange Debentures, if issued, will be issued pursuant to an indenture (the 'Exchange Debentures Indenture') between Parent and a trustee to be determined (the 'Trustee'). The Exchange Debentures will be general unsecured obligations of Parent, subordinated in right of payment to all existing and future Senior Indebtedness (as defined in the Exchange Debentures Indenture) of Parent, including its guarantee of the Notes and borrowings under the New Credit Agreement. The Exchange Debentures will bear interest from the Exchange Date at a rate of 11.75% per annum, payable in cash semiannually, commencing with the first such date to occur after the Exchange Date. The Exchange Debentures will mature on March 1, 2008. OPTIONAL REDEMPTION The Exchange Debentures will be redeemable at the option of Parent, in whole or in part, at any time on or after March 1, 2003, at certain redemption prices set forth in the Preferred Stock Exchange Offer Prospectus, together with accrued and unpaid interest, if any, thereon to the redemption date. CHANGE OF CONTROL Upon the occurrence of a Change of Control, each holder of Exchange Debentures will have the right to require Parent to repurchase all or any part of such holder's Exchange Debentures at an offer price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the date of repurchase. There can be no assurance that Parent will have financial resources necessary to repurchase the Exchange Debentures upon a Change of Control. CERTAIN COVENANTS The Exchange Debentures Indenture will contain covenants that, among other things, limit the ability of Parent, among other things: (a) to incur additional indebtedness, issue capital stock, engage in activities other than the performance of its guarantee under the New Credit Agreement and the Notes, or merge or consolidate with any other Person and (b) to permit the Company and its Restricted Subsidiaries (as defined in the Exchange Debenture Indenture) to: incur additional indebtedness; issue capital stock, pay dividends or make certain other distributions; enter into certain transactions with affiliates; or merge or consolidate with any other Person or sell all or substantially all of the assets of the Company and its Restricted Subsidiaries. These covenants are subject to a number of significant exceptions and qualifications. The Exchange Debentures Indenture will also require Parent to deliver certain reports and information to holders of the Preferred Stock. 110 PLAN OF DISTRIBUTION Each Holder desiring to participate in the Notes Exchange Offer will be required to represent, among other things, that (i) it is not an 'affiliate' (as defined in Rule 405 of the Securities Act) of the Company or any Guarantor (ii) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the New Notes and (iii) it is acquiring the New Notes in the ordinary course of its business (a Holder unable to make the foregoing representation is referred to as a 'Restricted Holder'). A Restricted Holder will not be able to participate in the Notes Exchange Offer and may only sell its Old Notes pursuant to a registration statement containing the selling security holder information required by Item 507 of Regulation S-K under the Securities Act, or pursuant to an exemption from the registration requirement of the Securities Act. Each broker-dealer (other than a Restricted Holder) that receives New Notes for its own account pursuant to the Notes Exchange Offer (a 'Participating Broker-Dealer') must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such New Notes. Based upon interpretations by the staff of the Commission, the Company believes that New Notes issued pursuant to the Notes Exchange Offer to Participating Broker-Dealers may be offered for resale, resold, and otherwise transferred by a participating Broker-Dealer upon compliance with the prospectus delivery requirements, but without compliance with the registration requirements, of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale. If the Company is not so notified by any Participating Broker-Dealers that they may be subject to such requirements or if it is later notified by all such Participating Broker-Dealers that they are no longer subject to such requirements, the Company will not be required to maintain the effectiveness of the Notes Exchange Offer Registration Statement or to amend or supplement this Prospectus following the consummation of the Notes Exchange Offer or following such date of notification, as the case may be. The Company believes that during such period of time, delivery of this Prospectus, as it may be amended or supplemented, will satisfy the prospectus delivery requirements of a Participating Broker-Dealer engaged in market-making or other trading activities. Based on interpretations by the staff of the Commission, the Company believes that New Notes issued pursuant to the Notes Exchange Offer may be offered for resale, resold, and other transferred by a Holder thereof (other than a Restricted Holder or a Participating Broker-Dealer) without compliance with the registration and prospectus delivery requirements of the Securities Act. The Company will not receive any proceeds from any sale of New Notes by broker-dealers (including Participating Broker-Dealers). New Notes received by Participating Broker-Dealers for their own accounts pursuant to the Notes Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer and/or the purchasers of any such New Notes. Any Participating Broker-Dealer that resells New Notes may be deemed to be an 'underwriter' within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an 'underwriter' within the meaning of the Securities Act. The Company has agreed to pay all expenses incidental to the Notes Exchange Offer other than commissions and concessions of any brokers or dealers and will indemnify Holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act, as set forth in the Registration Rights Agreement. 111 By acceptance of the Notes Exchange Offer, each Participating Broker-Dealer that receives New Notes pursuant to the Notes Exchange Offer hereby agrees to notify the Company prior to using the Prospectus in connection with the sale or transfer of New Notes, and acknowledges and agrees that, upon receipt of notice from the Company of the happening of any event that makes any statement in the Prospectus untrue in any material respect or which requires the making of any changes in the Prospectus in order to make the statements therein not misleading (which notice the Company agrees to deliver promptly to such Participating Broker-Dealer), such Participating Broker-Dealer will suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented prospectus to such Participating Broker-Dealer. CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of certain material United States federal income tax consequences generally applicable to the exchange of Old Notes for New Notes and the ownership and disposition of Notes. The federal income tax considerations set forth below are based upon currently existing provisions of the Code, applicable Treasury Regulations ('Treasury Regulations'), judicial authority, and current administrative rulings and pronouncements of the Internal Revenue Service (the 'IRS'). There can be no assurance that the IRS will not take a contrary view, and no ruling from the IRS has been, or will be, sought on the issues discussed herein. Legislative, judicial, or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conclusions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences discussed below. As used in this summary, 'Note' means either a New Note or an Old Note, and, where the context so requires, 'the Note' or 'such Note' includes a Note for which the relevant Note was exchanged pursuant to the Note Exchange Offer. As used in this summary, the term 'U.S. Holder' means the beneficial owner of a Note that is for U.S. federal income tax purposes (i) an individual citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate the income of which is subject to United States federal income tax regardless of its source, or (iv) a trust whose administration is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust. As used in this summary, the term 'Non-United States Holder' means an owner of a Note that is, for United States federal income tax purposes, (i) a nonresident alien individual, (ii) a foreign corporation or (iii) a foreign estate or foreign trust. The summary is not a complete analysis or description of all potential federal tax considerations that may be relevant to, or of the actual tax effect that any of the matters described herein will have on, particular U.S. Holders and Non-U.S. Holders (collectively, 'Holders'), and does not address foreign, state, local or other tax consequences. This summary does not address the federal income tax consequences to (a) special classes of taxpayers (such as S corporations, mutual funds, insurance companies, financial institutions, small business investment companies, foreign companies, nonresident alien individuals, regulated investment companies, real estate investment trusts, dealers in securities or currencies, broker-dealers and tax-exempt organizations) who are subject to special treatment under the federal income tax laws, (b) Holders that hold Notes as part of a position in a 'straddle,' or as part of a 'hedging,' 'conversion,' or other integrated investment transaction for federal income tax purposes, (c) Holders that do not hold the Notes as capital assets within the meaning of section 1221 of the Code or (d) Holders whose functional currency is not the U.S. dollar. Furthermore, estate and gift tax consequences are not discussed herein. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH PROSPECTIVE PURCHASER OF THE NEW NOTES IS STRONGLY URGED TO CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO HIS OR HER PARTICULAR TAX SITUATION AND AS TO ANY FEDERAL, FOREIGN, STATE, LOCAL OR OTHER TAX CONSIDERATIONS 112 (INCLUDING ANY POSSIBLE CHANGES IN TAX LAW) AFFECTING THE PURCHASE, HOLDING AND DISPOSITION OF THE NEW NOTES. Note Exchange Offer The exchange of Notes for the New Notes pursuant to the Note Exchange Offer should not be a taxable event for U.S. federal income tax purposes. As a result, there should be no U.S. federal income tax consequences to holders exchanging the Notes for the New Notes pursuant to the Note Exchange Offer, and immediately after the Expiration Date a holder should have the same tax basis and holding period in the New Notes as in the Old Notes exchanged therefor. TAX CONSEQUENCES TO U.S. HOLDERS Interest Generally, interest paid on the Notes will be taxable to a U.S. Holder as ordinary income at the time it accrues or is received in accordance with such U.S. Holder's method of accounting for U.S. federal income tax purposes. Market Discount If a Note is acquired at a 'market discount,' some or all of any gain realized upon a subsequent sale, other disposition, or full or partial principal payment, of such Note (including of a New Note received in exchange for an Old Note that was acquired at a 'market discount') may be treated as ordinary income, as described below. For this purpose, 'market discount' is the excess (if any) of the principal amount of a Note over the purchase price thereof, subject to a statutory de minimis exception. Unless a U.S. Holder has elected to include the market discount in income as it accrues, gain, if any, realized on any subsequent disposition (other than in connection with certain nonrecognition transactions) or full or partial principal payment of such Note will be treated as ordinary income to the extent of the market discount that is treated as having accrued during the period such U.S. Holder held such Note. The amount of market discount treated as having accrued will be determined either (i) on a straight-line basis by multiplying the market discount times a fraction, the numerator of which is the number of days the Note was held by the U.S. Holder and the denominator of which it is the total number of days after the date such U.S. Holder acquired the Note up to and including the date of its maturity or (ii) if the U.S. Holder so elects, on a constant interest rate method. A U.S. Holder may make that election with respect to any Note but, once made, such election is irrevocable. A U.S. Holder of a Note acquired at a market discount may elect to include market discount in income currently, through the use of either the straight-line inclusion method or the elective constant interest method in lieu of recharacterizing gain upon disposition as ordinary income to the extent of accrued market discount at the time of disposition. Once made, this election will apply to all notes and other obligations acquired by the electing U.S. Holder at a market discount during the taxable year for which the election is made, and all subsequent taxable years, unless the IRS consents to a revocation of the election. If an election is made to include market discount in income currently, the basis of the Note in the hands of the U.S. Holder will be increased by the amount of the market discount that is included in income. Unless a U.S. Holder who acquires a Note at a market discount elects to include market discount in income currently, such U.S. Holder may be required to defer deductions for a portion of the interest paid on indebtedness allocable to such Note in an amount not exceeding the deferred market discount, until such income is realized. Bond Premium Under the Code and regulations, including new regulations generally effective for bonds acquired on or after March 2, 1998 (or certain others by election), if a U.S. Holder purchases a Note and 113 immediately after the purchase the adjusted basis of the Note exceeds the sum of all amounts payable on the instrument after the purchase date (other than payments of stated interest), the Note will be treated as having been acquired with 'bond premium.' A U.S. Holder may elect to amortize such bond premium over the remaining term of such Note (or, if it results in a smaller amount of amortizable bond premium, until an earlier call date). If bond premium is amortized, the amount of interest that must be included in the U.S. Holder's income for each period ending on an interest payment date or at the stated maturity, as the case may be, will be reduced by the portion of premium allocable to such period based on the U.S Holder's yield to maturity with respect to the Note as determined under the bond premium rules. Under the new regulations, if the amortizable bond premium allocable to an accrual period exceeds the amount of stated interest allocable to such accrual period, such excess would be allowed as a deduction for such accrual period, but only to the extent of the U.S. Holder's prior interest inclusions on the Note; any excess is generally carried forward and allocable to the next accrual period. A U.S. Holder who elects to amortize bond premium must reduce his tax basis in the Note as described below under 'Disposition of the Notes.' If such an election to amortize bond premium is not made, a U.S. Holder must include the full amount of each interest payment in income in accordance with his or her regular method of accounting and may receive a tax benefit (in the form of capital loss or reduced capital gain) from the premium only in computing such U.S. Holder's gain or loss upon the sale or disposition or payment of the principal amount of the Note. An election to amortize premium will apply to amortizable bond premium on all notes and other bonds, the interest on which is includible in the U.S. Holder's gross income, held at the beginning of the U.S. Holder's first taxable year to which the election applies or that are thereafter acquired, and may be revoked only with the consent of the IRS. Disposition of the Notes Upon the sale, exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange or retirement (except to the extent attributable to accrued interest that has not been included in income) and such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in a Note will generally equal the U.S. Holder's purchase price for such Note, increased by any market discount previously included in income by the U.S. Holder and decreased by any principal payments received by the U.S. Holders, any amortizable bond premium used to offset stated interest and certain other amortizable bond premium allowed as a deduction under the new regulations described above under 'Bond Premium,' deducted over the term of the Note. Gain or loss realized on the sale, exchange or retirement of a Note generally will be capital gain or loss. Recently enacted legislation includes substantial changes to the federal taxation of capital gains recognized by individuals, including a 20% maximum tax rate for certain gains from the sale of capital assets held for more than 18 months. The deduction of capital losses is subject to certain limitations. Prospective investors should consult their tax advisors regarding the treatment of capital gains and losses. The Company does not intend to treat the possibility of an optional redemption or repurchase of the Notes as giving rise to any accrual of original issue discount or recognition of ordinary income upon redemption, sale or exchange of a Note. U.S. Holders may wish to consider that Treasury Regulations regarding the treatment of certain contingencies were recently issued and may wish to consult their tax advisers in this regard. Backup Withholding Under section 3406 of the Code and applicable Treasury Regulations, a noncorporate U.S. Holder of the Notes may be subject to backup withholding at the rate of 31 percent with respect to 'reportable payments,' which include interest paid on or the proceeds of a sale, exchange or redemption of, the Notes. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a Taxpayer Identification Number ('TIN') to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a 'notified payee 114 underreporting' described in section 3406(c) of the Code or (iv) there has been a failure of the payee to certify under penalty of perjury that the payee is not subject to withholding under section 3406(a)(1)(C) of the Code. As a result, if any one of the events listed above occurs, the payor will be required to withhold an amount equal to 31 percent from any interest payment made with respect to the Notes or any payment of proceeds of a redemption of the Notes to a noncorporate U.S. Holder. Amounts paid as backup withholding do not constitute an additional tax and will be credited against the U.S. Holder's federal income tax liability, so long as the required information is provided to the IRS. The payor generally will report to the U.S. Holders of the Notes and to the IRS the amount of any 'reportable payments' for each calendar year and the amount of tax withheld, if any, with respect to payment on those securities. TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS Interest paid by the Company to a Non-United States Holder will not be subject to United States federal income or withholding tax if such interest is not effectively connected with the conduct of a trade or business within the United States (or a permanent establishment therein, if a tax treaty applies) by such Non-United States Holder and such Non-United States Holder (i) does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company; (ii) is not a controlled foreign corporation with respect to which the Company is a 'related person'; (iii) is not a bank whose receipt of interest on a Note is described in Section 881(c) (3)(A) of the United States Internal Revenue Code of 1986, as amended, (the 'Code'); and (iv) certifies, under penalties of perjury, that such Holder is not a United States person and provides the Company with such Holder's name and address or a securities clearing organization, bank, or other financial institution that holds customers' securities in the ordinary course of its trade or business certifies, under penalties of perjury, that such certification and information has been received by it or a qualifying intermediary from the Non-United States Holder and furnishes the Company with a copy thereof. If a Non-United States Holder of a Note is engaged in a trade or business in the United States, and if interest (including market discount) on the Note (or gain realized on its sale, exchange or other disposition) is effectively connected with the conduct of such trade or business, the Non-United States Holder, although exempt from the withholding tax discussed in the preceding paragraph, will generally be subject to regular United States income tax on such effectively connected income in the same manner as if it were a U.S. Holder. See 'U.S. Holders' above. Such Holder will be required to provide to the withholding agent a properly executed IRS Form 4224 (or, after December 31, 1998, a Form W-8) to claim an exemption from withholding tax. In addition, if such Non-United States Holder is a foreign corporation, it may be subject to a 30% branch profits tax (unless reduced or eliminated by an applicable treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments. For purposes of the branch profits tax, interest (including market discount) on, and any gain recognized on the sale, exchange or other disposition of, a Note will be included in the effectively connected earnings and profits of such Non-United States Holder if such interest or gain, as the case may be, is effectively connected with the conduct by the Non-United States Holder of a trade or business in the United States. Gain on Disposition A Non-United States Holder will generally not be subject to United States federal income tax on gain recognized on a sale, redemption or other disposition of a Note unless (i) the gain is effectively connected with the conduct of a trade or business within the United States (or a permanent establishment therein, if a tax treaty applies) by the Non-United States Holder, (ii) in the case of a Non-United States Holder who is a nonresident alien individual and holds the Note as a capital asset, such Holder is present in the United States for 183 or more days in the taxable year and certain other requirements are met or (iii) the Holder is subject to tax pursuant to the provisions of the Code applicable to certain United States expatriates. 115 Information Reporting and Backup Withholding The Company will, where required, report to the Non-United States Holders of Notes and the IRS the amount of any interest paid on the Notes in each calendar year and the amounts of tax withheld, if any, with respect to such payments. In the case of payments of interest to Non-United States Holders, Treasury regulations provide that the 31% backup withholding tax and certain information reporting will not apply to such payments with respect to which either the requisite certification, as described above, has been received or an exemption has otherwise been established; provided that neither the Company nor its payment agent has actual knowledge that the Non-United States Holder is a United States person or that the conditions of any other exemption are not in fact satisfied. Under Treasury regulations, these information reporting and backup withholding requirements will apply, however, to the gross proceeds paid to a Non-United States Holder on the disposition of the Notes by or through a United States office of a United States or foreign broker, unless such Holder certifies to the broker under penalties of perjury as to its name, address and status as a foreign person or the Holder otherwise establishes an exemption. Information reporting requirements, but not backup withholding, will also apply to a payment of the proceeds of a disposition of the Notes by or through a foreign office of a United States broker or foreign brokers with certain types of relationships to the United States unless such broker has documentary evidence in its file that the Non-United States Holder of the Notes is not a United States person, and such broker has no actual knowledge to the contrary, or the Non-United States Holder establishes an exemption. Neither information reporting nor backup withholding generally will apply to a payment of the proceeds of a disposition of the Notes by or through a foreign office of a foreign broker not subject to the preceding sentence. The Treasury Department recently adopted regulations regarding the withholding and information reporting rules discussed above. In general, the final regulations do not alter the substantive withholding and information reporting requirements but unify current certification procedures and forms and clarify reliance standards. These regulations will become effective for payments made after December 31, 1998, subject to certain transition rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against the Non-United States Holder's United States federal income tax liability, provided that the required information is furnished to the Internal Revenue Service. LEGAL MATTERS The legality of the New Notes will be passed upon on behalf of the Company by Howard, Darby & Levin, New York, New York. EXPERTS The consolidated financial statements of Eagle-Picher Industries, Inc. as of and for the year ended November 30, 1997, included in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and have been so included in reliance upon the report of such firm given on their authority as experts in auditing and accounting. The consolidated financial statements of Eagle-Picher Industries, Inc. as of November 30, 1996 and for each of the two years in the period ended November 30, 1996, included in this Prospectus, have been audited by KPMG Peat Marwick LLP, independent auditors, as stated in their report appearing herein, and are given upon the authority of said firm as experts in auditing and accounting. See 'Business -- Change in Independent Auditors.' 116 INDEX TO FINANCIAL STATEMENTS
PAGE ---- Eagle-Picher Industries, Inc. Condensed Consolidated Statements of Income (Loss) For the Three Months Ended February 28, 1998 and 1997 (Unaudited)..................................................................................... F-2 Condensed Consolidated Balance Sheets as of February 28, 1998 and 1997 (Unaudited)......................................................................................... F-3 Condensed Consolidated Statements of Cash Flows For the Three Months Ended February 28, 1998 and 1997 (Unaudited).......................................................................................... F-4 Notes to Condensed Consolidated Financial Statements (Unaudited)...................................... F-5 Independent Auditors' Reports......................................................................... F-14 Consolidated Statements of Income (Loss) For the Years Ended November 30, 1997, 1996 and 1995......... F-16 Consolidated Balance Sheets as of November 30, 1997 and 1996.......................................... F-17 Consolidated Statements of Cash Flows For the Years Ended November 30, 1997, 1996 and 1995....................................................................................... F-18 Consolidated Statements of Shareholders' Equity (Deficit) For the Years Ended November 30, 1997, 1996 and 1995............................................................................................. F-19 Notes to Consolidated Financial Statements............................................................ F-20 Eagle-Picher Holdings, Inc. Condensed Consolidated Statements of Income For the Three Months Ended February 28, 1998 and 1997 (Unaudited).............................................................. F-44 Condensed Consolidated Balance Sheets as of February 28, 1998 and 1997 (Unaudited)......................................................................................... F-45 Condensed Consolidated Statements of Cash Flows For the Three Months Ended February 28, 1998 and 1997 (Unaudited).......................................................................................... F-46 Notes to Condensed Consolidated Financial Statements (Unaudited)...................................... F-47 Independent Auditors' Report.......................................................................... F-50 Balance Sheet and Notes to Balance Sheet as of December 22, 1997...................................... F-51
F-1 EAGLE-PICHER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED FEBRUARY 28, -------------------- 1998 1997 -------- -------- NET SALES................................................................................. $205,842 $223,607 OPERATING COSTS AND EXPENSES Cost of products sold..................................................................... 162,796 180,401 Selling and administrative................................................................ 17,141 19,724 Management compensation expenses.......................................................... 2,056 -- Depreciation.............................................................................. 8,983 10,366 Amortization of intangibles............................................................... 3,839 4,076 -------- -------- 194,815 214,567 Operating income.......................................................................... 11,027 9,040 OTHER INCOME (EXPENSE) Interest expense.......................................................................... (6,940) (8,927) Other income.............................................................................. 820 1,703 -------- -------- INCOME BEFORE TAXES....................................................................... 4,907 1,816 INCOME TAXES.............................................................................. 4,100 3,036 -------- -------- NET INCOME (LOSS)......................................................................... $ 807 $ (1,220) -------- -------- -------- -------- INCOME (LOSS) PER COMMON SHARE............................................................ $ .08 $ (.12) -------- -------- -------- --------
See accompanying notes to condensed consolidated financial statements. F-2 EAGLE-PICHER INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS OF DOLLARS)
FEBRUARY 28, ----------------------- 1998 1997 -------- ----------- PREDECESSOR ASSETS Current assets: Cash and cash equivalents........................................................... $ 18,967 $ 19,376 Receivables, less allowances........................................................ 135,632 144,805 Income tax refunds receivable....................................................... 2,001 56,814 Inventories: Raw materials and supplies..................................................... 56,970 51,804 Work in process................................................................ 22,569 35,071 Finished goods................................................................. 15,509 19,245 -------- ----------- 95,048 106,120 Prepaid expenses.................................................................... 9,499 9,729 Deferred income taxes............................................................... 19,535 20,575 -------- ----------- Total current assets...................................................... 280,682 357,419 Property, plant and equipment............................................................ 239,337 271,181 Less accumulated depreciation....................................................... -- 10,331 -------- ----------- Net property, plant and equipment.............................................. 239,337 260,850 Deferred income taxes.................................................................... -- 106,078 Excess of acquired net assets over cost.................................................. 255,495 -- Reorganization value in excess of amounts allocable to identifiable assets, net of accumulated amortization of $4,071..................................................... -- 61,050 Other assets............................................................................. 91,625 46,546 -------- ----------- Total assets.............................................................. $867,139 $ 831,943 -------- ----------- -------- ----------- LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Accounts payable.................................................................... $ 50,899 $ 39,118 Accrued liabilities................................................................. 49,931 50,742 Income taxes........................................................................ 6,746 5,176 Current portion -- long-term debt................................................... 10,656 54,010 -------- ----------- Total current liabilities................................................. 118,232 149,046 Long-term debt -- less current portion................................................... 536,340 318,160 Deferred income taxes.................................................................... 7,634 -- Other liabilities........................................................................ 24,928 26,095 -------- ----------- Total liabilities......................................................... 687,134 493,301 -------- ----------- Shareholder's equity Common shares -- authorized 20,000,000 shares, issued and outstanding 100 shares.... 180,005 -- Common shares -- authorized 20,000,000 shares, issued and outstanding 10,000,000 shares............................................................................. -- 341,807 Foreign currency translation........................................................ -- (1,945) Accumulated deficit Beginning balance.............................................................. -- -- Net loss year to date.......................................................... -- (1,220) -------- ----------- Total shareholder's equity................................................ 180,005 338,642 -------- ----------- Total liabilities and shareholder's equity................................ $867,139 $ 831,943 -------- ----------- -------- -----------
See accompanying notes to the condensed consolidated financial statements. F-3 EAGLE-PICHER INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS OF DOLLARS)
THREE MONTHS ENDED FEBRUARY 28, --------------------- 1998 1997 --------- -------- Cash flows from operating activities: Net income (loss)................................................................... $ 807 $ (1,220) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization....................................................... 12,822 14,442 Changes in assets and liabilities: Receivables.................................................................... (4,705) (11,930) Inventories.................................................................... (2,235) (3,219) Accounts payable............................................................... (2,787) (1,917) Accrued liabilities............................................................ (5,488) 2,176 Income tax refunds receivable.................................................. 1,024 16,906 Deferred taxes................................................................. 2,600 1,831 Other.......................................................................... (11,121) 845 --------- -------- Net cash provided by (used in) operating activities................................. (9,083) 17,914 Cash flows from investing activities: Capital expenditures................................................................ (5,692) (15,857) Other............................................................................... (1,042) (1,183) --------- -------- Net cash used in investing activities............................................... (6,734) (17,040) Cash flows from financing activities: Issuance of long-term debt.......................................................... 524,100 -- Reduction of long-term debt......................................................... (250,000) (16,703) Redemption of common stock.......................................................... (446,638) -- Issuance of common stock............................................................ 180,005 -- Debt issue cost..................................................................... (26,062) -- Other............................................................................... (360) 2,480 --------- -------- Net cash used in financing activities............................................... (18,955) (14,223) Net decrease in cash and cash equivalents................................................ (34,772) (13,349) --------- -------- Cash and cash equivalents, beginning of period........................................... 53,739 32,725 --------- -------- Cash and cash equivalents, end of period................................................. $ 18,967 $ 19,376 --------- -------- --------- -------- Supplemental cash flow information: Cash paid during the three month period: Interest paid.................................................................. $ 6,402 $ 475 Income tax refunds received net of payments.................................... $ (376) $(15,928)
See accompanying notes to the condensed consolidated financial statements. F-4 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A. BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS The unaudited financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and notes thereto included elsewhere in this document for the fiscal year ended November 30, 1997. The financial statements presented herein reflect all adjustments (consisting of normal and recurring accruals) which, in the opinion of management, are necessary to fairly state the results of operations for the three months ended February 28, 1998 and 1997. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year. See Note B. B. ACQUISITION OF THE COMPANY On February 24, 1998 ('Closing Date'), Eagle-Picher Industries, Inc. ('Company') was acquired by a subsidiary of Granaria Industries BV, Eagle-Picher Holdings, Inc. ('Parent'), from the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust ('Trust'). The Trust was established pursuant to the Company's Plan of Reorganization upon its emergence from bankruptcy. These unaudited condensed consolidated financial statements as of and for the three months ended February 28, 1998 include the effects of the Acquisition that result as of February 24, 1998, the Closing Date. Accordingly, the condensed consolidated statement of income (loss) for the three months ended February 28, 1998 includes results of operations from (1) December 1, 1997 through February 24, 1998 of the Company prior to the consummation of the Acquisition (for clarity, sometimes referred to herein as the 'Predecessor Company') and (2) February 25 through February 28, 1998 of the Company. The effects of the purchase accounting adjustments on the Company's results of operations for the three months ended February 28, 1998 were immaterial. Upon closing of the acquisition, the Parent received $100 million equity investment from Granaria Industries BV and an equity partner. The Parent also received proceeds approximating $80 million from its offering of preferred stock. These proceeds were invested in the Company, which issued approximately $180 million of common stock to the Parent. The Company also borrowed $225 million in term loans and $79.1 million in revolving credit loans under a syndicated senior secured loan facility, and issued $220 million in senior subordinated notes ('Subordinated Notes'), the proceeds of which were used to redeem the Company's 10% Senior Unsecured Sinking Fund Debentures ('Debentures') and common stock, both held by the Trust. The Company, a wholly-owned subsidiary of the Parent, is the operating entity. The Parent's results of operations and cash flows approximate those of the Company. C. BASIC EARNINGS PER SHARE The calculation of net income (loss) per share is based upon the net income (loss) divided by the average number of common shares outstanding, which was 9,555,560 and 10,000,000 in the three months ended February 28, 1998 and 1997, respectively. D. LONG-TERM DEBT On the Closing Date, the Company's existing $60 million unsecured committed revolving credit facility was terminated. It was replaced by a syndicated senior secured loan facility ('Credit Agreement') which provided $225 million in term loans ('Term Loans') and a $160 million revolving credit facility ('Facility'), of which $79.1 million was drawn at the time of closing. Immediately F-5 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) following the closing, the Company borrowed approximately $28.6 million for use as credit support in the form of letters of credit, leaving approximately $52.3 million in available credit. The Credit Agreement is secured by the capital stock of the Company, up to 65% of the capital stock of foreign subsidiaries and substantially all other property in the United States. The Credit Agreement contains covenants which restrict the Company's ability to, among others, declare dividends or redeem capital stock, issue additional debt or alter existing debt agreements, make loans, undergo a change in control and engage in mergers, acquisitions and asset sales. These covenants also limit the annual amount of capital expenditures and require the Company to meet minimum financial coverages. The Company was in compliance with all covenants at February 28, 1998. Long-term debt consisted of:
FEBRUARY 28, ----------------------- 1998 1997 ------ ------ (IN MILLIONS OF DOLLARS) New Credit Agreement: Revolving Credit Facility........................................................ $ 79.1 $ -- Term Loans....................................................................... 225.0 -- Senior Subordinated Notes............................................................. 220.0 -- Senior Unsecured Sinking Fund Debentures.............................................. -- 250.0 Divestiture Notes..................................................................... -- 50.0 Tax Refund Notes...................................................................... -- 52.6 Industrial Revenue Bonds.............................................................. 18.4 10.5 Secured Notes......................................................................... -- 6.7 Debt of Foreign Subsidiaries.......................................................... 4.5 2.4 ------ ------ 547.0 372.2 Less current portion.................................................................. 10.7 54.0 ------ ------ Long-term debt, less current portion.................................................. $536.3 $318.2 ------ ------ ------ ------
The Facility matures in 2004. It bears interest, at the Company's option, of an adjusted LIBOR rate plus 2 1/4% or the bank's prime rate plus 1 1/4%. There is a commitment fee equal to 1/2% per annum on the undrawn portion of the Facility and fees for letters of credit are equal to 2 1/4% per annum. The Term Loans mature in 2003, 2005 and 2006 and bear interest, at the Company's option, of an adjusted LIBOR rate plus spreads varying from 2 1/4% to 2 7/8% or the bank's prime rate plus spreads varying from 1 1/4% to 1 7/8%. In addition to regularly scheduled payments, the Company is required to make mandatory prepayments to first the Term Loans then the Facility of 60% of annual excess cash flow, the net proceeds from the sale of assets (subject to certain conditions), the net proceeds of new debt issued and 50% of the net proceeds of any equity securities issued. To partially hedge its variable interest rate exposure on its Term Loans, the Company has entered into a three year interest rate swap agreement ('Swap Agreement'). The Swap Agreement requires the Company to pay a fixed LIBOR rate (plus the appropriate spreads) on $150 million and receive the floating LIBOR rate on that same amount, effectively fixing the interest rate on $150 million of the Terms Loans at a weighted rate of 8.35%. The Subordinated Notes, which are unsecured, bear interest of 9 3/8% and mature in 2008, however, they are redeemable at the option of the Company, in whole or in part, any time after February 28, 2003 at set redemption prices. The Company may also redeem up to 35% of the aggregate principal amount of the Subordinated Notes prior to March 1, 2001 at a set redemption price provided certain conditions are met. The Company is also required to offer to purchase the Subordinated Notes at a set redemption price should there be a change in control of the Company. Both the Credit Agreement and the Subordinated Notes are guaranteed on a full, unconditional, and joint and several basis by certain of the Company's wholly-owned domestic subsidiaries F-6 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) ('Guarantors'). Management has determined that full financial statements of the Guarantors would not be material to investors and such financial statements are not presented. The following supplemental condensed combining financial statements present information regarding the Guarantors, the issuer of the debt and the subsidiaries that did not guaranteee the debt. SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998
NON-GUARANTORS FOREIGN ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL ------- ---------- -------------- ------------ -------- (IN THOUSANDS OF DOLLARS) Net sales Customers................................ $61,071 $123,181 $ 21,590 $ -- $205,842 Intercompany............................. 3,381 2,421 1,451 (7,253) -- Operating costs and expenses Cost of products sold.................... 48,329 102,771 18,772 (7,076) 162,796 Selling and administrative............... 9,673 5,167 2,301 -- 17,141 Management compensation expense.......... 2,056 -- -- -- 2,056 Intercompany charges..................... (2,172) 2,172 -- -- -- Depreciation............................. 2,823 5,220 940 -- 8,983 Amortization of intangibles.............. 765 3,064 10 -- 3,839 ------- ---------- -------------- ------------ -------- Total............................... 61,474 118,394 22,023 (7,076) 194,815 Operating income (loss)....................... 2,978 7,208 1,018 (177) 11,027 Other income (expense) Interest expense......................... (6,844) -- (96) -- (6,940) Other income (expense)................... 812 333 (325) -- 820 ------- ---------- -------------- ------------ -------- Income before taxes........................... (3,054) 7,541 597 (177) 4,907 Income taxes.................................. 1,083 2,486 531 -- 4,100 ------- ---------- -------------- ------------ -------- Net income (loss)............................. $(4,137) $ 5,055 $ 66 $ (177) $ 807 ------- ---------- -------------- ------------ -------- ------- ---------- -------------- ------------ --------
F-7 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEET (UNAUDITED) AS OF FEBRUARY 28, 1998
NON-GUARANTORS FOREIGN ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL --------- ---------- -------------- ------------ -------- (IN THOUSANDS OF DOLLARS) ASSETS Cash and cash equivalents..................... $ 12,115 $ 1,145 $ 5,513 $ 194 $ 18,967 Receivables................................... 38,724 78,745 18,163 -- 135,632 Intercompany accounts receivable.............. 3,081 4,012 -- (7,093) -- Income tax refunds receivable................. 2,001 -- -- -- 2,001 Inventories................................... 37,775 44,818 13,830 (1,375) 95,048 Prepaid expenses.............................. 5,527 3,490 482 -- 9,499 Deferred income taxes......................... 19,535 -- -- -- 19,535 --------- ---------- -------------- ------------ -------- Total current assets..................... 118,758 132,210 37,988 (8,274) 280,682 Property, plant and equipment................. 72,085 132,112 35,140 -- 239,337 Investment in subsidiaries.................... 60,908 5,185 -- (66,093) -- Excess of acquired net assets over cost....... 52,059 203,436 -- -- 255,495 Other assets.................................. 73,185 18,187 253 -- 91,625 --------- ---------- -------------- ------------ -------- Total assets............................. $ 376,995 $491,130 $ 73,381 $(74,367) $867,139 --------- ---------- -------------- ------------ -------- --------- ---------- -------------- ------------ -------- LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable.............................. $ 16,686 $ 25,241 $ 8,972 $ -- $ 50,899 Intercompany accounts payable................. 176 110 6,340 (6,626) -- Accrued liabilities........................... 27,614 19,782 2,535 -- 49,931 Income taxes.................................. 6,658 -- 88 -- 6,746 Long-term debt -- current portion............. 7,780 -- 2,876 -- 10,656 --------- ---------- -------------- ------------ -------- Current liabilities...................... 58,914 45,133 20,811 (6,626) 118,232 Long-term debt -- less current portion........ 534,720 -- 1,620 -- 536,340 Deferred income taxes......................... 7,634 -- -- -- 7,634 Other liabilities............................. 24,928 -- -- -- 24,928 --------- ---------- -------------- ------------ -------- Total liabilities........................ 626,196 45,133 22,431 (6,626) 687,134 Intercompany accounts......................... (429,206) 399,218 21,074 8,914 -- SHAREHOLDERS' EQUITY 180,005 46,779 29,876 (76,655) 180,005 --------- ---------- -------------- ------------ -------- Total liabilities and shareholders' equity................................. $ 376,995 $491,130 $ 73,381 $(74,367) $867,139 --------- ---------- -------------- ------------ -------- --------- ---------- -------------- ------------ --------
F-8 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998
NON- GUARANTORS FOREIGN ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL --------- ---------- ------------ ------------ --------- (IN THOUSANDS OF DOLLARS) Cash flows from operating activities: Net income (loss)......................... $ (4,137) $ 5,055 $ 66 $ (177) $ 807 Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation and amortization............. 3,588 8,284 950 -- 12,822 Changes in assets and liabilities......... (16,059) (9,247) 2,019 575 (22,712) --------- ---------- ------------ ------------ --------- Net cash provided by (used in) operating activities............... (16,608) 4,092 3,035 398 (9,083) Cash flows from investing activities: Capital expenditures...................... (2,300) (1,833) (1,559) -- (5,692) Other..................................... (956) 65 (846) 695 (1,042) --------- ---------- ------------ ------------ --------- Net cash provided by (used in) investing activities............... (3,256) (1,768) (2,405) 695 (6,734) Cash flows from financing activities: Issuance of long-term debt................ 524,100 -- -- -- 524,100 Reduction of long-term debt............... (250,000) -- -- -- (250,000) Redemption of common stock................ (446,638) -- -- -- (446,638) Issuance of common stock.................. 180,005 -- -- -- 180,005 Debt issue cost........................... (26,062) -- -- -- (26,062) Other..................................... -- -- (360) -- (360) --------- ---------- ------------ ------------ --------- Net cash provided by (used in) financing activities............... (18,595) -- (360) -- (18,955) --------- ---------- ------------ ------------ --------- Increase (decrease) in cash and cash equivalents.................................. (38,459) 2,324 270 1,093 (34,772) Intercompany accounts.......................... 1,740 (1,740) 899 (899) -- Cash and cash equivalents, beginning of period....................................... 48,834 561 4,344 -- 53,739 --------- ---------- ------------ ------------ --------- Cash and cash equivalents, end of period....... $ 12,115 $ 1,145 $ 5,513 $ 194 $ 18,967 --------- ---------- ------------ ------------ --------- --------- ---------- ------------ ------------ ---------
F-9 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED FEBRUARY 28, 1997
NON-GUARANTORS -------------------------- FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL ------- ---------- ------------- --------- ------------ -------- (IN THOUSANDS OF DOLLARS) Net sales Customers...................... $60,310 $114,398 $19,645 $ 29,254 $ -- $223,607 Intercompany................... 3,465 2,599 1,141 37 (7,242) -- Operating costs and expenses Cost of products sold.......... 47,577 95,817 16,853 27,299 (7,145) 180,401 Selling and administrative..... 11,222 4,843 2,021 1,638 -- 19,724 Intercompany charges........... (3,518) 2,512 -- 1,006 -- -- Depreciation................... 2,866 5,160 908 1,432 -- 10,366 Amortization of intangibles.... 813 3,258 5 -- -- 4,076 ------- ---------- ------------- --------- ------------ -------- Total..................... 58,960 111,590 19,787 31,375 (7,145) 214,567 Operating income.................... 4,815 5,407 999 (2,084) (97) 9,040 Other income (expense) Interest expense............... (8,899) -- (28) -- -- (8,927) Other income (expense)......... 1,416 212 75 -- -- 1,703 ------- ---------- ------------- --------- ------------ -------- Income before taxes................. (2,668) 5,619 1,046 (2,084) (97) 1,816 Income taxes........................ 113 2,040 814 69 -- 3,036 ------- ---------- ------------- --------- ------------ -------- Net income (loss)................... $(2,781) $ 3,579 $ 232 $ (2,153) $ (97) $ (1,220) ------- ---------- ------------- --------- ------------ -------- ------- ---------- ------------- --------- ------------ --------
F-10 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEET (UNAUDITED) AS OF FEBRUARY 28, 1997
NON-GUARANTORS ------------------------- FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL --------- ---------- ------------ --------- ------------ -------- (IN THOUSANDS OF DOLLARS) ASSETS Cash and cash equivalents.............. $ 14,133 $ 443 $ 4,688 $ 112 $ -- $ 19,376 Receivables............................ 37,995 71,568 17,827 17,415 -- 144,805 Intercompany accounts receivable....... 3,538 3,313 -- -- (6,851) -- Income tax refunds receivable.......... 56,814 -- -- -- -- 56,814 Inventories............................ 28,330 52,557 10,551 14,682 -- 106,120 Prepaid expenses....................... 4,476 3,860 332 1,061 -- 9,729 Deferred income taxes.................. 20,575 -- -- -- -- 20,575 --------- ---------- ------------ --------- ------------ -------- Total current assets.............. 165,861 131,741 33,398 33,270 (6,851) 357,419 Property, plant and equipment.......... 74,790 129,929 31,136 24,995 -- 260,850 Investment in subsidiaries............. 58,656 5,132 -- -- (63,788) -- Deferred income taxes.................. 106,078 -- -- -- -- 106,078 Reorganization value in excess of amounts allocable to identifiable assets............................... 12,187 48,863 -- -- -- 61,050 Other assets........................... 23,711 14,000 1,154 7,681 -- 46,546 --------- ---------- ------------ --------- ------------ -------- Total assets...................... $ 441,283 $329,665 $ 65,688 $ 65,946 $(70,639) $831,943 --------- ---------- ------------ --------- ------------ -------- --------- ---------- ------------ --------- ------------ -------- LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable....................... $ 15,927 $ 13,360 $ 4,231 $ 5,600 -- $ 39,118 Intercompany accounts payable.......... -- -- 6,597 -- (6,597) -- Accrued liabilities.................... 30,322 12,479 4,889 3,052 -- 50,742 Income taxes........................... 3,244 -- 1,932 -- -- 5,176 Current portion -- long-term debt...... 54,010 -- -- -- -- 54,010 --------- ---------- ------------ --------- ------------ -------- Current liabilities............... 103,503 25,839 17,649 8,652 (6,597) 149,046 Long-term debt -- less current portion.............................. 315,726 -- 2,434 -- -- 318,160 Other liabilities...................... 25,515 -- 580 -- -- 26,095 --------- ---------- ------------ --------- ------------ -------- Total liabilities................. 444,744 25,839 20,663 8,652 (6,597) 493,301 Intercompany accounts.................. (342,500) 273,584 15,790 39,360 13,766 -- SHAREHOLDER'S EQUITY 339,039 30,242 29,235 17,934 (77,808) 338,642 --------- ---------- ------------ --------- ------------ -------- Total liabilities and shareholder's equity............ $ 441,283 $329,665 $ 65,688 $ 65,946 $(70,639) $831,943 --------- ---------- ------------ --------- ------------ -------- --------- ---------- ------------ --------- ------------ --------
F-11 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED FEBRUARY 28, 1997
NON-GUARANTORS ------------------------- FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL -------- ---------- ------------ ---------- ------------ -------- (IN THOUSANDS OF DOLLARS) Cash flows from operating activities: Net income (loss)....................... $ (2,781) $ 3,579 $ 232 $ (2,153) $ (97) $ (1,220) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation and amortization........... 3,679 8,418 913 1,432 -- 14,442 Changes in assets and liabilities: Income tax refunds...................... 16,906 -- -- -- -- 16,906 Working capital and other............... 3,637 (16,185) (142) 250 226 (12,214) -------- ---------- ------------ ---------- ------ -------- Net cash provided by (used in) operating activities............. 21,441 (4,188) 1,003 (471) 129 17,914 Cash flows from investing activities: Capital expenditures.................... (1,790) (9,630) (4,036) (401) -- (15,857) Other................................... 98 (162) (704) (5) (410) (1,183) -------- ---------- ------------ ---------- ------ -------- Net cash provided by (used in) investing activities............. (1,692) (9,792) (4,740) (406) (410) (17,040) Cash flows from financing activities: Reduction of long-term debt............. (16,703) -- -- -- -- (16,703) Other................................... -- -- 2,480 -- -- 2,480 -------- ---------- ------------ ---------- ------ -------- Net cash provided by (used in) financing activities............. (16,703) -- 2,480 -- -- (14,223) -------- ---------- ------------ ---------- ------ -------- Increase (decrease) in cash and cash equivalents................................ 3,046 (13,980) (1,257) (877) (281) (13,349) Intercompany accounts........................ (15,002) 13,870 (40) 891 281 -- Cash and cash equivalents, beginning of period..................................... 26,089 553 5,985 98 -- 32,725 -------- ---------- ------------ ---------- ------ -------- Cash and cash equivalents, end of period.............................. $ 14,133 $ 443 $ 4,688 $ 112 $-- $ 19,376 -------- ---------- ------------ ---------- ------ -------- -------- ---------- ------------ ---------- ------ --------
F-12 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) E. INCOME TAXES The acquisition of the Company has been treated as a sale of its assets for purposes of income taxes. The deferred tax benefits relating to the Debentures, which were repaid on the Closing Date, and most of the benefits relating to the net operating loss carryforwards will be realized to shelter the gain on the sale of the assets. Any remaining net operating loss carryforwards will be lost. The Company, however, will be liable for approximately $2.0 in alternative minimum taxes and $1.6 million in state and local income taxes as a result of the transaction. These taxes are recognized as part of the Acquisition adjustments. F. LEGAL MATTERS The Company is involved in routine litigation, environmental proceedings and claims pending with respect to matters arising out of the normal course of business. In management's opinion, the ultimate liability resulting from all claims, individually or in the aggregate, will not materially affect the Company's consolidated financial position, results of operations or cash flows. G. INTANGIBLE ASSETS Excess of acquired net assets over cost is being amortized on a straight-line basis over fifteen years. The recoverability of these assets is evaluated periodically based on current and estimated future cash flows of each of the related business units over the remaining amortization period. F-13 INDEPENDENT AUDITORS' REPORT The Board of Directors Eagle-Picher Industries, Inc.: We have audited the accompanying consolidated balance sheet of Eagle-Picher Industries, Inc. and subsidiaries as of November 30, 1997, and the related consolidated statements of loss, shareholders' equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 1997, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. As discussed in Notes B and C to the consolidated financial statements, effective November 29, 1996, the Company emerged from Chapter 11 of the United States Bankruptcy Code and adopted 'fresh-start' reporting principles in accordance with the American Institute of Certified Public Accountants' Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.' As a result, the consolidated financial statements for the period subsequent to the adoption of fresh-start reporting are presented on a different cost basis than that for prior periods and, therefore, are not comparable. DELOITTE & TOUCHE LLP Cincinnati, Ohio January 15, 1998, except for Notes G and M, as to which the date is February 24, 1998 F-14 INDEPENDENT AUDITORS' REPORT The Board of Directors Eagle-Picher Industries, Inc.: We have audited the accompanying consolidated balance sheet of Eagle-Picher Industries, Inc. and subsidiaries as of November 30, 1996, and the related consolidated statements of income (loss), shareholders' equity (deficit), and cash flows for each of the years in the two-year period ended November 30, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Eagle-Picher Industries, Inc. and subsidiaries as of November 30, 1996, and the results of their operations and their cash flows for each of the years in the two-year period ended November 30, 1996 in conformity with generally accepted accounting principles. As discussed in Notes B and C to the consolidated financial statements, effective November 29, 1996, the Company emerged from chapter 11 of the United States Bankruptcy Code and adopted 'fresh-start' reporting principles in accordance with the American Institute of Certified Public Accountants' Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization under the Bankruptcy Code.' As discussed in Note E to the consolidated financial statements, the Company changed its method of computing LIFO for inventories of boron, germanium and other rare metals in 1996. KPMG PEAT MARWICK LLP Cincinnati, Ohio February 5, 1997 F-15 EAGLE-PICHER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
YEARS ENDED NOVEMBER 30, ------------------------------------- 1997 1996 1995 -------- ---------- ----------- Net sales................................................................ $906,077 $ 891,287 $ 848,548 Operating costs and expenses Cost of products sold............................................... 725,010 716,926 681,373 Selling and administrative.......................................... 77,109 81,505 75,380 Depreciation........................................................ 39,671 30,338 28,296 Amortization of intangibles......................................... 16,318 412 412 Loss on sale of divisions........................................... 2,411 -- -- -------- ---------- ----------- 860,519 829,181 785,461 -------- ---------- ----------- Operating income......................................................... 45,558 62,106 63,087 Adjustment for asbestos litigation....................................... -- 502,197 (1,005,511) Provision for other claims............................................... -- (4,244) -- Interest expense (contractual interest of $9,889 in 1996 and $8,897 in 1995).................................................................. (31,261) (3,083) (1,926) Gain on sale of investment............................................... -- -- 11,505 Other income (expense)................................................... (251) 1,345 199 -------- ---------- ----------- Income (loss) before reorganization items, taxes, extraordinary item and cumulative effect of accounting change................................. 14,046 558,321 (932,646) Fresh start revaluation.................................................. -- 118,684 -- Reorganization items..................................................... -- (2,349) (2,225) -------- ---------- ----------- Income (loss) before taxes, extraordinary item and cumulative effect of accounting change...................................................... 14,046 674,656 (934,871) Income taxes............................................................. 17,900 52,570 9,300 -------- ---------- ----------- Income (loss) before extraordinary item and cumulative effect of accounting change...................................................... (3,854) 622,086 (944,171) Extraordinary item -- gain on discharge of pre-petition liabilities...... -- 1,525,540 -- Cumulative effect of change in accounting for inventories................ -- (1,235) -- -------- ---------- ----------- Net income (loss).............................................. $ (3,854) $2,146,391 $ (944,171) -------- ---------- ----------- -------- ---------- ----------- Income (loss) per share: Income (loss) before extraordinary item and cumulative effect of accounting change................................................. $ (.39) $ 56.34 $ (85.51) Extraordinary item -- gain on discharge of pre-petition liabilities....................................................... -- 138.17 -- Cumulative effect of change in accounting for inventories........... -- (.11) -- -------- ---------- ----------- Net income (loss) per share.............................................. $ (.39) $ 194.40 $ (85.51) -------- ---------- ----------- -------- ---------- -----------
See accompanying notes to consolidated financial statements. F-16 EAGLE-PICHER INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS)
NOVEMBER 30, -------------------- 1997 1996 -------- -------- ASSETS Current assets: Cash and cash equivalents............................................................ $ 53,739 $ 32,725 Receivables, less allowances of $1,614 in 1997 and $2,233 in 1996.................... 130,927 132,875 Income tax refunds receivable........................................................ 3,025 73,720 Inventories.......................................................................... 92,196 102,901 Prepaid expenses..................................................................... 8,290 8,164 Deferred income taxes................................................................ 13,793 26,351 -------- -------- Total current assets............................................................ 301,970 376,736 -------- -------- Property, plant and equipment Land and land improvements........................................................... 19,832 20,010 Buildings............................................................................ 65,289 67,836 Machinery and equipment.............................................................. 173,909 145,309 Construction in progress............................................................. 20,817 23,196 -------- -------- 279,847 256,351 Less accumulated depreciation............................................................. 36,309 -- -------- -------- Net property, plant and equipment......................................................... 243,538 256,351 -------- -------- Deferred income taxes..................................................................... 98,991 102,133 Reorganization value in excess of amounts allocable to identifiable assets, net of accumulated amortization of $16,284 in 1997............................................. 48,837 65,121 Other assets.............................................................................. 53,545 48,539 -------- -------- Total assets.................................................................... $746,881 $848,880 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable..................................................................... $ 52,886 $ 41,035 Compensation and employee benefits................................................... 22,630 18,127 Long-term debt -- current portion.................................................... 3,403 70,378 Income taxes......................................................................... 2,294 3,649 Reorganization items................................................................. 13,128 13,292 Other accrued liabilities............................................................ 19,661 18,447 -------- -------- Total current liabilities....................................................... 114,002 164,928 -------- -------- Long-term debt, less current portion...................................................... 269,994 316,061 Postretirement benefits other than pensions............................................... 21,681 21,675 Other long-term liabilities............................................................... 5,087 4,409 -------- -------- Total liabilities............................................................... 410,764 507,073 -------- -------- Shareholders' equity Common stock -- no par value Authorized 20,000,000 shares; issued and outstanding 10,000,000 shares............. 341,807 341,807 Retained deficit..................................................................... (3,854) -- Foreign currency translation......................................................... (1,836) -- -------- -------- Total shareholders' equity...................................................... 336,117 341,807 -------- -------- Total liabilities and shareholders' equity...................................... $746,881 $848,880 -------- -------- -------- --------
See accompanying notes to consolidated financial statements. F-17 EAGLE-PICHER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
YEARS ENDED NOVEMBER 30, -------------------------------------- 1997 1996 1995 --------- ----------- ---------- Cash flows from operating activities: Net income (loss).................................................. $ (3,854) $ 2,146,391 $ (944,171) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Changes due to reorganization activities: Extraordinary gain on discharge of pre-petition liabilities... -- (1,525,540) -- Fresh start revaluation....................................... -- (118,684) -- Adjustment for asbestos litigation................................. -- (502,197) 1,005,511 Provision for other claims......................................... -- 4,244 -- Cumulative effect of accounting change............................. -- 1,235 -- Depreciation and amortization...................................... 55,989 30,750 28,708 Loss on sale of divisions.......................................... 2,411 -- -- Gain on sale of investment......................................... -- -- (11,505) Changes in assets and liabilities, net of effects of divestitures: Receivables................................................... (14,562) (7,664) (17,914) Income tax refunds receivable................................. 70,695 3,535 (2,156) Inventories................................................... (3,393) (6,283) (1,665) Deferred income taxes......................................... 15,700 29,170 (18,900) Accounts payable.............................................. 16,351 657 (3,373) Other......................................................... 8,546 17,247 (4,079) --------- ----------- ---------- Net cash provided by operating activities.......................... 147,883 72,861 30,456 Cash flows from investing activities: Proceeds from sale of divisions.................................... 39,007 4,248 -- Proceeds from sale of investment................................... -- -- 11,505 Capital expenditures............................................... (51,324) (44,957) (40,558) Other.............................................................. (1,510) (1,061) 340 --------- ----------- ---------- Net cash used in investing activities......................... (13,827) (41,770) (28,713) Cash flows from financing activities: Issuance of long-term debt......................................... 12,997 -- 1,240 Reduction of long-term debt........................................ (126,039) (3,198) (2,259) --------- ----------- ---------- Net cash used in financing activities......................... (113,042) (3,198) (1,019) Cash payments on effective date of plan of reorganization............... -- (88,498) -- --------- ----------- ---------- Net increase (decrease) in cash and cash equivalents.................... 21,014 (60,605) 724 --------- ----------- ---------- Cash and cash equivalents, beginning of year............................ 32,725 93,330 92,606 --------- ----------- ---------- Cash and cash equivalents, end of year.................................. $ 53,739 $ 32,725 $ 93,330 --------- ----------- ---------- --------- ----------- ----------
See accompanying notes to consolidated financial statements F-18 EAGLE-PICHER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS OF DOLLARS)
UNREALIZED ADDITIONAL GAIN (LOSS) COMMON PAID-IN RETAINED ON STOCK CAPITAL DEFICIT INVESTMENTS -------- ---------- ----------- ----------- Balance November 30, 1994............................................. $ 13,906 $ 36,378 $(1,317,118) $-- Cumulative effect of change in accounting for marketable securities..................................................... -- -- -- 5,377 Net loss......................................................... -- -- (944,171) -- Realized gain on investment...................................... -- -- -- (5,044) Foreign currency translation..................................... -- -- -- -- -------- ---------- ----------- ----------- Balance November 30, 1995............................................. 13,906 36,378 (2,261,289) 333 Net income....................................................... -- -- 2,146,391 -- Foreign currency translation..................................... -- -- -- -- Unrealized loss on investment.................................... -- -- -- (141) Cancellation of the former common shares per the Plan of Reorganization................................................. (13,906) (36,378) 48,371 -- Issuance of the new common shares per the Plan of Reorganization................................................. 341,807 -- -- -- Fresh-start revaluation.......................................... -- -- 66,527 (192) -------- ---------- ----------- ----------- Balance November 30, 1996............................................. 341,807 -- -- -- Net loss......................................................... -- -- (3,854) -- Foreign currency translation..................................... -- -- -- -- -------- ---------- ----------- ----------- Balance November 30, 1997............................................. $341,807 $ -- $ (3,854) $-- -------- ---------- ----------- ----------- -------- ---------- ----------- ----------- TOTAL FOREIGN SHAREHOLDERS' CURRENCY TREASURY EQUITY TRANSLATION STOCK (DEFICIT) ----------- -------- ------------- Balance November 30, 1994............................................. $ 2,054 $ (1,913) $ (1,266,693) Cumulative effect of change in accounting for marketable securities..................................................... -- -- 5,377 Net loss......................................................... -- -- (944,171) Realized gain on investment...................................... -- -- (5,044) Foreign currency translation..................................... (777) -- (777) ----------- -------- ------------- Balance November 30, 1995............................................. 1,277 (1,913) (2,211,308) Net income....................................................... -- -- 2,146,391 Foreign currency translation..................................... 129 -- 129 Unrealized loss on investment.................................... -- -- (141) Cancellation of the former common shares per the Plan of Reorganization................................................. -- 1,913 -- Issuance of the new common shares per the Plan of Reorganization................................................. -- -- 341,807 Fresh-start revaluation.......................................... (1,406) -- 64,929 ----------- -------- ------------- Balance November 30, 1996............................................. -- -- 341,807 Net loss......................................................... -- -- (3,854) Foreign currency translation..................................... (1,836) -- (1,836) ----------- -------- ------------- Balance November 30, 1997............................................. $(1,836) $ -- $ 336,117 ----------- -------- ------------- ----------- -------- -------------
See accompanying notes to consolidated financial statements. F-19 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company's subsidiaries which are more than 50% owned and controlled. Intercompany accounts and transactions have been eliminated. Investments in unconsolidated affiliates which are at least 20% owned and over which the Company exercises significant influence are accounted for using the equity method. Revenue Recognition Sales are recognized primarily upon shipment of products except for a division of the Company that sells products under contracts and subcontracts with various United States Government agencies and aerospace and defense contractors. On cost-reimbursable contracts, sales are recognized as costs are incurred and include a portion of the total estimated earnings to be realized in the ratio that costs incurred relate to total estimated costs. On fixed-price contracts, sales are recognized using the percentage of completion method, when deliveries are made or upon completion of specified tasks. Contract losses are provided for in their entirety in the period they become known, without regard to the percentage-of-completion. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Reporting for Reorganization Eagle-Picher Industries, Inc. (the 'Company') has accounted for all transactions related to its chapter 11 proceedings and reorganization in accordance with Statement of Position 90-7 ('SOP 90-7'), 'Financial Reporting by Entities in Reorganization Under the Bankruptcy Code' (See Note B). The adjustments to reflect the Company's emergence from bankruptcy have been reflected in the accompanying consolidated financial statements. Accordingly, a vertical black line is shown in the consolidated financial statements to separate post-emergence operations from those prior to November 29, 1996 since they have not been prepared on a comparable basis. Cash and Cash Equivalents Marketable securities with original maturities of three months or less are considered to be cash equivalents. Financial Instruments The Company's financial instruments consist primarily of investments in cash and cash equivalents, receivables and certain other assets as well as obligations under accounts payable and long-term debt. The carrying values of these financial instruments, with the exception of long-term debt, approximate fair value (See Note G). Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of trade accounts receivable. The Company's customer base includes all significant automotive manufacturers and their first tier suppliers in North America and Europe. Although the Company is directly affected by the well-being of the automotive industry, management does not believe significant credit risk existed at November 30, 1997. F-20 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Inventories Inventories are valued at the lower of cost or market, which approximates current replacement cost. A substantial portion of domestic inventories are valued using the last-in first-out ('LIFO') method while the balance of the Company's inventories are valued using the first-in first-out method. Property, Plant and Equipment The Company records investments in property, plant and equipment at cost. The Company provides for depreciation of plant and equipment using the straight-line method over the estimated lives of the assets which are generally 20 to 40 years for buildings and 3 to 10 years for machinery and equipment. Improvements which extend the useful life of property are capitalized, while repair and maintenance costs are charged to operations as incurred. In accordance with fresh-start reporting, property, plant and equipment in service at November 30, 1996 were stated at fair value, based on independent appraisals, as of that date. Intangible Assets Reorganization value in excess of amounts allocable to identifiable assets is being amortized on a straight-line basis over four years. The recoverability of the assets is evaluated periodically based on current and estimated future cash flows of the Company over the remaining amortization period. Prior to the Company's emergence from chapter 11, the excess of cost over net assets acquired was being amortized using the straight-line method primarily over 40 years. Environmental Remediation Costs The Company accrues for environmental expenses resulting from existing conditions relating to past operations when the costs are probable and reasonably estimable. Income Taxes Income taxes are provided based upon income for financial statement purposes. Deferred tax assets and liabilities are established based on the difference between the financial statement and income tax bases of assets and liabilities using existing tax rates. Foreign Currency Translation Assets and liabilities of foreign subsidiaries are translated at current exchange rates, and income and expenses are translated using weighted average exchange rates. Adjustments resulting from translation of financial statements stated in local currencies generally are excluded from the results of operations and accumulated in a separate component of Shareholders' Equity (Deficit). Gains and losses from foreign currency transactions are included in the determination of net income (loss) and were immaterial. Reclassifications Certain prior year amounts have been reclassified to conform with current year consolidated financial statement presentation. B. REORGANIZATION AND EMERGENCE FROM CHAPTER 11 On November 18, 1996, the U.S. Bankruptcy Court for the Southern District of Ohio, Western Division (the 'Bankruptcy Court'), together with the U.S. District Court for the Southern District of Ohio, Western Division (the 'District Court'), confirmed the Third Amended Consolidated Plan of F-21 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Reorganization (the 'Plan') of the Company and seven of its domestic subsidiaries. The Company emerged from bankruptcy on November 29, 1996 (the 'Effective Date'). The Plan was filed jointly by the Company, the Injury Claimants' Committee, which represented approximately 150,000 persons alleging injury due to exposure to asbestos-containing products manufactured by the Company from 1934 until 1971, and the Representative for Future Claimants, which represented future personal injury claimants. The Plan was also supported by the Unsecured Creditors' Committee. The Company's chapter 11 case commenced January 7, 1991 (the 'Petition Date'). The Plan was based on a settlement of $2.0 billion for the Company's liability for present and future asbestos-related personal injury claims. As a result of the settlement, which was reached in the third quarter of 1996, an adjustment was made to the consolidated financial statements to reduce the asbestos liability subject to compromise from $2.5 billion, the amount the Bankruptcy Court had previously estimated as the Company's liability for asbestos-related personal injury claims. The order confirming the Plan contains a permanent injunction which precludes holders of present and future asbestos or lead-related personal injury claims from pursuing their claims against the reorganized Company. Those claims will be channeled to an independently administered qualified settlement trust (the 'PI Trust') which has been established to resolve and satisfy those claims. Asbestos-related property damage claims will be channeled to and resolved by a separate trust (the 'PD Trust'). The Plan provided for distributions of $6.5 million in cash to holders of priority claims, convenience claims, certain secured claims, and administrative expenses. The PD Trust received $3.0 million in cash under the Plan. At November 30, 1996, the Company retained $15.0 million in cash for operating purposes, held $4.2 million in escrow from a division sale and set aside $13.5 million for remaining administrative expenses and unresolved claims. The remaining consideration was distributed to the holders of other general unsecured claims, which totaled approximately $152 million, and the PI Trust. The PI Trust and each holder of a general unsecured claim received a distribution that was proportionate to the size of its claim to the aggregate amount of unsecured claims of $2,152 million. Pursuant to the terms of the Plan, the general unsecured creditors received half of their consideration in cash and half in three-year notes of the reorganized Company. These notes were repaid in 1997. The PI Trust received, in the initial distribution, $51.3 million in cash, $18.1 million in such three-year notes, $69.1 million in Tax Refund notes, which were paid in 1997, $250.0 million in ten-year debentures and all of the outstanding shares of common stock of the reorganized Company. The Company's then existing shareholders received no distribution and their shares were canceled. Following the confirmation of the Plan, one general unsecured creditor and the Unofficial Asbestos Co-defendants' Committee each filed a notice indicating its intention to appeal the confirmation order issued by the Bankruptcy Court and the U.S. District Court. After the end of the Company's fiscal year, the general unsecured creditor formally withdrew its notice of appeal. The Company and the Unofficial Asbestos Co-defendants Committee have submitted appellate briefs to the United States Court of Appeals for the Sixth Circuit with respect to the appeal of the confirmation order. The Company expects a decision on the appeal in fiscal 1998. Further, the Company expects that the order confirming the Plan will be upheld by all appellate courts. It is anticipated that a final distribution will be made to the PI Trust and all unsecured claimants, other than those holding convenience claims, when all claims asserted in the chapter 11 cases (other than those channeled to the PI Trust and the PD Trust) are resolved. Based on certain assumptions, the Company anticipates that holders of general unsecured claims will ultimately receive consideration having a value equal to approximately 37% of their allowed claims. The Plan resulted in the discharge of pre-petition liabilities through the distribution of cash and securities to the PI Trust and the other creditors. The value of the consideration distributed and expected to be distributed to the PI Trust and other unsecured creditors was less than the amount of the allowed claims resulting in an extraordinary gain of approximately $1.5 billion. F-22 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The net expense resulting from the Company's chapter 11 filings was segregated from expenses related to ordinary operations in the accompanying Consolidated Statements of Income (Loss) and includes the following:
1996 1995 ------------- ----------- (IN THOUSANDS OF DOLLARS) Professional fees............................................................ $ 5,298 $ 7,047 Debt financing costs......................................................... 700 -- Other expenses............................................................... 1,711 181 Interest income.............................................................. (5,360) (5,003) ------------- ----------- $ 2,349 $ 2,225 ------------- ----------- ------------- -----------
Interest income was attributable to the accumulation of cash and cash equivalents subsequent to the petition date. C. FRESH-START REPORTING The Company adopted fresh-start reporting on the Effective Date in accordance with SOP 90-7. Fresh-start reporting requires valuation of assets and liabilities at fair value and valuation of equity based on the appraised reorganization value of the ongoing business. The Company's reorganization value was based on consideration of many factors and several valuation methods, including discounted cash flows and selected comparable publicly traded company multiples. The discounted cash flow approach was based on the Company's forecast of unleveraged, after-tax cash flows calculated for each year over the five-year period from 1997 through 2001. A growth rate of 3.5% was assumed to capitalize cash flows for years after 2001. Amounts were discounted to present value at rates ranging from 11.5% to 15%, which approximate the Company's projected weighted average cost of capital. The present value of future tax benefits was also considered. D. SUBSEQUENT EVENT On December 23, 1997, the PI Trust entered into an agreement (the 'Merger Agreement') to sell its 100% interest in the common equity of the Company to a unit of Granaria Holdings BV of The Netherlands. The transaction, which is subject to certain conditions, is expected to close in February 1998. E. INVENTORIES Inventories consisted of:
1997 1996 ------------- ----------- (IN THOUSANDS OF DOLLARS) Raw materials and supplies................................................... $51,797 $ 50,026 Work-in-process.............................................................. 25,932 34,250 Finished goods............................................................... 14,840 18,625 ------------- ----------- 92,569 102,901 Adjustment to state inventory at LIFO value.................................. (373) -- ------------- ----------- $92,196 $ 102,901 ------------- ----------- ------------- -----------
The percentage of inventories valued using the LIFO method was 81% in 1997 and 74% in 1996. In connection with fresh-start reporting, a new LIFO base layer was established based on inventory levels at November 30, 1996. The effects of liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years were immaterial. F-23 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Effective December 1, 1995, the Company changed its method of computing LIFO inventories of boron, germanium and other rare metals from a double-extension method to an index method. The Company believes that the index method results in better matching of revenues and expenses. The cumulative effect of the change on prior years was $1.2 million on an after tax basis. The effect of this change was to increase net income $8.1 million in fiscal year 1996. F. OTHER ASSETS Other assets consisted of:
1997 1996 ------------- ----------- (IN THOUSANDS OF DOLLARS) Prepaid pension cost -- Note J............................................... $36,621 $34,724 Investments in and receivables from unconsolidated affiliates................ 8,732 3,102 Notes receivable -- Note N................................................... 3,920 2,797 Other........................................................................ 4,272 7,916 ------------- ----------- $53,545 $48,539 ------------- ----------- ------------- -----------
On June 1, 1997, the Company contributed certain of the assets of the former Suspension Systems Division totaling $5.1 million to a joint venture, Eagle-Picher-Boge, L.L.C. ('E-P-Boge'). The Company retained a 45% interest in E-P-Boge and recorded no gain on this transaction. The Company is accounting for this investment in accordance with the equity method. The Company also received a note from E-P-Boge in the amount of $2,827,000. This note is due June 1, 2000, and bears interest of 7.5%. The note is secured by the accounts receivable of E-P-Boge. Included in the Consolidated Statements of Income (Loss) are the following results of the former Suspension Systems Division:
1997 1996 1995 ------- ------- ------- (IN THOUSANDS OF DOLLARS) Net sales............................................................ $10,577 $19,606 $18,681 ------- ------- ------- ------- ------- ------- Operating income (loss).............................................. $ 96 $ (998) $ (506) ------- ------- ------- ------- ------- -------
G. LONG-TERM DEBT AND SHORT-TERM BORROWINGS Credit Agreements On the Effective Date, the Company entered a financing agreement which provides a three-year, $60,000,000 unsecured committed revolving credit facility (the 'Facility'). The Facility expires November 29, 1999 and is available for cash borrowings and issuance of letters of credit. The Facility replaced debtor in possession financing (the 'Debtor in Possession Facility') which provided a $40,000,000 committed revolving credit facility secured by accounts receivable and inventories. There were no cash borrowings under either revolving credit facility at any time during 1997 or 1996. Letters of credit totaling $27,700,000 and $32,200,000 were outstanding at November 30, 1997 and 1996, respectively, leaving the Company with $32,300,000 and $27,800,000, respectively, of borrowing capacity. Fees for letters of credit have declined from 1.5% to 1.25% per annum and commitment fees on the unused portion have declined from .4% to .3% per annum. The Facility contains covenants which limit other debt and asset sales (other than those funding the Divestiture Notes), prohibit dividends and the sale of Company securities by the PI Trust, and require minimum financial coverages and bank approval for certain changes in corporate management and control. The Company was in compliance with the covenants of the Facility at November 30, 1997. It is anticipated, however, that the Facility would be replaced with another financing agreement upon sale of the Company. F-24 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Several of the Company's foreign subsidiaries have entered into agreements with various banks which provide lines of credit totaling approximately $20,200,000 at November 30, 1997 and $18,100,000 at November 30, 1996. At November 30, 1997, $5,000,000 of borrowings were outstanding leaving $15,200,000 in borrowing capacity. There were no borrowings outstanding on any of these agreements at November 30, 1996. These agreements, of which the substantial majority is committed and unsecured, expire in 1998 and 2001. The annual rates of interest on these lines of credit range from .75% to 1.5% over the banks' base rates. Some have no commitment fees; the fees on the others range from .25% to .65% per annum on the unused portion. These agreements also contain covenants which include restrictions on dividends and minimum financial requirements. The Company is in compliance with these covenants at November 30, 1997. Long-term debt consisted of:
1997 1996 ------------- ----------- (IN THOUSANDS OF DOLLARS) Senior unsecured sinking fund debentures..................................... $ 250,000 $ 250,000 Divestiture notes............................................................ -- 50,000 Tax refund notes............................................................. -- 69,146 Industrial revenue bonds..................................................... 18,400 10,475 Secured notes................................................................ -- 6,818 Debt of foreign subsidiaries................................................. 4,997 -- ------------- ----------- 273,397 386,439 Less: Current portion.............................................................. 3,403 70,378 ------------- ----------- Long-term debt, less current portion......................................... $ 269,994 $ 316,061 ------------- ----------- ------------- -----------
Long-term debt had estimated fair value of approximately $287,000,000 at November 30, 1997 and the estimated fair value approximated carrying value at November 30, 1996. The estimated fair value of long-term debt was calculated using discounted cash flow analysis based on current rates offered for similar debt issues. Senior Unsecured Sinking Fund Debentures The Company issued Senior Sinking Fund Debentures ('Debentures') to the PI Trust on the Effective Date in the amount of $250 million. The Debentures bear interest of 10% per annum, payable semi-annually, and mature in ten years. The Debentures will have a mandatory sinking fund of $20 million annually in the third through ninth years, with a final payment of $110 million at maturity. Beginning in the third year, the Company has the option to retire additional amounts of principal; however, a premium will be due on the amount in excess of twice the scheduled sinking fund amount. It is anticipated that the Debentures will be retired in conjunction with the Purchase Agreement and the premium for pre-payment will be waived. Divestiture Notes The Divestiture Notes, which were issued to the PI Trust and other unsecured creditors on the Effective Date, were unsecured, bore interest of 9% and were to mature November 29, 1999. These notes were repaid on August 25, 1997, without a penalty. Tax Refund Notes The Company issued Tax Refund Notes in the aggregate principal amount of the expected Federal income tax refund (see Note H), to the PI Trust on the Effective Date. These notes were repaid in 1997 when the Federal income tax refund was received. F-25 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Industrial Revenue Bonds Certain secured industrial revenue bonds, due in 2002 and 2004, were reinstated at their original terms during the chapter 11 process. The Company issued an additional industrial revenue bond in 1997 in the amount of $8 million which matures in 2012. Generally, the industrial revenue bonds bear interest at variable rates based on the market for similar issues and are secured by letters of credit. Secured Notes Certain secured notes, which were reissued on the effective date at 10% per annum, were repaid in 1997. The Company paid interest of $31,044,000, $2,767,000 and $1,966,000 during 1997, 1996 and 1995, respectively. Long-term debt is scheduled to mature over the next five years as follows: $3,403,000 in 1998, $20,080,000 in 1999, $20,080,000 in 2000, $21,754,000 in 2001 and $20,080,000 in 2002. Lease Commitments Future minimum rental commitments over the next five years as of November 30, 1997 under noncancellable operating leases, which expire at various dates, are as follows: $3,450,000 in 1998, $2,930,000 in 1999, $2,460,000 in 2000, $1,200,000 in 2001 and $530,000 in 2002. Rental expense in 1997, 1996, 1995 was approximately $4,900,000, $5,000,000 and $4,600,000, respectively. Acquisition by Granaria On February 24, 1998 ('Closing Date'), the Company was acquired by a subsidiary of Granaria Industries BV ('Granaria'), Eagle-Picher Holdings, Inc. ('Parent'), from the PI Trust. Upon closing of the acquisition, the Parent received a $100 million equity investment from Granaria and an equity partner. Parent also received proceeds approximating $80 million from a preferred stock issue. All proceeds were invested in the Company, which issued approximately $180 million of common stock to the Parent. The Company also borrowed $225 million in term loans and $79.1 million in revolving credit loans under a syndicated senior loan facility ('New Facility'), and issued $220 million in senior subordinated notes ('Subordinated Notes'). The Facility was terminated. The proceeds from the common stock, borrowings under the New Facility and Subordinated Notes were used to redeem the Debentures and the common stock held by the Trust. Both the New Facility and the Subordinated Notes are guaranteed on a full, unconditional, and joint and several basis by certain of the Company's wholly-owned domestic subsidiaries ('Guarantors'). Management has determined that full financial statements of the Guarantors would not be material, and such financial statements are not presented. The following supplemental condensed combining financial statements present information regarding the Guarantors, the issuer of the debt and the subsidiaries that did not guarantee the debt. F-26 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF INCOME (LOSS) (UNAUDITED) YEAR ENDED NOVEMBER 30, 1997
NON-GUARANTORS ------------------------ FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL -------- ---------- ------------ --------- ------------ -------- (IN THOUSANDS OF DOLLARS) Net sales Customers............................. $255,330 $489,304 $ 82,839 $ 78,604 $ -- $906,077 Intercompany.......................... 12,345 9,512 5,775 29 (27,661) -- Operating costs and expenses Cost of products sold................. 202,259 407,006 71,144 71,688 (27,087) 725,010 Selling and administrative............ 42,766 22,280 7,756 4,624 (317) 77,109 Intercompany charges.................. (11,015) 9,055 -- 1,960 -- -- Depreciation.......................... 11,523 21,001 3,609 3,538 -- 39,671 Amortization of intangibles........... 3,254 13,030 34 -- -- 16,318 Loss on sale of divisions............. 699 1,712 -- -- -- 2,411 -------- ---------- ------------ --------- ------------ -------- Total............................ 249,486 474,084 82,543 81,810 (27,404) 860,519 Operating income (loss).................... 18,189 24,732 6,071 (3,177) (257) 45,558 Other income (expense) Interest expense...................... (30,932) (131) (202) -- 4 (31,261) Other income (expense)................ 1,105 147 (231) 113 (1,385) (251) -------- ---------- ------------ --------- ------------ -------- Income (loss) before taxes................. (11,638) 24,748 5,638 (3,064) (1,638) 14,046 Income taxes............................... 9,659 8,719 (636) 158 -- 17,900 -------- ---------- ------------ --------- ------------ -------- Net income (loss).......................... $(21,297) $ 16,029 $ 6,274 $ (3,222) $ (1,638) $ (3,854) -------- ---------- ------------ --------- ------------ -------- -------- ---------- ------------ --------- ------------ --------
F-27 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEET (UNAUDITED) NOVEMBER 30, 1997
NON-GUARANTORS FOREIGN ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- ---------- -------------- ------------ -------- (IN THOUSANDS OF DOLLARS) ASSETS Cash and cash equivalents.................... $ 48,834 $ 561 $ 4,344 $ -- $ 53,739 Receivables.................................. 36,541 72,992 21,394 -- 130,927 Intercompany accounts receivable............. 2,982 3,295 -- (6,277) -- Income tax refunds receivable................ 3,025 -- -- -- 3,025 Inventories.................................. 32,309 48,830 12,432 (1,375) 92,196 Prepaid expenses............................. 5,618 2,401 271 -- 8,290 Deferred income taxes........................ 13,793 -- -- -- 13,793 -------- ---------- -------------- ------------ -------- Total current assets.................... 143,102 128,079 38,441 (7,652) 301,970 Property, plant and equipment................ 72,630 135,560 35,348 -- 243,538 Investment in subsidiaries................... 59,981 5,186 -- (65,167) -- Deferred income taxes........................ 98,991 -- -- -- 98,991 Reorganization value in excess of amounts allocable to indentifiable assets.......... 9,746 39,091 -- -- 48,837 Other assets................................. 36,395 16,462 688 -- 53,545 -------- ---------- -------------- ------------ -------- Total assets............................ $420,845 $324,378 $ 74,477 $(72,819) $746,881 -------- ---------- -------------- ------------ -------- -------- ---------- -------------- ------------ -------- LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Accounts payable........................ $ 16,974 $ 28,257 $ 7,655 $ -- $ 52,886 Intercompany accounts payable........... -- -- 6,247 (6,247) -- Accrued liabilities..................... 29,404 22,440 3,713 (138) 55,419 Income taxes............................ 2,284 -- 10 -- 2,294 Long-term debt -- current portion....... 80 -- 3,323 -- 3,403 -------- ---------- -------------- ------------ -------- Current liabilities................ 48,742 50,697 20,948 (6,385) 114,002 Long-term debt -- less current portion....... 268,320 -- 1,674 -- 269,994 Other liabilities............................ 26,768 -- -- -- 26,768 -------- ---------- -------------- ------------ -------- Total liabilities.................. 343,830 50,697 22,622 (6,385) 410,764 Intercompany accounts........................ (240,324) 210,930 16,895 12,499 -- Shareholder's Equity......................... 317,339 62,751 34,960 (78,933) 336,117 -------- ---------- -------------- ------------ -------- Total liabilities and shareholder's equity........................... $420,845 $324,378 $ 74,477 $(72,819) $746,881 -------- ---------- -------------- ------------ -------- -------- ---------- -------------- ------------ --------
F-28 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS (UNAUDITED) YEAR ENDED NOVEMBER 30, 1997
NON-GUARANTORS ------------------------ FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL --------- ---------- ------------ --------- ------------ --------- (IN THOUSANDS OF DOLLARS) Cash Flows From Operating Activities: Net Income (loss)...................... $ (21,297) $ 16,029 $ 6,274 $(3,222) $ (1,638) $ (3,854) Adjustments to reconcile net income loss to cash provided by (used in) operating activities: Depreciation and amortization.......... 14,777 34,031 3,643 3,538 -- 55,989 Loss on sale of divisions.............. 699 1,712 -- -- -- 2,411 Change in assets and liabilities: Income tax refunds receivable.......... 70,695 -- -- -- -- 70,695 Deferred income taxes.................. 15,700 -- -- -- -- 15,700 Working capital and other items........ (1,684) 9,991 (5,655) 3,051 1,239 6,942 --------- ---------- ------------ --------- ------------ --------- Net cash provided by (used in) operating activities............ 78,890 61,763 4,262 3,367 (399) 147,883 Cash Flows From Investing Activities: Proceeds from sale of divisions........ 30,735 8,272 -- -- -- 39,007 Capital expenditures................... (8,454) (31,396) (10,694) (780) -- (51,324) Other.................................. (1,670) 50 (1,271) (4) 1,385 (1,510) --------- ---------- ------------ --------- ------------ --------- Net cash provided by (used in) investing activities............ 20,611 (23,074) (11,965) (784) 1,385 (13,827) Cash Flows From Financing Activities: Issuance of long-term debt............. 8,000 -- 4,997 -- -- 12,997 Reduction of long-term debt............ (126,039) -- -- -- -- (126,039) --------- ---------- ------------ --------- ------------ --------- Net cash provided by (used in) financing activities............ (118,039) -- 4,997 -- -- (113,042) --------- ---------- ------------ --------- ------------ --------- Increase (decrease) in cash and cash equivalents............................... (18,538) 38,689 (2,706) 2,583 986 21,014 Intercompany accounts....................... 41,283 (38,681) 1,065 (2,681) (986) -- Cash and cash equivalents, beginning of year...................................... 26,089 553 5,985 98 -- 32,725 --------- ---------- ------------ --------- ------------ --------- Cash and cash equivalents, end of year............................... $ 48,834 $ 561 $ 4,344 $ -- $ -- $ 53,739 --------- ---------- ------------ --------- ------------ --------- --------- ---------- ------------ --------- ------------ ---------
F-29 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF INCOME (LOSS) (UNAUDITED) YEAR ENDED NOVEMBER 30, 1996
NON-GUARANTORS ----------------------- FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL ---------- ---------- ------------ --------- ------------ ---------- (IN THOUSANDS OF DOLLARS) Net sales Customers............................ $ 242,537 $432,194 $ 78,440 $ 138,116 $ -- $ 891,287 Intercompany......................... 11,944 6,990 5,551 80 (24,565) -- Operating costs and expenses Cost of products sold................ 196,102 357,062 64,314 122,367 (22,919) 716,926 Selling and administrative........... 42,262 22,616 8,834 9,166 (1,373) 81,505 Intercompany charges................. (10,010) 7,281 -- 2,729 -- -- Depreciation......................... 7,534 14,432 2,603 5,769 -- 30,338 Amortization of intangibles.......... 325 74 -- 13 -- 412 ---------- ---------- ------------ --------- ------------ ---------- Total........................... 236,213 401,465 75,751 140,044 (24,292) 829,181 Operating income (loss)................... 18,268 37,719 8,240 (1,848) (273) 62,106 Other income (expense) Interest expense..................... (2,914) -- (157) -- (12) (3,083) Other income (expense)............... 574 (206) 939 26 12 1,345 Asbestos litigation and other claims............................. 497,953 -- -- -- -- 497,953 ---------- ---------- ------------ --------- ------------ ---------- Income (loss) before reorganization items, taxes, extraordinary item and cumulative effect of accounting change............. 513,881 37,513 9,022 (1,822) (273) 558,321 Reorganization items...................... 116,335 -- -- -- -- 116,335 Income taxes.............................. (46,090) (1,999) (4,326) (155) -- (52,570) ---------- ---------- ------------ --------- ------------ ---------- Income (loss) before extraordinary item and cumulative effect of accounting change.................................. 584,126 35,514 4,696 (1,977) (273) 622,086 Extraordinary item -- gain on discharge of pre-petition liabilities............. 1,525,540 -- -- -- -- 1,525,540 Cumulative effect of change in accounting for inventories......................... (1,235) -- -- -- -- (1,235) ---------- ---------- ------------ --------- ------------ ---------- Net income (loss)......................... $2,108,431 $ 35,514 $ 4,696 $ (1,977) $ (273) $2,146,391 ---------- ---------- ------------ --------- ------------ ---------- ---------- ---------- ------------ --------- ------------ ----------
F-30 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEET (UNAUDITED) NOVEMBER 30, 1996
NON-GUARANTORS ------------------------ FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL --------- ---------- ------------ --------- ------------ -------- (IN THOUSANDS OF DOLLARS) ASSETS Cash and cash equivalents.................... $ 26,089 $ 553 $ 5,985 $ 98 $ -- $ 32,725 Receivables.................................. 34,258 64,400 17,436 16,781 -- 132,875 Intercompany accounts receivable............. 2,721 2,915 -- -- (5,636) -- Income tax refunds receivable................ 73,720 -- -- -- -- 73,720 Inventories.................................. 28,139 49,874 10,408 14,480 -- 102,901 Prepaid expenses............................. 3,067 3,449 505 1,143 -- 8,164 Deferred income taxes........................ 26,351 -- -- -- -- 26,351 --------- ---------- ------------ --------- ------------ -------- Total current assets.................... 194,345 121,191 34,334 32,502 (5,636) 376,736 Property, plant and equipment................ 75,865 125,586 28,879 26,021 -- 256,351 Investment in subsidiaries................... 58,743 24,960 -- -- (83,703) -- Deferred income taxes........................ 102,133 -- -- -- -- 102,133 Reorganization value in excess of amounts allocable to identifiable assets........... 13,000 52,121 -- -- -- 65,121 Other assets................................. 25,561 14,045 630 8,303 -- 48,539 --------- ---------- ------------ --------- ------------ -------- Total assets............................ $ 469,647 $337,903 $ 63,843 $ 66,826 $(89,339) $848,880 --------- ---------- ------------ --------- ------------ -------- --------- ---------- ------------ --------- ------------ -------- LIABLITIES AND SHAREHOLDER'S EQUITY Current liabilities: Accounts payable........................ $ 14,844 $ 16,210 $ 4,959 $ 5,022 $ -- $ 41,035 Intercompany accounts payable........... -- -- 5,608 -- (5,608) -- Accrued liabilities..................... 25,522 15,199 5,897 3,248 -- 49,866 Income taxes............................ 3,038 -- 611 -- -- 3,649 Long-term debt -- current portion....... 70,378 -- -- -- -- 70,378 --------- ---------- ------------ --------- ------------ -------- Current liabilities................ 113,782 31,409 17,075 8,270 (5,608) 164,928 Long-term debt -- less current portion....... 316,061 -- -- -- -- 316,061 Other liabilities............................ 25,495 -- 589 -- -- 26,084 --------- ---------- ------------ --------- ------------ -------- Total liabilities.................. 455,338 31,409 17,664 8,270 (5,608) 507,073 Intercompany accounts........................ (327,498) 259,714 15,830 38,469 13,485 -- Shareholder's Equity......................... 341,807 46,780 30,349 20,087 (97,216) 341,807 --------- ---------- ------------ --------- ------------ -------- Total Liabilities and Shareholder's Equity........................... $ 469,647 $337,903 $ 63,843 $ 66,826 $(89,339) $848,880 --------- ---------- ------------ --------- ------------ -------- --------- ---------- ------------ --------- ------------ --------
F-31 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS (UNAUDITED) YEAR ENDED NOVEMBER 30, 1996
NON-GUARANTORS ----------------------- FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL ---------- ---------- ------------ --------- ------------ ----------- (IN THOUSANDS OF DOLLARS) Cash flows from operating activities: Net income (loss)....................... $2,108,431 $ 35,514 $ 4,696 $ (1,977) $ (273) $ 2,146,391 Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Non-cash adjustments relating to non- operating income items..................... (2,140,942) -- -- -- -- (2,140,942) Depreciation and amortization................ 7,859 14,506 2,603 5,782 -- 30,750 Change in assets and liabilities: Deferred income taxes................... 29,170 -- -- -- -- 29,170 Working capital and other items......... 17,044 (15,532) 636 6,505 (1,161) 7,492 ---------- ---------- ------------ --------- ------------ ----------- Net cash provided by (used in) operating acitivities............ 21,562 34,488 7,935 10,310 (1,434) 72,861 Cash flows from investing activities: Proceeds from sale of divisions......... 4,248 -- -- -- -- 4,248 Capital expenditures.................... (9,417) (25,074) (5,602) (4,864) -- (44,957) Other................................... (661) (1,246) 108 44 694 (1,061) ---------- ---------- ------------ --------- ------------ ----------- Net cash provided by (used in) investing activities............. (5,830) (26,320) (5,494) (4,820) 694 (41,770) Cash flows from financing activities......... -- -- Reduction of long-term debt............. (1,520) -- (1,678) -- -- (3,198) Cash payments on effective date of plan of reorganization............................. (88,498) -- -- -- -- (88,498) ---------- ---------- ------------ --------- ------------ ----------- Increase (decrease) in cash and cash equivalents................................ (74,286) 8,168 763 5,490 (740) (60,605) Intercompany accounts........................ 13,409 (8,676) 196 (5,669) 740 -- Cash and cash equivalents, beginning of year....................................... 86,966 1,061 5,026 277 -- 93,330 ---------- ---------- ------------ --------- ------------ ----------- Cash and cash equivalents, end of year................................ $ 26,089 $ 553 $ 5,985 $ 98 $ -- $ 32,725 ---------- ---------- ------------ --------- ------------ ----------- ---------- ---------- ------------ --------- ------------ -----------
F-32 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF INCOME (LOSS) (UNAUDITED) YEAR ENDED NOVEMBER 30, 1995
NON-GUARANTORS ------------------------ FOREIGN DIVESTED ISSUER GUARANTOR SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL ----------- --------- ------------ --------- ------------ ----------- (IN THOUSANDS OF DOLLARS) Net sales Customers........................... $ 246,377 $ 381,297 $ 75,141 $ 145,733 $ -- $ 848,548 Intercompany........................ 11,028 6,394 3,143 51 (20,616) -- Operating costs and expenses Cost of products sold............... 198,632 314,195 62,020 126,450 (19,924) 681,373 Selling and administrative.......... 40,812 20,027 6,657 8,531 (647) 75,380 Intercompany charges................ (9,846) 6,140 -- 3,706 -- -- Depreciation........................ 6,716 13,436 2,391 5,753 -- 28,296 Amortization of intangibles......... 325 74 -- 13 -- 412 ----------- --------- ------------ --------- ------------ ----------- Total.......................... 236,639 353,872 71,068 144,453 (20,571) 785,461 Operating income (loss).................. 20,766 33,819 7,216 1,331 (45) 63,087 Other income (expense) Interest expense.................... (1,770) -- (189) -- 33 (1,926) Other income (expense).............. 11,379 377 210 (137) (125) 11,704 Adjustment for asbestos litigation........................ (1,005,511) -- -- -- -- (1,005,511) ----------- --------- ------------ --------- ------------ ----------- Income (loss) before taxes and reorganization items................... (975,136) 34,196 7,237 1,194 (137) (932,646) Reorganization items..................... (2,225) -- -- -- -- (2,225) Income taxes............................. (3,824) (2,011) (3,377) (88) -- (9,300) ----------- --------- ------------ --------- ------------ ----------- Net income (loss)........................ $ (981,185) $ 32,185 $ 3,860 $ 1,106 $ (137) $ (944,171) ----------- --------- ------------ --------- ------------ ----------- ----------- --------- ------------ --------- ------------ -----------
F-33 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS (UNAUDITED) YEAR ENDED NOVEMBER 30, 1995
NON-GUARANTORS ------------------------- FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL --------- ---------- ------------ --------- ------------ --------- (IN THOUSANDS OF DOLLARS) Cash flows from operating activities: Net income (loss).............. $(981,185) $ 32,185 $ 3,860 $ 1,106 $ (137) $(944,171) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Non-cash adjustments relating to non-operating income items........................ 994,006 -- -- -- -- 994,006 Depreciation and amortization................. 7,041 13,510 2,391 5,766 -- 28,708 Change in assets and liabilities: Deferred income taxes.......... (18,900) -- -- -- -- (18,900) Working capital and other items........................ (9,738) (9,137) (4,302) (6,095) 85 (29,187) --------- ---------- ------------ --------- ------ --------- Net cash provided by (used in) operating activities.............. (8,776) 36,558 1,949 777 (52) 30,456 Cash flows from investing activities: Proceeds from sale of investment................... 11,505 -- -- -- -- 11,505 Capital expenditures........... (17,582) (11,051) (5,620) (6,305) -- (40,558) Other.......................... (1,337) (1,518) 2,414 (176) 957 340 --------- ---------- ------------ --------- ------ --------- Net cash provided by (used in) investing activities.............. (7,414) (12,569) (3,206) (6,481) 957 (28,713) Cash flows from financing activities: Issuance of long-term debt..... -- -- 1,240 -- -- 1,240 Reduction of long-term debt.... (1,597) (42) (620) -- -- (2,259) --------- ---------- ------------ --------- ------ --------- Net cash provided by (used in) investing activities.............. (1,597) (42) 620 -- -- (1,019) --------- ---------- ------------ --------- ------ --------- Increase (decrease) in cash and cash equivalents....................... (17,787) 23,947 (637) (5,704) 905 724 Intercompany accounts............... 17,462 (23,300) 1,006 5,737 (905) -- Cash and cash equivalents, beginning of year........................... 87,291 414 4,657 244 -- 92,606 --------- ---------- ------------ --------- ------ --------- Cash and cash equivalents, end of year.............................. $ 86,966 $ 1,061 $ 5,026 $ 277 $-- $ 93,330 --------- ---------- ------------ --------- ------ --------- --------- ---------- ------------ --------- ------ ---------
F-34 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) H. INCOME TAXES The following is a summary of the components of income taxes (benefit) from operations and fresh start revaluation in 1996:
1997 1996 1995 ------- ------- ------- (IN THOUSANDS OF DOLLARS) Current: Federal......................................................... $ 1,000 $17,200 $20,900 Foreign......................................................... (600) 4,350 3,400 State and local................................................. 1,800 1,850 3,900 ------- ------- ------- 2,200 23,400 28,200 Deferred: Federal......................................................... 11,300 29,170 (18,900) State and local................................................. 4,400 -- -- ------- ------- ------- 15,700 29,170 (18,900) ------- ------- ------- $17,900 $52,570 $ 9,300 ------- ------- ------- ------- ------- -------
Total income tax benefit for the year ended November 30, 1996 of $117,880,000 consisted of $52,570,000 expense from operations and the fresh-start revaluation, $169,785,000 tax benefit from the extraordinary gain on the discharge of pre-petition liabilities, and $665,000 tax benefit from the cumulative effect of the change in accounting for inventories. The sources of income (loss) before income tax expense (benefit), extraordinary gain on discharge of pre-petition liabilities and cumulative effect of accounting change are as follows:
1997 1996 1995 ------- -------- --------- (IN THOUSANDS OF DOLLARS) United States..................................................... $ 7,873 $665,907 $(941,971) Foreign........................................................... 6,173 8,749 7,100 ------- -------- --------- $14,046 $674,656 $(934,871) ------- -------- --------- ------- -------- ---------
The differences between the total income tax expense from operations and fresh start revaluation in 1996 and the income tax expense computed using the Federal income tax rate were as follows:
1997 1996 1995 ------- --------- --------- (IN THOUSANDS OF DOLLARS) Income tax expense (benefit) at Federal statutory rate............. $ 4,900 $ 236,130 $(327,200) Change in valuation allowance...................................... 1,200 (187,950) 332,900 Foreign taxes rate differential.................................... (3,800) 900 600 State and local taxes, net of Federal benefit...................... 3,600 1,200 2,500 Non-deductible amortization of reorganization value in excess of amounts allocable to identifiable assets......................... 5,700 -- -- Non-deductible fresh start items................................... -- 4,100 -- Expired tax credits................................................ 5,900 -- -- Other.............................................................. 400 (1,810) 500 ------- --------- --------- Total income tax expense................................. $17,900 $ 52,570 $ 9,300 ------- --------- --------- ------- --------- ---------
F-35 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Components of deferred tax balances as of November 30 are as follows:
1997 1996 -------- -------- (IN THOUSANDS OF DOLLARS) Deferred tax liabilities: Property, plant and equipment.............................................. $(46,761) $(58,885) Prepaid pension............................................................ (12,817) (12,154) Other...................................................................... (5,735) (6,461) -------- -------- Total deferred tax liabilities........................................ (65,313) (77,500) -------- -------- Deferred tax assets: Notes to former creditors.................................................. 87,500 122,787 Net operating loss carryforwards........................................... 74,142 64,328 Credit carryforwards....................................................... 14,686 20,653 Accrued liabilities........................................................ 14,356 9,851 Postretirement benefit liability........................................... 7,588 7,586 Other...................................................................... 8,067 7,851 -------- -------- Total deferred tax assets............................................. 206,339 233,056 -------- -------- Valuation allowance........................................................ (28,242) (27,072) -------- -------- Net deferred tax assets............................................... $112,784 $128,484 -------- -------- -------- --------
At November 30, 1997, undistributed earnings of foreign subsidiaries totaled $30 million. Deferred tax liabilities have not been recognized for these undistributed earnings because it is management's intention to reinvest such undistributed earnings outside the United States. If all undistributed earnings were remitted to the United States, the amount of incremental United States Federal and foreign income taxes payable, net of foreign tax credits, would be approximately $10.5 million. On the Effective Date, the Company contributed cash, notes and stock to the PI Trust and distributed cash and notes to other unsecured creditors. The distribution of cash and stock resulted in a net operating loss for tax purposes for the fiscal year ended November 30, 1996. A portion of this operating loss was applied to prior years' taxable income according to carryback rules to generate a Federal tax refund of $69,146,000 which was received in 1997. The remainder is carried forward to offset taxable income in future years. Deductions for the notes distributed are taken as the notes are repaid. Net operating loss carryforwards of approximately $161 million and $34 million will expire in 2011 and 2012, respectively. As a result of the net operating loss carried back to obtain a refund, tax credits totaling $9,708,000, which had been previously used to reduce tax liability in the carryback years, were restored and are available to offset tax liability in future years. These credits are scheduled to expire in the years 1998 through 2012, but are expected to expire unutilized. Therefore, a provision for these items is included in the valuation allowance. The Company also has available minimum tax credits of approximately $5,000,000 which may be used indefinitely to reduce Federal income tax liability. While the Company was in chapter 11, significant uncertainties existed relating to the amounts of deferred tax benefits that would be realized. Accordingly, the valuation allowance reflected these uncertainties. The Company reversed a significant portion of the valuation allowance upon emergence from chapter 11 when the Company was able to determine more accurately the amounts of the deferred tax benefits. Based on its history of prior years' operations and its expectations for the future, the Company has determined that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax benefits before they expire, excluding the tax credits referred to above. Although the Automotive Segment is susceptible to economic cycles and recessions, the Industrial and Machinery Segments of the Company consist of certain businesses which are not impacted as significantly by economic downturns. F-36 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company paid income taxes, net of refunds received, of $4,300,000 in 1997 (with the exception of the Federal tax refund received of $69,146,000), $17,300,000 in 1996 and $28,800,000 in 1995. I. INCOME (LOSS) PER SHARE The calculation of net income (loss) per share is based upon the average number of shares outstanding. The average number of shares used in the computation of net income (loss) per share was 10,000,000 in 1997 and 11,040,932 in 1996 and 1995. J. RETIREMENT BENEFIT PLANS Substantially all employees of the Company and its subsidiaries are covered by various pension or profit sharing retirement plans. The cost of providing retirement benefits was $1,900,000 in 1997, $2,300,000 in 1996 and $1,900,000 in 1995. Amounts for a supplemental executive retirement plan to provide senior management with benefits in excess of normal pension benefits are included in the cost of providing retirement benefits. Under the plan, annuities are purchased by the Company and distributed to participants on an annual basis. The cost of these annuities was $1,058,000 in 1997, $1,279,000 in 1996 and $964,000 in 1995. The Company's funding policy for defined benefit plans is to fund amounts on an actuarial basis to provide for current and future benefits in accordance with the funding guidelines of ERISA. Plan benefits for salaried employees are based primarily on employees' highest five consecutive years' earnings during the last ten years of employment. Plan benefits for hourly employees typically are based on a dollar unit multiplied by the number of service years. Net periodic pension expense for the Company's defined benefit plans included the following components:
1997 1996 1995 -------- -------- -------- (IN THOUSANDS OF DOLLARS) Service cost-benefits earned during the period...................... $ 4,848 $ 5,497 $ 4,001 Interest cost on projected benefit obligation....................... 14,276 13,701 12,972 Actual gain on plan assets.......................................... (36,544) (29,296) (40,975) Net amortization and deferral....................................... 16,669 10,000 24,336 -------- -------- -------- Net periodic pension cost (income).................................. $ (751) $ (98) $ 334 -------- -------- -------- -------- -------- --------
In addition, in 1997, the Company recognized a curtailment gain of $1,662,000 due to the reduction in active participants in the Company's retirement plans that resulted primarily from the divestiture of divisions. The plans' assets consist primarily of listed equity securities and publicly traded notes and bonds. The actual net return on plan assets was 15.3% in 1997, 13.5% in 1996 and 21.2% in 1995, and generally reflects the performance of the equity and bond markets. F-37 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table sets forth the plans' funded status and amounts recognized in the Company's Consolidated Balance Sheets at November 30:
1997 1996 --------- --------- (IN THOUSANDS OF DOLLARS) Actuarial present value of: Vested benefit obligation................................................ $(184,123) $(168,896) --------- --------- --------- --------- Accumulated benefit obligation........................................... $(191,148) $(175,191) --------- --------- --------- --------- Projected benefit obligation............................................. $(209,701) $(191,667) Plan assets at fair value..................................................... 250,036 226,391 --------- --------- Projected benefit obligation less than plan assets............................ 40,335 34,724 Unrecognized net gain......................................................... (3,761) -- Unrecognized prior service cost............................................... 47 -- --------- --------- Prepaid pension cost recognized............................................... $ 36,621 $ 34,724 --------- --------- --------- ---------
The discount rate and weighted average rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7.0% and 4.2%, and 7.5% and 4.2%, respectively, at November 30, 1997 and 1996, respectively. The expected long-term rate of return on assets was 9.0% in 1997 and in 1996. Upon the adoption of fresh start reporting, all unrecognized items as of November 30, 1996 were recognized and recorded on the Company's Consolidated Balance Sheet. K. EMPLOYEE BENEFITS OTHER THAN PENSIONS In addition to providing pension retirement benefits, the Company makes health care and life insurance benefits available to certain retired employees on a limited basis. Generally, the medical plans pay a stated percentage of medical expenses reduced by deductibles and other coverages. Eligible employees may elect to be covered by these health and life insurance benefits if they reach early or normal retirement age while working for the Company. In most cases, a retiree contribution for health insurance coverage is required. The Company funds these benefit costs primarily on a pay-as-you-go basis. The net amounts funded approximate $1,000,000 on an annual basis. The components of net periodic postretirement benefit cost were as follows:
1997 1996 1995 ------ ------ ------ (IN THOUSANDS OF DOLLARS) Service cost -- benefits earned during the period.......................... $ 554 $ 710 $ 396 Interest cost on accumulated postretirement benefit obligation............. 1,241 1,424 1,202 Amortization of unrecognized net gain...................................... (93) -- (179) ------ ------ ------ Net periodic postretirement benefit cost................................... $1,702 $2,134 $1,419 ------ ------ ------ ------ ------ ------
In addition, in 1997, the Company recognized a curtailment gain of $564,000 due to the reduction in eligible employees that resulted primarily from the divestiture of divisions. F-38 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The accumulated postretirement benefit obligation at November 30 consisted of the following components:
1997 1996 ------- ------- (IN THOUSANDS OF DOLLARS) Retirees and dependents........................................................... $10,670 $12,561 Eligible active participants...................................................... 2,074 2,021 Other active participants......................................................... 6,993 7,093 ------- ------- Accumulated postretirement benefit obligation..................................... 19,737 21,675 Unrecognized net gain............................................................. 1,944 -- ------- ------- Accrued postretirement benefit costs.............................................. $21,681 $21,675 ------- ------- ------- -------
Benefit costs were estimated assuming retiree health care costs would initially increase at an 9% annual rate which decreases to an ultimate rate of 6% in 4 years. If this annual trend rate would increase by 1%, the accumulated postretirement obligation as of November 30, 1997 would increase by $2,460,000 with a corresponding increase of $323,000 in the postretirement benefit expense in 1997. The discount rates used in determining the accumulated postretirement obligation at November 30, 1997 and 1996 were 6.5% and 7.0%, respectively. The unrecognized net gain as of November 30, 1996 was recognized and recorded in the Consolidated Balance Sheet per the provisions of fresh-start reporting. L. ASBESTOS LITIGATION AND CLAIMS As discussed in Note B, above, the Plan provides that all present and future asbestos-related personal injury claims will be channeled to and resolved by the PI Trust. Such claims result from exposure to asbestos-containing industrial insulation products that the Company manufactured from 1934 to 1971. The Company expects that the approximately 150,000 such claims that were filed pursuant to the bar date for such claims, and the tens of thousands of such claims that will arise for several decades into the future, will be administered and resolved by such trust. In fact, the Company has learned that the PI Trust began resolving and paying such claims in fiscal 1997. Further, the Company expects that the channeling injunction provided by section 524 of the Bankruptcy Code will prevent any such claimants from prosecuting such claims against the reorganized Company. The Company is not aware of any attempt by any asbestos-related personal injury claimant to nullify the channeling injunction provided by section 524 of the Bankruptcy Code subsequent to the entry of that injunction by the Bankruptcy Court and the District Court in November, 1996. In addition, the Plan also resolved and discharged all asbestos property damage claims against the Company. The class of holders of such claims voted to accept a settlement for such claims that was contained in the Plan. Pursuant to the settlement, the Company has set aside $3 million in cash to fund the PD Trust to resolve such claims. Certain of the holders of such claims will appoint trustees to establish and administer such trust. The Company expects that such trust will be established in due course. Further, the Company expects that an injunction provided by the Plan, which orders all holders of asbestos property claims to pursue such claims solely against the PD Trust, will prevent any such claimants from prosecuting such claims against the reorganized Company. M. ENVIRONMENTAL AND OTHER LITIGATION CLAIMS Most of the pre-petition claims against the Company alleging a right to payment due to environmental and litigation matters were resolved prior to the Effective Date. The holders of those claims which were allowed have received a proportionate distribution of the assets of the estate based on the amount of their claims to the total liabilities of the Company. In addition to the items discussed below, the Company is also involved in routine litigation, environmental proceedings and claims pending with respect to matters arising out of the normal course F-39 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of business. As of November 30, 1997, the Company has reserved $6.1 million associated with environmental remediation activities at some of its current and former sites. In management's opinion, the ultimate liability resulting from all claims, individually or in the aggregate, will not materially affect the Company's consolidated financial position, results of operations or cash flows. Environmental The settlement among the Company, the United States Environmental Protection Agency, and the United States Department of Interior which resolved the majority of the 1,102 proofs of claim timely filed alleging a right to payment because of environmental matters, was approved by the Bankruptcy Court in June, 1996. Certain parties that may be liable at certain of the sites resolved by the settlement appealed such approval. In August 1997, the District Court affirmed the Bankruptcy Court's approval of the settlement. The time within which such affirmance may be appealed has expired without any further appeal having been taken. Thus, the settlement has become final and binding on all parties. One of the significant features of the settlement is the agreement with respect to 'Additional Sites.' Additional Sites are those superfund sites for which the Company's liability allegedly arises as a result of pre-petition waste disposal or recycling. The Company retains all of its defenses, legal or factual, at such sites. However, if the Company is found liable at any Additional Sites or settles any claims for any Additional Sites, the Company is required to pay as if such claims had been resolved in the reorganization under chapter 11. Thus, the Company's liability at Additional Sites will be paid at approximately 37% of any amount due. In fiscal 1997, the Company received notice that it may have liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 at sixteen Additional Sites. The Company believes, after an investigation of these claims, that it has only de minimis liability at thirteen of these sites. Three of the sixteen sites may require expenditures above the de minimis level. The Company has valid legal and factual defenses at these sites and intends to contest vigorously its liability. Lead Chemicals The Plan that was consummated on November 29, 1996 provides that all lead-related personal injury claims that were pending on the Plan's Effective Date and all future lead-related personal injury claims, will be channeled to and resolved by the PI Trust discussed in Notes B and L, above. The Company expects that the channeling injunction provided by section 524 of the Bankruptcy Code will prevent any such claimants from prosecuting such claims against the reorganized Company. The Company is not aware of any attempt by any lead-related personal injury claimant to nullify the channeling injunction provided by section 524 of the Bankruptcy Code subsequent to the entry of that injunction by the Bankruptcy Court and the District Court in November 1996. All claims asserting liability against the Company based on property damage from lead chemicals allegedly manufactured and sold by the Company were disallowed during the reorganization. Other Litigation Claims In May 1997, Caradon Doors and Windows, Inc. ('Caradon') filed a suit against the Company in the U.S. District Court in Atlanta, Georgia alleging breach of contract and asserting contribution rights against the Company. Prior to this suit, Caradon had been found liable to Therma-Tru Corporation ('Therma-Tru') in the amount of approximately $8.8 million for infringing a Therma-Tru patent for plastic door components manufactured by the Company's now divested Plastics Division. Caradon settled the litigation with Therma-Tru and was seeking to recover some or all of its liability from the Company. In May 1997, Therma-Tru also attempted to hold the Company liable for patent infringement for plastic door components that the Plastics Division manufactured and sold to Pease Industries, Inc. ('Pease'). Further, after the Company divested its Plastics Division in July 1997, Therma-Tru attempted to hold the purchaser of the Plastics Division, Cambridge Industries, Inc. ('Cambridge'), liable for infringement for Cambridge's manufacture of door components for Pease after the divestiture, but using F-40 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the prior technology. The Company had agreed to indemnify Cambridge for those sales. Thus, Therma-Tru's suit against Cambridge might also be a liability of the Company. The Company estimates that the total damages that Therma-Tru is seeking to recover, jointly and severally, from the Company and Pease in these two suits is approximately $11.4 million. The Company asserted, in a motion filed to dismiss these claims, that all of Caradon's and Therma-Tru's claims had been discharged in the Company's reorganization under chapter 11. On December 24, 1997, the Bankruptcy Court decided that all of Caradon's claim and approximately $9.8 million of Therma-Tru's claim were discharged and could not be asserted against the Company. The Company believes that these decisions will be upheld on appeal. Further, the Company believes that it has valid legal and factual defenses and intends to contest vigorously all such claims, either on appeal or in any proceeding on the approximately $1.6 million of Therma-Tru's claim that was not held to be discharged by the Bankruptcy Court's decision. In December 1997, two distributors of forklift trucks manufactured by the Company's Construction Equipment Division filed suit against the Company and two co-defendants in the Superior Court of Maricopa County, Arizona after such distributors were notified that they would be terminated as distributors. The suit alleged three causes of action, only two of which were against the Company. The suit alleged that the Company violated the Arizona Equipment Dealer Protection Law and breached its implied covenant of good faith and fair dealing. The suit sought not less than $10 million in damages on each count pled against the Company and not less than $30 million in punitive damages against all three defendants. On February 17, 1998, this suit was dismissed after the Company reversed its decision to terminate the distributors. N. DIVESTITURES Pursuant to the Plan, the Company sold its Plastics, Transicoil and Fabricon Divisions to fund the repayment of the Divestiture Notes. The Company received net cash proceeds of $39,007,000. The aggregate loss on these transactions was $2,411,000. The Company received a note for $3,719,000 from the buyer of the Fabricon Division, which is included in Other Assets. The note bears interest of 8% per annum and is secured by accounts receivable and inventory. Payments of $300,000 are required on the first and second anniversaries of the note with the balance due on October 31, 2000. The Company remains as guarantor on the lease of the building in which the former Transicoil Division is located, and is liable should the buyer not perform on the lease. The remaining lease payments total approximately $10,100,000 over the lease term which expires in 2005. The Company believes the likelihood of being liable for the lease to be remote. Included in the Consolidated Statements of Income (Loss) are the following results of these divested divisions (excluding net loss on sale of divisions):
1997 1996 1995 ------- -------- -------- (IN THOUSANDS OF DOLLARS) Net sales............................................................ $68,028 $118,508 $126,658 ------- -------- -------- ------- -------- -------- Operating income (loss).............................................. $(1,313) $ 1,732 $ 6,141 ------- -------- -------- ------- -------- --------
O. OTHER INCOME The Company held certain equity investments related to shares of stock in a Canadian mining concern that the Company received in 1990 in settlement of certain indebtedness. The Company had previously deemed the investments to be permanently impaired and had recorded a loss on the investments in the amount of its full book value. Subsequently, the value of the stock increased significantly. These investments were sold in June 1995, resulting in realized gain of $11.5 million. F-41 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) P. INDUSTRY SEGMENT INFORMATION The Company is a diversified manufacturer serving global markets and many industries. A general description of the products manufactured and the markets served by the Company's three industry segments is: Industrial Diatomaceous earth products, rubber products, rare metals, fiberglass reinforced plastic parts and industrial chemicals are produced by the Industrial Segment operations serving the food and beverage, recreation, nuclear, telecommunications, electronics, and other industrial markets globally. Sales and operating income (excluding net loss on sale of divisions), respectively, of divested operations included in this Segment were $29,534,000 and $1,500,000 in 1997, $39,344,000 and $1,008,000 in 1996 and $36,236,000 and $1,000,000 in 1995. Machinery The Machinery Segment serves the commercial aerospace, construction, food and beverage and other industrial markets. Its products include earth moving machines, heavy-duty forklift trucks, aerospace and defense batteries and components, metal cleaning and finishing systems and other industrial machinery. Divested operations included in this segment had sales and operating income (excluding net loss on sale of divisions), respectively, of $12,788,000 and $834,000 in 1997, $18,023,000 and $934,000 in 1996 and $14,766,000 and $715,000 in 1995. Automotive The operations in the Automotive Segment provide mechanical, structural, and trim parts for passenger cars, trucks, vans and sport utility vehicles for the original equipment manufacturers and replacement markets. Resources are concentrated in serving the North American, European and Pacific Rim markets. Sales and operating income (loss) (excluding net loss on sale of divisions), respectively, of divested operations and operations contributed to the E-P-Boge joint venture, which are included in the Automotive Segment were $36,284,000 and $(3,551,000) in 1997, $80,747,000 and $(1,208,000) in 1996 and $94,337,000 and $3,920,000 in 1995. Consolidated sales to Ford Motor Company amounted to $170,500,000 in 1997, $167,700,000 in 1996 and $166,800,000 in 1995. No other customer accounted for 10% or more of consolidated sales. Other Information Sales between segments were not material. Research and development costs are expensed as incurred. In fiscal 1997, the Company spent approximately $14,800,000 for research and development and related activities, primarily for the development of new products or the improvement of existing products. Comparable costs were $18,000,000 and $17,300,000 for 1996 and 1995, respectively. United States net sales include export sales to non-affiliated customers of $113,600,000 in 1997, $108,500,000 in 1996 and $92,500,000 in 1995. The Company does not derive more than 10% of its revenues from, nor do 10% of its assets reside in, its foreign operations, which are located primarily in Europe and Mexico. Intercompany transactions with foreign operations are made at established transfer prices. F-42 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INDUSTRY SEGMENT INFORMATION FOR THE YEARS ENDED NOVEMBER 30
INDUSTRIAL MACHINERY -------------------------- ----------------------------- 1997 1996 1995 1997 1996 1995 ------ ------ ------ ------ ------ --------- (IN MILLIONS OF DOLLARS) Sales.............................................................. $200.1 $194.1 $160.6 $270.8 $257.6 $ 254.7 ------ ------ ------ ------ ------ --------- ------ ------ ------ ------ ------ --------- Operating Income................................................... 15.0 20.6 15.6 20.0 22.5 24.1 ------ ------ ------ ------ ------ --------- ------ ------ ------ ------ ------ --------- Depreciation and amortization...................................... 14.4 6.9 6.1 10.3 5.0 4.7 ------ ------ ------ ------ ------ --------- ------ ------ ------ ------ ------ --------- Capital expenditures............................................... 10.6 10.8 4.4 5.9 4.5 7.6 ------ ------ ------ ------ ------ --------- ------ ------ ------ ------ ------ --------- Identifiable assets................................................ 138.1 146.3 80.6 122.3 136.0 112.0 ------ ------ ------ ------ ------ --------- ------ ------ ------ ------ ------ --------- AUTOMOTIVE ------------------------------ 1997 1996 1995 ------ ------ --------- (IN MILLIONS OF DOLLARS) Sales.............................................................. $435.2 $439.6 $ 433.2 ------ ------ --------- ------ ------ --------- Operating Income................................................... 29.7 38.5 42.1 ------ ------ --------- ------ ------ --------- Depreciation and amortization...................................... 30.9 18.7 17.6 ------ ------ --------- ------ ------ --------- Capital expenditures............................................... 34.6 29.5 28.3 ------ ------ --------- ------ ------ --------- Identifiable assets................................................ 274.0 292.8 217.1 ------ ------ --------- ------ ------ ---------
SEGMENT TOTAL CORPORATE -------------------------- ----------------------------- 1997 1996 1995 1997 1996 1995 ------ ------ ------ ------ ------ --------- (IN MILLIONS OF DOLLARS) Sales.............................................................. $906.1 $891.3 $848.5 $ -- $ -- $ -- ------ ------ ------ ------ ------ --------- ------ ------ ------ ------ ------ --------- Operating income (loss)............................................ 64.7 81.6 81.8 (19.1) (19.5) (18.7) ------ ------ ------ ------ ------ ------ Adjustment for asbestos litigation................................. -- 502.2 (1,005.5) Interest expenses.................................................. (31.3) (3.1) (1.9) Other income (expense)............................................. (0.3) (2.9) 11.6 Reorganization items............................................... -- 116.3 (2.2) ------ ------ --------- ------ ------ --------- Income (loss) before taxes......................................... Depreciation and amortization...................................... 55.6 30.6 28.4 0.4 0.2 0.3 ------ ------ ------ ------ ------ --------- ------ ------ ------ ------ ------ --------- Capital expenditures............................................... 51.1 44.8 40.3 0.2 0.2 0.3 ------ ------ ------ ------ ------ --------- ------ ------ ------ ------ ------ --------- Indentifiable assets............................................... 534.4 575.1 409.7 212.5 273.8 170.4 ------ ------ ------ ------ ------ --------- ------ ------ ------ ------ ------ --------- TOTAL ------------------------------ 1997 1996 1995 ------ ------ --------- (IN MILLIONS OF DOLLARS) Sales.............................................................. $906.1 $891.3 $ 848.5 ------ ------ --------- ------ ------ --------- Operating income (loss)............................................ 45.6 62.1 63.1 Adjustment for asbestos litigation................................. -- 502.2 (1,005.5) Interest expenses.................................................. (31.3) (3.1) (1.9) Other income (expense)............................................. (0.3) (2.9) 11.6 Reorganization items............................................... -- 116.3 (2.2) ------ ------ --------- Income (loss) before taxes......................................... 14.0 674.6(1) (934.9) ------ ------ --------- ------ ------ --------- Depreciation and amortization...................................... 56.0 30.8 28.7 ------ ------ --------- ------ ------ --------- Capital expenditures............................................... 51.3 45.0 40.6 ------ ------ --------- ------ ------ --------- Indentifiable assets............................................... 746.9 848.9 580.1 ------ ------ --------- ------ ------ ---------
- ------------ (1) Before extraordinary gain and cumulative effect of accounting change. F-43 EAGLE-PICHER HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED FEBRUARY 28, -------------------- 1998 1997 -------- -------- NET SALES................................................................................. $205,842 $223,607 OPERATING COSTS AND EXPENSES Cost of products sold..................................................................... 162,796 180,401 Selling and administrative................................................................ 17,141 19,724 Management compensation expenses.......................................................... 2,056 -- Depreciation.............................................................................. 8,983 10,366 Amortization of intangibles............................................................... 3,839 4,076 -------- -------- 194,815 214,567 Operating income.......................................................................... 11,027 9,040 OTHER INCOME (EXPENSE) Interest expense.......................................................................... (6,940) (8,927) Other income.............................................................................. 820 1,703 -------- -------- INCOME BEFORE TAXES....................................................................... 4,907 1,816 INCOME TAXES.............................................................................. 4,100 3,036 -------- -------- NET INCOME................................................................................ $ 807 $ (1,220) -------- -------- -------- -------- Income (loss) per common share............................................................ $.08 $(.12) -------- -------- -------- --------
See accompanying notes to condensed consolidated financial statements. F-44 EAGLE-PICHER HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (DOLLARS IN THOUSANDS)
FEBRUARY 28, ----------------------- 1998 1997 -------- ----------- PREDECESSOR ----------- ASSETS Current assets: Cash and cash equivalents........................................................... $ 18,968 $ 19,376 Receivables, less allowances........................................................ 135,632 144,805 Income tax refund receivable........................................................ 2,001 56,814 Inventories: Raw materials and supplies..................................................... 56,970 51,804 Work in process................................................................ 22,569 35,071 Finished goods................................................................. 15,509 19,245 -------- ----------- 95,048 106,120 Prepaid expenses.................................................................... 9,499 9,729 Deferred income taxes............................................................... 19,535 20,575 -------- ----------- Total current assets........................................................... 280,683 357,419 Property, plant and equipment............................................................ 239,337 271,181 Less accumulated depreciation....................................................... 10,331 -------- ----------- Net property, plant and equipment.............................................. 239,337 260,850 Excess of acquired net assets over cost.................................................. 255,495 -- Other assets............................................................................. 91,625 107,596 -------- ----------- Total assets................................................................... $867,140 $ 831,943 -------- ----------- -------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.................................................................... $ 50,899 $ 39,118 Other accrued liabilities........................................................... 49,931 50,742 Long-term debt -- current portion................................................... 10,656 54,010 Income taxes........................................................................ 6,746 5,176 -------- ----------- Total current liabilities...................................................... 118,232 149,046 Long-term debt -- less current portion................................................... 536,340 318,160 Deferred income taxes.................................................................... 7,634 -- Other liabilities........................................................................ 24,928 26,095 -------- ----------- Series A 11 3/4% Cumulative Exchangeable Preferred Stock; authorized 50,000 shares; issued and outstanding 14,191 shares................................................... 80,005 -- Shareholders' equity Class A Common stock, authorized 625,001 shares; issued and outstanding 625,001 shares............................................................................. 55,001 -- Class B Common stock, authorized 374,999 shares; issued and outstanding 374,999 shares............................................................................. 45,000 -- Common shares -- authorized 20,000,000 shares, issued and outstanding 10,000,000 shares............................................................................. 341,807 Foreign currency translation........................................................ (1,945) Accumulated deficit -- net loss year to date........................................ (1,220) -------- ----------- Total shareholders' equity..................................................... 100,001 338,642 -------- ----------- Total liabilities and shareholders' equity..................................... $867,140 $ 831,943 -------- ----------- -------- -----------
See accompanying notes to the condensed consolidated financial statements. F-45 EAGLE-PICHER HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED FEBRUARY 28, --------------------- 1998 1997 --------- -------- Cash flows from operating activities: Net income.......................................................................... $ 807 $ (1,220) Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization....................................................... 12,822 14,442 Changes in assets and liabilities: Receivables.................................................................... (4,705) (11,930) Inventories.................................................................... (2,235) (3,219) Accounts payable............................................................... (2,787) (1,917) Accrued liabilities............................................................ (5,488) 2,176 Income tax refund receivable................................................... 1,024 16,906 Deferred taxes................................................................. 2,600 1,831 Other.......................................................................... (11,121) 845 --------- -------- Net cash used in operating activities............................................... (9,083) 17,914 Cash flows from investing activities: Capital expenditures................................................................ (5,692) (15,857) Other............................................................................... (1,042) (1,183) --------- -------- Net cash used in investing activities............................................... (6,734) (17,040) Cash flows from financing activities: Issuance of long-term debt.......................................................... 524,100 -- Reduction of long-term debt......................................................... (250,000) (16,703) Redemption of common stock.......................................................... (446,638) -- Issuance of common stock............................................................ 100,001 -- Issuance of preferred stock......................................................... 80,005 -- Debt issue cost..................................................................... (26,062) -- Other............................................................................... (360) 2,480 --------- -------- Net cash used in financing activities.......................................... (18,954) (14,223) Net decrease in cash and cash equivalents................................................ (34,771) (13,349) --------- -------- Cash and cash equivalents, beginning of period........................................... 53,739 32,725 --------- -------- Cash and cash equivalents, end of period................................................. $ 18,968 $ 19,376 --------- -------- --------- -------- Supplemental cash flow information: Cash paid during the three month period: Interest paid.................................................................. $ 6,402 $ 475 Income tax refunds received net of payments.................................... $ (376) $(15,928)
See accompanying notes to the condensed consolidated financial statements. F-46 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A. BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS The unaudited financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and notes thereto included elsewhere in this document for the fiscal year ended November 30, 1997. The financial statements presented herein reflect all adjustments (consisting of normal and recurring accruals) which, in the opinion of management, are necessary to fairly state the results of operations for the three month periods ended February 28, 1998 and 1997. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year. See Note B. B. ACQUISITION OF THE COMPANY On February 24, 1998 ('Closing Date'), Eagle-Picher Industries, Inc. ('Company') was acquired by a subsidiary of Granaria Industries BV, Eagle-Picher Holdings, Inc. ('Parent'), from the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust ('Trust'). The Trust was established pursuant to the Company's Plan of Reorganization upon its emergence from bankruptcy. These unaudited condensed consolidated financial statements as of and for the three months ended February 28, 1998 include the effects of the Acquisition that result as of February 24, 1998, the Closing Date. Accordingly, the condensed consolidated statement of income (loss) for the three months ended February 28, 1998 includes results of operations from (1) December 1, 1997 through February 24, 1998 of the Company prior to the consummation of the Acquisition (for clarity, sometimes referred to herein as the 'Predecessor Company') and (2) February 25 through February 28, 1998 of the Company. The effects of the purchase accounting adjustments on the Company's results of operations for the three months ended February 28, 1998 were immaterial. Upon closing of the acquisition, the Parent received $100 million equity investment from Granaria Industries BV and an equity partner. The Parent also received proceeds approximating $80 million from its offering of preferred stock. These proceeds were invested in the Company, which issued approximately $180 million of common stock to the Parent. The Company also borrowed $225 million in term loans and $79.1 million in revolving credit loans under a syndicated senior secured loan facility, and issued $220 million in senior subordinated notes ('Subordinated Notes'), the proceeds of which were used to redeem the Company's 10% Senior Unsecured Sinking Fund Debentures ('Debentures') and common stock, both held by the Trust. The Company, which is the operating entity, is a wholly-owned subsidiary of the Parent. The Parent's results of operations and cash flows approximate those of the Company. C. EARNINGS PER SHARE The calculation of net income (loss) per share is based upon the net income (loss) divided by the average number of common shares outstanding, which was 9,600,071 and 10,000,000 in the three months ended February 28, 1998 and 1997, respectively. D. LONG-TERM DEBT On the Closing Date, the Company's existing $60 million unsecured committed revolving credit facility was terminated. It was replaced by a syndicated senior secured loan facility ('Credit Agreement') which provided $225 million in term loans ('Term Loans') and a $160 million revolving F-47 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) credit facility ('Facility'), of which $79.1 million was drawn at the time of closing. Immediately following the closing, the Company borrowed approximately $28.6 million for use as credit support in the form of letters of credit, leaving approximately $52.3 million in available credit. The Credit Agreement is secured by the capital stock of the Company, up to 65% of the capital stock of foreign subsidiaries and substantially all other property in the United States. The Credit Agreement contains covenants which restrict the Company's ability to, among others, declare dividends or redeem capital stock, issue additional debt or alter existing debt agreements, make loans, undergo a change in control and engage in mergers, acquisitions and asset sales. These covenants also limit the annual amount of capital expenditures and require the Company to meet minimum financial coverages. The Company was in compliance with all covenants at February 28, 1998. Long-term debt consisted of:
FEBRUARY 28, ------------------ 1998 1997 ------ ------ (IN MILLIONS OF DOLLARS) New Credit Agreement: Revolving Credit Facility.............................................................. $ 79.1 $ -- Term Loans............................................................................. 225.0 -- Senior Subordinated Notes................................................................... 220.0 -- Senior Unsecured Sinking Fund Debentures.................................................... -- 250.0 Divestiture Notes........................................................................... -- 50.0 Tax Refund Notes............................................................................ -- 52.6 Industrial Revenue Bonds.................................................................... 18.4 10.5 Secured Notes............................................................................... -- 6.7 Debt of Foreign Subsidiaries................................................................ 4.5 2.4 ------ ------ 547.0 372.2 Less current portion........................................................................ 10.7 54.0 ------ ------ Long-term debt, less current portion........................................................ $536.3 $318.2 ------ ------ ------ ------
The Facility matures in 2004. It bears interest, at the Company's option, of an adjusted LIBOR rate plus 2 1/4% or the bank's prime rate plus 1 1/4%. There is a commitment fee equal to 1/2% per annum on the undrawn portion of the Facility and fees for letters of credit are equal to 2 1/4% per annum. The Term Loans mature in 2003, 2005 and 2006 and bear interest, at the Company's option, of an adjusted LIBOR rate plus spreads varying from 2 1/4% to 2 7/8% or the bank's prime rate plus spreads varying from 1 1/4% to 1 7/8%. In addition to regularly scheduled payments, the Company is required to make mandatory prepayments to first the Term Loans then the Facility of 60% of annual excess cash flow, the net proceeds from the sale of assets (subject to certain conditions), the net proceeds of new debt issued and 50% of the net proceeds of any equity securities issued. To partially hedge its variable interest rate exposure on its Term Loans, the Company has entered into a three year interest rate swap agreement ('Swap Agreement'). The Swap Agreement requires the Company to pay a fixed LIBOR rate (plus the appropriate spreads) on $150 million and receive the floating LIBOR rate on that same amount, effectively fixing the interest rate on $150 million of the Term Loans at a weighted rate of 8.35%. The Subordinated Notes, which are unsecured, bear interest of 9 3/8% and mature in 2008, however, they are redeemable at the option of the Company, in whole or in part, any time after February 28, 2003 at set redemption prices. The Company may also redeem up to 35% of the aggregate principal amount of the Subordinated Notes prior to March 1, 2001 at a set redemption price provided certain conditions are met. The Company is also required to offer to purchase the Subordinated Notes at a set redemption price should there be a change in control of the Company. F-48 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) Both the Credit Agreement and the Subordinated Notes are guaranteed on a full, unconditional, and joint and several basis by certain of the Company's wholly-owned domestic subsidiaries ('Guarantors'). E. PREFERRED STOCK The liquidation preference of the 14,191 shares of 11 3/4% Cumulative Redeemable Exchangeable Preferred Stock ('Preferred Stock') will initially be $5,637.70 per share and will accrete from the Closing Date until March 1, 2003, at the rate of 11 3/4% per annum, compounded semi-annually, to $10,000.00. No dividends will accrue on the Preferred Stock prior to March 1, 2003; however, holders of the Preferred Stock will be entitled to cumulative dividends subsequent to that date. The Preferred Stock is mandatorily redeemable by Parent on the earlier of March 1, 2008 or upon occurrence of a defined mandatory redemption event. The Preferred Stock is also redeemable at the option of the Parent, in whole or in part, any time after February 28, 2003 at set redemption prices. Parent may also redeem up to 35% of the outstanding shares prior to March 1, 2001 at a set redemption price provided certain conditions are met. Each holder of the Preferred Stock would have the right to require that Parent repurchase the Preferred Stock at a set redemption price should there be a change in control of the Company. F. INCOME TAXES The acquisition of the Company has been treated as a sale of its assets for purposes of income taxes. The deferred tax benefits relating to the Debentures, which were repaid on the Closing Date, and most of the benefits relating to the net operating loss carryforwards will be realized to shelter the gain on the sale of the assets. Any remaining net operating loss carryforwards will be lost. The Company, however, will be liable for approximately $2.0 in alternative minimum taxes and $1.6 million in state and local income taxes as a result of the transaction. These taxes are recognized as part of the Acquisition adjustments. G. LEGAL MATTERS The Company is involved in routine litigation, environmental proceedings and claims pending with respect to matters arising out of the normal course of business. In management's opinion, the ultimate liability resulting from all claims, individually or in the aggregate, will not materially affect the Company's consolidated financial position, results of operations or cash flows. H. INTANGIBLE ASSETS Excess of acquired net assets over cost is being amortized on a straight-line basis over fifteen years. The recoverability of these assets is evaluated periodically based on current and estimated future cash flows of each of the related business units over the remaining amortization period. F-49 INDEPENDENT AUDITORS' REPORT To the Board of Directors Eagle-Picher Holdings, Inc.: We have audited the accompanying balance sheet of Eagle-Picher Holdings, Inc. as of December 22, 1997. This financial statement is the responsibility of Eagle-Picher Holdings, Inc. management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion. In our opinion, such balance sheet presents fairly, in all material respects, the financial position of the Company at December 22, 1997, in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Cincinnati, Ohio January 15, 1998 F-50 EAGLE-PICHER HOLDINGS, INC. BALANCE SHEET DECEMBER 22, 1997 ASSETS Cash..................................................................................................... $1,000 ------ ------ SHAREHOLDERS' EQUITY Common stock -- authorized 1,000 shares of $.01 par value each; 100 shares issued and outstanding................................................................................. 1 Additional Paid-in-Capital............................................................................... 999 ------ Total............................................................................................... $1,000 ------ ------
- ------------ NOTES TO BALANCE SHEET (1) Eagle-Picher Holdings, Inc. ('Holdings'), a Delaware corporation, was organized on December 22, 1997, and had no operations prior to that date. (2) On December 23, 1997, Holdings and its wholly-owned subsidiary, E-P Acquisition, Inc. ('Acquisition'), approved the merger of Acquisition with and into Eagle-Picher Industries, Inc. In connection with the merger, Holdings will offer $80,000,000 of cumulative redeemable exchangeable preferred stock. F-51 _____________________________ _____________________________ NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF A TIME SUBSEQUENT TO THE DATE HEREOF OR THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. TABLE OF CONTENTS
PAGE ---- Available Information....................................................................................................... 3 Summary..................................................................................................................... 4 Risk Factors................................................................................................................ 16 Company History............................................................................................................. 24 The Acquisition............................................................................................................. 24 Use of Proceeds............................................................................................................. 25 The Notes Exchange Offer.................................................................................................... 26 Capitalization.............................................................................................................. 35 Selected Historical Condensed Consolidated Financial Information............................................................ 37 Unaudited Pro Forma Consolidated Statements of Operations................................................................... 39 Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 42 Business.................................................................................................................... 50 Industry Overview........................................................................................................... 52 Description of Businesses................................................................................................... 54 Management.................................................................................................................. 71 Executive Compensation...................................................................................................... 72 Security Ownership and Certain Beneficial Owners and Management of Parent................................................... 78 Certain Relationships and Related Transactions.............................................................................. 78 Description of Industrial Revenue Bonds..................................................................................... 79 Description of New Credit Agreement......................................................................................... 79 Description of the Notes.................................................................................................... 81 Description of Preferred Stock.............................................................................................. 108 Description of Exchange Debentures.......................................................................................... 110 Plan of Distribution........................................................................................................ 111 Certain U.S. Federal Income Tax Considerations.............................................................................. 112 Legal Matters............................................................................................................... 116 Experts..................................................................................................................... 116 Index to Financial Statements............................................................................................... F-1
EAGLE-PICHER INDUSTRIES, INC. OFFER TO EXCHANGE ITS 9 3/8% SENIOR SUBORDINATED NOTES DUE 2008 FOR ANY AND ALL OF ITS OUTSTANDING 9 3/8% SENIOR SUBORDINATED NOTES DUE 2008 ---------------------- PROSPECTUS ---------------------- _____________________________ _____________________________ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Section 1701.13 of the Ohio General Corporation Law permits an Ohio corporation to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed civil, criminal, administrative, or investigative action, suit or proceeding by reason of the fact that such person is or was a director, officer, employee, or agent of the corporation, or is or was serving as such with respect to another corporation or entity at the request of the corporation, provided that such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the company and, with respect to any criminal action or proceeding, without reasonable cause to believe the conduct was unlawful. Where the action or suit is by or in the right of the corporation, the corporation may not indemnify such person for liability in connection with unlawful loans, dividends or distributions; nor may the corporation indemnify such person for any act of negligence or misconduct except as otherwise approved by the Ohio court of common pleas or the court in which the action or suit was brought. The Registrant has provided in its Regulations that its directors and officers will be indemnified and held harmless against all expenses, liability and loss (including attorneys' fees, and, in respect of claims not made by or in the right of the Company, judgments, fines ERISA excise taxes or penalties and amounts paid in settlement) to the fullest extent provided by the law as it exists or may hereafter be amended. Section 1701.13 of the Ohio General Corporation Law and the Regulations of the Registrant also permit the Registrant to purchase insurance for the benefit of any person who is or was a director, officer, employee, or agent of the corporation against any liability incurred by such person, whether or not the corporation would have the power to indemnify such person against such liability. The Registrant has purchased insurance on behalf of its directors and officers, in such amounts as it deems reasonable, against certain liabilities that may be asserted against, or incurred by, such persons in their capacities as directors or officers of Registrant, including liabilities under the federal and state securities laws. Each individual Employment Agreement entered into by Registrant with each Named Executive Officer contains provisions for the indemnification of such Named Executive Officer to the fullest extent permitted or required by the laws of the State of Ohio and for the procurement by Registrant of such insurance as Registrant deems necessary or appropriate to protect Registrant's interest. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits: 2.1 -- Third Amended Plan of Reorganization of Eagle-Picher Industries, Inc. (the 'Company')'D' 2.2 -- Exhibits to Third Amended Plan of Reorganization of the Company'D' 3.1 -- Articles of Incorporation of the Company, as amended'D' 3.2 -- Regulations of the Company'D' 3.3 -- Amended and Restated Certificate of Incorporation of Eagle-Picher Holdings, Inc.'D' 3.4 -- Bylaws of Eagle-Picher Holdings, Inc.'D' 3.5 -- Articles of Incorporation of Daisy Parts, Inc.* 3.6 -- Bylaws of Daisy Parts, Inc.* 3.7 -- Certificate of Incorporation of Eagle-Picher Development Company, Inc.* 3.8 -- Bylaws of Eagle-Picher Development Company, Inc.* 3.9 -- Certificate of Incorporation of Eagle-Picher Far East, Inc.* 3.10 -- Bylaws of Eagle-Picher Far East, Inc.* 3.11 -- Articles of Incorporation of Eagle-Picher Fluid Systems, Inc.* 3.12 -- Bylaws of Eagle-Picher Fluid Systems, Inc.* 3.13 -- Articles of Incorporation of Eagle-Picher Minerals, Inc.* 3.14 -- Bylaws of Eagle-Picher Minerals, Inc.* 3.15 -- Certificate of Formation of Eagle-Picher Technologies, LLC*
II-1 3.16 -- Operating Agreement of Eagle-Picher Technologies, LLC* 3.17 -- Articles of Incorporation of Hillsdale Tool & Manufacturing Co.* 3.18 -- Bylaws of Hillsdale Tool & Manufacturing Co.* 3.19 -- Articles of Incorporation of Michigan Automotive Research Corporation* 3.20 -- Bylaws of Michigan Automotive Research Corporation* 4.1 -- Indenture, dated as of February 24, 1998, between E-P Acquisition, Inc., Eagle-Picher Holdings, Inc. as a Guarantor, the Subsidiary Guarantors (Daisy Parts, Inc. Eagle-Picher Development Company, Inc., Eagle-Picher Far East, Inc., Eagle-Picher Fluid Systems, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher Technologies, LLC, Hillsdale Tool & Manufacturing Co., Michigan Automotive Research Corporation (together, the 'Subsidiary Guarantors' or the 'Domestic Subsidiaries'), and The Bank of New York as Trustee (the 'Trustee')'D' 4.2 -- Cross Reference Table showing the location in the Indenture of the provisions of Sections 310 through 318(a), inclusive, of the Trust Indenture Act of 1939.'D' 4.3 -- First Supplemental Indenture dated as of February 24, 1998, between the Company and the Trustee'D' 4.4 -- Form of Global Note (attached as Exhibit A to the Indenture filed as Exhibit 4.1 to the Registration Statement)'D' 5.1 -- Opinion of Howard, Darby & Levin as to the Legality of the New Notes* 10.1 -- Merger Agreement, dated as of December 23, 1997, among the Company, the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust, Eagle-Picher Holdings, Inc. and E-P Acquisition, Inc.'D' 10.2 -- Amendment No. 1 to the Merger Agreement, dated as of February 23, 1998, among the Company, the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust, Eagle-Picher Holdings, Inc. and E-P Acquisition, Inc.'D' 10.3 -- Supplemental Executive Retirement Plan of the Company* 10.4 -- Notes Purchase Agreement, dated February 19, 1998, among E-P Acquisition, Inc. the Company, Eagle-Picher Holdings, SBC Warburg Dillon Read and ABN AMRO Incorporated'D' 10.5 -- Assumption Agreement for the Notes Purchase Agreement, dated as of February 24, 1998, between the Company and the Subsidiary Guarantors'D' 10.6 -- Registration Rights Agreement, dated as of February 24, 1998, between E-P Acquisition, SBC Warburg Dillon Read and ABN AMRO Incorporated'D' 10.7 -- Assumption Agreement for the Registration Rights Agreement, dated as of February 24, 1998, of the Company'D' 10.8 -- Credit Agreement, dated as of February 19, 1998, among E-P Acquisition, Inc. (to be merged with and into the Company), Various Lenders from time to time party thereto, ABN AMRO Bank N.V., as Agent (the 'Agent'), PNC Bank, National Association, as Documentation Agent and DLJ Capital Funding, Inc., as Syndication Agent'D' 10.9 -- Assumption Agreement dated as of February 24, 1998, between the Company and the Agent'D' 10.10 -- Security Agreement, dated as of February 24, 1998, among the Company, the Agent and the Domestic Subsidiaries'D' 10.11 -- Holdings Pledge Agreement, dated as of February 24, 1998, between Eagle-Picher Holdings, Inc. and the Agent'D' 10.12 -- Borrower and Subsidiary Pledge Agreement, dated as of February 24, 1998, among the Company, E-P Development, E-P Minerals and the Agent'D' 10.13 -- Holdings Guaranty Agreement, dated as of February 24, 1998, by Eagle-Picher Holdings, Inc., accepted and agreed by the Agent'D' 10.14 -- Subsidiary Guaranty Agreement, dated as of February 24, 1998, by the Domestic Subsidiaries, accepted and agreed by the Agent'D' 10.15 -- Trademark Collateral Agreement, dated February 24, 1998, between the Company and the Agent'D' 10.16 -- Patent Collateral Agreement, dated February 24, 1998, between the Company and the Agent'D' 10.17 -- Copyright Collateral Agreement, dated February 24, 1998, between the Company and the Agent'D' 10.18 -- Subordination Agreement, dated as of February 24, 1998, among E-P Acquisition, Inc., the Company and the Domestic Subsidiaries*
II-2 10.19 -- Management Agreement dated as of February 24, 1998 between the Company and Granaria Holdings B.V.'D' 10.20 -- Eagle-Picher Management Trust made February 17, 1998, among Granaria Industries B.V. and Thomas E. Petry, Andries Ruijssenaars and Joel Wyler as trustees (the 'E-P Management Trust')* 10.21 -- Incentive Stock Plan of Eagle-Picher Industries, Inc., effective as of February 25, 1998* 10.22 -- Employment Agreements dated November 29, 1996 between Registrant and each Named Executive Officer* 10.23 -- Amendments dated August 5, 1997 to Employment Agreements between the Company and each Named Executive Officer* 10.24 -- Sales Incentive Program of the Company* 10.25 -- Letter Agreements dated August 5, 1997 between the Company and each Named Executive Officer regarding Short Term Sale Program* 10.26 -- Letter Agreement dated September 12, 1997 between the Company and Carroll D. Curless regarding Sale Incentive Bonus* 10.27 -- Letter Agreements dated February 18, 1998 between the Company and each Named Executive Officer regarding Short Term Sale Program* 10.28 -- Side Letter, dated February 23, 1998, regarding Amendments to the Short Term Sale Program* 12.1 -- Statement re: Computation of Ratios* 16.1 -- Letter of KPMG Peat Marwick LLP re: Change in Certifying Accountant* 21.1 -- Chart of Subsidiaries of the Company* 23.1 -- Consent of Deloitte & Touche LLP* 23.2 -- Consent of KPMG Peat Marwick LLP* 23.3 -- Consent of Howard, Darby & Levin (included in Exhibit 5.1)* 24.1 -- Power of Attorney of Directors and Officers (set forth on the signature pages of this Registration Statement)'D' 25.1 -- Statement of Eligibility of Trustee on Form T-1 related to the Notes'D' 27.1 -- Financial Data Schedule* 99.1 -- Form of Letter of Transmittal for the Notes* 99.2 -- Form of Notice of Guaranteed Delivery* (b) Financial Statement Schedules (filed as Exhibit 27.1)*
- ------------ * Filed herewith 'D' Previously filed. ITEM 22. UNDERTAKINGS. The undersigned registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof; II-3 (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; (4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the 'Securities Act') may be permitted to directors, officers and controlling persons of the registrants pursuant to the provisions described under Item 20 or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue; (5) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request; and (6) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-4 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 18, 1998. EAGLE-PICHER INDUSTRIES, INC. By /s/ JAMES A. RALSTON .................................. NAME: JAMES A. RALSTON TITLE: VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ -------------------------------------------- ------------------- * Director, President and Chief Executive May 18, 1998 ......................................... Officer ANDRIES RUIJSSENAARS /s/ DAVID N. HALL Senior Vice President - Finance May 18, 1998 ......................................... DAVID N. HALL * Vice President and Controller May 18, 1998 ......................................... CARROLL D. CURLESS * Director May 18, 1998 ......................................... JOEL P. WYLER * Director May 18, 1998 ......................................... THOMAS E. PETRY *By: /s/ DAVID N. HALL May 18, 1998 ......................................... DAVID N. HALL ATTORNEY-IN-FACT
II-5 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 18, 1998. EAGLE-PICHER HOLDINGS, INC. By /s/ JAMES A. RALSTON .................................. NAME: JAMES A. RALSTON TITLE: VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ -------------------------------------------------- --------------- * Director, President and Chief Executive Officer May 18, 1998 ......................................... ANDRIES RUIJSSENAARS /s/ DAVID N. HALL Senior Vice President - Finance May 18, 1998 ......................................... DAVID N. HALL * Vice President and Controller May 18, 1998 ......................................... CARROLL D. CURLESS * Chairman of the Board May 18, 1998 ......................................... JOEL P. WYLER * Director May 18, 1998 ......................................... THOMAS E. PETRY *By: /s/ DAVID N. HALL May 18, 1998 ......................................... DAVID N. HALL ATTORNEY-IN-FACT
II-6 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 18, 1998. DAISY PARTS, INC. By /s/ JAMES A. RALSTON .................................. NAME: JAMES A. RALSTON TITLE: SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ -------------------------------------------------- --------------- * President May 18, 1998 ......................................... MICHAEL E. ASLANIAN /s/ GARY M. FREYTAG Treasurer May 18, 1998 ......................................... GARY M. FREYTAG * Controller May 18, 1998 ......................................... DAVID P. KELLEY * Director May 18, 1998 ......................................... WAYNE R. WICKENS /s/ JAMES A. RALSTON Director May 18, 1998 ......................................... JAMES A. RALSTON /s/ DAVID N. EVANS Director May 18, 1998 ......................................... DAVID N. EVANS *By: /s/ DAVID N. HALL May 18, 1998 ......................................... DAVID N. HALL ATTORNEY-IN-FACT
II-7 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 18, 1998. EAGLE-PICHER DEVELOPMENT COMPANY, INC. By /s/ JAMES A. RALSTON .................................. NAME: JAMES A. RALSTON TITLE: SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ -------------------------------------------------- --------------- * President and Director May 18, 1998 ......................................... ANDRIES RUIJSSENAARS /s/ GARY M. FREYTAG Treasurer May 18, 1998 ......................................... GARY M. FREYTAG * Controller May 18, 1998 ......................................... CARROLL D. CURLESS /s/ JAMES A. RALSTON Director May 18, 1998 ......................................... JAMES A. RALSTON * Director May 18, 1998 ......................................... WAYNE R. WICKENS *By: /s/ DAVID N. HALL May 18, 1998 ......................................... DAVID N. HALL ATTORNEY-IN-FACT
II-8 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 18, 1998. EAGLE-PICHER FAR EAST, INC. By /s/ JAMES A. RALSTON .................................. NAME: JAMES A. RALSTON TITLE: SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------ --------------- * President May 18, 1998 ......................................... SADAO TAKAHASHI /s/ GARY M. FREYTAG Treasurer May 18, 1998 ......................................... GARY M. FREYTAG * Controller May 18, 1998 ......................................... CARROLL D. CURLESS * Director May 18, 1998 ......................................... ANDRIES RUIJSSENAARS /s/ JAMES A. RALSTON Director May 18, 1998 ......................................... JAMES A. RALSTON /s/ DAVID N. EVANS Director May 18, 1998 ......................................... DAVID N. EVANS *By: /s/ DAVID N. HALL May 18, 1998 ......................................... DAVID N. HALL ATTORNEY-IN-FACT
II-9 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 18, 1998. EAGLE-PICHER FLUID SYSTEMS, INC. By /s/ JAMES A. RALSTON .................................. NAME: JAMES A. RALSTON TITLE: SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------ --------------- * President May 18, 1998 ......................................... SCOTT F. MALY /s/ GARY M. FREYTAG Treasurer May 18, 1998 ......................................... GARY M. FREYTAG * Controller May 18, 1998 ......................................... DANIEL T. HOAG /s/ JAMES A. RALSTON Director May 18, 1998 ......................................... JAMES A. RALSTON *By: /s/ DAVID N. HALL May 18, 1998 ......................................... DAVID N. HALL ATTORNEY-IN-FACT
II-10 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 18, 1998. EAGLE-PICHER MINERALS, INC. By /s/ JAMES A. RALSTON .................................. NAME: JAMES A. RALSTON TITLE: SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------ --------------- * President May 18, 1998 ......................................... WESLEY D. LEE /s/ GARY M. FREYTAG Treasurer May 18, 1998 ......................................... GARY M. FREYTAG * Controller May 18, 1998 ......................................... NANCY C. REED * Director May 18, 1998 ......................................... ANDRIES RUIJSSENAARS /s/ JAMES A. RALSTON Director May 18, 1998 ......................................... JAMES A. RALSTON /s/ DAVID N. EVANS Director May 18, 1998 ......................................... DAVID N. EVANS *By: /s/ DAVID N. HALL May 18, 1998 ......................................... DAVID N. HALL ATTORNEY-IN-FACT
II-11 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 18, 1998. EAGLE-PICHER TECHNOLOGIES, LLC By /s/ WILLIAM E. LONG .................................. NAME: WILLIAM E. LONG TITLE: PRESIDENT PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------ --------------- /s/ WILLIAM E. LONG President and Director May 18, 1998 ......................................... WILLIAM E. LONG * Treasurer, Chief Financial Officer May 18, 1998 ......................................... and Controller J.D. SELLER * Director May 18, 1998 ......................................... DR. PAUL KAMINSKI * Director May 18, 1998 ......................................... NEIL A. ARMSTRONG * Director May 18, 1998 ......................................... ANDRIES RUIJSSENAARS * Director May 18, 1998 ......................................... JOEL P. WYLER *By: /s/ DAVID N. HALL May 18, 1998 ......................................... DAVID N. HALL ATTORNEY-IN-FACT
II-12 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 18, 1998. HILLSDALE TOOL & MANUFACTURING CO. By /s/ JAMES A. RALSTON .................................. NAME: JAMES A. RALSTON TITLE: SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ -------------------------------------------------- --------------- * President May 18, 1998 ......................................... MICHAEL E. ASLANIAN /s/ GARY M. FREYTAG Treasurer May 18, 1998 ......................................... GARY M. FREYTAG * Controller May 18, 1998 ......................................... DAVID P. KELLEY * Director May 18, 1998 ......................................... WAYNE R. WICKENS * Director May 18, 1998 ......................................... JAMES A. RALSTON *By: /s/ DAVID N. HALL May 18, 1998 ......................................... DAVID N. HALL ATTORNEY-IN-FACT
II-13 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 18, 1998. MICHIGAN AUTOMOTIVE RESEARCH CORPORATION By /s/ JAMES A. RALSTON .................................. NAME: JAMES A. RALSTON TITLE: ASSISTANT SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ -------------------------------------------------- --------------- * President and Director May 18, 1998 ......................................... MICHAEL J. BOERMA * Treasurer and Controller May 18, 1998 ......................................... TERENCE J. RHOADES * Director May 18, 1998 ......................................... WAYNE R. WICKENS /s/ JAMES A. RALSTON Director May 18, 1998 ......................................... JAMES A. RALSTON *By: /s/ DAVID N. HALL May 18, 1998 ......................................... DAVID N. HALL ATTORNEY-IN-FACT
II-14 EXHIBIT INDEX
LOCATION OF EXHIBIT EXHIBIT IN SEQUENTIAL NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM - ------ --------------------------------------------------------------------------------------- ------------------- 2.1 -- Third Amended Plan of Reorganization of Eagle-Picher Industries, Inc. (the 'Company')'D' 2.2 -- Exhibits to Third Amended Plan of Reorganization of the Company'D' 3.1 -- Articles of Incorporation of the Company, as amended'D' 3.2 -- Regulations of the Company'D' 3.3 -- Amended and Restated Certificate of Incorporation of Eagle-Picher Holdings, Inc.'D' 3.4 -- Bylaws of Eagle-Picher Holdings, Inc.'D' 3.5 -- Articles of Incorporation of Daisy Parts, Inc.* 3.6 -- Bylaws of Daisy Parts, Inc.* 3.7 -- Certificate of Incorporation of Eagle-Picher Development Company, Inc.* 3.8 -- Bylaws of Eagle-Picher Development Company, Inc.* 3.9 -- Certificate of Incorporation of Eagle-Picher Far East, Inc.* 3.10 -- Bylaws of Eagle-Picher Far East, Inc.* 3.11 -- Articles of Incorporation of Eagle-Picher Fluid Systems, Inc.* 3.12 -- Bylaws of Eagle-Picher Fluid Systems, Inc.* 3.13 -- Articles of Incorporation of Eagle-Picher Minerals, Inc.* 3.14 -- Bylaws of Eagle-Picher Minerals, Inc.* 3.15 -- Certificate of Formation of Eagle-Picher Technologies, LLC* 3.16 -- Operating Agreement of Eagle-Picher Technologies, LLC* 3.17 -- Articles of Incorporation of Hillsdale Tool & Manufacturing Co.* 3.18 -- Bylaws of Hillsdale Tool & Manufacturing Co.* 3.19 -- Articles of Incorporation of Michigan Automotive Research Corporation* 3.20 -- Bylaws of Michigan Automotive Research Corporation* 4.1 -- Indenture, dated as of February 24, 1998, between E-P Acquisition, Inc., Eagle-Picher Holdings, Inc. as a Guarantor, the Subsidiary Guarantors (Daisy Parts, Inc. Eagle-Picher Development Company, Inc., Eagle-Picher Far East, Inc., Eagle-Picher Fluid Systems, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher Technologies, LLC, Hillsdale Tool & Manufacturing Co., Michigan Automotive Research Corporation (together, the 'Subsidiary Guarantors' or the 'Domestic Subsidiaries'), and The Bank of New York as Trustee (the 'Trustee')'D' 4.2 -- Cross Reference Table showing the location in the Indenture of the provisions of Sections 310 through 318(a), inclusive, of the Trust Indenture Act of 1939.'D' 4.3 -- First Supplemental Indenture dated as of February 24, 1998, between the Company and the Trustee'D' 4.4 -- Form of Global Note (attached as Exhibit A to the Indenture filed as Exhibit 4.1 to the Registration Statement)'D' 5.1 -- Opinion of Howard, Darby & Levin as to the Legality of the New Notes* 10.1 -- Merger Agreement, dated as of December 23, 1997, among the Company, the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust, Eagle-Picher Holdings, Inc. and E-P Acquisition, Inc.'D' 10.2 -- Amendment No. 1 to the Merger Agreement, dated as of February 23, 1998, among the Company, the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust, Eagle-Picher Holdings, Inc. and E-P Acquisition, Inc.'D' 10.3 -- Supplemental Executive Retirement Plan of the Company* 10.4 -- Notes Purchase Agreement, dated February 19, 1998, among E-P Acquisition, Inc. the Company, Eagle-Picher Holdings, SBC Warburg Dillon Read and ABN AMRO Incorporated'D' 10.5 -- Assumption Agreement for the Notes Purchase Agreement, dated as of February 24, 1998, between the Company and the Subsidiary Guarantors'D' 10.6 -- Registration Rights Agreement, dated as of February 24, 1998, between E-P Acquisition, SBC Warburg Dillon Read and ABN AMRO Incorporated'D' 10.7 -- Assumption Agreement for the Registration Rights Agreement, dated as of February 24, 1998, of the Company'D'
10.8 -- Credit Agreement, dated as of February 19, 1998, among E-P Acquisition, Inc. (to be merged with and into the Company), Various Lenders from time to time party thereto, ABN AMRO Bank N.V., as Agent (the 'Agent'), PNC Bank, National Association, as Documentation Agent and DLJ Capital Funding, Inc., as Syndication Agent'D' 10.9 -- Assumption Agreement dated as of February 24, 1998, between the Company and the Agent'D' 10.10 -- Security Agreement, dated as of February 24, 1998, among the Company, the Agent and the Domestic Subsidiaries'D' 10.11 -- Holdings Pledge Agreement, dated as of February 24, 1998, between Eagle-Picher Holdings, Inc. and the Agent'D' 10.12 -- Borrower and Subsidiary Pledge Agreement, dated as of February 24, 1998, among the Company, E-P Development, E-P Minerals and the Agent'D' 10.13 -- Holdings Guaranty Agreement, dated as of February 24, 1998, by Eagle-Picher Holdings, Inc., accepted and agreed by the Agent'D' 10.14 -- Subsidiary Guaranty Agreement, dated as of February 24, 1998, by the Domestic Subsidiaries, accepted and agreed by the Agent'D' 10.15 -- Trademark Collateral Agreement, dated February 24, 1998, between the Company and the Agent'D' 10.16 -- Patent Collateral Agreement, dated February 24, 1998, between the Company and the Agent'D' 10.17 -- Copyright Collateral Agreement, dated February 24, 1998, between the Company and the Agent'D' 10.18 -- Subordination Agreement, dated as of February 24, 1998, among E-P Acquisition, Inc., the Company and the Domestic Subsidiaries* 10.19 -- Management Agreement dated as of February 24, 1998 between the Company and Granaria Holdings B.V.'D' 10.20 -- Eagle-Picher Management Trust made February 17, 1998, among Granaria Industries B.V. and Thomas E. Petry, Andries Ruijssenaars and Joel Wyler as trustees (the 'E-P Management Trust')* 10.21 -- Incentive Stock Plan of Eagle-Picher Industries, Inc., effective as of February 25, 1998* 10.22 -- Employment Agreements dated November 29, 1996 between Registrant and each Named Executive Officer* 10.23 -- Amendments dated August 5, 1997 to Employment Agreements between the Company and each Named Executive Officer* 10.24 -- Sales Incentive Program of the Company* 10.25 -- Letter Agreements dated August 5, 1997 between the Company and each Named Executive Officer regarding Short Term Sale Program* 10.26 -- Letter Agreement dated September 12, 1997 between the Company and Carroll D. Curless regarding Sale Incentive Bonus* 10.27 -- Letter Agreements dated February 18, 1998 between the Company and each Named Executive Officer regarding Short Term Sale Program* 10.28 -- Side Letter, dated February 23, 1998, regarding Amendments to the Short Term Sale Program* 12.1 -- Statement re: Computation of Ratios* 16.1 -- Letter of KPMG Peat Marwick LLP re: Change in Certifying Accountant* 21.1 -- Chart of Subsidiaries of the Company* 23.1 -- Consent of Deloitte & Touche LLP* 23.2 -- Consent of KPMG Peat Marwick LLP* 23.3 -- Consent of Howard, Darby & Levin (included in Exhibit 5.1)* 24.1 -- Power of Attorney of Directors and Officers (set forth on the signature pages of this Registration Statement)'D' 25.1 -- Statement of Eligibility of Trustee on Form T-1 related to the Notes'D' 27.1 -- Financial Data Schedule* 99.1 -- Form of Letter of Transmittal for the Notes* 99.2 -- Form of Notice of Guaranteed Delivery* (b) Financial Statement Schedules (filed as Exhibit 27.1)*
- ------------ * Filed herewith. 'D' Previously filed. STATEMENT OF DIFFERENCES ------------------------ The dagger symbol shall be expressed as............................... 'D' EX-3.5 2 EXHIBIT 3.5 - -------------------------------------------------------------------------------- MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU - -------------------------------------------------------------------------------- (FOR BUREAU USE ONLY) DATE RECEIVED DEC 10 1996 FILED ---------------------- FILED DEC 11 1996 ---------------------- ADMINISTRATOR MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU - -------------------------------------------------------------------------------- RESTATED ARTICLES OF INCORPORATION FOR USE BY DOMESTIC PROFIT CORPORATIONS (PLEASE READ INFORMATION AND INSTRUCTIONS ON LAST PAGE) Pursuant to the provisions of Act 264, Public Acts of 1972, the undersigned corporation executes the following Articles: - -------------------------------------------------------------------------------- 1. The present name of the corporation is: DAISY PARTS, INC. 2. The corporation identification number (CID) assigned by the Bureau is: 097-545 3. All former names of the corporation are: 4. The date of filing the original Articles of Incorporation was: March 3, 1952 - -------------------------------------------------------------------------------- The following Restated Articles of Incorporation supersede the Articles of Incorporation as amended and shall be the Articles of Incorporation for the corporation: ARTICLE I - -------------------------------------------------------------------------------- The name of the corporation is: DAISY PARTS, INC. - -------------------------------------------------------------------------------- ARTICLE II - -------------------------------------------------------------------------------- THE PURPOSE OR PURPOSES FOR WHICH THE CORPORATION IS FORMED ARE: to engage in the manufacture and distribution of machines, machine shop products, and, in general, to carry on a manufacturing business, to own any and all real or personal property which may be necessary or incident to the business of the corporation, and in general to carry on any business in connection therewith and incident thereto not forbidden by the laws of the State of Michigan and with all the powers conferred upon corporations by the laws of the State of Michigan. - -------------------------------------------------------------------------------- (MICH.-435-10/23/89) SEAL APPEARS ONLY ON ORIGINAL ARTICLE III - -------------------------------------------------------------------------------- The total authorized capital stock is: 1. Common shares 2,000, no par value ------------------- preferred shares None ---- 2. A STATEMENT OF ALL OR ANY OF THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SHARES OF EACH CLASS IS AS FOLLOWS: all stocks are common stocks of no par value with equal rights and preferences and powers. - -------------------------------------------------------------------------------- ARTICLE IV - -------------------------------------------------------------------------------- 1. The address of the current registered office is: 30600 Telegraph Road, Bingham Farms, Michigan 48025 - -------------------------------------- ---------------------------------------- (Street Address) (City) (Zip Code) 2. The mailing address of the current registered office if different than above: ,Michigan - -------------------------------------- -------------------------------- (P.O. Box) (City) (Zip Code) 3. The name of the current resident agent is: The Corporation Company - -------------------------------------------------------------------------------- ARTICLE VI (Optional. Delete if not applicable.) - -------------------------------------------------------------------------------- Any action required or permitted by the Act to be taken at an annual or special meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if consents in writing, setting forth the action so taken, signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote on the action were present and voted. The written consents shall bear the date of signature of each shareholder who signs the consent. No written consents shall be effective to take the corporate action referred to unless, within 60 days after the record date for determining shareholders entitled to express consent to or to dissent from a proposal without a meeting, written consents signed by a sufficient number of shareholders to take the action are delivered to the corporation. Delivery shall be SEAL APPEARS ONLY ON ORIGINAL ARTICLE VI (continued) to the corporation's registered office, its principal place of business, or an officer or agent of the corporation having custody of the minutes of the proceedings of its shareholders. Delivery made to a corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporation action without a meeting by less than unanimous wirtten consent shall be given to shareholders who have not consented in writing. ARTICLE VII (Additional provisions, if any, may be inserted here; attach additional pages if needed.) Pursuant to the requirements of Section 1123(a)(6) of the Bankruptcy Code, the Corporation shall not issue nonvoting equity securities, subject, however, to further amendment of these Amended and Restated Articles of Incorporation as and to the extent permitted by applicable law. 5. COMPLETE SECTION (a) IF THE RESTATED ARTICLES WERE ADOPTED BY THE UNANIMOUS CONSENT OF THE INCORPORATORS BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS; OTHERWISE, COMPLETE SECTION (b) a. [ ] These Restated Articles of Incorporation were duly adopted on the ______ day of ________________, 19___, in accordance with the provisions of Section 642 of the Act by the unanimous consent of the incorporators before the first meeting of the Board of Directors. Signed this _____ day of ___________________________________, 19____ __________________________________ _________________________________ __________________________________ _________________________________ (Signature of all incorporators: type or print name under each signature) b. [X] These Restated Articles of Incorporation were duly adopted on the 5th day of December, 1996, in accordance with the provisions of Section 642 of the Act and: (check one of the following) [ ] were duly adopted by the Board of Directors without a vote of the shareholders. These Restated Articles of Incorporation only restate and integrate and do not further amend the provisions of the Articles of Incorporation as heretofore amended and there is no material discrepancy between those provisions and the provisions of these Restated Articles. [ ] were duly adopted by the shareholders. The necessary number of shares as required by statute were voted in favor of these Restated Articles. [ ] were duly adopted by the written consent of the shareholders having not less than the minimum number of votes required by statute in accordance with Section 407 (1) of the Act. Written notice to shareholders who have not consented in writing has been given. (Note: Written consent by less than all of the shareholders is permitted only if such provision appears in the Articles of Incorporation.) [X] were duly adopted by the written consent of all the shareholders entitled to vote in accordance with Section 407 (2) of the Act. Signed this 5th day of December, 1996 By /s/ JAMES A. RALSTON ----------------------------------------------------- (Only Signature of President, Vice President, Chairperson, Vice-Chairperson) James A. Ralston Vice President, General Counsel and Secretary ---------------------------------------------------- (Type or Print Name and Title) (MICH.-435) SEAL APPEARS ONLY ON ORIGINAL DOCUMENT WILL BE RETURNED TO NAME AND Name of person or organization MAILING ADDRESS INDICATED IN THE BOX remitting fees: BELOW. Include name, street and number (or P.O. box), city, state and ZIP code. --------------------------------- - ----------------------------------------- Eagle-Picher Industries, Inc. --------------------------------- 580 Walnut Street Preparer's name and business P.O. Box 779 telephone number: Cincinnati, Ohio 45201 Patricia A. Harris (513) 629-2453 INFORMATION AND INSTRUCTIONS 1. The articles of incorporation cannot be restated until this form, or a comparable document, is submitted. 2. Submit one original copy of this document. Upon filing, a microfilm copy will be prepared for the records of the Corporation and Securities Bureau. The original copy will be returned to the address appearing in the box above as evidence of filing. Since this document must be microfilmed, it is important that the filing be legible. Documents with poor black and white contrast, or otherwise illegible, will be rejected. 3. This document is to be used pursuant to sections 641 through 643 of the Act for the purpose of restating the articles of incorporation of a domestic profit corporation. Restated articles of incorporation are an integration into a single instrument of the current provisions of the corporation's articles of incorporation, along with any desired amendments to those articles. 4. Restated articles of incorporation which do not amend the articles of incorporation may be adopted by the board of directors without a vote of the shareholders. Restated articles of incorporation which amend the articles of incorporation require adoption by the shareholders. Restated articles of incorporation submitted before the first meeting of the board of directors require adoption by all of the incorporators. 5. Item 2--Enter the identification number previously assigned by the Bureau. If this number is unknown, leave it blank. 6. The duration of the corporation should be stated in the restated articles of incorporation only if it is not perpetual. 7. This document is effective on the date approved and filed by the Bureau. A later effective date, no more than 90 days after the date of delivery, may be stated. 8. If the restated articles are adopted before the first meeting of the board of directors, this document must be signed in ink by all of the incorporators. Other restated articles must be signed by the president, vice-president, chairperson or vice-chairperson. 9. FEES: NONREFUNDABLE FEE (Make remittance payable to State of Michigan).................................................... $10.00 Franchise fee--payable only if authorized shares is increased: first 60,000 authorized shares............................. $50.00 each additional 20,000 authorized shares................... $30.00 10. Mail form and fee to: Michigan Department of Commerce Corporation and Securities Bureau Corporation Division P.O. Box 30054 6546 Mercantile Way Lansing, Michigan 48909 Telephone: (517) 334-6302 SEAL APPEARS ONLY ON ORIGINAL EX-3.6 3 EXHIBIT 3.6 ACTION OF SOLE SHAREHOLDER WITHOUT A MEETING * * * * * * * * Eagle-Picher Industries, Inc., being the sole shareholder of Daisy Parts, Inc., a Michigan corporation ("the Corporation"), hereby amends and restates the Bylaws of the Corporation to provide as follows: BYLAWS ARTICLE 1 STOCK SECTION 1. CERTIFICATES OF SHARES. The Certificates for shares of the Capital Stock of the Corporation shall be in such form, not inconsistent with the Articles of Incorporation of the Corporation, as shall be prepared or be approved by the Board of Directors. The Certificates shall be signed by the President or Vice President, and also by the Secretary. SECTION 2. TRANSFER OF SHARES. Shares of the Capital Stock of the Corporation shall be transferred by endorsement of the certificate representing said shares by the registered holder thereof or his attorney and surrender of the certificate to the Secretary for cancellation. Whereupon the Secretary shall issue to the transferee or transferees, as specified by the endorsement upon the surrendered certificate, a new certificate for a like number of shares. Transfers shall only be made upon the books of the Corporation upon said surrender and cancellation. Transfers shall entitle the transferee to all the privileges, rights and interests of a shareholder of the Corporation. SECTION 3. CLOSING THE STOCK BOOKS. The stock books shall be closed for the meeting of the shareholders, and for the payment of dividends during such period, not more than forty days nor less than ten days before the date of the shareholders' meeting, as from time to time may be determined by the Board of Directors, and during such period no stock shall be transferred upon said books. SECTION 4. LIEN. The Corporation shall have a lien upon all stock or property of its members invested therein, for all 1 debts due to it by the owners thereof. SECTION 5. LOST CERTIFICATES. In case of the loss of any certificate of shares of stock, upon affidavit by the registered holder or his representative of such loss, and subject to any additional requirement of the Board of Directors , the Secretary shall issue a duplicate certificate in its place, upon the Corporation's being fully indemnified therefor. SECTION 6. DIVIDENDS. The Board of Directors, in its discretion from time to time, may declare dividends upon the Capital Stock from the surplus and net profits of the Corporation. SECTION 7. FISCAL YEAR. The fiscal year of the Corporation shall end on the 30th day of November in each year. SECTION 8. CORPORATE SEAL. The Board of Directors shall provide a suitable corporate seal, which seal shall be in charge of the Secretary, and shall be used by him. ARTICLE 2 SHAREHOLDERS' MEETING SECTION 1. TIME, PLACE AND PURPOSE. Meetings of the shareholders of the Corporation shall be held annually at the registered office of the Corporation in Hillsdale at 10:00 a.m. on the third (3rd) Tuesday of August of each year, if not a legal holiday, and if a legal holiday, then on the day following, for the purpose of electing directors, and for the transaction of such other business as may be brought before the meeting. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the President and Secretary, and shall be called by either of them at the request in writing or by vote of a majority of the Board of Directors, or at the request in writing by shareholders of record owning a majority in amount of the entire Capital Stock of the Corporation issued and outstanding. SECTION 3. NOTICE. Written notice of any shareholders' meeting shall be mailed to each shareholder at his last known address, as the same appears on the stock books of the Corporation, or otherwise, at least ten days prior to any meeting. Any notice of a special meeting shall indicate briefly the object or objects thereof. If all the shareholders waive notice of the meeting, no notice of the same shall be required; and whenever all the shareholders shall meet in person or by proxy, such meeting shall be valid for all purposes, without call or notice, and at such meeting any corporate action shall not be invalid for want of 2 notice. SECTION 4. QUORUM. At any meeting of the shareholders, the holders of sixty percent of all the voting shares of the Capital Stock of the Corporation issued and outstanding, present in person or represented by proxy, shall constitute a quorum. Meetings at which less than a quorum is represented may, however, be adjourned from time to time to a future date by those who attend, without further notice other than the announcement at such meeting; and when a quorum shall be present upon any such adjourned day, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 5. VOTING. Each shareholder shall be entitled to one vote for each share of voting stock standing registered in his or her name on the stock books of the Corporation, in person or by proxy duly appointed in writing and filed with the Secretary of the meeting, on all questions and elections. No proxy shall be voted after three years from its date unless said proxy provides for a longer period. SECTION 6. ORGANIZATION. The President shall call meetings of the shareholders to order and shall act as Chairman of such meetings, unless otherwise determined by the holders of a majority of all the shares of the Capital Stock issued and outstanding, present in person or by proxy. The Secretary of the Corporation shall act as Secretary of all meetings of the Corporation; but in the absence of the Secretary at any meeting of the shareholders or his inability to act as Secretary, the presiding officer may appoint any person to act as Secretary of the meeting. SECTION 7. INSPECTORS. Whenever any shareholder present at a meeting of shareholders shall request the appointment of inspectors, a majority of the shareholders present at such meeting and entitled to vote thereat shall appoint inspectors who need not be shareholders. If the right of any person to vote at such meeting shall be challenged, the inspectors of election shall determine such right. The inspectors shall receive and count the votes either upon an election or for the decision of any question and shall determine the result. A writing by the inspectors certifying any vote shall be prima facie evidence thereof. SECTION 8. NEW SHAREHOLDERS. Every person becoming a shareholder in the Corporation shall be deemed to assent to these Bylaws, and shall designate to the Secretary the address to which he desires that the notice herein required to be given may be sent; and all notices mailed to such addresses, with postage prepaid, shall be considered as duly given at the date of mailing. Any person failing to so designate his address shall be deemed to have waived notice of such meeting. 3 SECTION 9. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the shareholders at any annual or special meeting may be taken by a writing signed by all of the shareholders indicating their unanimous consent. ARTICLE 3 DIRECTORS SECTION 1. DUTIES, NUMBER, CLASSIFICATION AND TERM OF OFFICE. The business and the property of the Corporation shall be managed and controlled by the Board of Directors. The number of Directors shall be three, but the number may be changed from time to time by the alteration of these Bylaws. Directors shall hold office for a term of one year, and/or until their successors are elected and qualified. SECTION 2. PLACE OF MEETING. The Directors may hold their meetings in such place or places within or without this State as a majority of the Board of Directors may from time to time determine. SECTION 3. MEETINGS. Meetings of the Board of Directors may be called at any time by the President or Secretary, or by a majority of the Board of Directors. Directors shall be notified in writing, personally or by telephone of the time, place and purpose of all meetings of the Board at least three days prior to the meeting, except the regular meeting held immediately after the annual meeting of shareholders. Any Director shall, however, be deemed to have waived such notice by his attendance at any meeting. SECTION 4. QUORUM. A majority of the Board of Directors shall constitute a quorum for the transaction of business; and if at any meeting of the Board of Directors there be less than a quorum present, a majority of those present may adjourn the meeting from time to time. SECTION 5. VACANCIES. Vacancies in the Board of Directors shall be filled by the remaining members of the Board. A Director so elected to fill any vacancy shall be a director until his successor is elected by the shareholders, who may make such election at the next annual meeting of the stockholders or at any special meeting duly called for that purpose. SECTION 6. COMPENSATION. No Director shall receive any salary or compensation for his services as Director, unless otherwise especially ordered by the Board of Directors or by Bylaw. SECTION 7. ACTION WITHOUT MEETING. Any action required 4 or permitted to be taken by the Board of Directors at any regular, annual , or special meeting may be taken by the Directors by a writing signed by all of the Directors indicating their unanimous consent. ARTICLE 4 OFFICERS SECTION 1. The Board of Directors shall select a President, a Secretary and a Treasurer and may select one or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers, who shall be elected by the Board of Directors at their regular meeting held immediately after the adjournment of the regular annual shareholders' meeting. The term of office shall be for one year and/or until their successors are chosen. No one of such officers need be a director. Any two of the above offices, except those of President and Vice-President, may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity. The Board of Directors may fix the salaries of the officers of the Corporation. SECTION 2. The Board of Directors may also appoint such other officers and agents as it may deem necessary for the transaction of the business of the Corporation. All officers and agents shall respectively have such authority and perform such duties in the management of the property and affairs of the Corporation as may be designated by the Board of Directors. Any officer or agent may be removed, or any vacancies filled, by the Board of Directors whenever in its judgment the business interests of the Corporation will be served thereby. SECTION 3. The Board of Directors may secure the fidelity of any or all of such officers by bond or otherwise. ARTICLE 5 DUTIES OF OFFICERS SECTION 1. PRESIDENT. The President shall be the chief executive officer of the Corporation, and in the recess of the Board of Directors shall have the general control and management of its business and affairs, subject, however, to the right of the Board of Directors to delegate any specific power to any other officer or officers of the Corporation, except such as may be by statute exclusively conferred upon the President. SECTION 2. VICE-PRESIDENT. In case the office of 5 President shall become vacant by death, resignation, or otherwise, or in case of the absence of the President, or his disability to discharge the duties of his office, such duties shall, for the time being, devolve upon the Vice-President designated by the Board, who shall do and perform such other acts as the Board of Directors may, from time to time, authorize him to do. SECTION 3. TREASURER. The Treasurer shall have custody and keep account of all money, funds and property of the Corporation, unless otherwise determined by the Board of Directors, and he shall render such accounts and present such statements to the Directors and President as may be required of him. He shall deposit all funds of the Corporation which may come into his hands in such bank or banks as the Board of Directors may designate. He shall keep all bank accounts in the name of the Corporation and shall exhibit his books and accounts, at all reasonable times, to any Director of the Corporation upon application at the office of the corporation during business hours. He shall pay out money as the business may require upon the order of the properly constituted officer or officers of the Corporation, taking proper vouchers therefor; provided, however, that the Board of Directors shall have the power by resolution to delegate any of the duties of the Treasurer to other officers, and to provide by what officers, if any, all bills, notes, checks, vouchers, orders or other instruments shall be countersigned. He shall perform, in addition, such other duties as may be delegated to him by the Board of Directors. SECTION 4. SECRETARY. The Secretary of the Corporation shall keep the minutes of all the meetings of the shareholders and Board of Directors in books provided for that purpose. He shall attend to the giving and receiving of all notices of the Corporation. He shall have charge of the stock books and such other books and records as the Board of Directors may direct, all of which, shall at all reasonable times be open to the examination of any Director upon application at the office of Secretary. He shall perform, in addition, such other duties as may be delegated to him by the Board of Directors. ARTICLE 6 NOTICE NOTICE. Any notice required by statute or by these Bylaws to be given to the shareholders, to directors, or to any officer of the Corporation, shall be deemed to be sufficiently given by depositing the same in a post office box, in a sealed, post-paid wrapper, addressed to such shareholder, director, or 6 officer at his last known address, and such notice shall be deemed to have been given at the time of such mailing. ARTICLE 7 AMENDMENTS The shareholders or the Board of Directors may alter, amend, add to or repeal these Bylaws by majority vote, or by a writing signed by all of the shareholders or all of the directors indicating their unanimous consent, including the fixing and altering of the Board of Directors; provided that the Board of Directors shall not make or alter any Bylaws fixing their qualifications, classification, or term of office. IN WITNESS WHEREOF, Eagle-Picher Industries, Inc. has caused this Action of Sole Shareholder Without a Meeting to be executed by a duly authorized officer this 28th day of November, 1994. EAGLE-PICHER INDUSTRIES, INC. By /s/ JAMES A. RALSTON ------------------------------- James A. Ralston, Vice President, General Counsel and Secretary ATTEST: /s/ DAVID W. MATTHEWS - ---------------------------------- David W. Matthews Assistant Secretary 7 EX-3.7 4 EXHIBIT 3.7 CERTIFICATE OF INCORPORATION OF EAGLE-PICHER DEVELOPMENT COMPANY, INC. I, the undersigned, for the purpose of incorporating and organizing a corporation under the General Corporation Law of the State of Delaware, do hereby certify as follows: FIRST: The name of the corporation (hereinafter called the Corporation) Eagle-Picher Development Company, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of common stock which the Corporation shall have authority to issue is 100. All such shares shall be without par value. FIFTH: The name and mailing address of the incorporator is Jon A. Christensen, 1900 Huntington Center, Columbus, Ohio 43215. SIXTH: The names and mailing addresses of the persons who are to serve as directors of the Corporation until the first annual meeting of stockholders or until their successors are elected and qualified are as follows: NAME MAILING ADDRESS John E. Powers P.O. Box 779, Cincinnati, Ohio 45201 Corinne M. Faris P.O. Box 779, Cincinnati, Ohio 45201 James A. Ralston P.O. Box 779, Cincinnati, Ohio 45201 SEVENTH: The board of directors of the Corporation shall have power to make, alter or amend By-Laws of the Corporation. EIGHTH: (a) Each person who is or was or had agreed to become a director or officer of the Corporation, or each such person who is or was serving or had agreed to serve at the request of the Board of Directors or an officer of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified by the Corporation to the full extent permitted by the General Corporation Law of the State of Delaware or any other applicable laws as presently or hereafter in effect. Without limiting the generality or effect of the foregoing, the Corporation may enter into one or more agreements with any person which provide for -2- indemnification greater or different than that provided in this paragraph (a) of Section Eighth. No amendment to or repeal of this paragraph (a) of Section Eighth shall apply to or have any effect on the right to indemnity permitted or authorized hereunder for or with respect to claims asserted before or after such amendment or repeal arising from acts or omissions occurring in whole or in part before the effective date of such amendment or repeal. (b) To the full extent permitted by the General Corporation Law of the State of Delaware or any other applicable laws as presented or hereafter in effect, no director of the Corporation shall be personally liable to the corporation or its stockholders for or with respect to any acts or omissions in the performance of his or her duties as a director of the Corporation. No amendment to or repeal of this paragraph (b) of Section Eighth shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. NINTH: The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and -3- pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article. IN WITNESS WHEREOF, I the undersigned, being the incorporator hereinabove named, do hereby execute this Certificate of Incorporation this 26th day of August, 1987. JON A. CHISTENSEN ---------------------------------- Jon A. Christensen -4- EAGLE-PICHER DEVELOPMENT COMPANY, INC. --------------------- ACTION OF BOARD OF DIRECTORS UPON UNANIMOUS WRITTEN CONSENT The undersigned, constituting all of the Members of the Board of Directors of Eagle-Picher Development Company, Inc. (the "Company"), a Delaware corporation, hereby consent to the adoption of the following resolution: RESOLVED, that the By-Laws of the Company be, and they hereby are, amended as follows: Article II, Section 2. Annual meetings of stockholders shall be held on the 4th Tuesday of January, if not a legal holiday, and if a legal holiday, then on the next day following which is not a Saturday, Sunday, or legal holiday, or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote, or by written consent, a board of directors, and transact such other business as may properly be brought before the meeting. 12/29/93 MELVIN F. CHUBB, JR. - ------------------ ------------------------------- Date Melvin F. Chubb, Jr., Director December 28, 1993 JAMES A. RALSTON - ------------------ ------------------------------- Date James A. Ralston, Director 1/10/94 ANDRIES RUIJSSENAARS - ------------------ ------------------------------- Date Andries Ruijssenaars, Director EX-3.8 5 EXHIBIT 3.8 EAGLE-PICHER DEVELOPMENT COMPANY, INC. BY-LAWS ARTICLE I OFFICES Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders, commencing with the year 1988, shall be held at such date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote or by written ballot a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 4. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 5. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 6. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the -2- stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. Section 7. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 8. Each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder. Section 9. Any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. -3- ARTICLE III DIRECTORS Section 1. The board of directors shall consist of one or more members. The first board shall consist of three directors. Thereafter the number of directors shall be determined by resolution of the board of directors or by the stockholders at the annual meeting or a special meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. Section 3. The business and affairs of the Corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. -4- Section 4. The board of directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 6. Special meetings of the board may be called by the chairman of the board or by the president on one day's notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors. Section 7. At all meetings of the board a majority of the directors then in office shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board -5- of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes or proceedings of the board or committee. Section 9. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 10. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such -6- committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the by-laws of the Corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Section 11. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on -7- the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram or telephone. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the Corporation shall be chosen by the board of directors and shall be a president, a secretary and a treasurer. The board of directors may also choose a chairman of the board of directors, one or more vice-presidents, and one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide. Section 2. The officers of the Corporation shall hold office until their successors are chosen and qualified. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the Corporation shall be filled by the board of directors. -8- Section 3. The officers of the Corporation shall have such authority and shall perform such duties as are customarily incident to their respective offices, or as may be specified from time to time by the directors regardless of whether such authority and duties are customarily incident to such office. ARTICLE VI CERTIFICATES OF STOCK Section 1. Every holder of stock in the Corporation shall be entitled to have a certificate, signed in the name of the Corporation by the president or a vice-president and the secretary or an assistant secretary of the Corporation, certifying the number of shares owned by him in the Corporation. Section 2. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE VII INDEMNIFICATION OF DIRECTORS AND OFFICERS Each person who is or was or had agreed to become a director or officer of the Corporation, or each such person who is or was serving or had agreed to serve at the request of the -9- Board of directors or an officer of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified by the Corporation to the full extent permitted by the General Corporation Law of the State of Delaware or any other applicable laws as presently or hereafter in effect. Without limiting the generality or effect of the foregoing, the Corporation may enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article VII. No amendment to or repeal of this Article VII shall apply to or have any effect on the right to indemnity permitted or authorized hereunder for or with respect to claims asserted before or after such amendment or repeal arising from acts or omissions occurring in whole or in part before the effective date of such amendment or repeal. The Corporation may, but shall not be obligated to, maintain insurance, at its expense, for its benefit in respect of such indemnification and that of any person whether or not the Corporation would otherwise have the power to indemnify such person. ARTICLE VIII GENERAL PROVISIONS Section 1. Dividends upon the capital stock of the Corporation, subject to the provisions of the certificate of -10- incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 3. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or perscns as the board of directors may from time to time designate. Section 4. The board of directors may adopt a corporate seal and use the same by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE IX AMENDMENTS Section 1. These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the board of directors. -11- Exhibit C Board Resolutions EX-3.9 6 EXHIBIT 3.9 CERTIFICATE OF INCORPORATION OF EAGLE-PICHER FAR EAST, INC. 1. The name of the corporation is: EAGLE-PICHER FAR EAST, INC 2. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock which the corporation shall have authority to issue is One Hundred (100) all of such shares shall be without par value. 5. The board of directors is authorized to make, alter or repeal the by-laws of the corporation. Election of directors need not be by written ballot. 6. The name and mailing address of the incorporator is: V.A. Brookens Corporation Trust Center 1209 Orange Street Wilmington, Delaware 19801 7. To the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this llth day of January, 1988. V.A. Brookens ----------------------------- V.A. Brookens EX-3.10 7 EXHIBIT 3.10 EAGLE-PICHER FAR EAST, INC. BY-LAWS ARTICLE I OFFICES Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders, commencing with the year 1988, shall be held on the fourth Tuesday of January if not a legal holiday, and if a legal holiday, then on the next secular day following, at 9:00 A.M., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote or by written ballot a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 4. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 5. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 6. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the -2- stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. Section 7. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 8. Each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder. Section 9. Any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. -3- ARTICLE III DIRECTORS Section 1. The board of directors shall consist of one or more members. The first board shall consist of three directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the stockholders at the annual meeting or a special meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. Section 3. The business and affairs of the Corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these -4- by-laws directed or required to be exercised or done by the stockholders. Section 4. The board of directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 6. Special meetings of the board may be called by the chairman of the board or by the president on one day's notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors. Section 7. At all meetings of the board a majority of the directors then in office shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. -5- Section 8. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes or proceedings of the board or committee. Section 9. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 10. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors -6- in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the by-laws of the Corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Section 11. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or -7- stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram or telephone. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the Corporation shall be chosen by the board of directors and shall be a president, a secretary and a treasurer. The board of directors may also choose a chairman of the board of directors, one or more vice-presidents, and one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide. Section 2. The compensation of all officers and agents of the Corporation who are also directors of the -8- Corporation shall be fixed by the board of directors. The board of directors may delegate the power to fix the compensation of all other officers and agents of the Corporation to an officer of the Corporation. Section 3. The officers of the Corporation shall hold office until their successors are chosen and qualified. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the Corporation shall be filled by the board of directors. Section 4. The officers of the Corporation shall have such authority and shall perform such duties as are customarily incident to their respective offices, or as may be specified from time to time by the directors regardless of whether such authority and duties are customarily incident to such office. ARTICLE VI CERTIFICATES OF STOCK Section 1. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by the president or a vice-president and the secretary or an assistant secretary of the Corporation, certifying the number of shares owned by him in the Corporation. Section 2. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, -9- assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. ARTICLE VII INDEMNIFICATION OF DIRECTORS AND OFFICERS Each person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person) shall be indemnified by the Corporation to the full extent permitted or authorized by the General Corporation Law of the State of Delaware. The Corporation may, but shall not be obligated to, maintain insurance, at its expense, for its benefit in respect of such indemnification and that of any such person whether or not the Corporation would otherwise have the power to indemnify such person. ARTICLE VIII GENERAL PROVISIONS Section 1. Dividends upon the capital stock of the Corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of -10- directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 3. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. Section 4. The fiscal year of the Corporation shall be fixed by resolution of the board of directors. Section 5. The board of directors may adopt a corporate seal and use the same by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. -11- ARTICLE IX AMENDMENTS Section 1. These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the board of directors. -12- EX-3.11 8 EXHIBIT 3.11
- -------------------------------------------------------------------------------------------- MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU - -------------------------------------------------------------------------------------------- Date Received (FOR BUREAU USE ONLY) DEC 27 1995 - ---------------------------------- FILED DEC 28 1995 - ---------------------------------- Name Administrator James A. Ralston, Esq. MICHIGAN DEPARTMENT OF COMMERCE - ---------------------------------------------------- Address Eagle-Picher Industries, Inc. Corporation & Securities Bureau 580 Walnut Street - ---------------------------------------------------- City State Zip Code Cincinnati Ohio 45202 EFFECTIVE DATE: - ---------------------------------------------------- ----------------------------------- DOCUMENT WILL BE RETURNED TO THE NAME AND ADDRESS YOU ENTER ABOVE
357-915 ARTICLES OF INCORPORATION FOR USE BY DOMESTIC PROFIT CORPORATIONS (Please read information and instructions on the last page) Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned corporation executes the following Articles: ARTICLE I - ------------------------------------------------------------------------------- The name of the corporation is: Eagle-Picher Fluid Systems Inc. - ------------------------------------------------------------------------------- ARTICLE II - ------------------------------------------------------------------------------- The purpose or purposes for which the corporation is formed is to engage in any activity within the purposes for which corporations may be formed under the Business Corporation Act of Michigan. - ------------------------------------------------------------------------------- ARTICLE III - ------------------------------------------------------------------------------- The total authorized shares: 1. Common Shares 100 Shares without par value. -------------------------------------------------------- Preferred Shares----------------------------------------------------- 2. A statement of all or any of the relative rights, preferences and limitations of the shares of each class is as follows: All shares shall be of the same class of common stock and each share shall have equal rights, in all respects, with each other share. - ------------------------------------------------------------------------------- SEAL APPEARS ONLY ON ORIGINAL
ARTICLE IV - --------------------------------------------------------------------------------------------- 1. The address of the registered office is: 30600 Telegraph Rd., Bingham Farms , Michigan 48025 ------------------------------------------- ------------------ (Street Address) (City) (Zip Code) 2. The mailing address of the registered office, if different than above: ___________________________________________ , Michigan _________________ (Street Address or P.O. Box) (City) (Zip Code) 3. The name of the resident agent at the registered office is: The Corporation Company ---------------------------- - ----------------------------------------------------------------------------------------------
ARTICLE V - ------------------------------------------------------------------------------- The name(s) and address(es) of the incorporator(s) is (are) as follows: Name Residence or Business Address James A. Ralston c/o Eagle-Picher Industries, Inc. - --------------------------------------------------------------------------- 580 Walnut Street Cincinnati, Ohio 45202 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ARTICLE VI (OPTIONAL. DELETE IF NOT APPLICABLE) ARTICLE VII (OPTIONAL. DELETE IF NOT APPLICABLE) SEAL APPEARS ONLY ON ORIGINAL Use space below for additional Articles or for continuation of previous Articles. Please identify any Article being continued or added. Attach additional pages if needed. ARTICLE VI Any action required or permitted to be taken by the shareholders at any annual or special meeting may be taken by a writing signed by all of the shareholders indicating their unanimous consent. I, (We), the incorporator(s) sign my (our) name(s) this 21st day of December , 1995. --------- -------------------- -- /s/ JAMES A. RALSTON - ---------------------------------------- -------------------------------------------- - ---------------------------------------- -------------------------------------------- - ---------------------------------------- -------------------------------------------- - ---------------------------------------- -------------------------------------------- - --------------------------------------- --------------------------------------------
ACTION BY WRITTEN CONSENT OF THE SOLE INCORPORATOR OF EAGLE-PICHER FLUID SYSTEMS, INC. (the 'Corporation') The undersigned being the sole incorporator of Eagle-Picher Fluid Systems, Inc., a Michigan corporation, hereby adopts the following resolutions: RESOLVED, that the Bylaws attached hereto be, and the same hereby are, adopted as and for the Bylaws of the Corporation, RESOLVED, that the following subscription for shares in the Corporation be, and it hereby is, accepted and directed to be filed with the minutes: Names of Subscriber Number and Class of Shares ------------------- ---------------------------- Eagle-Picher One Hundred common shares Industries, Inc. RESOLVED, that the following person be, and he hereby is, elected Director of the Corporation until the first annual meeting of shareholders or until his successors are elected and qualified: James A. Ralston IN WITNESS WHEREOF, James A. Ralston, has signed this Action of Sole Incorporator this 4th day of April, 1996. ----- /s/ JAMES A. RALSTON ------------------------- James A. Ralston EX-3.12 9 EXHIBIT 3.12 EAGLE-PICHER FLUID SYSTEMS, INC. BYLAWS ARTICLE I SHAREHOLDERS Section 1.1. Place of Meetings. Meetings of shareholders, whether annual or special, shall be held at such place within or outside of the State of Michigan as shall be determined by the Board of Directors. In the absence of such determination, meetings shall be held at the principal office of the corporation. Section 1.2. Annual Meeting. The annual meeting of shareholders of the corporation shall be held on such date as shall be designated by the Board of Directors. In the absence of such designation, the annual meeting shall be held at 2:00 P.M. on the fourth Tuesday of March in each year if not a legal holiday, and, if a legal holiday, then on the next day not a legal holiday. At the annual meeting, directors shall be elected, and such other business shall be transacted as may properly be brought before the meeting. Section 1.3. Special Meetings. Special meetings of the shareholders may be called at any time by the majority of Directors, the President or the Secretary of the Corporation, or by the majority of the shareholders. Section 1.4. Actions Without Meeting. Any action required or permitted to be taken by the shareholders at any annual or special meeting may be taken by a writing signed by all of the shareholders indicating their unanimous consent, which writing or writings shall be filed with or entered upon the records of the corporation. Section 1.5. Notice of Meetings. Written notice of each meeting of shareholders, stating the time, place and purposes of the meeting, shall be given not less than ten nor more than sixty days before the date of the meeting by or at the direction of the President, the Secretary or any other person required or permitted by these Bylaws to give the notice. Notice of adjournment of a meeting need not be given if the time and place to which it is adjourned are fixed and announced at the meeting. Section 1.6. Waiver of Notice. Notice of the time, place and purposes of any meeting of shareholders may be waived in writing by any shareholder, either before or after the holding of such meeting. Such writing shall be filed with or entered upon the records of the meeting. The attendance of any shareholder at any 1 meeting without protesting, prior to or at the commencement of the meeting, the lack of proper notice shall be deemed to be a waiver by the shareholder of notice of the meeting. Section 1.7. Quorum. The holders of a majority of the shares of each class of shares of the corporation entitled to vote at any meeting of shareholders, present in person or by proxy, shall constitute a quorum at such meetings. If a quorum is not present at a meeting of the shareholders, those shareholders present in person or by proxy and entitled to vote at the meeting shall have the power to adjourn the meeting without notice other than announcement at the meeting of the place, date and hour of the adjourned meeting, until a quorum is present in person or by proxy at the adjourned meeting. At an adjourned meeting at which a quorum is present in person or by proxy, the corporation may transact any business which might have been transacted at the original meeting. Section 1.8. Voting. When a quorum is present at any meeting, except as otherwise expressly required by statute, the Articles of Incorporation or these Bylaws, a majority of the votes cast at a meeting of shareholders shall control. Unless the express terms of any class of shares provide otherwise, each share shall entitle the holder of such share to one vote upon each matter properly submitted to the shareholders for their vote at a meeting of shareholders. Section 1.9. Proxies. Persons entitled to vote shares or to act with respect to shares may vote or act in person or by proxy. The person appointed as a proxy need not be a shareholder. A proxy must be appointed in a writing signed by the shareholder. No appointment of a proxy is valid after the expiration of three years after it is made, unless the writing specifies the date on which it is to expire or the length of time for which it is to continue in force. Every appointment of a proxy shall be revocable, unless the appointment is coupled with an interest. ARTICLE II DIRECTORS Section 2.1. General Powers. All of the authority of the corporation shall be exercised by or under the direction of the Board of Directors, subject to limitations imposed by law, the Articles of Incorporation or these Bylaws. Section 2.2. Number, Classes and Election. The election of directors shall take place at the annual meeting of shareholders or at a special meeting called for that purpose. The number of directors of the Corporation shall be such number, one or more, as 2 shall be determined from time to time by action of the Board of Directors of the Corporation. Section 2.3. Vacancies. All vacancies in the Board of Directors, including a vacancy resulting from an increase in the number of directors, may be filled by the shareholders or the Board of Directors. Section 2.4. Removal. Any director may be removed from office as provided by law. Section 2.5. Place of Meetings. All meetings of the Board of Directors shall be held at the principal office of the corporation or at such place, within or outside of the State of Michigan, as may be designated from time to time by a majority of the directors, or as may be designated in the notice or in the waiver of notice of such meeting. Section 2.6. Organizational Meetings. An organizational meeting of the Board of Directors may be held, without call or notice, immediately following each annual meeting of the shareholders of this corporation or at such alternative time as may be provided in a notice of meeting. Section 2.7. Other Meetings; Notice. Other meetings of the Board of Directors may be held at any time on the call of the President or any director. Written notice of any such meeting, unless waived, shall be given not less than two days prior to the day of the meeting. Notice also may be given personally or by telephone at least two days prior to such meeting, The notice shall state the time and place, but need not state the purposes, of the meeting. If the Secretary fails or refuses to give such notice promptly, the notice may be given by the person who called the meeting. Notice of adjournment of a meeting of the Board of Directors need not be given if the time and place to which it is adjourned are fixed and announced at such meeting. Section 2.8. Waiver of Notice. Notice of the time and place of any meeting of the Board of Directors may be waived in writing, by any director, either before or after the meeting takes place, which writing shall be filed with or entered upon the records of the meeting. The attendance of any director at any meeting without protesting, prior to or at the commencement of the meeting, the lack of proper notice, shall be deemed to be a waiver by such director of notice of the meeting. Section 2.9. Quorum. A majority of the whole authorized number of directors is necessary to constitute a quorum for a meeting of the Board of Directors, except that a majority of the directors in office constitutes a quorum for filling a vacancy in the Board of Directors. The act of a majority of the directors present at a meeting at which a quorum is present is the act of the 3 Board of Directors, except as otherwise provided by law, the Articles of Incorporation or these Bylaws. Section 2.10. Telephonic Meetings. Meetings of the directors may be held by means of any communications equipment if all persons participating can hear each other, and participation in a meeting in such manner shall constitute presence at such meeting. Section 2.11. Actions Without Meeting. Any action that may be authorized or taken at a meeting of the Board of Directors of the corporation may be authorized or taken without a meeting with the affirmative vote or approval of, and in a writing or writings signed by, all the directors, which writing or writings shall be filed with or entered upon the records of the corporation. ARTICLE III OFFICERS Section 3.1. Officers; Terms; Duties. The Board of Directors must elect a President, Secretary and Treasurer and may, in its discretion, elect a Chairman of the Board. The Board of Directors also may elect such Vice Presidents, Assistant Secretaries, Assistant Treasurers, a Controller and such other officers and agents as the Board of Directors may determine. All officers shall be elected by the Board of Directors, and they shall hold office for such period, exercise such authority and perform such duties as the Board of Directors may from time to time determine. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity if such instrument is required by law, the Articles of Incorporation or these Bylaws to be executed, acknowledged or verified by two or more officers. Section 3.2. Election, Term, Eligibility and Removal. The officers of the corporation shall be elected annually by the Board of Directors at its organizational meeting held pursuant to Section 2.6 or at a special meeting held for such purpose. New or additional officers may be elected at any meeting of the Board of Directors. Each officer shall serve at the pleasure of the Board of Directors, and each officer shall hold office until his or her successor is chosen or until his or her death, resignation or removal. Any officer may be removed, with or without cause, by the Board of Directors without prejudice to the contract rights of such officer. Section 3.3. Vacancies. If any office shall become vacant by reason of death, resignation, removal or otherwise, the Board of Directors shall elect a successor to fill such office. 4 Section 3.4. Bonds. If the Board of Directors shall so require, any officer or agent of the corporation shall give a bond to the corporation in such amount and with such surety as the Board of Directors may deem sufficient, conditioned upon the faithful performance of his or her duties. Section 3.5. Delegation of Duties. In case of the absence of any officer of the corporation or for any other reason that may seem sufficient to the Board of Directors, the Board of Directors may, for such time as the Board of Directors determines, delegate powers and duties of such officer to any other officer or to any director. ARTICLE IV SHARES Section 4.1. Share Certificates. Certificates for shares of the corporation shall be in such form and style as the Board of Directors may determine, and each certificate shall set forth the following: (a) the name of the corporation and that the corporation is organized under the laws of the State of Michigan; (b) the name of the holder of the shares represented by the certificate; (c) the number and class (or series of any class) represented by such certificate; (d) the par value of each share represented by such certificate or a statement that such shares are without par value; and (e) any restrictions upon transfer of the shares represented by such certificate. Certificates for shares of the corporation shall be numbered serially for each class of shares (or series thereof) as they are issued, and shall be signed by the Chairman of the Board, the President or a Vice President, and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer. Section 4.2. Lost Certificate. Any shareholder claiming that a certificate for shares has been lost, stolen or destroyed may make an affidavit or affirmation of the fact. Subject to any requirement established by the Board of Directors, a new certificate may be issued of the same tenor and representing the same number, class or series of shares, or any combination thereof, as were represented by the certificate alleged to have been lost, 5 stolen or destroyed. Section 4.3. Share Transfers. Shares in the Corporation are not transferable by mere delivery. Shares in the Corporation shall be transferable by endorsement of the certificate representing such shares by the registered holder or by instrument in such other form as may be approved by the Board of Directors, and delivery of the certificate or instrument to the Secretary. The transferor shall be deemed to remain the holder of such shares until the name of the transferee is entered in the register in respect thereof. ARTICLE V INDEMNIFICATION Section 5.1. Indemnification of Directors and Officers. Any person who is a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he or she is or was a director or officer of the corporation or, as a director or officer of the corporation, is or was serving at the request of the corporation as a director, officer, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including service with respect to employee benefit plans) , whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, trustee, employee or agent or in any other capacity (and whether or not he or she continues as such director or officer), shall be indemnified and held harmless by the corporation to the fullest extent authorized by law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys' fees, and, in respect of claims not made by or in the right of the corporation, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) actually and reasonably incurred by such person in connection with the Proceeding; provided, however, that the corporation shall indemnify any person seeking indemnity in connection with a Proceeding initiated by such person only if such Proceeding was authorized by the Board of Directors. Section 5.2. Indemnification of Employees and Agents. The corporation may, to such extent and in such manner as is determined by the Board of Directors , but in no event to an extent greater than is permitted by the Michigan Business Corporation Act, indemnify any employees and agents of the corporation and any other persons permitted to be indemnified by the Michigan Business Corporation Act, but whose right to indemnification is not covered 6 by Section 5.1, above. Section 5.3. Right of Claimant to Bring Suit. If a claim under Section 5.1 hereof is not paid in full by the corporation within 30 days after a written claim therefor has been received by the corporation, the claimant may bring suit against the corporation to recover the unpaid amount of the claim. If the claimant is successful in whole or in part, he or she also shall be entitled to be paid the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in a Proceeding in advance of its final disposition where the required undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the applicable law for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including the Board of Directors, independent legal counsel, or the shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct, nor an actual determination by the corporation (including the Board of Directors, independent legal counsel, or the shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 5.4. Contractual Rights. The right to be indemnified under Section 5.1 (but not Section 5.2), including any right to the reimbursement or advancement of expenses pursuant thereto, (i) is a contract right based upon good and valuable consideration, pursuant to which the person entitled thereto may bring suit as if the provisions hereof were set forth in a separate written contract between the corporation and the director or officer, (ii) is intended to be retroactive and shall be available with respect to events occurring prior to the adoption hereof, and (iii) shall continue to exist after the rescission or restrictive modification hereof with respect to events occurring prior thereto. Section 5.5. Non-Exclusivity of Rights. The rights conferred on any person by this Article V shall not be exclusive, and shall be in addition to, any other right of indemnification or reimbursement which such person may have under any statute, provision of the Articles of Incorporation of the corporation, agreement, vote of shareholders or disinterested directors or otherwise. Section 5.6. Insurance. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation against expenses, liability or loss incurred in respect of the Proceeding, whether or 7 not the corporation would have the power to indemnify such person against such expense, liability or loss under the Michigan Business Corporation Act. Section 5.7. Determinations. Any determination to be made under this Article V by the Board of Directors shall be made as follows: (a) by a majority vote of a quorum consisting of directors of the corporation who were not and are not parties to or threatened with any such action, suit, or proceeding; (b) if the quorum described in paragraph (a) of this Section 5.7 is not obtainable or if a majority vote of a quorum of disinterested directors so directs, in a written opinion by independent legal counsel other than an attorney, or a firm having associated with it an attorney, who has been retained by or who has performed services for the corporation or any person to be indemnified within the past five years; (c) by the shareholders; or (d) by the court of common pleas or the court in which such action, suit, or proceeding was brought. ARTICLE VI NOTICE Whenever provisions of law, the Articles of Incorporation or these Bylaws require notice to be given to any director or shareholder, personal or hand delivery of such notice shall not be required. Any such notice may be given in writing, by mail (by deposit in a post office or letter box, in an envelope with postage affixed), by courier, by overnight package delivery, by telegraph or by telecopier, in any case addressed to such director or shareholder at such address as appears on the records of the corporation. Notice given by any one of the above methods shall be sufficient, and the method of giving notice to all directors or to all shareholders, as the case may be, need not be uniform. If otherwise permitted by these Bylaws, notice to directors may also be given by telephone call. Such notice shall be deemed to be given at the time when it is so mailed, or delivered to a courier, an overnight package delivery company or a telegraph company, or, in the case of a telecopy, when transmission has been confirmed. In computing the period of time for the giving of notice, the day on which notice is given shall be excluded, and the day when the act for which notice is given is to be done is included, unless the 8 instrument calling for the notice otherwise provides. ARTICLE VII SEAL A corporate seal shall not be required. If the Board of Directors elects to provide a seal, failure to affix such seal to any document shall not affect the validity thereof. ARTICLE VIII AMENDMENT These Bylaws may be altered, amended or repealed, or new Bylaws may be adopted, (i) at any annual or special meeting of the shareholders called for that purpose, by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the corporation on the proposal, or (ii) without a meeting by the written consent of the holders of the corporation's common shares entitling them to exercise two-thirds of the voting power of the corporation on such proposal. 9 EX-3.13 10 EXHIBIT 3.13 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA NOV 17 1986 ARTICLES OF INCORPORATION OF EAGLE-PICHER MINERALS, INC. * * * * * * FIRST. The name of the corporation is EAGLE-PICHER MINERALS, INC. SECOND. Its principal office in the State of Nevada is located at One East First Street, Reno, Washoe County, Nevada 89501. The name and address of its resident agent is The Corporation Trust Company of Nevada, One East First Street, Reno, Nevada 89501. THIRD. The nature of the business, or objects or purposes proposed to be transacted, promoted or carried on are: To engage in any lawful activity and to manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description. FOURTH. The total number of shares that may be issued by the corporation is one (1) share without nominal or par value. Such share without nominal or par value may be issued by the corporation from time to time for such consideration as may be fixed from time to time by the board of directors. FIFTH. The governing board of this corporation shall be known as directors, and the number of directors may from time to time be increased or decreased in such manner as shall be provided by the by-laws of this corporation, provided that the number of directors shall not be reduced to less than three (3), except that in cases where all the shares of the corporation are owned beneficially and of record by either one or two stockholders, the number of directors may be less than three (3) but not less than the number of stockholders. The names and post-office addresses of the first board of directors, which shall be three (3) in number, are as follows:
NAME POST-OFFICE ADDRESS ---- ------------------- Thomas E. Petry 580 Walnut Street, 13th Flr. Cincinnati, Ohio 45202 Zack D. Grinten 580 Walnut Street, 13th Flr. Cincinnati, Ohio 45202 James A. Ralston 580 Walnut Street, 13th Flr. Cincinnati, Ohio 45202
SIXTH. The capital stock, after the amount of the subscription price, or par value, has been paid in shall not be subject to assessment to pay the debts of the corporation. SEVENTH. The name and post-office address of each of the incorporators signing the articles of incorporation are as follows:
NAME POST-OFFICE ADDRESS ---- ------------------- C. A. Record 813 Carew Tower Cincinnati, Ohio 45202 F. L. Schindler 813 Carew Tower Cincinnati, Ohio 45202 L. S. McElfresh 813 Carew Tower Cincinnati, Ohio 45202
EIGHTH. The corporation is to have perpetual existence. NINTH. In furtherance, and not in limitation of the powers conferred by statute, the board of directors is expressly authorized: Subject to the by-laws, if any, adopted by the stockholders, to make, alter or amend the by-laws of the corporation. To fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and cause to be executed mortgages and liens upon the real and personal property of this corporation. By resolution passed by a majority of the whole board, to designate one (1) or more committees, each committee to consist of one (1) or more of the directors of the corporation, which, to the extent provided in the resolution or in the by-laws of the corporation, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the by-laws of the corporation or as may be determined from time to time by resolution adopted by the board of directors. When and as authorized by the affirmative vote of stockholders holding stock entitling them to exercise at least a majority of the voting power given at a stockholders' meeting called for that purpose, or when authorized by the written consent of the holders of at least a majority of the voting stock issued and outstanding, the board of directors shall have power and authority at any meeting to sell, lease or exchange all of the property and assets of the corporation, including its good will and its corporate franchises, upon such terms and conditions as its board of directors deem expedient and for the best interests of the corporation. TENTH. Meetings of stockholders may be held outside the State of Nevada, if the by-laws so provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Nevada at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. ELEVENTH. This corporation reserves the right to amend, alter, change or repeal any provision contained in the articles of incorporation, in the manner now or hereafter prescribed by statute, or by the articles of incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation. WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Nevada, do make and file these articles of incorporation, hereby declaring and certifying that the facts herein stated are true, and accordingly have hereunto set our hands this 13th day of November, 1986. /s/ C.A. RECORD ------------------------------ C.A. Record /s/ K.L. SCHINDLER ------------------------------ K.L. Schindler /s/ L.S. McELFRESH ------------------------------ L.S. McElfresh STATE OF Ohio COUNTY OF Hamilton On this 13th day of November, 1986, before me, a Notary Public, personally appeared C.A. Record, K.L. Schindler, and L.S. McElfresh, who severally acknowledged that they executed the above instrument. /s/ MARY LOU SCHOOLER ----------------------------------- Notary Public MARY LOU SCHOOLER Notary Public, State of Ohio My Commission Expires Sept. 23, 1991 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA DEC 17 1996 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF EAGLE-PICHER MINERALS, INC. --------------------------- Pursuant to the provisions of Section 78.403 of the Nevada Revised Statutes, the undersigned corporation adopts the following Amended and Restated Articles of Incorporation as of this date: FIRST: The name of the corporation is EAGLE-PICHER MINERALS, INC. --------------------------- SECOND: The Articles of Incorporation of the corporation were filed by the Secretary of State on the 17th day of November, 1986. THIRD: The names and addresses of the original incorporators are as follows: C. A. Record K.L. Schindler L.S. McElfresh 813 Carew Tower 813 Carew Tower 813 Carew Tower Cincinnati, Ohio 45202 Cincinnati, Ohio 45202 Cincinnati, Ohio 45202
FOURTH: The board of directors of the corporation at a meeting duly convened and held on the 5th day of December, 1996, adopted a resolution to amend the original Articles as follows: Article SEVENTH is hereby amended to read as follows: Pursuant to the requirements of Section 1123(a)(6) of the Bankruptcy Code, the Corporation shall not issue nonvoting equity securities, subject, however, to further amendment of these Amended and Restated Articles of Incorporation as and to the extent permitted by applicable law. FIFTH: The number of shares of the corporation outstanding and entitled to vote on an amendment to the Articles of Incorporation are one (1), that the above change(s) and amendment has been consented to and approved by a majority vote of the stockholders holding at least a majority of each class of stock outstanding and entitled to vote thereon. -1- SIXTH: The Articles of Incorporation, as amended to the date of this certificate, are hereby restated as follows: See Annex A. (set forth articles) James A. Ralston is the Vice-President of EAGLE-PICHER MINERALS, INC. and that he is the secretary of the corporation; that he has been authorized to execute the foregoing certificate by resolution of the board of directors, adopted at a meeting of the directors duly called and that such meeting was held on the 5th day of December, 1996 and that the foregoing certificate sets forth the text of the Articles of Incorporation as amended to the date of the certificate. Date December, 1996. EAGLE-PICHER MINERALS, INC. By /s/ JAMES A. RALSTON _________________________________ Its Vice President & Secretary and _________________________________ Its ____________Secretary STATE OF Ohio ) ) ss. COUNTY OF Hamilton ) -2- I, Patricia A. Harris, a notary public, do hereby certify that on this ________day of December, 1996, personally appeared before me James A. Ralston, and ________________________,who being by me first duly sworn, declared that he is the Vice President and Secretary of EAGLE-PICHER MINERALS, INC., that he signed the foregoing document as Vice President and Secretary of the corporation, and that the statements therein contained are true. /s/ PATRICIA A. HARRIS -------------------------------- Notary Public (Notorial Seal) My commission expires: [ILLEGIBLE] ------------------------ -3- ANNEX A AMENDED AND RESTATED ARTICLES OF INCORPORATION OF EAGLE-PICHER MINERALS, INC. * * * * * FIRST: The name of the corporation is EAGLE-PICHER MINERALS, INC. SECOND:Its principal office in the State of Nevada is located at 6110 Plumas Street, Reno, Washoe County, Nevada 89509. The name and address of its resident agent is The Corporation Trust Company of Nevada, One East First Street, Reno, Nevada 89501. THIRD: The nature of the business, or objects or purposes proposed to be transacted, promoted or carried on are: To engage in any lawful activity and to manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description. FOURTH:The total number of shares that may be issued by the corporation is one (1) share without nominal or par value. 1 Such share without nominal or par value may be issued by the corporation from time for such consideration as may be fixed time to time by the board of directors. FIFTH: The governing board of this corporation shall be known as directors, and the number of directors may from time to time be increased or decreased in such manner as shall be provided by the by-laws of this corporation, provided that the number of directors shall not be reduced to less than three (3), except that in cases where all the shares of the corporation are owned beneficially and of record by either one or two stockholders, the number of directors may be less than three (3) but not less than the number of stockholders. The names and post-office addresses of the current board of directors, which shall be three (3) in number, are as follows:
NAME POST-OFFICE ADDRESS ---- -------------------- Andries Ruijssenaars 580 Walnut Street, 13th Floor Cincinnati, Ohio 45202 Harry A. Neely 580 Walnut Street, 13th Floor Cincinnati, Ohio 45202 James A. Ralston 580 Walnut Street, 13th Floor Cincinnati, Ohio 45202
SIXTH: The capital stock, after the amount of the subscription price, or par value, has been paid in shall 2 not be subject to assessment to pay the debts of the corporation. SEVENTH: Pursuant to the requirements of Section 1123 (a)(6) of the Bankruptcy Code, the corporation shall not issue nonvoting equity securities, subject, however, to further amendment of these Amended and Restated Articles of Incorporation as and to the extent permitted by applicable law. EIGHTH:The corporation is to have perpetual existence. NINTH: In furtherance, and not in limitation of the powers conferred by statute, the board of directors is expressly authorized: Subject to the by-laws, if any, adopted by the stockholders, to make, alter or amend the by-laws of the corporation. To fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and cause to be executed mortgages and liens upon the real and personal property of this corporation. By resolution passed by a majority of the whole board, to designate one (1) or more committees, each committee to consist of one (1) or more of the directors of the corporation, which, to the extent provided in the resolution or in the by-laws of the corporation, shall have 3 and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the by-laws of the corporation or as may be determined from time to time by resolution adopted by the board of directors. When and as authorized by the affirmative vote of stockholders holding stock entitling them to exercise at least a majority of the voting power given a stockholder's meeting called for that purpose, or when authorized by the written consent of the holders of at least a majority of the voting stock issued and outstanding, the board of directors shall have power and authority at any meeting to sell, lease or exchange all of the property and assets of the corporation, including its good will and its corporate franchises, upon such terms and conditions as its board of directors deem expedient and for the best interests of the corporation. TENTH: Meetings of stockholders may be held outside the State of Nevada, if the by-laws so provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Nevada at such place or places as may be designated from 4 time to time by the board of directors or in the by-laws of the corporation. ELEVENTH: This corporation reserves the right to amend, alter, change or repeal any provision contained in the articles of incorporation, in the manner now or hereafter prescribed by statute, or by the articles of incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation. 5 THIS FORM SHOULD ACCOMPANY AMENDED AND/OR RESTATED ARTICLES OF INCORPORATION FOR A NEVADA CORPORATION 1. Name of corporation: EAGLE PICHER MINERALS, INC. 2. Date of adoption of Amended and/or Restated Articles: December 5, 1996 3. If the articles were amended, please indicate what changes have been made: See Annex A. (a) Was there a name change? Yes [ ] No [X] If yes, what is the new name? ................................................................................ (b) Did you change your resident agent? Yes [ ] No [X] If yes, please indicate new address: ................................................................................ (c) Did you change the purposes? Yes [ ] No [X] Did you add Banking? [ ] Gaming? [ ] Insurance? [ ] None of these? [X] ................................................................................ (d) Did you change the capital stock? Yes [ ] No[X] If yes, what is the new capital stock? ................................................................................ (e) Did you change the directors? Yes [ ] No [X] If yes, indicate the change: ................................................................................ (f) Did you add the directors liability provision? Yes [ ] No [X] ................................................................................ (g) Did you change the period of existence? Yes [ ] No [X] If yes, what is the new existence? ................................................................................ (h) If none of the above apply, and you have amended or modified the articles, how did you change your articles: See Annex A ................................................................................ /s/ JAMES A. RALSTON _________________________________________ James A. Ralston Vice President and Secretary _________________________________________ Name and Title of Officer December 5, 1996 _________________________________________ Date STATE OF OHIO ) ) ss. COUNTY OF HAMILTON ) On December 5, 1996 personally appeared before me, a Notary Public, James A. Ralston who acknowledged that he executed the above document. /s/ PATRICIA A. HARRIS _________________________________________ Notary Public ANNEX A The second paragraph of Article FIFTH has been amended in its entirety to read as follows: The names and post-office addresses of the current board of directors, which shall be three (3) in number, are as follows:
NAME POST-OFFICE ADDRESS ---- ------------------- Andries Ruijssenaars 580 Walnut Street, 13th Floor Cincinnati, Ohio 45202 Harry A. Neely 580 Walnut Street, 13th Floor Cincinnati, Ohio 45202 James A. Ralston 580 Walnut Street, 13th Floor Cincinnati, Ohio 45202
Article SEVENTH has been amended in its entirety to read as follows: SEVENTH: Pursuant to the requirements of Section 1123 (a)(6) of the Bankruptcy Code, the corporation shall not issue nonvoting equity securities, subject, however, to further amendment of these Amended and Restated Articles of Incorporation as and to the extent permitted by law. EX-3.14 11 EXHIBIT 3.14 EAGLE-PICHER MINERALS, INC. * * * * * * * * * B Y - L A W S * * * * * * * * * ARTICLE I OFFICES Section 1. The principal office shall be in the City of Reno, County of Washoe, State of Nevada. Section 2. The corporation may also have offices at such other places both within and without the State of Nevada as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All annual meetings of the stockholders shall be held in the City of Cincinnati, State of Ohio. Special meetings of the stockholders may be held at such time and place within or without the State of Nevada as shall be stated in the notice of the meeting, or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders, commencing with the year 1987, shall be held on the 4th Tuesday of March, if not a legal holiday, and if a legal holiday, then on the next secular day following, at 4 P.M. , at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 4. Notices of meetings shall be in writing and signed by the president or a vice president, or the secretary, or an assistant secretary, or by such other person or persons as the directors shall designate. Such notice shall state the purpose or purposes for which the meeting is called and the time when, and the place, which may be within or without this state, where it is to be held. A copy of such notice shall be either delivered personally to or shall be mailed, postage prepaid, to each stockholder of record entitled to vote at such meeting not less than ten nor more than sixty days before such meeting. If mailed, it shall be directed to a stockholder at his address as it 2 appears upon the records of the corporation and upon such mailing of any such notice, the service thereof shall be complete, and the time of the notice shall begin to run from the date upon which such notice is deposited in the mail for transmission to such stockholder. Personal delivery of any such notice to any officer of a corporation or association, or to any member of a partnership shall constitute delivery of such notice to such corporation, association or partnership. In the event of the transfer of stock after delivery or mailing of the notice of and prior to the holding of the meeting it shall not be necessary to deliver or mail notice of the meeting to the transferee. Section 5. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 6. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the articles of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a 3 quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Section 7. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the articles of incorporation a different vote is required in which case such express provision shall govern and control the decision of such question. Section 8. Every stockholder of record of the corporation shall be entitled at each meeting of stockholders to one vote for each share of stock standing in his name on the books of the corporation. Section 9. At any meeting of the stockholders, any stockholder may be represented and vote by a proxy or proxies appointed by an instrument in writing. In the event that any such instrument in writing shall designate two or more persons to act as proxies, a majority of such persons present at the meeting, or, if only one shall be present, then that one shall have and may exercise all of the powers conferred by such written instrument upon all of the persons so designated unless the instrument shall otherwise provide. No such proxy shall be valid after the expiration of six months from the date of its execution, unless coupled with 4 an interest, or unless the person executing it specifies therein the length of time for which it is to continue in force, which in no case shall exceed seven years from the date of its execution. Subject to the above, any proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it or a duly executed proxy bearing a later date is filed with the secretary of the corporation. Section 10. Any action, except election of directors, which may be taken by the vote of the stockholders at a meeting, may be taken without a meeting if authorized by the written consent of stockholders holding at least a majority of the voting power, unless the provisions of the statutes or of the articles of incorporation require a greater proportion of voting power to authorize such action in which case such greater proportion of written consents shall be required. ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be three (3). The directors shall be elected at the annual meeting of the stockholders, and except as provided in Section 2 of this article, each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies, including those caused by an increase in the number of directors, may be filled by a 5 majority of the remaining directors though less than a quorum. When one or more directors shall give notice of his or their resignation to the board, effective at a future date, the board shall have power to fill such vacancy or vacancies to take effect when such resignation or resignations shall become effective, each director so appointed to hold office during the remainder of the term of office of the resigning director or directors. Section 3. The business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Nevada. MEETINGS OF THE BOARD OF DIRECTORS Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected 6 board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the board of directors may be held without notice at such time and place as shall from time to time be determined by the board. Section 7. Special meetings of the board of directors may be called by the president or secretary on the written request of two directors. Written notice of special meetings of the board of directors is not required to be given. Section 8. A majority of the board of directors, at a meeting duly assembled, shall be necessary to constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the articles of incorporation. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof. 7 COMMITTEES OF DIRECTORS Section 9. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which, to the extent provided in the resolution, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may have power to authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Section 10. The committees shall keep regular minutes of their proceedings and report the same to the board when required. COMPENSATION OF DIRECTORS Section 11. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. 8 ARTICLE IV NOTICES Section 1. Notices to directors and stockholders shall be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram. Section 2. Whenever all parties entitled to vote at any meeting, whether of directors or stockholders, consent, either by a writing on the records of the meeting or filed with the secretary, or by presence at such meeting and oral consent entered on the minutes, or by taking part in the deliberations at such meeting without objection, the doings of such meeting shall be as valid as if had at a meeting regularly called and noticed, and at such meeting any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time, and if any meeting be irregular for want of notice or of such consent, provided a quorum was present at such meeting, the proceedings of said meeting may be ratified and approved and rendered likewise valid and the irregularity or defect therein waived by a writing signed by all parties having the right to vote at such meetings; and such consent or approval of stockholders may be by proxy or attorney, but all such proxies and powers of attorney must be in writing. 9 Section 3. Whenever any notice whatever is required to be given under the provisions of the statutes, of the articles of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a vice president, a secretary and a treasurer. Any person may hold two or more offices. Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, a vice president, a secretary and a treasurer, none of whom need be a member of the board. Section 3. The board of directors may appoint additional vice presidents, and assistant secretaries and assistant treasurers and such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. 10 Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise shall be filled by the board of directors. THE PRESIDENT Section 6. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the corporation, and shall see that all orders and resolutions of the board of directors are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. THE VICE PRESIDENT Section 8. The vice president shall, in the 11 absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties as the board of directors may from time to time prescribe. THE SECRETARY Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation and, when authorized by the board of directors, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the treasurer or an assistant secretary. THE TREASURER Section 10. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys 12 and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 11. He shall disburse the funds of the corporation as may be ordered by the board of directors taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at the regular meetings of the board, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 12. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. ARTICLE VI CERTIFICATES OF STOCK Section 1. Every stockholder shall be entitled to have a certificate, signed by the president or a vice president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the 13 corporation. When the corporation is authorized to issue shares of more than one class or more than one series of any class, there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any stockholders upon request and without charge, a full or summary statement of the designations, preferences and relative, participating, optional or other special rights of the various classes of stock or series thereof and the qualifications, limitations or restrictions of such rights, and, if the corporation shall be authorized to issue only special stock, such certificate shall set forth in full or summarize the rights of the holders of such stock. Section 2. Whenever any certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk, and by a registrar, then a facsimile of the signatures of the officers or agents of the corporation may be printed or lithographed upon such certificate in lieu of the actual signatures. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons 14 who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon, had not ceased to be the officer or officers of such corporation. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. TRANSFER OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be 15 the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. CLOSING OF TRANSFER BOOKS Section 5. The directors may prescribe a period not exceeding sixty days prior to any meeting of the stockholders during which no transfer of stock on the books of the corporation may be made, or may fix a day not more than sixty days prior to the holding of any such meeting as the day as of which stockholders entitled to notice of and to vote at such meeting shall be determined; and only stockholders of record on such day shall be entitled to notice or to vote at such meeting. REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Nevada. 16 ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meeting pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the articles of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserves in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. 17 FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SEAL Section 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its incorporation and the words "Corporate Seal, Nevada." ARTICLE VIII AMENDMENTS Section 1. These by-laws may be altered or repealed at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration or repeal be contained in the notice of such special meeting. ARTICLE IX INDEMNIFICATION The corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the Nevada Corporation Law. 18 EX-3.15 12 EXHIBIT 3.15 CERTIFICATE OF FORMATION OF EAGLE-PICHER TECHNOLOGIES, LLC This Certificate of Formation of Eagle-Picher Technologies, LLC is being duly executed and filed to form a limited liability company under the Delaware Limited Liability Company Act (6 Del. C. Section 18-101 et seq.). FIRST: The name of the limited liability company (the "Company") is Eagle-Picher Technologies, LLC. SECOND: The address of the registered office of the Company in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, and the registered agent of the Company in the State of Delaware is The Corporation Trust Company, whose business office is identical with the registered office of the Company. THIRD: No member of the Company, solely by reason of being a member, is an agent of the Company for the purpose of its business and no member shall have the authority to act for the Company solely by virtue of being a member. IN WITNESS WHEREOF, the undersigned has subscribed this document on the 19th day of February, 1998 and does hereby affirm, under penalties of perjury, that the statements contained herein have been examined by the undersigned and are true and correct. /s/ SCOTT H. ROSENBLATT ____________________________________ Scott H. Rosenblatt Authorized Person EX-3.16 13 EXHIBIT 3.16 LIMITED LIABILITY COMPANY AGREEMENT of EAGLE- PICHER TECHNOLOGIES, LLC (the "Agreement"), dated as of February 24, 1998, by Eagle-Picher Industries, Inc., an Ohio corporation ---------------------------------------------------------- Eagle-Picher Industries, Inc. has determined to organize and operate a limited liability company in accordance with the terms and subject to the conditions set forth in this Agreement. It is agreed as follows: 1. Organization. Eagle-Picher Industries, Inc. hereby organizes a limited liability company pursuant to the Delaware Limited Liability Company Act (the "Act") and the provisions of this Agreement and, for that purpose, has caused a Certificate of Formation (the "Certificate") to be prepared, executed and filed with the Secretary of State of the State of Delaware ("Secretary of State") on February 19, 1998. The Company and the Member each hereby approves, authorizes and ratifies the actions of Scott H. Rosenblatt, Esq. of Howard, Darby & Levin, in filing the Certificate with the Secretary of State. 2. Name. The name of the limited liability company shall be Eagle-Picher Technologies, LLC (the "Company"). 3. Purpose. The purpose of the Company is to engage in any lawful act or activity for which limited liability companies may be formed under the Act and to engage in any and all activities necessary or incidental thereto. 4. Principal Office. The Company's principal place of business shall be located at "C" and Porter Streets, Joplin, Missouri 64801. The Company may have such other business offices within or without the State of Delaware as determined from time to time. 5. Term. The term of the Company shall begin upon the filing of the Certificate with the Secretary of State and shall continue until dissolved in accordance with this Agreement. 6. Member. The sole member of the Company is Eagle-Picher Industries, Inc., an Ohio corporation (the "Member"). 7. Capital Contributions; Capital Accounts. (a) Initial Capital Contributions. Upon the execution of this Agreement, the Member shall contribute to the Company all property and assets of its Technologies Division pursuant to a Bill of Sale in substantially the form attached hereto as Exhibit A and an Assignment and Assumption Agreement in substantially the form attached hereto as Exhibit B. (b) Additional Capital Contributions. The Member may from time to time make additional capital contributions in amounts determined in the sole discretion of the Member, including capital contributions in accordance with the Member's cash management system. (c) All capital, whenever contributed, shall be subject in all respects to the risks of the business and subordinate in right of payment to the claims of present or future creditors of the Company and of any successor firm in accordance with this Agreement. (d) No interest shall be allowed to the Member by reason of the amount of its capital contribution or Capital Account except as provided in Section 21. 8. Allocations. Except as provided in Section 20, each item of income, gain, loss or expense of the Company for any period shall be allocated to the Member. 9. Distributions. The Company shall distribute to the Member, each business day, all cash received by the Company since the last such distribution. 10. Management; Director-Manager Voting and Meetings. (a) The property, business and affairs of the Company shall be managed by its Board of Director-Managers (the "Managing Board"), composed of: (i) at least two individuals who have no prior relationship with the Company or its Affiliates (the "Outside Director-Managers"), except as otherwise allowed by the United States Department of Defense (the "DoD"), (ii) at least one individual who shall be designated by, and represent, the Member (the "Inside Director-Manager"), and (iii) one or more officer(s) of the Company having DoD personnel security clearance at the level of security clearance of the Company's facility at which such officer is employed (the "Officer/Director-Manager"). The number of Inside Director-Managers shall not exceed the combined total of Outside Director-Managers and Officer/Director-Managers. The initial Managing Board shall consist of the following persons each of which shall be the type of Director-Manager set forth beside such Director-Manager's name:
Director-Manager Type of Director-Manager ---------------- ------------------------ Dr. Paul G. Kaminski Outside Neil Armstrong Outside Andries Ruijssenaars Inside Joel P. Wyler Inside William E. Long Officer
The term "Affiliates" shall mean, with respect to any person, all entities which such person controls, or by which such person is controlled. -2- (b) Except where (i) the Member's approval is expressly required by this Agreement or by the Act or (ii) authority has been expressly vested in the GS Committee (as defined below) by this Agreement or the Department of Defense Special Security Agreement (DD Form 4411), as may be amended (the "Special Security Agreement"), the Director-Managers shall have full authority, power and discretion to make all decisions with respect to the Company's business and to perform such other services and activities as set forth in this Agreement. Each Director-Manager shall be an agent of the Company for the purpose of its business and the act of each Director-Manager, including the execution in the name of the Company of an instrument, for apparently carrying on in the usual way the business of the Company shall bind the Company, unless (x) a Director-Manager acting has in fact no authority to act for the Company in the particular matter and (y) the person with whom such Director-Manager is dealing has knowledge that the action has not been so approved. Unless otherwise expressly authorized by this Agreement or the Member, the act of a Director-Manager that is not apparent for carrying on the Company's business in the ordinary course shall not bind the Company. (c) Except as otherwise expressly provided in this Agreement or the Act, each Member, solely by reason of being a member of the Company, shall not have the right to control or manage, or take any part in the control or management of, the property, business or affairs of the Company. (d) The Managing Board may, by unanimous decision, from time to time create or designate additional classes of Director-Managers or officers having such relative powers, duties and limitations as the Director-Managers shall unanimously determine, subject to the limitations set forth in this Agreement; provided, however, that no such additional classes shall be created or designated if such action would violate the terms of Special Security Agreement. (e) The Managing Board may hold meetings either within or without the State of Delaware. Meetings of the Managing Board may be held without notice at such time and at such place as may from time to time be determined by the Managing Board. A quorum must be present at each meeting of the Managing Board. A majority in number of the Managing Board shall be necessary to constitute a quorum; provided, however, that at least one Outside Director-Manager and one Inside Director-Manager must be in attendance in order for there to be a quorum present at any meeting of the Managing Board. The Director-Managers shall approve actions to be taken by the Board by a vote of a majority in number of Director-Managers at a meeting at which a quorum is present. (f) Notwithstanding anything set forth in this Agreement, in addition to the affirmative vote of the Managing Board, the prior written consent of the Member shall be required to approve each of the following: (i) the sale, exchange, lease, mortgage, pledge or other transfer or disposition of any property or assets of the Company, other than in the ordinary course of business; -3- (ii) the entry into any agreement to borrow money or to grant a mortgage on, a security interest in, a pledge or otherwise encumbers, any asset of the Company, other than in the ordinary course of business; (iii) the merger or consolidation of the Company with or into another limited liability company, foreign limited liability company or other entity; (iv) the authorization for a confession of judgment against the Company; (v) the assignment for the benefit of creditors of the Company, filing of a voluntary bankruptcy petition, or consent to an involuntary petition, under Title 11 of the United States Code or the reorganization, dissolution or liquidation of the Company; (vi) the amendment of the Certificate; or (vii) the initiation of action to terminate the Company or the Special Security Agreement (except as provided in Section 13.02 of the Special Security Agreement). (g) Notwithstanding anything set forth in this Agreement, the Member is hereby authorized, without the consent of the Managing Board, to adopt the resolutions set forth in Exhibit C hereto. (h) In lieu of holding a meeting, the Director-Managers may vote or otherwise take action by a written instrument indicating the consent of the requisite number of the Director-Managers as would be required for the Director-Managers to take action under this Agreement. If such consent is not unanimous, prompt notice shall be given to those Director-Managers who have not consented in writing but who would have been entitled to vote thereon had such action been taken at a meeting. (i) Director-Managers may participate in a meeting by conference telephone or similar communications equipment, by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. (j) The removal of any Director-Manager and the appointment of new or replacement Director-Managers (other than Insider Director-Managers) shall be in compliance with Section 1.01 of the Special Security Agreement. 11. Committees. (a) Government Security Committee. (i) There is hereby established a permanent committee of the Managing Board to be known as the Government Security Committee (the "GS Committee"). The Committee shall consist of all Outside Director-Managers and Officer Director-Managers. The purpose of the GS Committee is to assure that (x) the Company maintains policies and practices to safeguard classified information and controlled unclassified information in the possession of the Company consistent with the terms of the Special Security Agreement and (y) the protective measures contained in the Special Security Agreement are implemented effectively and maintained throughout the duration of such agreement. Each Director- -4- Manager that is a member of the GS Committee shall be cleared to the level of the facility security clearance of the Company and shall be specifically approved for this function by the United States Defense Security Service ("DSS"). One Outside Director-Manager shall be designated as Chairman of the GS Committee. (ii) The GS Committee may hold meetings either within or without the State of Delaware. Meetings of the GS Committee may be held without notice at such time and at such place as may from time to time be determined by the GS Committee. A quorum must be present at each meeting of the GS Committee. A majority in number of the members of GS Committee shall be necessary to constitute a quorum. In lieu of holding a meeting, the members of the GS Committee may vote or otherwise take action by a written instrument indicating the consent of the requisite number of the Director-Managers as would be required for the GS Committee to take action under this Agreement or the Special Security Agreement, as applicable. If such consent is not unanimous, prompt notice shall be given to those Director-Managers on the GS Committee who have not consented in writing but who would have been entitled to vote thereon had such action been taken at a meeting. The members of the GS Committee may participate in a meeting by conference telephone or similar communications equipment, by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. (iii) One Officer Director-Manager that is a member of the GS Committee shall be designated by the GS Committee to assure that all records, journals and minutes of the GS Committee are maintained and readily available for inspection by the DSS. (b) Compensation Committee. The Managing Board shall establish a permanent committee of the Managing Board, consisting of at least one Outside Director-Manager and one Inside Director-Manager, to be known as the Compensation Committee. The Compensation Committee shall be responsible for reviewing and approving recommendations for the annual compensation of the Company's principal officers, pursuant to the Special Security Agreement. (c) Other Committees. The Managing Board may designate other standing committees of the Managing Board; provided, that all such additional committees shall be created and shall operate in compliance with the terms of the Special Security Agreement. 12. Compliance with Special Security Agreement. THE COMPANY, THE MEMBER AND THE MANAGING BOARD SHALL COMPLY IN ALL RESPECTS WITH THE TERMS, RESTRICTIONS, LIMITATIONS AND PROVISIONS OF, AND IN NO WAY VIOLATE, THE SPECIAL SECURITY AGREEMENT, A COPY OF WHICH IS ATTACHED HERETO AS EXHIBIT D. In the case of any conflict, as to the management of the Company, between the terms of this Agreement and the terms of the Special Security Agreement, the terms of the Special Security Agreement shall govern. All notices to be provided and consents to be obtained by the Company, the Member or any Director-Manager pursuant to the Special Security Agreement shall be provided or obtained, as the case may be, in accordance with the Special Security Agreement. -5- 13. Assignments. The Member may not sell, assign or otherwise transfer in whole or in part its membership interest in the Company without the affirmative vote or written consent of the GS Committee, which vote or consent may be withheld in its sole discretion. Any sale, assignment or other transfer that is not in compliance with this Section shall be null and void. 14. Withdrawal. The Member may not withdraw from the Company without the affirmative vote or written consent of the GS Committee, which vote or consent may be withheld in their sole discretion. Until such withdrawal becomes effective, the Member shall in all respects continue to be a member hereunder. 15. Admission of an Additional Member. One or more additional members of the Company may be admitted to the Company at any time or from time to time with the affirmative vote of (x) the Member and (y) all members of the GS Committee. Upon the admission of an additional member, this Agreement shall be amended and restated as agreed by the Member, such additional member and the Managing Board. Each new member will be required to execute an agreement pursuant to which such member becomes bound by the terms of this Agreement and the Special Security Agreement. 16. Events of Dissolution. (a) The Company shall be dissolved upon the happening of any of the following events: (i) the written consent of the Member; (ii) at any time there are no members; or (iii) the entry of a decree of judicial dissolution under Section 802 of the Delaware Act. (b) The resignation or bankruptcy of any member or the occurrence of any other event that terminates the continued membership of any member shall not cause the Company to be dissolved or its affairs to be wound up, and upon the occurrence of any such event, the Company shall be continued without dissolution, unless such event results in the Company having no members. 17. Liability of Member. The Member shall not have any liability (personal or otherwise) for the obligations or liabilities of the Company except to the extent provided in the Act. 18. Exculpation of the Director-Managers. None of the Director-Managers shall have liability (personal or otherwise) to the Company or the Member for damages for any breach of duty in such capacity; provided that nothing in this Section shall eliminate or limit the liability of the Director-Managers if a judgment or other final adjudication adverse to any such Director-Manager establishes that his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law or that he personally gained in fact a financial profit or other advantage to which such Director-Manager was not legally entitled or that with respect to a distribution to the Member the acts of such Director-Manager were not performed in accordance with the Act. -6- 19. Indemnification. To the fullest extent permitted by law, the Company shall indemnify and hold harmless the Director-Managers and the Member and their respective directors, trustees, shareholders, officers, employees and agents (collectively, the "Indemnitees"), from and against any and all costs, liabilities, claims, expenses, including reasonable attorneys' fees, and damages (collectively, "Losses") paid or incurred by any such Indemnitee in connection with the conduct of the Company's business in accordance with this Agreement and the Act, except that no Indemnitee shall be entitled to indemnification in respect of any Loss incurred by such Indemnitee by reason of such Indemnitee's gross negligence or willful misconduct. Any indemnity under this Section shall be provided out of and to the extent of Company assets only and the Member shall not have any personal liability on account thereof. All rights of an Indemnitee under this Section shall survive the dissolution of the Company and the withdrawal of the Indemnitee from membership in the Company and shall inure to the benefit of such Indemnitee's heirs, personal representatives, successors and assigns. 20. Liquidation. (a) Upon dissolution of the Company, a person selected by the Member shall be the liquidator of the Company (the "Liquidator"). The Liquidator shall liquidate the assets of the Company and apply and distribute the proceeds of such liquidation in the following order of priority, unless otherwise required by mandatory provisions of applicable law: (i) to creditors of the Company (other than the Member); and (ii) the balance to the Member; provided, however, that the Liquidator may place in escrow a reserve of cash or other assets of the Company for contingent liabilities in an amount determined by the Liquidator to be appropriate for such purposes. 21. Tax Matters. The Member and the Company intend that the Company be treated as an entity with a single owner electing to be disregarded as a separate entity for United States federal income tax purposes, and all applicable state and local income tax purposes, and will file such necessary and appropriate forms in furtherance thereof. The Company's fiscal and taxable year will end on November 30 of each year; provided, however, if either the fiscal or taxable year of the Member is changed such that it shall end on a date other than November 30, the fiscal or taxable year, as the case may be, of the Company shall be changed so as to be consistent with the fiscal or taxable year of the Member. The Member, or its authorized agent, shall be the only person authorized to prepare, execute and file tax returns and tax reports on behalf of the Company and to represent the Company before the Internal Revenue Service and any state or local taxing authority. 22. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (other than the conflicts of law rules), all rights and remedies being governed by said laws. 23. Amendments. Except as otherwise provided by this Agreement or the Act, this Agreement may be amended by the Member; provided, however, that no provision of Sections 10, 11 or 12 shall be amended without the consent of all members of the GS Committee. -7- 24. Power of Attorney. The Member hereby constitutes and appoints each of the Director-Managers, jointly and severally or, if a Liquidator shall have been selected pursuant to Section 20, the Liquidator, as the Member's true and lawful agent and attorney in fact ("Agent"), with full power of substitution, with full power and authority in the Member's name, place and stead to execute, acknowledge, deliver and file all such documents which the Agent deems necessary or appropriate (i) to continue the existence or qualification of the Company as a limited liability company under the laws of any state or jurisdiction, (ii) to reflect amendments to this Agreement or the Certificate made pursuant hereto, (iii) to reflect the dissolution or liquidation of the Company pursuant to the terms hereof, or (iv) to reflect the admission, withdrawal or expulsion of any member pursuant to the terms hereof. The foregoing power of attorney is hereby declared irrevocable and a power coupled with an interest and shall extend to each Member's successors and assigns, heirs or representatives. 25. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not constitute a part hereof. IN WITNESS WHEREOF, the Member has executed this Agreement. EAGLE-PICHER INDUSTRIES, INC. By: ANDRIES RUIJSSENAARS ______________________________________ Andries Ruijssenaars, President -8- EX-3.17 14 EXHIBIT 3.17 C&S-510 (10/89) 096A#1985 1210 ORG&FI $10.00 - -------------------------------------------------------------------------------- MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU - -------------------------------------------------------------------------------- (FOR BUREAU USE ONLY) DATE RECEIVED FILED ----------------- DEC 11 1996 DEC 10 1996 FILED ----------------- ADMINISTRATOR MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES ----------------- CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU - -------------------------------------------------------------------------------- RESTATED ARTICLES OF INCORPORATION FOR USE BY DOMESTIC PROFIT CORPORATIONS (Please read information and instructions on last page) Pursuant to the provisions of Act 264, Public Acts of 1972, the undersigned corporation executes the following Articles: - -------------------------------------------------------------------------------- 1. The present name of the corporation is: HILLSDALE TOOL & MANUFACTURING CO. 2. The corporation identification number (CID) assigned by the Bureau is: 0 2 2 - 9 0 6 3. All former names of the corporation are: Purcell-Evans Tool Company 4. The date of filing the original Articles of Incorporation was: June 13, 1940 - -------------------------------------------------------------------------------- The following Restated Articles of Incorporation supersede the Articles of Incoporation as amended and shall be the articles of incorporation for the corporation: ARTICLE I - -------------------------------------------------------------------------------- The name of the corporation is: HILLSDALE TOOL & MANUFACTURING CO. - -------------------------------------------------------------------------------- ARTICLE II - -------------------------------------------------------------------------------- The purpose or purposes for which the corporation is formed are: the manufacturing, designing and sale of tool and dies, and the manufacturing, production and sale of metal products, and in general to carry on any business in connection therewith and incident thereto not forbidden by the laws of the State of Michigan and with all the powers conferred upon corporations by the laws of the State of Michigan. - -------------------------------------------------------------------------------- (Mich. - 435 - 10/23/89) SEAL APPEARS ONLY ON ORIGINAL ARTICLE III - -------------------------------------------------------------------------------- The total authorized capital stock is: 1. Common shares 100,000, par value $10.000 per share ----------------------------------------------------------- Preferred shares None ----------------------------------------------------------- 2. A statement of all or any of the relative rights, preferences and limitations of the shares of each class is as follows: The corporation's stock consists of 100,000 shares of common stock, par value $10.00 per share, without preferences, limitations or restrictions. - -------------------------------------------------------------------------------- ARTICLE IV - -------------------------------------------------------------------------------- 1. The address of the current registered office is: 30600 Telegraph Road Bingham Farms, Michigan 48025 ----------------------------------------------- ------------------ (Street Address) (City) (Zip Code) 2. The mailing address of the current registered office if different than above: , Michigan ----------------------------------------------- ----------------- (P.O. Box) (City) (Zip Code) 3. The name of the current resident agent is: The Corporation Company - -------------------------------------------------------------------------------- ARTICLE VI (OPTIONAL. DELETE IF NOT APPLICABLE.) - -------------------------------------------------------------------------------- Any action required or permitted by the Act to be taken at an annual or special meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if consents in writing, setting forth the action so taken as signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote on the action were present and voted. The written consents shall bear the date of signature of each shareholder who signs the consent. No written consents shall be effective to take the corporate action referred to unless, within 60 days after the record date for determining shareholders entitled to express consent to or to dissent from a proposal without a meeting, written consents signed by a sufficient number of shareholders to take the action are delivered to the corporation. Delivery shall be - -------------------------------------------------------------------------------- SEAL APPEARS ONLY ON ORIGINAL - -------------------------------------------------------------------------------- ARTICLE VI (CONT'D) to the corporation's registered office, its principal place of business, or an officer or agent of the corporation having custody of the minutes of the proceedings of its shareholders. Delivery made to a corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporation action without a meeting by less than unanimous written consent shall be given to shareholders who have not consented in writing. - -------------------------------------------------------------------------------- ARTICLE VII (ADDITIONAL PROVISIONS, IF ANY MAY BE INSERTED HERE; ATTACH ADDITIONAL PAGES IF NEEDED.) - -------------------------------------------------------------------------------- Pursuant to the requirements of Section 1123(a)(6) of the Bankruptcy Code, the Corporation shall not issue nonvoting equity securities, subject, however, to further amendment of these Amended and Restated Articles of Incorporation as and to the extent permitted by applicable law. - -------------------------------------------------------------------------------- 5. COMPLETE SECTION (a) IF THE RESTATED ARTICLES WERE ADOPTED BY THE UNANIMOUS CONSENT OF THE INCORPORATORS BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS; OTHERWISE, COMPLETE SECTION (b) a. [ ] These Restated Articles of Incorporation were duly adopted on the ______ day of ________________, 19___, in accordance with the provisions of Section 642 of the Act by the unanimous consent of the incorporators before the first meeting of the Board of Directors. Signed this _____ day of ___________________________________, 19____ __________________________________ _________________________________ __________________________________ _________________________________ (Signatures of ALL incorporators; type or print name under each signature) b. [X] These Restated Articles of Incorporation were duly adopted on the 5th day of December, 1996, in accordance with the provisions of Section 642 of the Act and: (check one of the following) [ ] were duly adopted by the Board of Directors without a vote of the shareholders. These Restated Articles of Incorporation only restate and integrate and do not further amend the provisions of the Articles of Incorporation as heretofore amended and there is no material discrepancy between those provisions and the provisions of these Restated Articles. [ ] were duly adopted by the shareholders. The necessary number of shares as required by statute were voted in favor of these Restated Articles. [ ] were duly adopted by the written consent of the shareholders having not less than the minimum number of votes required by statute in accordance with Section 407 (1) of the Act. Written notice to shareholders who have not consented in writing has been given. (Note: Written consent by less than all of the shareholders is permitted only if such provision appears in the Articles of Incorporation.) [X] were duly adopted by the written consent of all the shareholders entitled to vote in accordance with Section 407 (2) of the Act. Signed this 5th day of December, 1996 By /s/ JAMES A. RALSTON -------------------------------------------- (Only Signature of President, Vice President, Chairperson, Vice-Chairperson) James A. Ralston Vice President, General Counsel and Secretary ---------------------------------------------- (Type or Print Name and Title) (MICH. - 435) SEAL APPEARS ONLY ON ORIGINAL C&S-510 DOCUMENT WILL BE RETURNED TO NAME AND Name of person or organization MAILING ADDRESS INDICATED IN THE BOX remitting fees: BELOW. Include name, street and number (or P.O. box), city, state and ZIP code. --------------------------------- Eagle-Picher Industries, Inc. --------------------------------- 580 Walnut Street Preparer's name and business P.O. Box 779 telephone number: Cincinnati, Ohio 45201 Patricia A. Harris --------------------------------- (513) 629-2453 --------------------------------- INFORMATION AND INSTRUCTIONS 1. The articles of incorporation cannot be restated until this form, or a comparable document, is submitted. 2. Submit one original copy of this document. Upon filing, a microfilm copy will be prepared for the records of the Corporation and Securities Bureau. The original copy will be returned to the address appearing in the box above as evidence of filing. Since this document must be microfilmed, it is important that the filing be legible. Documents with poor black and white contrast, or otherwise illegible, will be rejected. 3. This document is to be used pursuant to sections 641 through 643 of the Act for the purpose of restating the articles of incorporation of a domestic profit corporation. Restated articles of incorporation are an integration into a single instrument of the current provisions of the corporation's articles of incorporation, along with any desired amendments to those articles. 4. Restated articles of incorporation which do not amend the articles of incorporation may be adopted by the board of directors without a vote of the shareholders. Restated articles of incorporation which amend the articles of incorporation require adoption by the shareholders. Restated articles of incorporation submitted before the first meeting of the board of directors require adoption by all of the incorporators. 5. Item 2--Enter the identification number previously assigned by the Bureau. If this number is unknown, leave it blank. 6. The duration of the corporation should be stated in the restated articles of incorporation only if it is not perpetual. 7. This document is effective on the date approved and filed by the Bureau. A later effective date, no more than 90 days after the date of delivery, may be stated. 8. If the restated articles are adopted before the first meeting of the board of directors, this document must be signed in ink by all of the incorporators. Other restated articles must be signed by the president, vice-president, chairperson or vice-chairperson. 9. FEES: NONREFUNDABLE FEE (Make remittance payable to State of Michigan)....$10.00 Franchise fee--payable only if authorized shares is increased: first 60,000 authorized shares............................$50.00 each additional 20,000 authorized shares..................$30.00
10. Mail form and fee to: Michigan Department of Commerce Corporation and Securities Bureau Corporation Division P.O. Box 30054 6546 Mercantile Way Lansing, Michigan 48909 Telephone: (517) 334-6302 SEAL APPEARS ONLY ON ORIGINAL EX-3.18 15 EXHIBIT 3.18 ACTION OF SOLE SHAREHOLDER WITHOUT A MEETING * * * * * * * Eagle-Picher Industries, Inc., being the sole shareholder of Hillsdale Tool & Manufacturing Co., a Michigan corporation ("the Corporation"), hereby amends and restates the Bylaws of the Corporation to provide as follows: BYLAWS ARTICLE 1 STOCK SECTION 1. CERTIFICATES OF SHARES. The Certificates for shares of the Capital Stock of the Corporation shall be in such form, not inconsistent with the Articles of Incorporation of the Corporation, as shall be prepared or be approved by the Board of Directors. The Certificates shall be signed by the President or Vice President, and also by the Secretary. SECTION 2. TRANSFER OF SHARES. Shares of the Capital Stock of the Corporation shall be transferred by endorsement of the certificate representing said shares by the registered holder thereof or his attorney and surrender of the certificate to the Secretary for cancellation. Whereupon the Secretary shall issue to the transferee or transferees, as specified by the endorsement upon the surrendered certificate, a new certificate for a like number of shares, Transfers shall only be made upon the books of the Corporation upon said surrender and cancellation. Transfers shall entitle the transferee to all the privileges, rights and interests of a shareholder of the Corporation. SECTION 3. CLOSING THE STOCK BOOKS. The stock books shall be closed for the meeting of the shareholders, and for the payment of dividends during such period, not more than forty days nor less than ten days before the date of the shareholders' meeting, as from time to time may be determined by the Board of Directors, and during such period no stock shall be transferred upon said books. SECTION 4. LIEN. The Corporation shall have a lien upon all stock or property of its members invested therein, for all 1 debts due to it by the owners thereof. SECTION 5. LOST CERTIFICATES. In case of the loss of any certificate of shares of stock, upon affidavit by the registered holder or his representative of such loss, and subject to any additional requirement of the Board of Directors, the Secretary shall issue a duplicate certificate in its place, upon the Corporation's being fully indemnified therefor. SECTION 6. DIVIDENDS. The Board of Directors, in its discretion from time to time, may declare dividends upon the Capital Stock from the surplus and net profits of the Corporation. SECTION 7. FISCAL YEAR. The fiscal year of the Corporation shall end on the 30th day of November in each year. SECTION 8. CORPORATE SEAL. The Board of Directors shall provide a suitable corporate seal , which seal shall be in charge of the Secretary, and shall be used by him. ARTICLE 2 SHAREHOLDERS' MEETING SECTION 1. TIME, PLACE AND PURPOSE. Meetings of the shareholders of the Corporation shall be held annually at the registered office of the Corporation in Hillsdale at 10:00 a.m. on the third (3rd) Tuesday of August of each year, if not a legal holiday, and if a legal holiday, then on the day following, for the purpose of electing directors, and for the transaction of such other business as may be brought before the meeting. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the President and Secretary, and shall be called by either of them at the request in writing or by vote of a majority of the Board of Directors, or at the request in writing by shareholders of record owning a majority in amount of the entire Capital Stock of the Corporation issued and outstanding. SECTION 3. NOTICE. Written notice of any shareholders' meeting shall be mailed to each shareholder at his last known address, as the same appears on the stock books of the Corporation, or otherwise, at least ten days prior to any meeting; Any notice of a special meeting shall indicate briefly the object or objects thereof. If all the shareholders waive notice of the meeting, no notice of the same shall be required; and whenever all the shareholders shall meet in person or by proxy, such meeting shall be valid for all purposes, without call or notice, and at such meeting any corporate action shall not be invalid for want of 2 notice. SECTION 4. QUORUM. At any meeting of the shareholders, the holders of sixty percent of all the voting shares of the Capital Stock of the Corporation issued and outstanding, present in person or represented by proxy, shall constitute a quorum. Meetings at which less than a quorum is represented may, however, be adjourned from time to time to a future date by those who attend, without further notice other than the announcement at such meeting; and when a quorum shall be present upon any such adjourned day, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 5. VOTING. Each shareholder shall be entitled to one vote for each share of voting stock standing registered in his or her name on the stock books of the Corporation, in person or by proxy duly appointed in writing and filed with the Secretary of the meeting, on all questions and elections. No proxy shall be voted after three years from its date unless said proxy provides for a longer period. SECTION 6. ORGANIZATION. The President shall call meetings of the shareholders to order and shall act as Chairman of such meetings, unless otherwise determined by the holders of a majority of all the shares of the Capital Stock issued and outstanding, present in person or by proxy. The Secretary of the Corporation shall act as Secretary of all meetings of the Corporation; but in the absence of the Secretary at any meeting of the shareholders or his inability to act as Secretary, the presiding officer may appoint any person to act as Secretary of the meeting. SECTION 7. INSPECTORS. Whenever any shareholder present at a meeting of shareholders shall request the appointment of inspectors, a majority of the shareholders present at such meeting and entitled to vote thereat shall appoint inspectors who need not be shareholders, If the right of any person to vote at such meeting shall be challenged, the inspectors of election shall determine such right. The inspectors shall receive and count the votes either upon an election or for the decision of any question and shall determine the result. A writing by the inspectors certifying any vote shall be prima facie evidence thereof. SECTION 8. NEW SHAREHOLDERS. Every person becoming a shareholder in the Corporation shall be deemed to assent to these Bylaws, and shall designate to the Secretary the address to which he desires that the notice herein required to be given may be sent; and all notices mailed to such addresses, with postage prepaid, shall be considered as duly given at the date of mailing. Any person failing to so designate his address shall be deemed to have waived notice of such meeting. 3 SECTION 9. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the shareholders at any annual or special meeting may be taken by a writing signed by all of the shareholders indicating their unanimous consent. ARTICLE 3 DIRECTORS SECTION 1. DUTIES, NUMBER, CLASSIFICATION AND TERM OF OFFICE. The business and the property of the Corporation shall be managed and controlled by the Board of Directors. The number of Directors shall be three, but the number may be changed from time to time by the alteration of these Bylaws. Directors shall hold office for a term of one year, and/or until their successors are elected and qualified. SECTION 2. PLACE OF MEETING. The Directors may hold their meetings in such place or places within or without this State as a majority of the Board of Directors may from time to time determine. SECTION 3. MEETINGS. Meetings of the Board of Directors may be called at any time by the President or Secretary, or by a majority of the Board of Directors. Directors shall be notified in writing, personally or by telephone of the time, place and purpose of all meetings of the Board at least three days prior to the meeting, except the regular meeting held immediately after the annual meeting of shareholders, Any Director shall, however, be deemed to have waived such notice by his attendance at any meeting. SECTION 4. QUORUM. A majority of the Board of Directors shall constitute a quorum for the transaction of business; and if at any meeting of the Board of Directors there be less than a quorum present, a majority of those present may adjourn the meeting from time to time. SECTION 5. VACANCIES. Vacancies in the Board of Directors shall be filled by the remaining members of the Board. A Director so elected to fill any vacancy shall be a director until his successor is elected by the shareholders, who may make such election at the next annual meeting of the stockholders or at any special meeting duly called for that purpose. SECTION 6. COMPENSATION. No Director shall receive any salary or compensation for his services as Director, unless otherwise especially ordered by the Board of Directors or by Bylaw. SECTION 7. ACTION WITHOUT MEETING. Any action required 4 or permitted to be taken by the Board of Directors at any regular, annual, or special meeting may be taken by the Directors by a writing signed by all of the Directors indicating their unanimous consent. ARTICLE 4 OFFICERS SECTION 1. The Board of Directors shall select a President, a Secretary and a Treasurer and may select one or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers, who shall be elected by the Board of Directors at their regular meeting held immediately after the adjournment of the regular annual shareholders' meeting. The term of office shall be for one year and/or until their successors are chosen. No one of such officers need be a director. Any two of the above offices, except those of President and Vice-President, may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity. The Board of Directors may fix the salaries of the officers of the Corporation. SECTION 2. The Board of Directors may also appoint such other officers and agents as it may deem necessary for the transaction of the business of the Corporation. All officers and agents shall respectively have such authority and perform such duties in the management of the property and affairs of the Corporation as may be designated by the Board of Directors. Any officer or agent may be removed, or any vacancies filled, by the Board of Directors whenever in its judgment the business interests of the Corporation will be served thereby. SECTION 3. The Board of Directors may secure the fidelity of any or all of such officers by bond or otherwise. ARTICLE 5 DUTIES OF OFFICERS SECTION l. PRESIDENT. The President shall be the chief executive officer of the Corporation, and in the recess of the Board of Directors shall have the general control and management of its business and affairs, subject, however, to the right of the Board of Directors to delegate any specific power to any other officer or officers of the Corporation, except such as may be by statute exclusively conferred upon the President. SECTION 2. VICE-PRESIDENT. In case the office of 5 President shall become vacant by death, resignation, or otherwise, or in case of the absence of the President, or his disability to discharge the duties of his office, such duties shall, for the time being, devolve upon the Vice-President designated by the Board, who shall do and perform such other acts as the Board of Directors may, from time to time, authorize him to do. SECTION 3. TREASURER. The Treasurer shall have custody and keep account of all money, funds and property of the Corporation, unless otherwise determined by the Board of Directors, and he shall render such accounts and present such statements to the Directors and President as may be required of him. He shall deposit all funds of the Corporation which may come into his hands in such bank or banks as the Board of Directors may designate. He shall keep all bank accounts in the name of the Corporation and shall exhibit his books and accounts, at all reasonable times, to any Director of the Corporation upon application at the office of the Corporation during business hours. He shall pay out money as the business may require upon the order of the properly constituted officer or officers of the Corporation, taking proper vouchers therefor; provided, however, that the Board of Directors shall have the power by resolution to delegate any of the duties of the Treasurer to other officers, and to provide by what officers, if any, all bills, notes, checks, vouchers, orders or other instruments shall be countersigned. He shall perform, in addition, such other duties as may be delegated to him by the Board of Directors. SECTION 4. SECRETARY. The Secretary of the Corporation shall keep the minutes of all the meetings of the shareholders and Board of Directors in books provided for that purpose. He shall attend to the giving and receiving of all notices of the Corporation. He shall have charge of the stock books and such other books and records as the Board of Directors may direct, all of which, shall at all reasonable times be open to the examination of any Director upon application at the office of Secretary. He shall perform, in addition, such other duties as may be delegated to him by the Board of Directors. ARTICLE 6 NOTICE NOTICE. Any notice required by statute or by these Bylaws to be given to the shareholders, to directors, or to any officer of the Corporation, shall be deemed to be sufficiently given by depositing the same in a post office box, in a sealed, post-paid wrapper, addressed to such shareholder, director, or 6 officer at his last known address, and such notice shall be deemed to have been given at the time of such mailing. ARTICLE 7 AMENDMENTS The shareholders or the Board of Directors may alter, amend, add to or repeal these Bylaws by majority vote, or by a writing signed by all of the shareholders or all of the directors indicating their unanimous consent, including the fixing and altering of the Board of Directors; provided that the Board of Directors shall not make or alter any Bylaws fixing their qualifications, classification, or term of office. IN WITNESS WHEREOF, Eagle-Picher Industries, Inc. has caused this Action of Sole Shareholder Without a Meeting to be executed by a duly authorized officer this 28th day of November, 1994. EAGLE-PICHER INDUSTRIES, INC. By: /s/ JAMES A. RALSTON --------------------------------- James A. Ralston, Vice President, General Counsel and Secretary ATTEST: /s/ DAVID W. MATTHEWS - -------------------------- David W. Matthews Assistant Secretary 7 EX-3.19 16 EXHIBIT 3.19 C&S-510 (10/89) 096A#1986 1210 ORG&FI $10.00 - -------------------------------------------------------------------------------- MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU - -------------------------------------------------------------------------------- (FOR BUREAU USE ONLY) DATE RECEIVED FILED ----------------- DEC 11 1996 DEC 10 1996 ----------------- ADMINISTRATOR MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES ----------------- CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU - -------------------------------------------------------------------------------- RESTATED ARTICLES OF INCORPORATION FOR USE BY DOMESTIC PROFIT CORPORATIONS (Please read information and instructions on last page) Pursuant to the provisions of Act 264, Public Acts of 1972, the undersigned corporation executes the following Articles: - -------------------------------------------------------------------------------- 1. The present name of the corporation is: Michigan Automotive Research Corporation 2. The corporation identification number (CID) assigned by the Bureau is: 0 2 7 - 3 0 9 3. All former names of the corporation are: 4. The date of filing the original Articles of Incorporation was: November 18, 1977 - -------------------------------------------------------------------------------- The following Restated Articles of Incorporation supersede the Articles of Incoporation as amended and shall be the Articles of Incorporation for the corporation: ARTICLE I - -------------------------------------------------------------------------------- The name of the corporation is: Michigan Automotive Research Corporation - -------------------------------------------------------------------------------- ARTICLE II - -------------------------------------------------------------------------------- The purpose or purposes for which the corporation is formed are: to engage in any activity within the purposes for which corporations may be organized under the Business Corporation Act of Michigan. - -------------------------------------------------------------------------------- SEAL APPEARS ONLY ON ORIGINAL ARTICLE III The total authorized capital stock is: 1. Common shares 25,000, par value $2.00 per share --------------------------------- Preferred shares 5,000, par value $100.00 per share ---------------------------------- 2. A statement of all or any of the relative rights, preferences and limitations of the shares of each class is as follows: The preferred stock shall be non-voting and shall carry and be limited to 15% cumulative preferred dividend and shall be preferred to all classes of stock and limited to par value in liquidation. ARTICLE IV 1. The address of the current registered office is: 1254 North Main Street Ann Arbor, Michigan 48104 ----------------------------------------- -------- (Street Address) (City) (ZIP Code) 2. The mailing address of the current registered office if different than above: P.O. Box 7209 Ann Arbor, Michigan 48107 ----------------------------------------- -------- (P.O. Box) (City) (ZIP Code) 3. The name of the current resident agent is: Terence J. Rhoades ARTICLE VI (Optional. Delete if not applicable.) Any action required or permitted by the Act to be taken at an annual or special meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if consents in writing, setting forth the action so taken, signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote on the action were present and voted. The written consents shall bear the date of signature of each shareholder who signs the consent. No written consents shall be effective to take the corporate action referred to unless, within 60 days after the record date for determining shareholders entitled to express consent to or to dissent from a proposal without a meeting, written consents signed by a sufficient number of shareholders to take the action are delivered to the corporation. Delivery shall be SEAL APPEARS ONLY ON ORIGINAL ARTICLE VI (CONT'D) to the corporation's registered office, its principal place of business, or an officer or agent of the corporation having custody of the minutes of the proceedings of its shareholders. Delivery made to a corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to shareholders who have not consented in writing. ARTICLE VII (Additional provisions, if any, may be inserted here; attach additional pages if needed.) Pursuant to the requirements of Section 1123(a)(6) of the Bankruptcy Code, the Corporation shall not issue nonvoting equity securities, subject, however, to further amendment of these Amended and Restated Articles of Incorporation as and to the extent permitted by applicable law. 5. COMPLETE SECTION (a) IF THE RESTATED ARTICLES WERE ADOPTED BY THE UNANIMOUS CONSENT OF THE INCORPORATORS BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS; OTHERWISE, COMPLETE SECTION (b) a.[ ] These Restated Articles of Incorporation were duly adopted on the ______ day of ____________, 19___, in accordance with the provisions of Section 642 of the Act by the unanimous consent of the incorporators before the first meeting of the Board of Directors. Signed this _____ day of ____________________________________, 19 ___ _____________________________________________________________________ _____________________________________________________________________ (Signatures of ALL incorporators: type or print name under each signature) b.[X] These Restated Articles of Incorporation were duly adopted on the 5th day of December, 1996, in accordance with the provisions of Section 642 of the Act and: (check one of the following) [ ] were duly adopted by the Board of Directors without a vote of the shareholders. These Restated Articles of Incorporation only restate and integrate and do not further amend the provisions of the Articles of Incorporation as heretofore amended and there is no material discrepancy between those provisions and the provisions of these Restated Articles. [ ] were duly adopted by the shareholders. The necessary number of shares as required by statute were voted in favor of these Restated Articles. [ ] were duly adopted by the written consent of the shareholders having not less than the minimum number of votes required by statute in accordance with Section 407(1) of the Act. Written notice to shareholders who have not consented in writing has been given. (Note: Written consent by less than all of the shareholders is permitted only if such provision appears in the Articles of Incorporation.) [X] were duly adopted by the written consent of all the shareholders entitled to vote in accordance with Section 407(2) of the Act. Signed this 5th day of December, 19 96 ------- ------------- -- By /s/ James A. Ralston --------------------------------------------------- (Only Signature of: President, Vice-President, Chairperson, Vice-Chairperson) James A. Ralston Vice President, General Counsel and Secretary ----------------------------------------------------- (Type or Print Name and Title) (MICH. - 435) SEAL APPEARS ONLY ON ORIGINAL DOCUMENT WILL BE RETURNED TO NAME AND MAILING ADDRESS Name of person or organization INDICATED IN THE BOX BELOW. Include name, street and number remitting fees: (or P.O. Box), city, state and ZIP code. ------------------------------ Eagle-Picher Industries, Inc. ------------------------------ 580 Walnut Street Preparer's name and business P.O. Box 779 telephone number: Cincinnati, Ohio 45201 Patricia A. Harris ------------------------------ (513) 629-2453 ------------------------------
INFORMATION AND INSTRUCTIONS 1. The articles of incorporation cannot be restated until this form, or a comparable document, is submitted. 2. Submit one original copy of this document. Upon filing, a microfilm copy will be prepared for the records of the Corporation and Securities Bureau. The original copy will be returned to the address appearing in the box above as evidence of filing. Since this document must be microfilmed, it is important that the filing be legible. Documents with poor black and white contrast, or otherwise illegible, will be rejected. 3. This document is to be used pursuant to sections 641 through 643 of the Act for the purpose of restating the articles of incorporation of a domestic profit corporation. Restated articles of incorporation are an integration into a single instrument of the current provisions of the corporation's articles of incorporation, along with any desired amendments to those articles. 4. Restated articles of incorporation which do not amend the articles of incorporation may be adopted by the board of directors without a vote of the shareholders. Restated articles of incorporation which amend the articles of incorporation require adoption by the shareholders. Restated articles of incorporation submitted before the first meeting of the board of directors require adoption by all of the incorporators. 5. Item 2 -- Enter the identification number previously assigned by the Bureau. If this number is unknown, leave it blank. 6. The duration of the corporation should be stated in the restated articles of incorporation only if it is not perpetual. 7. This document is effective on the date approved and filed by the Bureau. A later effective date, no more than 90 days after the date of delivery, may be stated. 8. If the restated articles are adopted before the first meeting of the board of directors, this document must be signed in ink by all of the incorporators. Other restated articles must be signed by the president, vice-president, chairperson or vice-chairperson. 9. FEES: NONREFUNDABLE FEE (Make remittance payable to State of Michigan) $10.00 Franchise fee - payable only if authorized shares is increased: first 60,000 authorized shares...........................$50.00 each additional 20,000 authorized shares.................$30.00 10. Mail form and fee to: Michigan Department of Commerce Corporation and Securities Bureau Corporation Division P.O. Box 30054 6546 Mercantile Way Lansing, Michigan 48909 Telephone: (517) 334-6302 SEAL APPEARS ONLY ON ORIGINAL EX-3.20 17 EXHIBIT 3.20 BYLAWS OF MICHIGAN AUTOMOTIVE RESEARCH CORPORATION ARTICLE I SHAREHOLDERS Section 1. Annual Meeting. The annual meeting of the shareholders shall be held in each year on or before ninety (90) days after the expiration of the fiscal year of the Corporation for the purpose of electing Directors and of transacting such other business as may properly be brought before the meeting. Section 2. Delayed Annual Meeting. If for any reason the annual meeting of the shareholders shall not be held within the period hereinbefore designated, such meeting may be called and held as a special meeting and the same proceedings may be had thereat at an annual meeting. Section 3. Special Meetings. Special meetings of shareholders may be called at any time by the President, by a majority of the Board of Directors, or by shareholders holding together at least one-fourth in number of the total outstanding shares of any class of stock entitled to vote at such meeting. At a special meeting of shareholders, no business shall be transacted and no corporate action shall be taken other than that stated in the notice of the meeting. Section 4. Place of Meetings. Unless and until otherwise provided by the Board of Directors every annual meeting of the shareholders and every other meeting of shareholders shall be held at the registered office of the Corporation, but the Board of Directors may from time to time provide for the holding of any annual or special meeting of shareholders at such other place within or without the State of Michigan, as the Board shall by resolution determine. Section 5. Notice of Meeting. Written notice of the time and place, and in the case of special meetings the purpose or purposes of every such meeting shall be given to each shareholder entitled to vote at the meeting by mailing the same, at least ten (10) days before the meeting, to each shareholder of the Corporation at his address as the same appears on the books of the Corporation. No notice need be given to any shareholder who is present in person or is represented by proxy at the meeting. All notices required to be given by any provision of these By-Laws shall state the authority pursuant to which they are issued, as "by order of", the "President", "Board of Directors" or "shareholders", as the case may be. When a notice is served by mail such notice shall be deemed duly served when the same has been deposited in the United States mail with postage fully prepaid, plainly addressed to the sendee at his, her or its last address appearing upon the stock ledger of the Corporation. Section 6. Quorum. At any meeting of the shareholders, the holders of a majority in number of all of the shares of each class of the capital stock of the Corporation issued and outstanding, presented by proxy, shall constitute a quorum of the shareholders for all purposes. When a quorum exists a majority in number of all of the shares of each class of the capital stock of the Corporation present or represented at the meeting casting votes shall decide any question brought before the meeting unless the question is one upon which, by express provision of law or the Articles of Incorporation, a different vote is required, in which case such express provision shall control the decision of the question. If a quorum shall not be present or represented at any meeting of shareholders, the holders of a majority in number of the shares of each class of the capital stock of the Corporation present in person or by proxy entitled to vote at such meeting may adjourn from time to time without notice, other than by announcement at the meeting, until quorum shall attend in person or by proxy. Any meeting at which a quorum is present may also be adjourned in like manner and for such time with or without call as may be determined by the holders of a majority in number of the shares of each class of the capital stock of the Corporation present in person or by proxy and entitled to vote. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. Section 7. Organization. The President shall call meetings of the shareholders to order and shall act as Chairman of the meeting. In the absence of the President, the holders -2- of a majority in number of the shares of the capital stock of the Corporation present in person or represented by proxy and entitled to vote at such meeting shall elect a Chairman. The Secretary of the Corporation shall act as Secretary of all meetings of the shareholders; but in the absence of the Secretary the Chairman may appoint any person to act as Secretary of the meeting. Section 8. Voting. Each outstanding share of stock shall be entitled to one vote on each matter submitted to a vote at any meeting of shareholders. A shareholder may vote the shares owned of record by him either in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. No proxy shall be valid after eleven (11) months from its date unless otherwise provided in the proxy. At all meetings of stockholders, unless the voting is conducted by inspectors, all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by the Chairman of the meeting. ARTICLE II BOARD OF DIRECTORS Section 1. Number and Term of Office. The business and property of the Corporation shall be managed by a Board of Directors consisting of at least one Director, which number shall be determined from time to time by resolution of the Boards. The initial Board shall consist of three Directors. The Directors need not be shareholders of the Corporations The Directors shall, except as hereinafter otherwise provided for filling vacancies, be elected annually at the annual meeting of shareholders and shall continue in office for one year and until their respective successors shall have been elected and qualified. Members of the Board of Directors named in the Articles of Incorporation shall hold office until their successors shall have been elected and qualified. Section 2. Vacancies and Additional Directors. Vacancies in the Board of Directors may be filled by shareholders at a special meeting, and each person so elected shall be a Director until his successor is elected by the shareholders who may make such election at the next annual meeting of the shareholders, -3- or at any special meeting called for that purpose and held prior thereto. Newly created directorships resulting from any increase in the authorized number of Directors may be filled by the affirmative vote of a majority of the Directors then in office, but the term of any Directors, so elected, shall expire at the next succeeding annual meeting of shareholders. Section 3. Place of Meetings. The meetings of the Board of Directors may be held at such place, in the State of Michigan, or elsewhere as a majority of the Directors may from time to time determine. Section 4. Annual Meeting. The Board of Directors shall meet each year immediately after the annual meeting of the shareholders for the purpose of organization, election of officers, and consideration of any other business that may properly be brought before the meeting. No notice of any kind to either old or new members of the Board of Directors for such annual meeting shall be necessary. Section 5. Special Meetings. Special meetings of the Board of Directors shall be held whenever called by direction of the President, or by a majority of the Directors. Written notice of the time, place and purpose or purposes of every such meeting shall be given each Director by mailing the same to his address as the same shall appear for such purpose on the records of the Corporation at least two days before the meeting. At any meeting at which every Director shall be present, even though without the notice herein provided, any business may be transacted. Section 6. Quorum. Subject to the provisions of Section 2 of this Article II, a majority of the Board of Directors shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the Directors present at a meeting at which a quorum is present shall be -4- the acts of the Board of Directors, unless otherwise provided by law, the Articles of Incorporation or the By-Laws. Section 7. Books. The Directors may cause the books of the corporation, except such as are required by law to be kept within the State outside of the State of Michigan, at such place or places as they may from time to time determine. Section 8. Compensation of Directors. Directors shall not receive any salary for their services, but, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, may be allowed for attending any regular or special meeting of the Board or of any committee thereof; provided, however, that nothing herein contained shall be construed as precluding any Director from serving the Corporation in any other capacity and receiving the compensation therefore. ARTICLE III OFFICERS Section 1. Officers. The Board of Directors of the Corporation shall elect a President, a Secretary and a Treasurer, and may select one or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers. No one of such officers except the President need be a Director but a Vice-President who is not a Director cannot succeed to or fill the office of President. Any two offices, except those of President and Vice-President may be held by the same person but no officer shall execute, acknowledge or verify any instrument in more than one capacity. The Board of Directors may also appoint such other officers and agents as they may deem necessary for the transaction of the business of the Corporation. All officers and agents shall respectively have such authority and perform such duties in the management of the property and affairs of the Corporation as may be delegated by the Board of Directors. The Board of Directors shall have power to fill any vacancies in any office occurring for whatever reason. The Board of Directors may secure the fidelity of any or all of such officers by bond or otherwise. Officers shall serve at the pleasure of the Board of Directors. Section 2. Powers and Duties of the Presidents. The President shall be the chief executive of officer of the Corporation, and subject to the control of the Board of Directors, shall have -5- general charge and control of all its business and affairs and shall supervise the other officers and agents of the Corporation in the performance of their regular duties. He shall preside at all meetings of the shareholders and the Board of Directors. The President may sign certificates for shares of stock and sign and execute contracts in the name and on behalf of the Corporation when so authorized and directed so to do, either generally or in special instances by the Board of Directors. Section 3. Powers and Duties of Vice-Presidents. Vice-Presidents of the Corporation shall have such powers and perform such duties as shall from time to time be assigned by them by these By-Laws or by the Board of Directors. Section 4. Powers and Duties of the Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and the minutes of all meetings of the shareholder in books provided for that purpose; he shall attend to the giving or serving of all notices of the Corporation. He may sign with the President or Vice-President, in the name of the Corporation, all contracts when authorized so to do either generally or in special instance by the Board of Directors and, when so ordered by the Board of Directors, he shall affix the seal of the Corporation thereto; he shall have charge of the stock certificate books, transfer books and stock ledgers and such other books and papers as the Board of Directors shall direct, all of which shall at all reasonable times be open to the examination of any Director, and he shall in general perform all the duties incident to the office of Secretary, subject to the control of the Board of Directors. Section 5. Powers and Duties of the Treasurer. The Treasurer shall have custody of all of the funds and securities of the Corporation which may come into his hands; he may endorse on behalf of the Corporation for collection checks, notes and other obligations and shall deposit the same to the credit of the Corporation in such bank or banks or depositary or depositaries as the Board of Directors may designate; he may sign all receipts and vouchers for payment made to the Corporation; he shall enter or cause to be entered regularly in the books of the Corporation kept for the purpose full and accurate accounts of all moneys received and paid on account of the Corporation and whenever required by the Board of Directors, shall render statements of such accounts; -6- he shall at all reasonable times exhibit his books and accounts to any Director of the Corporation, and he shall perform all the actions incident to the position of Treasurer, subject to the control of the Board of Directors. Section 6. Compensation of Officers. The President and other officers of the Corporation shall be entitled to receive such compensation for their services as shall from time to time be determined by the Board of Directors. Section 7. Absence of Officers. In the absence of any officer of the Corporation, or for any other reason which the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, the powers or duties of any of them, or such officers to any other officer or to any Director or Directors provided a majority of the Board of Directors concur therein. ARTICLE IV CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE Section 1. Record Date. The Board of Directors may fix, in advance, a date as the record date, for the purpose of determining shareholders entitled to notice of, or to vote at any meeting or entitled to receive payment of dividends, or to the allotment of rights or to exercise the rights in respect of any change, conversion or exchange of capital stock. Such date, in any case, shall not be more than forty (40) days, and in the case of a meeting of shareholders, not less than ten (10) days, prior to the date on which a particular action requiring such determination of shareholders is to be taken. Section 2. Closing Books. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed in any case, twenty days preceding the original date fixed for any meeting of shareholders or the date for the allotment of rights or the date for the payment of any dividend or the date when any change or conversion or exchange of capital stock shall go into effect. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, -7- such book shall be closed for at least ten (10) days immediately preceding such meeting. Section 3. Voting List. The Secretary shall make, at least ten (10) day before such meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office of the Corporation and shall be subject to inspection by any shareholder holding two (2%) percent or more of the outstanding capital stock of the Corporation, at any time during the usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the stockholders entitled to examine such list, or Stock Transfer Books, or to vote at any meeting of shareholders. Failure to comply with the requirements of this Section shall not affect the validity of any action taken at such meeting. ARTICLE V CAPITAL STOCK - SEAL - FISCAL YEAR Section 1. Certificates for Shares. The certificates for shares of the capital stock of the Corporation shall be in such form, not inconsistent with the Articles of Incorporation, as shall be approved by the Board of Directors. All certificates shall be signed by the President or Vice-President and shall be signed by the Treasurer, Assistant Treasurer or the Secretary or Assistant Secretary and sealed with the corporate seal and shall not be valid unless so signed and sealed. In case any officer or officers, who shall have signed any such certificate or certificates, shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates had not ceased to be such officer of the Corporation. -8- All certificates for shares of stock shall be consecutively numbered as the same are issued. The name of the person owning the shares represented thereby with the number of such shares and the date of issue thereof shall be entered on the Corporation's books. All certificates surrendered to the Corporation for transfer shall be cancelled, and no new certificates shall be issued until former certificates for the same number of shares have been surrendered and cancelled. Except as hereinbefore provided, the Board of Directors shall have the power and authority to make all rules and regulations as the Board shall deem expedient, regulations and issuance, transfer and registration of certificates for shares in this Corporation. Section 2. Transfer of Shares. Title to a certificate and to the shares represented thereby can be transferred only (a) by delivery of the certificate endorsed either in blank or to a specified person by the person appearing by the certificate to be the owner of the shares represented thereby, or (b) by delivery of the certificate and a separate document containing a written assignment of the certificate or a power of attorney to sell, assign or transfer the same or the shares represented thereby, signed by the person appearing by the certificate to be the owner of the shares represented thereby. Such assignment or power of attorney may be either in blank or to a specified person. However, this Corporation will only recognize the person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have express or other notice thereof, save as may be otherwise provided by statute. Shares of the capital stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof, in person or by his attorney duly authorized in writing, upon surrender and cancellation of certificates for the number of shares to be transferred. Books for the transfer of shares of its capital stock shall be kept by the Corporation or by one or more transfer agents appointed by it. Section 3. Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged -9- to have been stolen, lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be stolen, lost or destroyed. When authorizing such issue of a new certificate the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such stolen, lost or destroyed certificate or his legal representative to advertise the same in such manner as it shall require and/or to give bonds with sufficient surety, to the Corporation to indemnify it against any loss or claim which may arise by reason of the issuance of a new certificate. Section 4. Corporate Seal. The Board of Directors shall provide a suitable seal, containing the name of the Corporation, which shall be in the charge of the Secretary. If and when so directed by the Board of Directors, a duplicate of the seal may be kept and used by any officer of the Corporation designated by the Board. Section 5. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors of Directors. ARTICLE VI MISCELLANEOUS Section 1. Records Accounts. All accounts, records and memoranda shall be kept in books and papers supplied by the Corporation and these and all vouchers, documents and other writings, whether in book form or otherwise, whether or not supplied by the Corporation, shall be subject to the control of the Board of Directors. Section 2. Waivers of Notice. Notice of the time, place and purpose of any meeting required to be given under the provisions of these By-Laws may be waived by telegram, radiogram, cablegram or other writing by those not present and entitled to vote thereat either before or after the holding thereof. Section 3. Bank Accounts, Checks, Drafts, Etc. The officers of the Corporation shall establish and maintain bank accounts, in the name of the Corporation, in such banks or depositaries as the Board of Directors shall select. Any moneys, checks drafts and others for the payment of money shall be deposited therein to the credit of the Corporation without undue delays and all payments on behalf of the Corporation shall be made by check on any of such accounts. -10- All notes, checks, drafts and orders for the payment of money issued by this Corporation shall be signed on behalf of the Corporation by such officers or agents of the Corporation as the Board of Directors shall from time to time prescribe. The sale, transfer, assignment and/or conveyance of any of the assets of the Corporation shall be executed in the name of and on behalf of the Corporation by such officers of the Corporation as the Board of Directors shall from time to time prescribe, and in the absence of such specification by the Board of Directors the President may execute the same in the name of and on behalf of this Corporation and may affix the corporate seal thereto, or any Vice-President, and the Secretary, or Assistant Secretary, may execute the same in the name of and on behalf of this Corporation and may affix the corporate seal thereto. ARTICLE VII AMENDMENTS The Board of Directors shall have power to alter, amend, add to and repeal the By-Laws of the Corporation by a vote of a majority of the Board. The shareholders, by the affirmative vote of a majority of the stock issued, outstanding and entitled to vote, may make, alter, amend or add to the By-Laws without notice at any regular meeting, or at any special meeting, if the substance of such amendment be contained in the notice of such special meeting, provided that the Board of Directors shall not make or alter any By-Laws fixing their qualification, classifications or term of office. ARTICLE VIII ACTION BY UNANIMOUS WRITTEN CONSENT Notwithstanding any other provision of these By-Laws, if and when the Directors or stockholders of this Corporation shall severally or collectively consent in writing to any action to be taken by the Corporation, such action shall be as valid a corporate action as though it had been authorized at a meeting of the Board of Directors or stockholders respectively, -11- whether such consent is given before or after the action is taken, and said consent in writing and the action taken thereon shall be evidenced by appropriate memorandum in the minute book of this Corporation, and the execution of said consent in writing by any Directors or stockholders shall constitute a waiver of the notice requirements set forth in the statutes of the State of incorporation of this Corporation, or By-Laws of this Corporation which might otherwise invalidate said action. ARTICLE IX DISALLOWED PAYMENTS TO OFFICERS Any payments made to an officer of the Corporation such as salary, commission, bonus, interest, or rent, or entertainment expenses incurred by him, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer to the Corporation to the full extent of such disallowance. It shall be the duty of the Directors, as a Board, to enforce payment of each such amount disallowed. In lieu of payment by the officer, subject to the determination of the Directors, proportionate amounts may be withheld from his future compensation payments until the amount owed to the Corporation has been recovered. -12- EX-5.1 18 EXHIBIT 5.1 [LETTERHEAD OF HOWARD, DARBY & LEVIN] May 20, 1998 Eagle-Picher Industries, Inc. Suite 500 250 East Fifth Street Cincinnati, Ohio 45202 Ladies and Gentlemen: In connection with the registration under the Securities Act of 1933, as amended (the "Act"), pursuant to the Registration Statement (No. 333-49957) on Form S-4 (the "Registration Statement") filed with the Securities and Exchange Commission, of (a) $220,000,000 aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2008 (the "New Notes") of Eagle-Picher Industries, Inc., an Ohio corporation (the "Company"), and (b) Guarantees of the New Notes (together with the New Notes, the "Securities") by Eagle-Picher Holdings, Inc., a Delaware corporation ("Parent"), and Daisy Parts, Inc., a Michigan corporation, Eagle-Picher Development Company, Inc., a Delaware corporation, Eagle-Picher Far East, Inc., a Delaware corporation, Eagle-Picher Fluid Systems, Inc., a Michigan corporation, Eagle-Picher Minerals, Inc., a Nevada corporation, Eagle-Picher Technologies, LLC, a Delaware limited liability company, Hillsdale Tool & Manufacturing Co., a Michigan corporation and Michigan Automotive Research Corporation, a Michigan corporation (collectively, the "Subsidiary Guarantors"), we have reviewed such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion. We have assumed that each of the Company and the Subsidiary Guarantors is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and that it has or had all requisite power and authority to execute, deliver and perform the Indenture, dated as of February 24, 1998, as supplemented by the First Supplemental Indenture, dated as of February 24, 1998, among the Company, Parent, the Subsidiary Guarantors and The Bank of New York, as Trustee (the "Indenture"), and to issue the Securities and that each of the Company and the Subsidiary Guarantors has duly authorized, executed and delivered the Indenture and the Company has duly authorized, executed and delivered the Securities. Upon the basis of such examination and subject to the foregoing assumptions, we advise you that, in our opinion, when the Registration Statement has become effective under the Act, and the Securities have been duly executed and authenticated in accordance with the Indenture and issued in exchange for the 9 3/8% Senior Subordinated Notes due 2008 previously issued by the Company and the guarantees thereof of Parent and the Subsidiary Guarantors in accordance with the exchange offer contemplated by the Registration Statement, and assuming compliance with the Act, the Securities will constitute the valid and binding obligations of the Company, Parent and the Subsidiary Guarantors, as the case may be, enforceable against each such party in accordance with their terms, subject to bankruptcy, Eagle-Picher Industries, Inc. -2- insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights, to general equity principles, and to the qualification that we express no opinion with respect to the waivers contained in Section 4.04 of the Indenture. We are members of the bar of the State of New York. We do not purport to be experts in, and we do not express any opinion on, any laws other than the law of the State of New York, the Delaware General Corporation Law and the Federal law of the United States of America. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm under the heading "Legal Matters" in the Prospectus. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, /s/ Howard, Darby & Levin EX-10.3 19 EXHIBIT 10.3 EAGLE-PICHER INDUSTRIES, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AS AMENDED MAY 3, 1995 SECTION 1. ESTABLISHMENT OF THE PLAN 1.1 ESTABLISHMENT OF THE PLAN. Eagle-Picher Industries, Inc. (the "Company") established, effective November 4, 1987, this supplemental retirement plan for eligible employees of the Company, which plan shall be known as the EAGLE-PICHER SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (the "Plan"). 1.2 DESCRIPTION OF THE PLAN. This Plan has been established as an unfunded plan in order to provide supplemental retirement benefits for a select group of management or highly compensated employees and as such the Plan is exempt from the participation, vesting, funding and fiduciary requirements of Title I of the Employee Retirement Income Security Act of 1974, as amended. SECTION 2. DEFINITIONS 2.1 DEFINITIONS. Whenever used in the Plan, the following terms shall mean: (a) "Accrued Benefit" means the benefit payable to the Member under Section 4.1 or Section 4.2 determined as if the Member's participation under the Plan terminated as of the date the accrued benefit is being measured. (b) "Affiliate" means each wholly-owned subsidiary of the Company. (c) "Board of Directors" means the Board of Directors of Eagle-Picher Industries, Inc. (d) "Committee" means the Committee as defined in Section 6.1 hereof. (e) "Company" means Eagle-Picher Industries, Inc., or any successor thereto. (f) "Effective Date" means November 4, 1987. (g) "Final Average Monthly Salary" means the sum of the Employee's Salary for the five consecutive calendar years of his service as a Member of this Plan in which 1 he had the highest Salary during his last ten calendar years of service as a Member of this Plan divided by 60. (h) "Other Pension" means the actuarial equivalent life annuity value of any benefit from any qualified defined benefit or defined contribution plan maintained by the Company or an Affiliate (other than the Eagle-Picher Savings Plan) and the Member's Primary Social Security. (i) "Participant" means key employees designated by the Board of Directors. (j) "Plan" means The Eagle-Picher Industries, Inc. Supplemental Executive Retirement Plan. (k) "Plan Year" means the fiscal year of the Company (which presently ends November 30). (l) "Primary Social Security" means the monthly benefit which a retired Member or a terminated Member receives or would be entitled to receive at his 62nd birthday, or in the case of a Member who terminates employment after age 62, at the date his Benefit Service terminates as a primary insurance amount under the U.S. Social Security Act, as amended, whether he applies for such benefit or not, and even though he may lose part or all of such benefit for any reason. The amount of such Primary Social Security to which the retired or terminated Member is or would be entitled shall be estimated and computed by the Company for the purposes of the Plan as of the January 1 of the calandar year of retirement or termination on the following basis: (1) For a Member whose Benefit Service terminates on or after his Normal Retirement Age, on the basis of the U.S. Social Security Age as amended 2 and in effect, and the rate in effect, on the January 1 coincident with or next preceding his Normal Retirement Date (regardless of any retroactive changes made by legislation enacted after said January 1). (2) For a Member whose Benefit Service terminates prior to his Normal Retirement Age, on the basis and at the rate of the U.S. Social Security Act as amended and in effect on the January 1 coincident with or next preceding the date of termination of his Benefit Service (regardless of any retroactive changes made by legislation enacted after said January 1), and, assuming that he will continue to have each year until he reaches age 62, annual compensation in covered employment under the Act at least equal to the maximum earnings which are considered compensation subject to tax under the Act. In the case of a Member whose projected Benefit Service at age 62 will be less than 25 years, the amount of the Member's Primary Social Security will be prorated based on Benefit Service projected to age 62 (maximum 25 years) divided by 25 years. If a Member's Benefit Service terminates after age 62 and is less than 25 years, his Primary Social Security will be prorated based on actual years of Benefit Service (maximum 25 years) divided by 25 years. (m) "Normal Retirement Age" means a Member's age when he has attained his 62nd birthday and has completed ten years of Vesting Service. (n) "Normal Retirement Date" means the first day of the calendar month coincident with or next following a Member's Normal Retirement Age. (o) "Salary" means a Member's total aggregate calendar year compensation before any deferral under the Eagle-Picher Savings Plan or the Eagle-Picher Flex Plan, 3 including bonuses, commissions, overtime pay and severance pay, but excluding fringe benefits (including but not limited to automobile allowances, imputed income from group term life insurance, relocation allowances, income from the exercise of non-qualified stock options or disposition of incentive stock option stock, interest reimbursements, and income from annuity purchases under Section 5.1 or tax reimbursements under Section 5.2 of this Plan). Bonuses accrued after 1984 shall be included in Salary for the calendar year of accrual if actually paid by January 15th of the following year. All other bonuses shall be included in Salary for the calendar year in which paid. 2.2 GENDER REFERENCE. Any words in this Plan document (or amendments to it) which are used in one gender shall be read and construed to mean or include the other sender wherever they would so apply. SECTION 3. MEMBERSHIP AND SERVICE 3.1 MEMBERSHIP. A person will become a Member upon designation by the Board of Directors. A Member's participation in the Plan may be terminated by action of the Board of Directors if the Member's position with the Company is changed. 3.2 SERVICE. A Member's Vesting Service and Benefit Service under the Plan shall be computed in the same manner as they would be computed under the Eagle-Pitcher Salaried Plan; provided, however, that the Executive Committee of the Board of Directors, in its discretion, may grant additional Vesting Service and Benefit Service to a Member by written notice to the Member with a copy to the Committee. SECTION 4. BENEFITS 4.1 TERMINATION ON OR AFTER AGE 62. The monthly benefit payable for life 4 commencing at age 62 for an individual who terminates employment with the Company or an Affiliate on or after attainment of age 62 with at least 10 years of Vesting Service shall be equal to: (1) .024 multiplied by the Member's Final Average Monthly Salary and multiplied by his Benefit Service (maximum 25 years) (2) minus any Other Pension payable at that date. 4.2 TERMINATION BEFORE AGE 62. The monthly benefit payable for life commencing at age 62 for an individual who terminates employment with the Company or an Affiliate before age 62 with at least 10 years of Vesting Service shall be equal to: (1) .024 multiplied by the Member's Final Average Monthly Salary and multiplied by his Benefit Service projected to age 62 (maximum 25 years) (2) minus any Other Pension (projecting service to age 62, using the Member's current Final Average Monthly Salary and the Member's Primary Social Security payable at age 62) (3) multiplied by Benefit Service earned (maximum 25 years) divided by Benefit Service projected to age 62 (maximum 25 years); provided, however, that in no event shall the sum of the Member's Other Pension and the benefit payable under this section be less than .024 multiplied by the Member's Final Average Monthly Salary and multiplied by his Benefit Service earned (maximum 25 years). 4.3 TERMINATION WITHOUT 10 YEARS OF VESTING SERVICE. A Member who terminates employment with the Company or an Affiliate before earning ten years of Vesting Service shall not be entitled to any benefits under this Plan. 4.4 FORM OF BENEFITS. The normal form of benefits payable under this Plan 5 shall be monthly payments for the life of the Member. To the extent the Company has purchased annuity contracts for the Member's Accrued Benefit under the Plan, payments made under the annuity contracts shall satisfy the Company's obligation hereunder. SECTION 5. ANNUITY PURCHASES AND TAX REIMBURSEMENT 5.1 ANNUITY PURCHASES. The Company may purchase single premium annuity contracts from time to time to provide for a Member's Accrued Benefit under the Plan. Upon a Member's termination of employment, the Company may distribute the cost of purchasing an annuity to the Member rather than purchasing an annuity for the portion of his benefit not otherwise provided for. 5.2 TAX REIMBURSEMENT. The Company will reimburse the Member an amount calculated to approximate the income and excise tax liability attributable to any annuity purchase. The Committee shall determine the federal, state and local tax rates to be used. The Committee's determination of these tax rates shall be final. The Member will have a basis in the annuity contract equal to the amount the Company pays for the annuity. SECTION 6. ADMINISTRATION 6.1 PLAN ADMINISTRATOR AND FIDUCIARY. The Committee shall be the Plan Administrator and shall be named fiduciary under the Plan. The Committee shall consist of not less than three persons (who may be Members) who shall be appointed by the Board of Directors. The number of members on the Committee may be increased or decreased from time to time provided the total number of members shall at all times be an odd number and shall not be less than three. A member of the Committee may resign or he may be removed by the Board of Directors. 6.2 CHAIRMAN AND SECRETARY. The Committee shall select a Chairman and 6 may select a Secretary (who need not be a member of the Committee) to keep its records or to assist it in the performance of any of its functions. 6.3 POWERS AND DUTIES. The Committee shall administer the Plan and shall have the power and the duty to take all action, and to make all decisions necessary or proper to carry out the Plan, including, without limitation, the following: (a) To interpret the Plan, which interpretations shall be final and conclusive; (b) To resolve all questions concerning the Plan; (c) To compute the benefit to be paid to any person under the Plan. Provided, however, that the Committee may delegate all or part of its powers and duties in connection with administering the Plan to a named delegate. 6.4 APPOINTMENT OF AGENTS AND DELEGATION OF DUTIES. The Committee may appoint such accountants, actuaries, counsel, specialists and other persons as it shall deem necessary or desirable in connection with the administration of the Plan. The Committee and any person to whom it may delegate any duty or power in connection with administering the Plan shall be entitled to rely conclusively upon, and shall be fully protected in any action taken by them in good faith in reliance upon, any tables, valuations, certificates, opinions or reports which shall be furnished to them by any such actuary, counsel or other specialist. 6.5 ACTION OF COMMITTEE. The Committee may act by a majority of its members either at a meeting or in writing without a meeting. 6.6 COMPENSATION. Unless otherwise agreed to by the Company, members of the Committee shall serve without compensation. All expenses of the Committee shall be paid by the Company. 7 6.7 INDEMNITY FOR LIABILITY. The Company shall indemnify the Committee, its members and delegates, against any and all claims, losses, damages, expenses, including counsel fees, incurred by these parties and any liability, including any amounts paid in settlement with the Committee's approval, arising from the Committee's, its members' and/or delegates' action or failure to act, except when the same is judicially determined to be attributable to the gross negligence or willful misconduct of such Member. 6.8 CLAIMS PROCEDURE. (a) Claim, Denial and Notice: All claims for benefits shall be in writing and signed by the Member or Beneficiary. Any Member or Beneficiary whose written request to the Committee for benefits has been denied in whole or in part shall be furnished with written notice of the denial of this claim by the Committee within sixty (60) days of receipt by the Committee of the claim. Such notice shall be written in a manner calculated to be understood by the Member or Beneficiary and shall contain the specific reasons for such denial, specific references to pertinent Plan provisions on which the denial is based, a description of additional material or information which is needed to complete the claim and why such is necessary, and an explanation of the Plan's appeal procedure. (b) Appeal: Within sixty (60) days after the receipt of a notice that his claim was denied, the claimant may appeal in writing the denial of his claim to the Committee stating the reason for his appeal and submitting any issues or comments for the Committee's review. (c) Decision on Appeal: Within sixty (60) days of receipt of an appeal, the Committee shall mail to the applicant a written notice of its decision setting forth 8 in a manner calculated to be understood by the applicant the specific reasons for its decision and specific references to the pertinent Plan provisions on which the Committee's decision was based. SECTION 7. AMENDMENT AND TERMINATION 7.1 AMENDMENT AND TERMINATION. Eagle-Picher Industries, Inc. reserves the right to make any modifications or amendments to the Plan or to terminate it at any time for any reason. No amendment or termination of the Plan shall reduce benefits already accrued and vested under the Plan. SECTION 8. MISCELLANEOUS AND APPLICABLE LAW 8.1 NO GUARANTEE OF EMPLOYMENT. The Plan shall not be deemed a contract of employment between the Company and any Member, nor shall it impede the right of the Company to discharge any Member at any time. 8.2 APPLICABLE LAW. The Plan and all rights hereunder shall be governed by and construed according to the laws of the State of Ohio. IN WITNESS WHEREOF, this document is executed on May 3, 1995. EAGLE-PICHER INDUSTRIES, INC. By: /s/ Thomas E. Petry -------------------------------- Thomas E. Petry, Chief Executive Officer and Chairman of the Board ATTEST: /s/ James A. Ralston --------------------------------- James A. Ralston, Secretary 9 EX-10.18 20 EXHIBIT 10.18 SUBORDINATION AGREEMENT THIS SUBORDINATION AGREEMENT is dated as of February 24, 1998 and by and among E-P ACQUISITION, INC., a Delaware corporation (the "BORROWER"), and EACH OF THE CORPORATIONS LISTED ON THE ATTACHED SUBSIDIARIES SCHEDULE I (the "SUBSIDIARIES" being collectively referred to herein together with Borrower as the "COMPANIES" and individually as a "COMPANY"), and for the benefit of the Guaranteed Creditors (as defined in the Credit Agreement defined below) and ABN AMRO BANK N.V., in its capacity as agent for the Guaranteed Creditors (the "AGENT"). Each capitalized term used herein shall, unless otherwise defined herein, have the same meaning given to such term in the Credit Agreement dated as of February 19, 1998 (as it may hereafter be amended, restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT") by and among the Borrower, the Lenders (as defined in the Credit Agreement) and the Agent. WITNESSETH THAT: WHEREAS, pursuant to the Credit Agreement, the Lenders intend to extend certain credit facilities to the Borrower as provided therein; WHEREAS, the Companies are now or may hereafter become indebted to each other (all present and future indebtedness of the Companies to each other, whether created directly or acquired by assignment or otherwise, and interest and premiums, if any, thereon and other amounts payable in respect thereof are hereinafter collectively referred to as the "INTERCOMPANY DEBT"); and WHEREAS, the obligation of the Lenders to extend such credit facilities to the Borrower are subject to the condition, among others, that the Companies subordinate the Intercompany Debt to the Obligations of the Credit Parties to the Guaranteed Creditors pursuant to the Credit Documents and the obligations of the Borrower under Interest Rate Protection Agreements with any Lender or affiliate thereof (the "SENIOR DEBT") in the manner set forth herein. NOW, THEREFORE, intending to be legally bound hereby, the parties hereto covenant and agree as follows: 1. INTERCOMPANY DEBT SUBORDINATED TO SENIOR DEBT. The recitals set forth above are hereby incorporated by reference. All Intercompany Debt shall be subordinate and subject in right of payment to the prior indefeasible payment in full of all Senior Debt pursuant to the provisions contained herein. 2. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. Upon any distribution of assets of any Company (a) in the event of any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization, assignment for the benefit of creditors or other similar case or proceeding in connection therewith, relative to any such Company or to its assets, or (b) after the occurrence and during the continuance of an Event of Default or Default under the Credit Agreement or any liquidation, dissolution or other winding up of any such Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) in the event of any assignment for the benefit of creditors or any marshalling of assets and liabilities of any such Company (a Company distributing assets as set forth herein being referred to in such capacity as a "Distributing Company"), then and in any such event the Guaranteed Creditors shall be entitled to receive indefeasible payment in full of all amounts due or to become due (whether or not an Event of Default has occurred under the terms of the Credit Documents or the Senior Debt has been declared due and payable prior to the date on which it would otherwise have become due and payable) on or in respect of any and all Senior Debt before the holder of any Intercompany Debt owed by the Distributing Company is entitled to receive any payment on account of the principal of or interest on such Intercompany Debt, and to that end the Guaranteed Creditors shall be entitled to receive, for application to the payment of the Senior Debt, any payment or distribution of any kind or character, whether in cash, property or securities, which may be payable or deliverable in respect of the Intercompany Debt owed by the Distributing Company in any such case, proceeding, dissolution, liquidation or other winding up or event. 3. NO COMMENCEMENT OF ANY PROCEEDING. Each Company agrees that, so long as the Senior Debt shall remain unpaid, it will not commence, or join with any credit other than the Guaranteed Creditors or the Agent on behalf of the Guaranteed Creditors in commencing, any collection or enforcement proceeding against any other Company, including, but not limited to, those described in Section 2 hereof, or any other enforcement action of any kind against any Company in respect of the Intercompany Debt. 4. PRIOR PAYMENT OF SENIOR DEBT UPON ACCELERATION OF INTERCOMPANY DEBT. If any portion of the Intercompany Debt owed by any Company becomes or is declared due and payable before its stated maturity, then and in such event the Guaranteed Creditors shall be entitled to receive indefeasible payment in full of all amounts due and to become due on or in respect of the Senior Debt (whether or not an Event of Default has occurred under the terms of the Credit Agreement or the Senior Debt has been declared due and payable prior to the date on which it would otherwise have become due and payable) before the holder of any such Intercompany Debt is entitled to receive any payment thereon. 5. NO PAYMENT WHEN SENIOR DEBT IN DEFAULT. If any Event of Default under the Credit Agreement shall have occurred and be continuing or such an Event of Default would result from or exist after giving effect to a payment with respect to any portion of the Intercompany Debt, unless the Lenders or Required Lenders shall have consented to or waived the same, so long as any of the Senior Debt shall remain outstanding, no payment shall be made by the Company owing such Intercompany Debt on account of principal or interest on any portion of the Intercompany Debt. 6. PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in this Agreement shall prevent any of the Companies, at any time, except during the pendency of any of the conditions described in Sections 2, 4 and 5, from making the regularly scheduled payments of the Intercompany Debt, or the retention thereof by any of the Companies of any money deposited with it for the regularly scheduled payments of or on account of the Intercompany Debt. 7. RECEIPT OF PROHIBITED PAYMENTS. If, notwithstanding the foregoing provisions of Sections 2, 4, 5 and 6, a Company which is owed Intercompany Debt by a Distributing Company shall have received any payment or distribution of assets from the Distributing Company of any kind or character, whether in cash, property or securities, other than as expressly permitted by the terms of this Agreement, then and in such event such payment or distribution shall be held in trust for the benefit of the Guaranteed Creditors, shall be segregated from other funds and property held by such Company, and shall be forthwith paid over to the Agent for the benefit of the Guaranteed Creditors in the same form as so received (with any necessary endorsement) to be applied (in the case of cash) to or held as collateral (in the case of non-cash property) for the payment or prepayment of the Senior Debt in accordance with the terms of the Credit Agreement. 8. RIGHTS OF SUBROGATION. Each Company agrees that no payment or distribution to the Guaranteed Creditors pursuant to the provisions of this Agreement shall entitle the Company to exercise any rights of subrogation in respect thereof until the Senior Debt shall have been indefeasibly paid in full and the Commitments under the Credit Agreement shall have terminated. 9. INSTRUMENTS EVIDENCING INTERCOMPANY DEBT. At the request of the Agent, each Company shall cause each instrument which now or hereafter evidences all or a portion of the Intercompany Debt to be conspicuously marked as follows: "This instrument is subject to the terms of a Subordination Agreement dated as of February 24, 1998, in favor of ABN AMRO Bank N.V., as Agent, which Subordination Agreement is incorporated herein by reference. Notwithstanding any contrary statement contained in the within instrument, no payment on account of the principal thereof or interest thereon shall become due or payable except in accordance with the express terms of said Subordination Agreement." and promptly deliver such instrument to the Agent to be pledged under the Security Agreement. At the Agent's request, each Company will further mark its books of account in such a manner as shall be effective to give proper notice to the effect of this Agreement. 10. AGREEMENT SOLELY TO DEFINE RELATIVE RIGHTS. The purpose of this Agreement is solely to define the relative rights of the Companies, on the one hand, and the Guaranteed Creditors, on the other hand. Nothing contained in this Agreement is intended to or shall prevent the Companies from exercising all remedies otherwise permitted by applicable law upon default under any agreement pursuant to which the Intercompany Debt is created, subject to Sections 2, 3, 4, 5 and 6 hereof, including, without limitation, the rights under this Agreement of the Guaranteed Creditors to receive cash, property or securities otherwise payable or deliverable with respect to the Intercompany Debt. 11. NO IMPLIED WAIVERS OF SUBORDINATION. No right of the Guaranteed Creditors to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Company, by any act or failure to act by any Guaranteed Creditor, or by any non-compliance by any Company with the terms, provisions and covenants of any agreement pursuant to which the Intercompany Debt is created, regardless of any knowledge thereof any Guaranteed Creditor may have or be otherwise charged with. Each Company by its acceptance hereof agrees that, so long as there is Senior Debt outstanding or any Commitment is in effect under the Credit Agreement, such Company shall not agree to sell, assign, pledge, encumber or otherwise dispose of, the obligations of the Intercompany Debt, other than by means of payment of such Intercompany Debt according to its terms, without the prior written consent of the Agent. Without in any way limiting the generality of the foregoing paragraph, in accordance with the Credit Agreement, the Agent on behalf of the Lenders, the Lenders, or the Required Lenders, as the case may be, at any time and from time to time, without the consent of or notice to the Companies, except to the extent required by the Credit Agreement or other Credit Documents, without incurring responsibility to the Companies and without impairing or releasing the subordination provided in this Agreement or the obligations hereunder of the Companies to the Guaranteed Creditors, may do any one or more of the following: (i) change the manner, place or terms of payment, or extend the time of payment, renew or alter the Senior Debt or otherwise amend, restate, supplement or otherwise modify the Senior Debt or the Credit Documents; (ii) release any collateral or any person liable in any manner for the payment or collection of the Senior Debt; and (iii) exercise or refrain from exercising any rights against any of the Companies and any other person or entity. 12. ADDITIONAL SUBSIDIARIES. The Companies covenant and agree that each of them shall cause any Subsidiary (including, without limitation, each direct or indirect Subsidiary) which it creates or acquires after the date hereof to become a party to this Agreement by executing a joinder to this Agreement in a form acceptable to and approved by the Agent promptly after such Company acquires or creates such Subsidiary. 13. CONTINUING FORCE AND EFFECT. This Agreement shall continue in force until all of the Senior Debt is indefeasibly paid in full and the Commitments under the Credit Agreement have terminated, it being contemplated that this Agreement be of a continuing nature. 14. MODIFICATION, AMENDMENTS OR WAIVERS. Any and all agreements amending or changing any provision of this Agreement or the rights of the Agent on behalf of the Guaranteed Creditors or the Guaranteed Creditors hereunder, and any and all waivers or consents to any departures from the due performance of the Companies hereunder shall be made only by written agreement, waiver or consent signed by the Agent and the Credit Parties. 15. EXPENSES. In accordance with the Credit Agreement, the Companies each unconditionally and jointly and severally agree upon demand to pay to the Agent the amount of any and all reasonable and necessary out-of-pocket costs, expenses and disbursements, including but not limited to reasonable fees and expenses of counsel, which may be incurred by the Guaranteed Creditors in connection with (a) the exercise or enforcement of any of the rights of the Guaranteed Creditors hereunder, or (b) the failure by the Companies to perform or observe any of the provisions hereof. 16. SEVERABILITY. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 17. GOVERNING LAW. This Agreement shall be a contract under the internal laws of the State of New York and for all purposes shall be construed in accordance with the laws of said State without giving effect to its conflicts of law principles. 18. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of the Guaranteed Creditors and their respective successors and assigns, and the obligations of the Companies shall be binding upon their respective successors and assigns. The duties and obligations of each of the Companies may not be delegated or transferred by it. 19. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which, when executed and delivered, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. 20. ATTORNEYS-IN-FACT. Each Company hereby authorizes and empowers the Agent, at its election and in the name of either itself, or in the name of each Company after an Event of Default, to execute and file proofs and documents and take any other action the Agent may deem advisable to enforce the Guaranteed Creditors' interests relating to the Intercompany Debt created hereunder and their right of enforcement thereof as set forth herein, and to that end the Companies hereby irrevocably make, constitute and appoint the Agent, its officers, employees and agents, or any of them, with full power of substitution, as the true and lawful attorney-in-fact and agent of such Company and with full power for such Company and in the name, place and stead of such Company for the purpose of carrying out the provisions of this Agreement and taking any action and executing, delivering, filing and recording any instruments which the Agent may deem necessary or advisable to accomplish the purposes hereof, which power of attorney, being given for security, is coupled with an interest and irrevocable. Each Company hereby ratifies and confirms and agrees to ratify and confirm all action taken by the Agent, its officers, employees or agents pursuant to the foregoing power of attorney. 21. APPLICATION OF PAYMENTS. In the event any payments are received by the Agent on behalf of the Guaranteed Creditors or any Guaranteed Creditor under the terms of this Agreement for application to the Senior Debt at any time when the Senior Debt has not been declared due and payable and prior to the date on which it would otherwise become due and payable, such payment shall constitute a voluntary prepayment of the Senior Debt for all purposes under the Credit Agreement. 22. REMEDIES. In the event of a breach by any of the Companies in the performance of any of the terms of this Agreement, the Agent on behalf of the Guaranteed Creditors or any Guaranteed Creditor may demand specific performance of this Agreement and seek injunctive relief and may exercise any other remedy available at law or in equity, it being recognized that the remedies of the Guaranteed Creditors at law may not fully compensate the Guaranteed Creditors for the damages it may suffer in the event of a breach hereof. 23. CONSENT TO JURISDICTION; WAIVER OR JURY TRIAL. EACH COMPANY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND EACH COMPANY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT TO THE FULL EXTENT PERMITTED BY LAW. WITNESS the due execution hereof as of the day and year first above written. E-P ACQUISITION, INC. By: /s/ JOEL P. WYLER ........................................ Name: Joel P. Wyler ........................................ Title: President ........................................ DAISY PARTS, INC. By: /s/ ANDRIES RUIJSSENAARS ........................................ Name: Andries Ruijssenaars ........................................ Title: Authorized Person ........................................ EAGLE-PICHER TECHNOLOGIES, LLC By: /s/ ANDRIES RUIJSSENAARS ........................................ Name: Andries Ruijssenaars ........................................ Title: Director-Manager ........................................ EAGLE-PICHER DEVELOPMENT COMPANY, INC. By: /s/ ANDRIES RUIJSSENAARS ........................................ Name: Andries Ruijssenaars ........................................ Title: President ........................................ EAGLE-PICHER FAR EAST, INC. By: /s/ ANDRIES RUIJSSENAARS ........................................ Name: Andries Ruijssenaars ........................................ Title: Authorized Person ........................................ EAGLE-PICHER FLUID SYSTEMS, INC. By: /s/ ANDRIES RUIJSSENAARS ........................................ Name: Andries Ruijssenaars ........................................ Title: Authorized Person ........................................ EAGLE-PICHER MINERALS, INC. By: /s/ ANDRIES RUIJSSENAARS ........................................ Name: Andries Ruijssenaars ........................................ Title: Authorized Person ........................................ HILLSDALE TOOL & MANUFACTURING CO. By: /s/ ANDRIES RUIJSSENAARS ........................................ Name: Andries Ruijssenaars ........................................ Title: Authorized Person ........................................ MICHIGAN AUTOMOTIVE RESEARCH CORPORATION By: /s/ ANDRIES RUIJSSENAARS ........................................ Name: Andries Ruijssenaars ........................................ Title: Authorized Person ........................................ EX-10.20 21 EXHIBIT 10.20 EAGLE-PICHER MANAGEMENT TRUST February 17, 1998 TABLE OF CONTENTS Page ---- ARTICLE 1 TRUST...............................................................1 1.1 Trust...............................................................1 1.2 Effective Date......................................................1 ARTICLE 2 PAYMENTS TO TRUST FUND..............................................1 2.1 Receipt of Payments.................................................1 2.2 Form of Payments....................................................2 ARTICLE 3 POWERS AND DUTIES OF TRUSTEES.......................................2 3.1 General.............................................................2 3.2 Investment of the Trust Assets......................................2 3.3 Allocation and Delegation of Responsibilities.......................2 3.4 Taxes and Expenses..................................................2 3.5 Tenure in Office....................................................3 3.6 Successor Trustees..................................................3 ARTICLE 4 INVESTMENT POWERS...................................................3 4.1 General.............................................................3 4.2 Voting Restricted Stock.............................................4 ARTICLE 5 ACCOUNTS AND RECORDS................................................5 5.1 Accounts............................................................5 5.2 Reports.............................................................5 ARTICLE 6 PAYMENTS FROM THE TRUST FUND........................................5 6.1 Payments Generally..................................................5 ARTICLE 7 SPENDTHRIFT PROVISIONS..............................................6 7.1 No Assignment.......................................................6 ARTICLE 8 AMENDMENTS AND TERMINATION..........................................6 8.1 Right to Amend......................................................6 8.2 Termination.........................................................6 8.3 Limitations.........................................................6 ARTICLE 9 TRUSTEE'S LIABILITY.................................................6 9.1 Indemnification.....................................................6 i Page ---- ARTICLE 10 MISCELLANEOUS PROVISIONS...........................................7 10.1 General Undertaking................................................7 10.2 Invalidity of Certain Provisions...................................7 10.3 Masculine, Feminine, Singular, and Plural..........................7 10.4 Mailing Notices....................................................7 10.5 Submitting Notice..................................................7 10.6 Governing Law......................................................8 ii EAGLE-PICHER MANAGEMENT TRUST THIS TRUST AGREEMENT (the "Agreement") is made this 17th day of February, 1998, by and among Granaria Industries B.V., a Dutch corporation (the "Issuer"), and Thomas E. Petry, Andries Ruijssenaars, and Joel Wyler (the "Trustees"). WITNESSETH WHEREAS, the Issuer expects Eagle-Picher Industries, Inc., an Ohio corporation (the "Company") to have adopted the Incentive Stock Plan of Eagle-Picher Industries, Inc. (the "Plan") substantially in the form attached hereto as Annex A for the benefit of Participants and their Beneficiaries under such Plan, and WHEREAS, the Issuer and the Trustees agree to the terms and conditions of this Trust Agreement; and intend that the Company shall be bound as of the date the Company executes this Agreement. NOW, THEREFORE, it is agreed by and between the Issuer, the Trustees and (upon its execution of this Agreement) the Company, as follows: Capitalized terms used but not defined in this Agreement have the same meaning given them in the Plan. ARTICLE 1 TRUST 1.1 Trust. The Issuer hereby establishes a Trust for the benefit of Participants and their Beneficiaries under the Plan, to be known as the Eagle-Picher Management Trust (the "Trust"), consisting of the cash transfer made this day to the Trust by the Issuer and such contributions as shall be received by the Trustees from the Company in accordance with the provisions of the Plan. The Trust is not intended to be a tax-exempt entity under Section 501(a) of the Internal Revenue Code. The Trustees shall receive such contributions and transfers in Trust and, except as provided herein, shall hold and administer the same as a single Trust fund, shall invest and reinvest the same and the income therefrom, without distinction between principal and income, and shall pay over and distribute the net income therefrom and the principal thereof in accordance with the provisions of the Plan upon written direction of the Committee. 1.2 Effective Date. The effective date of this Trust is February 17, 1998. ARTICLE 2 PAYMENTS TO TRUST FUND 2.1 Receipt of Payments. The Company may from time to time remit contributions under the Plan to the Trustees. Such contributions, together with any income thereon, shall be held in trust on behalf of Participants and their Beneficiaries. 2.2 Form of Payments. All payments to the Trust shall be remitted by the Company in United States currency, by wire transfer or by check to the Trustees at the address and to the account specified by the Trustees. ARTICLE 3 POWERS AND DUTIES OF TRUSTEES 3.1 General. The Trustees shall hold the funds and assets received under the Plan subject to the terms and purposes of the Plan and of the Trust. The Trustees shall be responsible only for such funds and assets as shall be received by them as Trustees hereunder. 3.2 Investment of the Trust Assets. (a) The Trustees shall invest and reinvest the Trust assets in Restricted Stock, in accordance with the terms of the Plan and this Trust Agreement. Except to the extent of dividends or other distributions by the Issuer with respect to Restricted Stock held by the Trust, and the income therefrom, the Trustees shall invest and hold 100% of the Trust assets in Restricted Stock. (b) Subject to paragraph (a), the Trustees may place Trust assets in various deposit accounts offered by any bank or savings and loan association, invest in other securities or investments desirable for the Trust, or in any kind of investment fund, or Trust assets may be held temporarily in cash. (c) In the event the Trustees intend to dispose of any Restricted Stock held in the Trust under circumstances which require registration and/or qualification under applicable securities laws, then the Company or the Issuer, at its own expense, will take or cause to be taken any and all such actions as may be necessary or appropriate to effect such registration and/or qualification. 3.3 Allocation and Delegation of Responsibilities. The Trustees may delegate their duties and responsibilities under the Plan and Trust, except that any responsibilities to manage assets of the Plan may not be delegated to anyone other than a Trustee. Joel Wyler is granted the power and authority as attorney-in-fact for all the Trustees to carry out all transactions, and execute all documents by his sole hand, as if he were sole Trustee, but only in connection with the purchase of Restricted Stock by the Trust and any ancillary transaction necessary and proper to effectuate such purchase by the Trust. The power and authority granted to Joel Wyler under the preceding sentence shall lapse upon the earliest to occur of (i) March 2, 2 1998; (ii) the day before the Trust receives a transfer of cash or property from the Company; or (iii) the day the Company authorizes a transfer of cash or property to the Trust. 3.4 Taxes and Expenses. (a) The Trustees may deduct from and charge against the Trust any taxes, including transfer taxes, paid by the Trustees which may be imposed upon the Trust or the income thereof, or which the Trustees are required to pay upon or with respect to the interest of any person under the Plan. (b) The Trustees may pay from the Trust all expenses properly and actually incurred by the Trustee in the administration of this Trust, including but not limited to accounting, consulting and legal expenses, or such expenses may be paid by the Company. The Trustees will serve without compensation. The Trustees' expenses shall be chargeable to, and shall be a lien upon the Trust Fund, and the Trustee is authorized to withdraw such amounts from the Trust after 60 days of presentation of a statement of amounts due, unless the Company or the Issuer pays such amount within the 60 day period after presentation. 3.5 Tenure in Office. Any Trustee may resign upon written notice to the other Trustees. If any Trustee resigns, dies, or becomes incapacitated, the Committee shall appoint his successor, provided, however, that the successor to Mr. Wyler shall be appointed by the Issuer. 3.6 Successor Trustees. The appointment of successor Trustees shall become effective upon acceptance in writing of such appointment by the additional or successor Trustee. The successor Trustee shall have no liability for anything done or omitted to be done by a former Trustee and his existing co-Trustee. Every successor co-Trustee appointed to and accepting a trusteeship hereunder shall have all the rights, title, powers, duties, exemptions and limitations of the original Trustee. The Committee shall notify the Participants of any change in Trustee. ARTICLE 4 INVESTMENT POWERS 4.1 General. (a) The Trustees shall have the following powers and authority in the administration of the Trust: (i) to purchase, receive, or subscribe to Restricted Stock and to retain in trust such Restricted Stock; (ii) to settle, compromise, or submit to arbitration any claims, debts, or damages, due to owing to or for the Trust, to commence or defend suits or legal proceedings in any court of law or before any other body or tribunal; (iii) to exercise any conversion privilege or subscription right available in connection with any securities or other property at any time held by them; to oppose 3 or to consent to the reorganization, consolidation, merger, or readjustment of the finances of any corporation, company or association, or to the sale, mortgage, pledge or lease of the property of any corporation, company or association any of the securities of which may at any time be held by them and to do any act with reference thereto, including the exercise of options, the making of agreements or subscriptions and the payment of expenses, assessments or subscriptions which may be deemed necessary or advisable in connection therewith, and to hold and retain any securities or other property which they may so acquire; (iv) to keep portions of the Trust Fund in cash or cash balances pending investment or to meet anticipated payouts from the Trust Fund; (v) to employ suitable agents and counsel and to pay their reasonable expenses and compensation; (vi) to register any Restricted Stock held by the Trustees hereunder in the name of the Trustees or in the name of a nominee with or without the addition of words indicating that such securities are held in a fiduciary capacity and to hold any securities in bearer form. The Trustees are authorized to use securities depositories or custodians and may register such securities as are held by a depository or custodian in the name of such depository, its nominee or custodian or the name of such custodian or its nominee respectively; (vii) to invest funds of the Trust in time deposits or savings accounts bearing a reasonable rate of interest in any bank; (viii) to deposit monies in federally insured savings accounts or certificates of deposit in banks or savings and loan associations; (ix) to borrow or raise monies for the purposes of the Trust from any source, to issue promissory notes and to secure the repayment thereof by pledging all or any part of the Trust; (x) generally to do all acts, whether or not expressly authorized, which the Trustees may deem necessary or desirable for the protection of the Trust Fund; (b) Notwithstanding anything herein to the contrary, in no event shall the Trustees engage in any transaction that would be prohibited under ERISA. 4.2 Voting Trust For Restricted Stock. All shares of Restricted Stock held by the Trust shall be non-voting certificates of beneficial ownership ("certificaten van aandalen") in a voting trust ("stichting administratie kantoor") holding class B shares in the Issuer. 4 ARTICLE 5 ACCOUNTS AND RECORDS 5.1 Accounts. The Trustee shall keep full accounts of all investments, receipts and disbursements, other transactions under the Plan, and gains and losses resulting from same by Participants and Beneficiaries having an interest in the Trust. The Trustees' records with respect to the assets under this Trust shall be open to inspection during reasonable business hours by Participants and Beneficiaries having an interest in the Trust. 5.2 Reports. The Trustees shall render an annual report to the Committee within three (3) months after the end of each calendar year, said reports to contain a complete accounting showing the total assets in the trust, as well as a statement of purchases, sales, and any investment charges and all income, expenses, and disbursements since the last such report. ARTICLE 6 PAYMENTS FROM THE TRUST FUND 6.1 Payments Generally. The Trustees shall make payments out of the assets of the Trust to such persons, in such manner and in such amounts as are required under the Plan. 6.2 Manner of Payment. Payments by the Trustee shall be delivered or mailed to addresses supplied by the Committee and the Trustees' obligation to make such payments shall be satisfied upon such delivery or mailing. The Trustees shall have no obligation to determine the identity of persons entitled to benefits or their mailing addresses. Any cash distribution shall be made by the Trust's furnishing its check to the Participant or Beneficiary. ARTICLE 7 SPENDTHRIFT PROVISIONS 7.1 No Assignment. Except to the extent required by the Plan or by applicable law, the interest of Participants and Beneficiaries in the Trust and in the net earnings and profits thereof may not be assigned or used as collateral for a loan and shall not be subject to garnishment, attachment, levy, or execution of any kind for the debts or defaults of the Trustees or of any person, natural or legal, having an interest in the Trust. ARTICLE 8 AMENDMENTS AND TERMINATION 8.1 Right to Amend. The Trust may be amended at any time by a supplemental agreement in writing signed by a majority of the Trustees but only if such majority includes Mr. Wyler or the Trustee appointed to succeed Mr. Wyler and only if the amendment is approved by the Committee. 5 8.2 Termination. At any time after all Units awarded by the Committee shall have either vested or been forfeited and canceled, the Trustees shall terminate the Trust. Unless the Issuer, the Company, the Committee, and the Trustees shall all have consented in writing to a supplemental agreement extending the Trust, the Trust shall terminate on December 31, 2002. Promptly after any termination of the Trust, the Trustees shall distribute the Trust assets as follows: (a) First, Restricted Stock representing Units that have not been forfeited shall be transferred to an escrow agent appointed by the Committee to hold such Restricted Stock and distribute the same to Participants in respect of Units that shall have become vested in accordance with the Plan. (b) Second, any remaining Restricted Stock (representing Units not awarded or forfeited unvested Units) shall be transferred to the Issuer or its designee. (c) Third, any remaining Trust assets (other than Restricted Stock) shall be transferred to the Company. 8.3 Limitations. No amendment of the Trust may cause any detriment to or reduce any benefit of Participants or their Beneficiaries without their consent. ARTICLE 9 TRUSTEE'S LIABILITY 9.1 Indemnification. (a) To the maximum extent permitted by applicable law, the Trustees shall not be liable for and the Issuer and Company jointly and severally shall indemnify the Trustees against, and hold the Trustees harmless from, all liabilities and claims (including attorney's fees and expenses in defending against such liabilities and claims) against a Trustee, arising from the Trustees' performance of their duties in conformance with the terms of the Plan and this Trust Agreement, unless such liability or claim results from reckless or willful acts of commission or omission by the Trustees, or a Trustee's gross negligence. (b) To the maximum extent permitted by applicable law and except as otherwise provided in paragraph (a) above, no Trustee shall be liable for acting or not acting in accordance with any written direction of the Committee or an investment manager, or, where an investment manager has been designated, failing to act in the absence of any such direction, including, without limitation, any claim or liability that may be asserted against a Trustee on account of failure to receive securities purchased, or failure to deliver securities sold pursuant to orders issued by an investment manager, and the Issuer and Company jointly and severally shall indemnify the Trustee against, and agrees to hold the Trustees harmless from, all such liabilities and claims (including attorney's fees and expenses in defending against such liabilities and claims). (c) The foregoing indemnifications shall also apply to liabilities and claims against a Trustee arising from any breach of fiduciary responsibility by a fiduciary other 6 than the Trustee, unless the Trustee (i) participates knowingly in or knowingly undertakes to conceal such breach, (ii) has enabled such fiduciary to commit such breach. by his failure to exercise his fiduciary duties or (iii) has actual knowledge of such breach and fails to take reasonable remedial action to remedy such breach. ARTICLE 10 MISCELLANEOUS PROVISIONS 10.1 General Undertaking. All parties to this Trust and all persons claiming any interest whatsoever hereunder agree to perform any and all acts and execute any and all documents and papers which may be necessary or desirable for the carrying out of the Trust or any of its provisions. 10.2 Invalidity of Certain Provisions. If any provision of this Trust shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof and the Trust shall be construed and enforced as if such provisions had not been included. 10.3 Masculine, Feminine, Singular, and Plural. The masculine shall be read in the feminine, the singular in the plural, and vice versa, whenever the context shall so require. 10.4 Mailing Notices. Notices. accountings, and reports required to be given by the Trustees may be given by personal delivery or by mail addressed to the party involved at the last address of such party recorded on the general address files of the Trustees. If given by mail, the date of mailing shall be deemed to be the date as of which the same was given or furnished to the addressee. Any notice required under the Trust may be waived in writing by the person entitled to notice. 10.5 Submitting Notice. All notices, designations, and elections of Participants shall be submitted to the Committee for transmittal to the Trustees. All notices, designations, and elections to be transmitted to the Trustees shall be on forms and to the address specified by the Trustees. 10.6 Governing Law. This Trust shall be construed, administered and enforced in accordance with the laws of the State of New York. 10.7 Counterparts. This Agreement may be signed in counterparts which together shall comprise this Agreement. 7 IN WITNESS WHEREOF, the Company, the Issuer and the Trustees have caused this instrument to be signed as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By: /s/ ANDRIES RUIJSSENAARS -------------------------- Andries Ruijssenaars GRANARIA INDUSTRIES B.V. By: /s/ JOEL P. WYLER -------------------------- Joel P. Wyler /s/ JOEL WYLER ----------------------------- Joel Wyler, Trustee /s/ THOMAS E. PETRY ----------------------------- Thomas E. Petry, Trustee /s/ ANDRIES RUIJSSENAARS ----------------------------- Andries Ruijssenaars, Trustee 8 EX-10.21 22 EXHIBIT 10.21 INCENTIVE STOCK PLAN OF EAGLE-PICHER INDUSTRIES, INC. Section 1. Purpose. The Incentive Stock Plan is intended to further the attainment of the profit and growth objectives of Eagle-Picher Industries, Inc. (the "Company") by providing incentive to those key executives whose management and individual performance have a direct impact on achieving those objectives. The Plan also is expected to encourage the continued employment of the Company's key executives and to facilitate the recruiting of executive personnel in the future. The Plan is not intended to be an "employee pension benefit plan" within the meaning of Section 3 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Section 2. Definitions. As used herein, the following terms shall have the following meanings: (a) "Affiliate" means any entity if, (i) the Company, directly or indirectly, owns at least 50% of the combined voting power of all classes of stock of such entity or at least 50% of the ownership interests in such entity, (ii) such entity, directly or indirectly, owns at least 50% of the combined voting power of all classes of stock of the Company, or (iii) such entity is at least 50% owned (directly or indirectly) by one or more entities described in (i) or (ii) above. (b) "Agreed Share Price" means a US Dollar cash price per share of Restricted Stock equal to the quotient of (A) the excess of (i) the sum of 6.54 times EBITDA for the Company's and the Company's Subsidiaries' most recently ended fiscal year plus cash and cash equivalents of the Company and the Company's Subsidiaries (but only to the extent the total of such cash and cash equivalents exceeds $15 million) over (ii) the principal amount of outstanding debt of the Issuer and its Subsidiaries owing to banks, or owing with respect to securities issued by the Issuer or by any Subsidiary of the Issuer and the aggregate liquidation preference of all outstanding preferred stock issued by the Parent; divided by (B) the product of (i) the total number of outstanding shares of Common Stock of the Company, on a fully diluted basis as if all outstanding options on such Common Stock had been exercised in full, times (ii) the share (expressed as a percentage) of the number of shares of Common Stock of the Company described in (B)(i) above that is held directly or indirectly through one or more intervening entities by the Issuer. The calculation of Agreed Share Price shall be as of the Company's and the Company's Subsidiaries' most recently ended fiscal year. (c) "Award Date" of Units is the date the Committee resolves in writing to award the Units to a Participant. (d) "Beneficiary" means the person, persons, trust or trusts which have been designated by a Participant in his or her most recent written beneficiary designation filed with the Committee to receive the Participant's rights under the Plan upon the Participant's death, or, if there is no such designation or no such designated person survives the Participant, then the person, persons, trust or trusts entitled by will or applicable law to receive such rights or, if no such person has such right then the Participant's executor or administrator. (e) "Change of Control Date" shall mean the date as of which (i) any person who as of February 25, 1998 does not beneficially own, directly or indirectly, voting stock of the Company shall acquire (including by purchase or merger) direct or indirect beneficial ownership of more than 50% of the voting stock of the Company (or any successor of the Company) or (ii) substantially all of the assets of the Company are sold, disposed of or liquidated. (f) "Committee" shall mean the committee described in Section 3. (g) "Company" shall mean Eagle-Picher Industries, Inc., or any successor corporation. (h) "EBITDA" (except to the extent modified according to Section 3(c) if applicable) shall have the meaning such term has in the Credit Agreement among E-P Acquisition, Inc., various lenders, and ABN AMRO Bank N.V. as Agent, dated February 19, 1998. (i) "Incapacitated" shall mean permanently and totally disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended. (j) "Issuer" shall mean Granaria Industries B.V., a Dutch corporation. (k) "Parent" shall mean Eagle-Picher Holdings, Inc. (l) "Participant" shall mean any senior officer or senior manager (including a consultant) of the Company or of a Subsidiary or Affiliate of the Company who is a member of a select group of executives and who, in the opinion of the Committee, is in a position to have a direct and significant impact on achieving the Company's profit and growth objectives and whom the Committee designates as a Participant. (m) "Plan" shall mean this Incentive Stock Plan in its entirety, including any amendments, rules and regulations adopted pursuant hereto. (n) "Restricted Stock" means non-voting certificates of beneficial ownership ("certificaten van aandalen") in a voting trust ("stichting administratie kantoor") established under Dutch law for the purpose of holding Class B shares of the Issuer. A share of Restricted Stock is an amount of Restricted Stock that represents a beneficial ownership interest in the voting trust corresponding to one Class B share of the Issuer. (o) "Subsidiary" of any person shall mean any entity in which the person owns, directly or indirectly, at least 50% of the combined voting power of all classes of stock in such entity or at least 50% of the ownership interests in such entity. (p) "Trust" shall mean the Eagle-Picher Management Trust established under a trust agreement dated February 17, 1998, with Thomas E. Petry, Joel P. Wyler and Andries Ruijssenaars as Trustees. 2 (q) "Unit" shall mean a unit representing the right, subject to the provisions of the Plan, to receive from the Trust one share of Restricted Stock, which right has been awarded to a Participant pursuant to the Plan. Section 3. Administration. (a) The Committee shall be composed of three individuals each of whom shall continue to serve until he resigns, dies or is Incapacitated. Initially, the members of the Committee shall be Thomas E. Petry, Joel P. Wyler and Andries Ruijssenaars, each of whom shall continue to serve until he resigns, dies or is Incapacitated. In the event that either Mr. Petry or Mr. Ruijssenaars shall resign, die or be Incapacitated, the remaining members of the Committee shall appoint his successor. In the event that Mr. Wyler shall resign, die, or be Incapacitated, his successor shall be appointed by the Issuer. (b) The Plan shall be administered by and in the sole discretion of the Committee which, by vote of a majority of the members, but only if Mr. Wyler (or his successor appointed by the Issuer) is included in the majority, may establish such rules and regulations as it deems necessary, make amendments consistent with Section 11(d), make adjustments in the calculation of EBITDA pursuant to Section 3(c), appoint successor Trustees (except as provided in the last sentence of paragraph (a)), interpret the Plan and otherwise make all determinations and take such action in connection with the Plan as it deems appropriate. It is intended that the total number of Units awarded under the Plan shall be not less than 1600; no member of the Committee shall exercise his power to vote against the awarding of Units for the sole purpose of preventing the eventual award of a total of 1600 Units. (c) From time to time, the Committee in its sole discretion may make adjustments in the Company's consolidated earnings derived from operations before interest, taxes, depreciation and amortization determined in accordance with GAAP for purposes of calculating EDITDA so that changes in accounting principles; extraordinary or unusual charges or credits; acquisitions, mergers, consolidations, and other corporate transactions; and other elements or factors influencing calculation of EBITDA do not distort or affect the operation of the Plan in a manner inconsistent with the achievement of its purposes. (d) The decisions of the Committee shall be final, conclusive, and binding upon all parties. In administering the Plan, the Committee may employ accountants and counsel (who may be the independent auditors and outside counsel for the Company or Issuer) and other persons to assist or render advice to it, all at the expense of the Company or Issuer Section 4. Eligibility. (a) The Committee shall designate those persons who shall be Participants and shall award Units to each Participant. Upon designating a Participant, the Committee shall classify the Participant for purposes of the Plan as either a Senior Officer or as a Senior Manager. (b) The Committee shall record the designation and classification of a Participant and the award of Units, in writing and shall notify the affected Participant of such designation and award 3 in writing. The Committee may at any time increase the number of Units awarded to a Participant. Section 5. Vesting. One half of a Senior Officer's Units will vest on each of the 30th day after the Award Date of the Units and the second anniversary of the Award Date. One fourth of a Senior Manager's Units will vest on each of the 30th day after the Award Date and the first three anniversaries of the Award Date. In the event that a Participant ceases to be an employee of the Company and any Affiliate for any reason other than by reason of death or being Incapacitated, any of the Participant's Units that have not yet vested as of the date of such termination of his employment shall be forfeited and cancelled. By written notice to the Participant at the time he is notified of the award, the Committee may determine to apply a different vesting schedule to the Units awarded. The Units of a Participant who dies or is Incapacitated while employed by the Company or any Affiliate shall be immediately 100% vested as of the date of death or incapacity. The Units of a Participant who is employed by the Company or any Affiliate on any Change of Control Date shall be immediately 100% vested as of the Change of Control Date. At any time, the Committee may accelerate the vesting schedule applicable to a particular Participant by notifying the Participant in writing. Section 6. The Trust. The Issuer has established the Trust for the benefit of the Participants. Upon adoption of this Plan by the Board of Directors of the Company, the Company shall transfer to the Trust not less than $10 million to fund the Trust's purchase of Restricted Stock from the Issuer and the Trust's expenses related to such purchase. Section 7. Payout of Units. (a) Upon the earlier of the date as of which a Participant has become 100% vested in all his awarded Units or the date as of which the Participant forfeited Units pursuant to Section 5, the Trustees shall transfer to the Participant or, if the Participant has died, to his Beneficiary, a number of shares of Restricted Stock equal to the number of the Participant's Units that have vested. The right of a Participant to receive Restricted Stock pursuant to the preceding sentence shall be conditioned on the Participant's execution of the Shareholders' Agreement described herein. (b) The Shareholders Agreement will be an agreement (in form and substance satisfactory to the Committee) among Granaria Holdings B.V., the Issuer, the Company, and holders of Restricted Stock whereby such holders designate a custodian of their shares of Restricted Stock (who shall be appointed by the Committee), and grant to Granaria Holdings B.V. or its designee a right of first refusal of any sale of Restricted Stock to any person other than the Company or the Issuer. (c) The Shareholders Agreement will provide that upon 30 days' written notice to the Senior Manager or his Beneficiary, the Issuer may require a Senior Manager who is, or has given notice that he will be, no longer employed by the Company or any Affiliate (or his Beneficiary) to sell to the Issuer or its designee any or all Restricted Stock held by the Senior Manager or Beneficiary for a cash price per share of Restricted Stock equal to the Agreed Share Price. 4 (d) The Shareholders Agreement will provide that (i) any Beneficiary or any Incapacitated Participant at any time, (ii) any Participant who at the time he attained age 62 is or was employed by the Company or any Affiliate, (iii) any Senior Manager who has held Units and the associated Restricted Stock for an aggregate period of not less than 10 years, and (iv) any Participant whose employment with the Company and any Affiliate is involuntarily terminated solely because of the sale, liquidation, or other disposition of a Subsidiary or because of the termination, sale, or other disposition of a business or division of the Company or of a Subsidiary may require the Company to purchase all or any part of the Restricted Stock tendered by such person for a cash purchase price per share of Restricted Stock equal to the Agreed Share Price. To exercise the right described in the previous sentence, the holder of Restricted Stock shall give to the Company 60 days written notice. In the event that before the 60th day after such notice, Granaria Holdings B.V. or its designee has not purchased the tendered shares of Restricted Stock for the Agreed Share Price, the Company shall purchase the shares of Restricted Stock for the Agreed Share Price. The rights described in this subparagraph (d) will terminate and be ineffective in the event either the Restricted Stock or the Class B shares of the Issuer become publicly traded. (e) The Shareholders' Agreement will provide that, without the written consent of the Committee, except for transfers described in paragraphs (c) and (d), no Restricted Stock may be sold or transferred by a Participant unless the Participant has attained age 62 or is a Senior Manager who has held Units and the associated Restricted Stock for an aggregate period of not less than 10 years. Unless held by the Trust, certificates for Restricted Stock shall bear a legend referring to the transfer restrictions contained in the Shareholders' Agreement. Section 8. Dividends. (a) In the event that the Trust receives a dividend paid with respect to Restricted Stock, the Trustees shall pay to each Participant an amount that bears the same ratio to the aggregate dividend received by the Trust that the number of vested Units awarded to the Participant bears to the total number of shares of Restricted Stock held by the Trust on which dividends were paid. (b) At the time the Trustees transfer Restricted Stock to a Participant or Beneficiary, the Trustees shall also transfer to the Participant or Beneficiary cash equal to the aggregate amount of dividends received by the Trust on such an amount of Restricted Stock less the amount of dividends previously distributed to the Participant and his Beneficiary pursuant to paragraph (a). Section 9. Designation of Beneficiaries. (a) Each Participant shall file with the Committee a written designation of one or more persons as the Beneficiary who shall be entitled to receive the amount, if any, payable under the Plan upon his death. A Participant may, from time to time, revoke or change his Beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant's death, and in no event shall it be effective as of a date prior to such receipt. 5 (b) If the Committee is in doubt as to the right of any person to receive such amount, the Committee may retain such amount, without liability for any interest thereon, until the rights thereon are determined, or the Committee may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Plan, the Company, the Issuer, the Trustees and the Committee therefor. Section 10. Tax Reimbursement. At the time any Units awarded to a Participant become vested, the Company or any Subsidiary shall reimburse the Participant (in the amount required in the judgment of professional tax advisors to the Committee) to equal the aggregate income tax liability of the Participant with respect to the sum of the fair market value of newly vested Units and the amount of such reimbursement. In their discretion, the Committee or its professional tax advisors may consult with the Participant or the Participant's tax advisor. The Company shall indemnify a Participant for any income taxes imposed on the Participant with respect to both the vesting of Units and any payment under this Section 10 (including an indemnity payment pursuant to this sentence). The Company shall make no reimbursement pursuant to this Section 10 either (i) in respect of any income tax liability resulting from a Participant's election under Section 83(b) of the Internal Revenue Code of 1986, as amended, or (ii) for taxes resulting from the Participant's transfer of Units or an interest in Restricted Stock to any person. Section 11. Miscellaneous. (a) The Plan, the awarding of Units thereunder, the issuance and delivery of shares of Restricted Stock with respect to Units and the other obligations of the Company, the Trustees and the Issuer under the Plan, shall be subject to all applicable federal, state, and Dutch laws, rules and regulations, and to such approvals by any regulatory or governmental agency as may be required. The Trustees, in their discretion, may postpone the issuance and delivery of shares of Restricted Stock with respect to Units until completion of such stock exchange listing or registration or qualification of such stock or securities or other required action under any state, federal or Dutch law, rule or regulation as the Trustees may consider appropriate, and may require any Participant or Beneficiary to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of stock or securities in compliance with applicable laws, rules and regulations. (b) Nothing in the Plan shall confer upon any Participant the right to continue in the employ of, or to continue as a director of the Company, or any Affiliate, as the case may be, or to be entitled to any remuneration or benefits not set forth in the Plan or to interfere with or limit in any way the right of the Company or any Affiliate to terminate such Participant's employment or directorship. (c) The Company or any Affiliate and the Trustees are authorized to withhold from any payment of cash or issuance of shares of Restricted Stock with respect to Units under the Plan, amounts of withholding and other taxes due in connection with any transaction under the Plan, and to take such other action as the Committee may deem advisable to enable the Company and a Participant to satisfy obligations for the payment of withholding taxes and other tax obligations 6 relating to any Unit or shares of Restricted Stock. This authority shall include authority to withhold or receive shares of Restricted Stock or other securities or other property and to make cash payments in respect thereof in satisfaction of a Participant's tax obligations. (d) The Committee may at any time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part. Notwithstanding the foregoing, no amendment shall affect adversely any of the rights of any Participant without such Participant's consent. (e) Except as provided in Section 4, no person shall have any claim to Units under the Plan. Except as provided specifically herein, Participants shall have no rights as a stockholder with respect to any shares of Restricted Stock until the date of the issuance of certificates to such Participants for such shares of Restricted Stock. The Plan is for the benefit of the Participants and their Beneficiaries and not for the benefit of any other person. (f) No interest in the Trust or the Units shall be subject in any manner to anticipation, alienation, pledge, transfer, or assignment, except by will or by the laws of descent and distribution or with the written consent of the Trustees and the Committee and any attempt to so anticipate, alienate, pledge, transfer, or assign shall be void and the interest of the Participant shall be forfeited. (g) Neither the granting of, nor any payout of Restricted Stock with respect to, any award of Units under the Plan shall limit a Participant's right to receive, or to be eligible for, any other compensation or benefits from the Company. (h) Awards and payouts of Units will not be considered as compensation for the purpose of computing employee contributions or benefits under the Company's retirement, pension, thrift, group life insurance or other employee benefit plan. (i) In the event that a Participant violates the terms of any covenant regarding confidentiality, return of property, soliciting customer accounts, doing business with customers, non-competition, or soliciting or hiring of employees of the Company or its Affiliates that is contained in any written employment agreement as in effect at the time of such violation, then any rights of the Participant under the Plan shall immediately terminate, any Units of the Participant, whether or not vested, shall be cancelled, and the Participant shall return to the Company any cash, Restricted Stock or property received by him under the Plan. The Company shall have the right to set off against any amount payable by the Company or any Affiliate to the Participant, including, without limitation, salary, benefits or other amounts, any amounts owed by the Participant to the Company under this paragraph (i). The Committee may waive the provisions of this paragraph (i) if it determines in its sole discretion that such action is in the best interests of the Company. (j) Any payment by the Company that is to be made in cash shall be from the general funds of the Company. No special or separate fund shall be established or other segregation of assets made to assure any cash payment by the Company under the Plan. No Participant or other person shall have under any circumstances any interest whatever in any particular property or assets of the Company. 7 (k) If any provision of the Plan shall be determined to be illegal and unenforceable by any court of law, the remaining provisions shall be severable and enforceable in accordance with their terms. (l) This Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Ohio without giving effect to the conflicts of law principles thereof. Section 12. Effective Date. The Plan shall be effective as of February 25, 1998. 8 EX-10.22 23 EXHIBIT 10.22 EMPLOYMENT AGREEMENT AGREEMENT, dated as of November 29, 1996, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201, and Wayne R. Wickens (the "Executive"), residing at 7470 Pinehurst, Cincinnati, Ohio 45244. W I T N E S S E T H : WHEREAS, the Executive is employed on a full-time basis by the Company and is currently serving as Senior Vice President and Group Executive of the Company; and WHEREAS, on January 7, 1991, the Company and certain of its affiliates (collectively, the "Debtors") each filed a petition for relief under chapter 11, title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Ohio, Western Division (the "Bankruptcy Court"); and WHEREAS, by order dated November 18, 1996 (the "Confirmation Order") the Bankruptcy Court and the United States District Court for the Southern District of Ohio, Western Division, confirmed the Third Amended Consolidated Plan of Reorganization, dated August 28, 1996 (the "Plan"), in the Debtors' chapter 11 cases; and WHEREAS, the Plan contemplates that the Company and the Executive will enter into this Agreement which is to become effective on the Effective Date (as such term is defined in the Plan). NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Employment; Effectiveness of Agreement. The obligation of the Company to employ the Executive, and of the Executive to serve the Company, pursuant to this Agreement shall become effective automatically on the Effective Date. 2. Term. The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and shall continue thereafter until the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court, unless terminated earlier as hereinafter provided. 3. Duties and Extent of Services. During the Term, Executive agrees to continue to serve as the Senior Vice President and Group Executive of the Company faithfully and to the best of his ability under the direction of the Chief Executive Officer and the Board of Directors of the Company (the "Board"), and agrees to devote substantially all of his business time, energy and skill to such 2 employment. Executive agrees to perform the duties commensurate with the position of Senior Vice President and Group Executive of the Company, which shall include, without limitation, the duties set forth on Annex A hereto. Executive agrees also to perform such specific duties and services of a senior executive nature as the Chief Executive Officer of the Company or the Board shall reasonably request consistent with Executive's position as Senior Vice President and Group Executive. The principal place of employment of Executive shall be Cincinnati, Ohio and, subject to such reasonable travel as the performance of his duties may require, such principal place of employment shall not be changed unless the Executive otherwise consents. 4. Compensation. 4.1 Base Salary. The Company agrees to pay or cause to be paid to Executive during the Term, a base salary equal to the amount of his base salary as at the date immediately preceding the Effective Date, subject to adjustment as provided below (as so adjusted, the "Base Salary"). The Base Salary shall be payable in accordance with the regular payroll policies of the Company from time to time in effect, less such deductions as shall be required to be withheld by applicable law and regulations. On each December 1 during the Term, the Board or a committee 3 thereof, shall review Executive's Base Salary as then in effect and may, but shall not be obligated to, increase such salary by such amount as the Board (or such committee), in its sole discretion, shall determine. 4.2 Discretionary Bonus. In addition to Base Salary, the Executive shall be entitled to receive an annual cash bonus based on the performance of the Company and of the Executive, the amount of which, if any, shall be determined by the Board (or a committee thereof). Determinations made by the Board (or such committee) with respect to the amount, if any, of annual bonuses to be paid to Executive under this Agreement shall be final and conclusive. 4.3 Benefits and Perquisites. During the Term, the Company shall provide Executive with and Executive shall be entitled to the following benefits and perquisites: (a) participation in and the receipt of benefits under (i) all of the Company's employee benefit plans and arrangements in effect from time to time applicable to salaried employees of the Company, (ii) all short-term and long-term incentive plans of the Company as in effect from time to time, (iii) a supplemental executive retirement plan (the "SERP") substantially in accordance with and no less favorable to Executive than the terms, 4 provisions and benefits under the supplemental executive retirement plan currently provided by the Company, and (iv) any life insurance, health and accident plan or arrangement made available by the Company, now or in the future, to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. (b) four (4) weeks of paid vacation in each calendar year. (c) an automobile paid for by the Company for use in the performance of his services under this Agreement, in a manner substantially consistent with past practices. (d) membership fees paid for by the Company with respect to any of the Executive's business-related club memberships (it being understood that such membership fees shall not include any fees for country clubs or other similar, primarily social, clubs). The Company also shall implement, as soon as reasonably practicable after the Effective Date, a long-term incentive plan. Although the ability to receive stock of the Company may not be available for such plan, the plan nevertheless shall provide the Executive with opportunities and incentives reasonably economically equivalent to those 5 provided by similar companies, many of which do provide stock options and/or other types of stock grants as components of their long-term incentive plans. 4.4 Expenses. Subject to such policies as may from time to time be established by the Board, the Company shall pay or reimburse Executive for all reasonable expenses actually incurred or paid by Executive during the Term in the performance of his services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as the Company may require. 5. Termination. 5.1 Cause. The Company may terminate Executive's employment hereunder for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate Executive's employment hereunder only by reason of any one or more of the following: (i) Executive's commission of any crime (whether or not involving the Company or any of its subsidiaries) which constitutes a felony in the jurisdiction involved; or (ii) Executive's commission of an act of fraud upon the Company or any or its subsidiaries; or (iii) Executive's willful failure to perform in all material respects his duties hereunder in accordance with the terms of this Agreement which failure (other than by reason of death or disability) continues 6 uncorrected for a period of ten (10) days after Executive shall have received written notice from the Board stating with specificity the nature of such failure or refusal. 5.2 Termination by the Executive. Executive may terminate his employment hereunder upon thirty (30) days' prior written notice to the Company for Good Reason. For purposes of this Agreement, "Good Reason" shall mean (i) the material diminution of the nature or scope of the duties assigned to Executive from that contemplated by Section 3 hereof, (ii) a reduction in Executive's Base Salary, or a material reduction in Executive's fringe benefits or any other material failure by the Company to comply with Section 4 hereof, other than any such reduction or failure as shall apply to all salaried employees of the Company generally, (iii) ceased participation by Executive, for any reason other than as a result of any action by Executive, in any employee benefit plan of the Company with respect to which Executive is or was, prior to such time, eligible to participate, (iv) the relocation of Executive's principal place of employment more than twenty (20) miles from the location specified in Section 3 hereof without Executive's consent, (v) the requirement that Executive engage in a substantial amount of additional travel (as compared to Executive's past practices) in the performance of his duties 7 hereunder without Executive's consent, or (vi) any other material breach by the Company of its obligations under this Agreement. Good Reason shall not exist in the event of a sale or disposition of a subsidiary or division of the Company and Executive either (a) voluntarily agrees to be employed by such subsidiary or division, or (b) is offered a comparable position with the Company. For purposes hereof, comparable shall encompass such items as salary, benefits, duties and geographic location. 5.3 Notice of Termination. Any termination by the Company pursuant to Section 5.1 above or by Executive pursuant to Section 5.2 above shall be communicated by written notice (the "Notice of Termination"), which notice shall indicate the specific termination provision in this Agreement relied upon for such termination. 5.4 Date of Termination. "Date of Termination" shall mean (i) if Executive's employment is terminated pursuant to Section 5.1 or 5.2 hereof, the date specified in the Notice of Termination, and (ii) if Executive's employment is terminated by the Company other than for Cause or by Executive other than for Good Reason, the date on which a Notice of Termination is given. 5.5 Payments upon Termination. (a) If the employment of Executive with the Company is terminated (i) 8 by the Company other than for Cause or (ii) by the Executive for Good Reason, then Executive shall be entitled to receive from the Company, and the Company shall pay to Executive, a lump sum severance payment equal to the greater of (x) the aggregate Base Salary (at the rate in effect at the Date of Termination) that Executive would have received for the remainder of the Term if his employment had not been terminated, or (y) the aggregate amount of the Base Salary (at the rate in effect at the Date of Termination) which would be paid for a period of twenty-four (24) months, plus, in either case, such other benefits or reimbursement of expenses payable to the Executive pursuant to Sections 4.3 and 4.4 hereof (including, without limitation, the SERP), and less such amounts as shall be required to be withheld by the Company pursuant to applicable laws and regulations (the "Severance Amount"). The Severance Amount shall not be present-valued and shall be payable by the Company to Executive within thirty (30) days after Executive's termination. Executive shall not be required to mitigate the Company's obligation to pay the full Severance Amount by seeking employment or otherwise and the Severance Amount shall not be decreased or otherwise offset as a result of any compensation received by Executive from employment in any capacity. The Severance Amount shall be deemed 9 compensation payable to Executive for the purpose of determining the total amount due Executive pursuant to the SERP. (b) If the employment of Executive with the Company is terminated (i) by the Company for Cause, or (ii) by the Executive other than for Good Reason, then the Executive shall be entitled to receive, and the Company shall pay to Executive, (x) all accrued and unpaid Base Salary and amounts due Executive in respect of perquisites provided him hereunder through the Date of Termination at the rate in effect at the time Notice of Termination is given, (y) Base Salary payable in lieu of accrued and unused vacation days in accordance with the policies of the Company from time to time in effect, and (z) all accrued and unpaid benefits payable to Executive pursuant to any benefit plan or otherwise through the Date of Termination. Upon the payment of the foregoing amounts, the Company shall have no further obligations to Executive under this Agreement. 5.6 Limited Payment Cap. (a) Notwithstanding any other provision in this Agreement to the contrary, this Section 5.6 will apply in the event that the Executive would receive payments under this Agreement or under any other plan, agreement, program, or policy that is sponsored by the Company, which relate to a change in 10 control of the Company ("parachute payments"), and any such parachute payments are determined by the Company to be subject to excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") ("excess parachute payments"). If it is determined that such excise tax would cause the net after-tax parachute payments to be paid to or on behalf of the Executive to be less than what he would have netted, after federal, state and local income and social security taxes, had the present value of his total parachute payments equalled $1 less than three times his "base amount," as defined under Section 280G(b)(3)(A) of the Code, then such Executive's total parachute payments shall be reduced (but by the minimum possible amount), so that their aggregate present value equals $1 less than three times the Executive's base amount. If it is determined that any payment to or on behalf of the Executive will be an excess parachute payment, the Company shall promptly give the Executive notice to that effect, a copy of the detailed calculation thereof, and an explanation of the calculation of the reduction (if any) required hereunder. If a reduction hereunder is required, the Executive may then elect which payments shall be eliminated or reduced (as long as after such election the aggregate present value of the remaining parachute payments is less than three times the 11 Executive's base amount). The Executive shall advise the Company in writing of his election within 10 days of his receipt of this notice. If no such election is made by the Executive, the Company may elect which and how much of such payments to eliminate or reduce to accomplish this required reduction, and shall promptly thereafter pay or distribute for the Executive's benefit such amounts as become due under this Agreement. (b) It shall be assumed for purposes of the calculations described in subsection (a) above that the Executive's income tax rate will be computed based upon the maximum effective marginal federal, state and local income tax rates and Medicare tax on earned income, with such maximum effective federal income tax rate to be computed with regard to Section 68 of the Code, and applying any available deduction of state and local income taxes for federal income tax purposes. In the event that the Executive and the Company are unable to agree as to the amount of the reduction described in subsection (a) above, if any, the Executive shall select a law firm or public accounting firm from among those regularly consulted by the Company regarding federal income tax matters, such law firm or accounting firm shall determine the amount of such 12 reduction, and such firm's determination shall be final and binding upon the Executive and the Company. 6. Death or Disability. 6.1 Death. If Executive dies during the Term, this Employment Agreement, other than the provisions of Section 6.3 hereof, shall terminate. 6.2 Disability. If, during the Term, Executive becomes physically or mentally disabled, whether totally or partially, so that he is unable substantially to perform his services hereunder for (i) a period of six (6) consecutive months or (ii) for shorter periods aggregating six (6) months during any eighteen (18) month period, the Company may at any time after the last day of the six (6) consecutive months of disability or the day on which the shorter periods of disability equal an aggregate of six (6) months, by written notice to Executive (the "Disability Notice"), terminate the Term of the Executive's employment hereunder. 6.3 Payments upon Death or Disability. Upon a termination due to the death or disability of Executive, Executive (or, in the event of a termination as a result of the death of Executive, Executive's estate (or a designated beneficiary thereof)) shall be entitled to receive from the Company, and the Company shall pay to Executive (or Execu- 13 tive's estate, if applicable) the amount of any accrued and unpaid Base Salary and other benefits and reimbursement of expenses payable to the Executive hereunder pursuant to Sections 4.3 and 4.4 hereof as of the date of Executive's death or the date of the Disability Notice, as applicable. In addition, for a period of thirty (30) months following the date of such termination, the Company shall continue to pay and provide to Executive and Executive's dependents at the Date of Termination all medical benefits pursuant to any plans and programs in which Executive was entitled to participate immediately prior to the Date of Termination as if Executive were still employed by the Company pursuant hereto. If Executive's participation in any plan or program pursuant to which such medical benefits are provided to Executive is barred as a result of such termination, the Company shall arrange to provide Executive and Executive's dependents with benefits substantially similar on an after tax basis to those which Executive was entitled to receive under such plan or program. 7. Non-Competition; Confidentiality. 7.1 Non-Competition. Executive agrees that, during the Term and for a period of two years following the date of a termination of Executive's employment under Section 5 hereof (the "Restricted Period"), he will not, 14 directly or indirectly, own, manage, operate or control, or participate in the ownership, management, operation or control of, or be connected as an officer, employee, partner, director or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, any entity or business which competes with any material business conducted by the Company or by any group, division or subsidiary of the Company, in any area where such business is being conducted, or for which negotiations to conduct business are pending, at the date of such termination (a "Competitive Operation"); provided, however, that Executive may acquire, solely as an investment and through market purchases, securities of any corporation that are traded on any national securities exchange or listed on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), if Executive is not a controlling person of, or a member of a group which controls, such corporation; and Executive does not, directly or indirectly, own more than one percent (1%) of any class of securities of such corporation. 7.2 Confidential Information; Personal Relationships. Executive agrees that, during the Term and thereafter, he shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit 15 of others, any and all confidential information relating to the Company, including, without limitation, trade secrets, customer lists, financial plans or projections, pricing policies, marketing plans or strategies, business acquisition or divestiture plans, new personnel acquisition plans, technical processes, inventions and other research projects heretofore or hereafter learned by Executive, and he shall not disclose any such information to anyone outside the Company or any of its subsidiaries, except as required by law in connection with any judicial or administrative proceeding or inquiry (provided prior written notice thereof is given by Executive to the Company) or except with the Company's prior written consent, unless such information is known generally to the public or the trade through sources other than Executive's unauthorized disclosure. 7.3 Property of the Company. All memoranda, notes, lists, records and other documents or papers (and all copies thereof), including such items stored in computer memories, or microfiche or by any other means, made or compiled by or on behalf of Executive, or made available to Executive, relating to the Company or any successors thereto, are and shall be the property of the Company or any such successor and shall be delivered to the Company or any such successor promptly at any time on request. 16 7.4 Employees of the Company. During the Restricted Period, the Executive shall not, directly or indirectly, hire, solicit or encourage to leave the employment of the Company, any of its employees or hire any such employee who has left the employment of the Company. 7.5 Rights and Remedies Upon Breach. If Executive breaches, or threatens to commit a breach of, any of the provisions of this Section 7 (the "Restrictive Covenants"), the Company and any successor thereto shall have the following rights and remedies, each of which shall be independent of the other and severally enforceable, and all of which shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity. (a) Specific Performance. The right and remedy to have the Restrictive Covenants specifically enforced by any arbitrator or any court having equity jurisdiction, it being acknowledged and agreed by Executive that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. (b) Accounting. The right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or 17 other benefits (collectively, "Benefits") derived or received by Executive as the result of any transactions constituting a breach of any of the Restrictive Covenants, and Executive shall account for and pay over such Benefits to the Company. 7.6 Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in geographical and temporal scope and in all other respects. Notwithstanding the foregoing, if any arbitrator or court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable or should be reduced, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect without regard to the invalid Restrictive Covenants or portions thereof. 8. Insurance. The Company may, from time to time, apply for and take out, in its own name and at its own expense, naming itself or others as the designated beneficiary (which it may change from time to time), policies for health, accident, disability or other insurance upon Executive in any amount that it may deem necessary or appropriate to protect its interest. Executive agrees to aid the Company in procuring such insurance by submitting to reasonable medical examinations and by filling out, executing and 18 delivering such applications and other instruments in writing as may reasonably be required by any insurance company to which the Company may apply for insurance. 9. Indemnification. To the fullest extent permitted or required by the laws of the State of Ohio, the Company shall indemnify and hold harmless Executive, in accordance with the terms of such laws, if Executive is made a party, or threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive is or was an officer or director of the Company, or any subsidiary or affiliate of the Company in which capacity Executive is or was serving at the Company's request, against expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement, all as actually and reasonably incurred by him in connection with such action, suit or proceeding. In the event it becomes necessary for Executive to take any action to enforce the indemnity provided herein, Executive shall be promptly reimbursed by the Company for all costs and expenses associated therewith (including reasonable attorneys' fees). 10. Arbitration. All disputes arising under or related to this Agreement shall be resolved by arbitration. 19 Such arbitration shall be conducted by an arbitrator mutually selected by the Company and Executive (or, if the Company and Executive are unable to agree upon an arbitrator within ten (10) days, then the Company and Executive shall each select an arbitrator, and the arbitrators so selected shall mutually select a third arbitrator, who shall resolve such dispute). Such arbitration shall be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company shall pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also shall pay Executive's reasonable legal fees and expenses incurred in connection with any successful enforcement by Executive of his rights hereunder. 11. Miscellaneous. 11.1 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telecopied or sent by certified or registered mail, postage prepaid, or by Federal Express or similar overnight courier. Any such notice shall be deemed given when delivered: 20 (i) if to the Company, to: Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Attn: General Counsel Telecopy No.: (513) 721-3404 (ii) if to Executive, to: Wayne R. Wickens Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Telecopy No.: (513) 721-2779 11.2 Waivers and Amendments. This Agreement may not be amended, modified, superseded or cancelled except by a written instrument signed by the Company and Executive. No delay on the part of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right or remedy, nor any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. 11.3 Survival. The provisions of Sections 7 and 9 hereof shall survive the Term, irrespective of the reasons for termination of Executive's employment hereunder. 11.4 Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Ohio applicable to agreements made and to be performed entirely within such State. 21 11.5 Entire Agreement. This Agreement (including the schedules, annexes and exhibits hereto) contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, proposals or representations, arrangements or understandings, written or oral, with respect thereto. 11.6 Assignment. This Agreement, and any rights and obligations hereunder, may not be assigned by any 22 party hereto without the prior written consent of the other party. 11.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By /s/ Thomas E. Petry -------------------------------- Name: Thomas E. Petry Title: Chairman of the Board of Directors and Chief Executive Officer /s/ Wayne R. Wickens ----------------------------------- Wayne R. Wickens 23 ANNEX A TO EMPLOYMENT AGREEMENT OF WAYNE R. WICKENS Position: Senior Vice President and Group Executive Duties: Plans, directs and controls all activities in certain profit centers (currently ten Automotive Divisions) through the general managers of those entities. Those general managers are in turn responsible for production, research, engineering, marketing/sales, purchasing and human resources in their operations. EMPLOYMENT AGREEMENT AGREEMENT, dated as of November 29, 1996, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201, and Thomas E. Petry (the "Executive"), residing at Four Lexington Circle, Terrace Park, Ohio 45174. W I T N E S S E T H : WHEREAS, the Executive is employed on a full-time basis by the Company and is currently serving as Chairman of the Board of Directors and Chief Executive Officer of the Company; and WHEREAS, on January 7, 1991, the Company and certain of its affiliates (collectively, the "Debtors") each filed a petition for relief under chapter 11, title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Ohio, Western Division (the "Bankruptcy Court"); and WHEREAS, by order dated November 18, 1996 (the "Confirmation Order") the Bankruptcy Court and the United States District Court for the Southern District of Ohio, Western Division, confirmed the Third Amended Consolidated Plan of Reorganization, dated August 28, 1996 (the "Plan"), in the Debtors' chapter 11 cases; and 1 WHEREAS, the Plan contemplates that the Company and the Executive will enter into this Agreement which is to become effective on the Effective Date (as such term is defined in the Plan). NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Employment; Effectiveness of Agreement. The obligation of the Company to employ the Executive, and of the Executive to serve the Company, pursuant to this Agreement shall become effective automatically on the Effective Date. 2. Term. The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and shall continue thereafter until the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court, unless terminated earlier as hereinafter provided. 3. Duties and Extent of Services. During the Term, Executive agrees to continue to serve as the Chairman of the Board of Directors and Chief Executive Officer of the Company faithfully and to the best of his ability under the direction of the Board of Directors of the Company (the 2 "Board"), and agrees to devote substantially all of his business time, energy and skill to such employment. Executive agrees to perform the duties commensurate with the position of Chairman of the Board of Directors and Chief Executive Officer of the Company, which shall include, without limitation, the duties set forth on Annex A hereto. Executive agrees also to perform such specific duties and services of a senior executive nature as the Board shall reasonably request consistent with Executive's position as Chairman of the Board of Directors and Chief Executive Officer. The principal place of employment of Executive shall be Cincinnati, Ohio and, subject to such reasonable travel as the performance of his duties may require, such principal place of employment shall not be changed unless the Executive otherwise consents. 4. Compensation. 4.1 Base Salary. The Company agrees to pay or cause to be paid to Executive during the Term, a base salary equal to the amount of his base salary as at the date immediately preceding the Effective Date, subject to adjustment as provided below (as so adjusted, the "Base Salary"). The Base Salary shall be payable in accordance with the regular payroll policies of the Company from time to time in effect, less such deductions as shall be required 3 to be withheld by applicable law and regulations. On each December 1 during the Term, the Board or a committee thereof, shall review Executive's Base Salary as then in effect and may, but shall not be obligated to, increase such salary by such amount as the Board (or such committee), in its sole discretion, shall determine. 4.2 Discretionary Bonus. In addition to Base Salary, the Executive shall be entitled to receive an annual cash bonus based on the performance of the Company and of the Executive, the amount of which, if any, shall be determined by the Board (or a committee thereof). Determinations made by the Board (or such committee) with respect to the amount, if any, of annual bonuses to be paid to Executive under this Agreement shall be final and conclusive. 4.3 Benefits and Perquisites. During the Term, the Company shall provide Executive with and Executive shall be entitled to the following benefits and perquisites: (a) participation in and the receipt of benefits under (i) all of the Company's employee benefit plans and arrangements in effect from time to time applicable to salaried employees of the Company, (ii) all short-term and long-term incentive plans of the Company as in effect from time to time, (iii) a supplemental executive 4 retirement plan (the "SERP") substantially in accordance with and no less favorable to Executive than the terms, provisions and benefits under the supplemental executive retirement plan currently provided by the Company, and (iv) any life insurance, health and accident plan or arrangement made available by the Company, now or in the future, to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. (b) four (4) weeks of paid vacation in each calendar year. (c) an automobile paid for by the Company for use in the performance of his services under this Agreement, in a manner substantially consistent with past practices. (d) membership fees paid for by the Company with respect to any of the Executive's business-related club memberships (it being understood that such membership fees shall not include any fees for country clubs or other similar, primarily social, clubs). The Company also shall implement, as soon as reasonably practicable after the Effective Date, a long-term incentive plan. Although the ability to receive stock of the Company may not be available for such plan, the plan 5 nevertheless shall provide the Executive with opportunities and incentives reasonably economically equivalent to those provided by similar companies, many of which do provide stock options and/or other types of stock grants as components of their long-term incentive plans. 4.4 Expenses. Subject to such policies as may from time to time be established by the Board, the Company shall pay or reimburse Executive for all reasonable expenses actually incurred or paid by Executive during the Term in the performance of his services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as the Company may require. 5. Termination. 5.1 Cause. The Company may terminate Executive's employment hereunder for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate Executive's employment hereunder only by reason of any one or more of the following: (i) Executive's commission of any crime (whether or not involving the Company or any of its subsidiaries) which constitutes a felony in the jurisdiction involved; or (ii) Executive's commission of an act of fraud upon the Company or any or its subsidiaries; or 6 (iii) Executive's willful failure to perform in all material respects his duties hereunder in accordance with the terms of this Agreement which failure (other than by reason of death or disability) continues uncorrected for a period of ten (10) days after Executive shall have received written notice from the Board stating with specificity the nature of such failure or refusal. 5.2 Termination by the Executive. Executive may terminate his employment hereunder upon thirty (30) days' prior written notice to the Company for Good Reason. For purposes of this Agreement, "Good Reason" shall mean (i) the material diminution of the nature or scope of the duties assigned to Executive from that contemplated by Section 3 hereof, (ii) a reduction in Executive's Base Salary, or a material reduction in Executive's fringe benefits or any other material failure by the Company to comply with Section 4 hereof, other than any such reduction or failure as shall apply to all salaried employees of the Company generally, (iii) ceased participation by Executive, for any reason other than as a result of any action by Executive, in any employee benefit plan of the Company with respect to which Executive is or was, prior to such time, eligible to participate, (iv) the relocation of Executive's principal place of employment more than twenty (20) miles from the location specified in Section 3 hereof without Executive's consent, (v) the requirement that Executive engage in a 7 substantial amount of additional travel (as compared to Executive's past practices) in the performance of his duties hereunder without Executive's consent, or (vi) any other material breach by the Company of its obligations under this Agreement. Good Reason shall not exist in the event of a sale or disposition of a subsidiary or division of the Company and Executive either (a) voluntarily agrees to be employed by such subsidiary or division, or (b) is offered a comparable position with the Company. For purposes hereof, comparable shall encompass such items as salary, benefits, duties and geographic location. 5.3 Notice of Termination. Any termination by the Company pursuant to Section 5.1 above or by Executive pursuant to Section 5.2 above shall be communicated by written notice (the "Notice of Termination"), which notice shall indicate the specific termination provision in this Agreement relied upon for such termination. 5.4 Date of Termination. "Date of Termination" shall mean (i) if Executive's employment is terminated pursuant to Section 5.1 or 5.2 hereof, the date specified in the Notice of Termination, and (ii) if Executive's employment is terminated by the Company other than for Cause or by Executive other than for Good Reason, the date on which a Notice of Termination is given. 8 5.5 Payments upon Termination. (a) If the employment of Executive with the Company is terminated (i) by the Company other than for Cause or (ii) by the Executive for Good Reason, then Executive shall be entitled to receive from the Company, and the Company shall pay to Executive, a lump sum severance payment equal to the greater of (x) the aggregate Base Salary (at the rate in effect at the Date of Termination) that Executive would have received for the remainder of the Term if his employment had not been terminated, or (y) the aggregate amount of the Base Salary (at the rate in effect at the Date of Termination) which would be paid for a period of twenty-four (24) months, plus, in either case, such other benefits or reimbursement of expenses payable to the Executive pursuant to Sections 4.3 and 4.4 hereof (including, without limitation, the SERP), and less such amounts as shall be required to be withheld by the Company pursuant to applicable laws and regulations (the "Severance Amount"). The Severance Amount shall not be present-valued and shall be payable by the Company to Executive within thirty (30) days after Executive's termination. Executive shall not be required to mitigate the Company's obligation to pay the full Severance Amount by seeking employment or otherwise and the Severance Amount shall not be decreased or otherwise offset as a result of 9 any compensation received by Executive from employment in any capacity. The Severance Amount shall be deemed compensation payable to Executive for the purpose of determining the total amount due Executive pursuant to the SERP. (b) If the employment of Executive with the Company is terminated (i) by the Company for Cause, or (ii) by the Executive other than for Good Reason, then the Executive shall be entitled to receive, and the Company shall pay to Executive, (x) all accrued and unpaid Base Salary and amounts due Executive in respect of perquisites provided him hereunder through the Date of Termination at the rate in effect at the time Notice of Termination is given, (y) Base Salary payable in lieu of accrued and unused vacation days in accordance with the policies of the Company from time to time in effect, and (z) all accrued and unpaid benefits payable to Executive pursuant to any benefit plan or otherwise through the Date of Termination. Upon the payment of the foregoing amounts, the Company shall have no further obligations to Executive under this Agreement. 5.6 Limited Payment Cap. (a) Notwithstanding any other provision in this Agreement to the contrary, this Section 5.6 will apply in the event that the Executive would receive payments under this Agreement or 10 under any other plan, agreement, program, or policy that is sponsored by the Company, which relate to a change in control of the Company ("parachute payments"), and any such parachute payments are determined by the Company to be subject to excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") ("excess parachute payments"). If it is determined that such excise tax would cause the net after-tax parachute payments to be paid to or on behalf of the Executive to be less than what he would have netted, after federal, state and local income and social security taxes, had the present value of his total parachute payments equalled $1 less than three times his "base amount," as defined under Section 280G(b)(3)(A) of the Code, then such Executive's total parachute payments shall be reduced (but by the minimum possible amount), so that their aggregate present value equals $1 less than three times the Executive's base amount. If it is determined that any payment to or on behalf of the Executive will be an excess parachute payment, the Company shall promptly give the Executive notice to that effect, a copy of the detailed calculation thereof, and an explanation of the calculation of the reduction (if any) required hereunder. If a reduction hereunder is required, the Executive may then elect which payments shall be eliminated or reduced (as long 11 as after such election the aggregate present value of the remaining parachute payments is less than three times the Executive's base amount). The Executive shall advise the Company in writing of his election within 10 days of his receipt of this notice. If no such election is made by the Executive, the Company may elect which and how much of such payments to eliminate or reduce to accomplish this required reduction, and shall promptly thereafter pay or distribute for the Executive's benefit such amounts as become due under this Agreement. (b) It shall be assumed for purposes of the calculations described in subsection (a) above that the Executive's income tax rate will be computed based upon the maximum effective marginal federal, state and local income tax rates and Medicare tax on earned income, with such maximum effective federal income tax rate to be computed with regard to Section 68 of the Code, and applying any available deduction of state and local income taxes for federal income tax purposes. In the event that the Executive and the Company are unable to agree as to the amount of the reduction described in subsection (a) above, if any, the Executive shall select a law firm or public accounting firm from among those regularly consulted by the Company regarding federal income tax matters, such law firm 12 or accounting firm shall determine the amount of such reduction, and such firm's determination shall be final and binding upon the Executive and the Company. 6. Death or Disability. 6.1 Death. If Executive dies during the Term, this Employment Agreement, other than the provisions of Section 6.3 hereof, shall terminate. 6.2 Disability. If, during the Term, Executive becomes physically or mentally disabled, whether totally or partially, so that he is unable substantially to perform his services hereunder for (i) a period of six (6) consecutive months or (ii) for shorter periods aggregating six (6) months during any eighteen (18) month period, the Company may at any time after the last day of the six (6) consecutive months of disability or the day on which the shorter periods of disability equal an aggregate of six (6) months, by written notice to Executive (the "Disability Notice"), terminate the Term of the Executive's employment hereunder. 6.3 Payments upon Death or Disability. Upon a termination due to the death or disability of Executive, Executive (or, in the event of a termination as a result of the death of Executive, Executive's estate (or a designated beneficiary thereof)) shall be entitled to receive from the 13 Company, and the Company shall pay to Executive (or Executive's estate, if applicable) the amount of any accrued and unpaid Base Salary and other benefits and reimbursement of expenses payable to the Executive hereunder pursuant to Sections 4.3 and 4.4 hereof as of the date of Executive's death or the date of the Disability Notice, as applicable. In addition, for a period of thirty (30) months following the date of such termination, the Company shall continue to pay and provide to Executive and Executive's dependents at the Date of Termination all medical benefits pursuant to any plans and programs in which Executive was entitled to participate immediately prior to the Date of Termination as if Executive were still employed by the Company pursuant hereto. If Executive's participation in any plan or program pursuant to which such medical benefits are provided to Executive is barred as a result of such termination, the Company shall arrange to provide Executive and Executive's dependents with benefits substantially similar on an after tax basis to those which Executive was entitled to receive under such plan or program. 7. Non-Competition; Confidentiality. 7.1 Non-Competition. Executive agrees that, during the Term and for a period of two years following the date of a termination of Executive's employment under 14 Section 5 hereof (the "Restricted Period"), he will not, directly or indirectly, own, manage, operate or control, or participate in the ownership, management, operation or control of, or be connected as an officer, employee, partner, director or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, any entity or business which competes with any material business conducted by the Company or by any group, division or subsidiary of the Company, in any area where such business is being conducted, or for which negotiations to conduct business are pending, at the date of such termination (a "Competitive Operation"); provided, however, that Executive may acquire, solely as an investment and through market purchases, securities of any corporation that are traded on any national securities exchange or listed on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), if Executive is not a controlling person of, or a member of a group which controls, such corporation; and Executive does not, directly or indirectly, own more than one percent (1%) of any class of securities of such corporation. 7.2 Confidential Information; Personal Relationships. Executive agrees that, during the Term and thereafter, he shall keep secret and retain in strictest 15 confidence, and shall not use for his benefit or the benefit of others, any and all confidential information relating to the Company, including, without limitation, trade secrets, customer lists, financial plans or projections, pricing policies, marketing plans or strategies, business acquisition or divestiture plans, new personnel acquisition plans, technical processes, inventions and other research projects heretofore or hereafter learned by Executive, and he shall not disclose any such information to anyone outside the Company or any of its subsidiaries, except as required by law in connection with any judicial or administrative proceeding or inquiry (provided prior written notice thereof is given by Executive to the Company) or except with the Company's prior written consent, unless such information is known generally to the public or the trade through sources other than Executive's unauthorized disclosure. 7.3 Property of the Company. All memoranda, notes, lists, records and other documents or papers (and all copies thereof), including such items stored in computer memories, or microfiche or by any other means, made or compiled by or on behalf of Executive, or made available to Executive, relating to the Company or any successors thereto, are and shall be the property of the Company or any such 16 successor and shall be delivered to the Company or any such successor promptly at any time on request. 7.4 Employees of the Company. During the Restricted Period, the Executive shall not, directly or indirectly, hire, solicit or encourage to leave the employment of the Company, any of its employees or hire any such employee who has left the employment of the Company. 7.5 Rights and Remedies Upon Breach. If Executive breaches, or threatens to commit a breach of, any of the provisions of this Section 7 (the "Restrictive Covenants"), the Company and any successor thereto shall have the following rights and remedies, each of which shall be independent of the other and severally enforceable, and all of which shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity. (a) Specific Performance. The right and remedy to have the Restrictive Covenants specifically enforced by any arbitrator or any court having equity jurisdiction, it being acknowledged and agreed by Executive that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. 17 (b) Accounting. The right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits (collectively, "Benefits") derived or received by Executive as the result of any transactions constituting a breach of any of the Restrictive Covenants, and Executive shall account for and pay over such Benefits to the Company. 7.6 Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in geographical and temporal scope and in all other respects. Notwithstanding the foregoing, if any arbitrator or court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable or should be reduced, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect without regard to the invalid Restrictive Covenants or portions thereof. 8. Insurance. The Company may, from time to time, apply for and take out, in its own name and at its own expense, naming itself or others as the designated beneficiary (which it may change from time to time), policies for health, accident, disability or other insurance upon Executive in any amount that it may deem necessary or appropriate 18 to protect its interest. Executive agrees to aid the Company in procuring such insurance by submitting to reasonable medical examinations and by filling out, executing and delivering such applications and other instruments in writing as may reasonably be required by any insurance company to which the Company may apply for insurance. 9. Indemnification. To the fullest extent permitted or required by the laws of the State of Ohio, the Company shall indemnify and hold harmless Executive, in accordance with the terms of such laws, if Executive is made a party, or threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive is or was an officer or director of the Company, or any subsidiary or affiliate of the Company in which capacity Executive is or was serving at the Company's request, against expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement, all as actually and reasonably incurred by him in connection with such action, suit or proceeding. In the event it becomes necessary for Executive to take any action to enforce the indemnity provided herein, Executive shall be promptly reimbursed by the Company for all costs and 19 expenses associated therewith (including reasonable attorneys' fees). 10. Arbitration. All disputes arising under or related to this Agreement shall be resolved by arbitration. Such arbitration shall be conducted by an arbitrator mutually selected by the Company and Executive (or, if the Company and Executive are unable to agree upon an arbitrator within ten (10) days, then the Company and Executive shall each select an arbitrator, and the arbitrators so selected shall mutually select a third arbitrator, who shall resolve such dispute). Such arbitration shall be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company shall pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also shall pay Executive's reasonable legal fees and expenses incurred in connection with any successful enforcement by Executive of his rights hereunder. 11. Miscellaneous. 11.1 Notices. Any notice or other communication required or permitted hereunder shall be in writing 20 and shall be delivered personally, telecopied or sent by certified or registered mail, postage prepaid, or by Federal Express or similar overnight courier. Any such notice shall be deemed given when delivered: (i) if to the Company, to: Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Attn: General Counsel Telecopy No.: (513) 721-3404 (ii) if to Executive, to: Thomas E. Petry Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Telecopy No.: (513) 721-2779 11.2 Waivers and Amendments. This Agreement may not be amended, modified, superseded or cancelled except by a written instrument signed by the Company and Executive. No delay on the part of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right or remedy, nor any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. 11.3 Survival. The provisions of Sections 7 and 9 hereof shall survive the Term, irrespective of the reasons for termination of Executive's employment hereunder. 21 11.4 Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Ohio applicable to agreements made and to be performed entirely within such State. 11.5 Entire Agreement. This Agreement (including the schedules, annexes and exhibits hereto) contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, proposals or representations, arrangements or understandings, written or oral, with respect thereto. 11.6 Assignment. This Agreement, and any rights and obligations hereunder, may not be assigned by any party hereto without the prior written consent of the other party. 11.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an 22 original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By /s/ ANDRIES RUIJSSENAARS ------------------------ Name: Andries Ruijssenaars Title: President and Chief Operating Officer /s/ THOMAS E. PETRY ------------------------ Thomas E. Petry 23 ANNEX A TO EMPLOYMENT AGREEMENT OF THOMAS E. PETRY Position: Chairman and Chief Executive Officer Duties: Serves as presiding officer of the Board of Directors. In that capacity guides the deliberations and activities of that group. Responsible for directing the Company toward the objective of providing maximum profit and return on invested capital. Establishes short-term and long-range objectives, plans, and policies, subject to the approval of the Board of Directors. Represents the Company before all of its constituencies, including, without limitation, major customers, the financial community, the Company's operations and host communities, and the public. EMPLOYMENT AGREEMENT AGREEMENT, dated as of November 29, 1996, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201, and Carroll D. Curless (the "Executive"), residing at 2117 Beechcreek Lane, Cincinnati, Ohio 45233. W I T N E S S E T H : WHEREAS, the Executive is employed on a full-time basis by the Company and is currently serving as Vice President and Controller of the Company; and WHEREAS, on January 7, 1991, the Company and certain of its affiliates (collectively, the "Debtors") each filed a petition for relief under chapter 11, title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Ohio, Western Division (the "Bankruptcy Court"); and WHEREAS, by order dated November 18, 1996 (the "Confirmation Order") the Bankruptcy Court and the United States District Court for the Southern District of Ohio, Western Division, confirmed the Third Amended Consolidated Plan of Reorganization, dated August 28, 1996 (the "Plan"), in the Debtors' chapter 11 cases; and WHEREAS, the Plan contemplates that the Company and the Executive will enter into this Agreement which is to become effective on the Effective Date (as such term is defined in the Plan). NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Employment; Effectiveness of Agreement. The obligation of the Company to employ the Executive, and of the Executive to serve the Company, pursuant to this Agreement shall become effective automatically on the Effective Date. 2. Term. The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and shall continue thereafter until the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court, unless terminated earlier as hereinafter provided. 3. Duties and Extent of Services. During the Term, Executive agrees to continue to serve as the Vice President and Controller of the Company faithfully and to the best of his ability under the direction of the Chief Executive Officer and the Board of Directors of the Company (the "Board"), and agrees to devote substantially all of his business time, energy and skill to such employment. Execu- 2 tive agrees to perform the duties commensurate with the position of Vice President and Controller of the Company, which shall include, without limitation, the duties set forth on Annex A hereto. Executive agrees also to perform such specific duties and services of a senior executive nature as the Chief Executive Officer of the Company or the Board shall reasonably request consistent with Executive's position as Vice President and Controller. The principal place of employment of Executive shall be Cincinnati, Ohio and, subject to such reasonable travel as the performance of his duties may require, such principal place of employment shall not be changed unless the Executive otherwise consents. 4. Compensation. 4.1 Base Salary. The Company agrees to pay or cause to be paid to Executive during the Term, a base salary equal to the amount of his base salary as at the date immediately preceding the Effective Date, subject to adjustment as provided below (as so adjusted, the "Base Salary"). The Base Salary shall be payable in accordance with the regular payroll policies of the Company from time to time in effect, less such deductions as shall be required to be withheld by applicable law and regulations. On each December 1 during the Term, the Board or a committee 3 thereof, shall review Executive's Base Salary as then in effect and may, but shall not be obligated to, increase such salary by such amount as the Board (or such committee), in its sole discretion, shall determine. 4.2 Discretionary Bonus. In addition to Base Salary, the Executive shall be entitled to receive an annual cash bonus based on the performance of the Company and of the Executive, the amount of which, if any, shall be determined by the Board (or a committee thereof). Determinations made by the Board (or such committee) with respect to the amount, if any, of annual bonuses to be paid to Executive under this Agreement shall be final and conclusive. 4.3 Benefits and Perquisites. During the Term, the Company shall provide Executive with and Executive shall be entitled to the following benefits and perquisites: (a) participation in and the receipt of benefits under (i) all of the Company's employee benefit plans and arrangements in effect from time to time applicable to salaried employees of the Company, (ii) all short-term and long-term incentive plans of the Company as in effect from time to time, (iii) a supplemental executive retirement plan (the "SERP") substantially in accordance with and no less favorable to Executive than the terms, 4 provisions and benefits under the supplemental executive retirement plan currently provided by the Company, and (iv) any life insurance, health and accident plan or arrangement made available by the Company, now or in the future, to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. (b) four (4) weeks of paid vacation in each calendar year. (c) an automobile paid for by the Company for use in the performance of his services under this Agreement, in a manner substantially consistent with past practices. (d) membership fees paid for by the Company with respect to any of the Executive's business-related club memberships (it being understood that such membership fees shall not include any fees for country clubs or other similar, primarily social, clubs). The Company also shall implement, as soon as reasonably practicable after the Effective Date, a long-term incentive plan. Although the ability to receive stock of the Company may not be available for such plan, the plan nevertheless shall provide the Executive with opportunities and incentives reasonably economically equivalent to those 5 provided by similar companies, many of which do provide stock options and/or other types of stock grants as components of their long-term incentive plans. 4.4 Expenses. Subject to such policies as may from time to time be established by the Board, the Company shall pay or reimburse Executive for all reasonable expenses actually incurred or paid by Executive during the Term in the performance of his services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as the Company may require. 5. Termination. 5.1 Cause. The Company may terminate Executive's employment hereunder for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate Executive's employment hereunder only by reason of any one or more of the following: (i) Executive's commission of any crime (whether or not involving the Company or any of its subsidiaries) which constitutes a felony in the jurisdiction involved; or (ii) Executive's commission of an act of fraud upon the Company or any or its subsidiaries; or (iii) Executive's willful failure to perform in all material respects his duties hereunder in accordance with the terms of this Agreement which failure (other than by reason of death or disability) continues 6 uncorrected for a period of ten (10) days after Executive shall have received written notice from the Board stating with specificity the nature of such failure or refusal. 5.2 Termination by the Executive. Executive may terminate his employment hereunder upon thirty (30) days' prior written notice to the Company for Good Reason. For purposes of this Agreement, "Good Reason" shall mean (i) the material diminution of the nature or scope of the duties assigned to Executive from that contemplated by Section 3 hereof, (ii) a reduction in Executive's Base Salary, or a material reduction in Executive's fringe benefits or any other material failure by the Company to comply with Section 4 hereof, other than any such reduction or failure as shall apply to all salaried employees of the Company generally, (iii) ceased participation by Executive, for any reason other than as a result of any action by Executive, in any employee benefit plan of the Company with respect to which Executive is or was, prior to such time, eligible to participate, (iv) the relocation of Executive's principal place of employment more than twenty (20) miles from the location specified in Section 3 hereof without Executive's consent, (v) the requirement that Executive engage in a substantial amount of additional travel (as compared to Executive's past practices) in the performance of his duties 7 hereunder without Executive's consent, or (vi) any other material breach by the Company of its obligations under this Agreement. Good Reason shall not exist in the event of a sale or disposition of a subsidiary or division of the Company and Executive either (a) voluntarily agrees to be employed by such subsidiary or division, or (b) is offered a comparable position with the Company. For purposes hereof, comparable shall encompass such items as salary, benefits, duties and geographic location. 5.3 Notice of Termination. Any termination by the Company pursuant to Section 5.1 above or by Executive pursuant to Section 5.2 above shall be communicated by written notice (the "Notice of Termination"), which notice shall indicate the specific termination provision in this Agreement relied upon for such termination. 5.4 Date of Termination. "Date of Termination" shall mean (i) if Executive's employment is terminated pursuant to Section 5.1 or 5.2 hereof, the date specified in the Notice of Termination, and (ii) if Executive's employment is terminated by the Company other than for Cause or by Executive other than for Good Reason, the date on which a Notice of Termination is given. 5.5 Payments upon Termination. (a) If the employment of Executive with the Company is terminated (i) 8 by the Company other than for Cause or (ii) by the Executive for Good Reason, then Executive shall be entitled to receive from the Company, and the Company shall pay to Executive, a lump sum severance payment equal to the greater of (x) the aggregate Base Salary (at the rate in effect at the Date of Termination) that Executive would have received for the remainder of the Term if his employment had not been terminated, or (y) the aggregate amount of the Base Salary (at the rate in effect at the Date of Termination) which would be paid for a period of twenty-four (24) months, plus, in either case, such other benefits or reimbursement of expenses payable to the Executive pursuant to Sections 4.3 and 4.4 hereof (including, without limitation, the SERP), and less such amounts as shall be required to be withheld by the Company pursuant to applicable laws and regulations (the "Severance Amount"). The Severance Amount shall not be present-valued and shall be payable by the Company to Executive within thirty (30) days after Executive's termination. Executive shall not be required to mitigate the Company's obligation to pay the full Severance Amount by seeking employment or otherwise and the Severance Amount shall not be decreased or otherwise offset as a result of any compensation received by Executive from employment in any capacity. The Severance Amount shall be deemed 9 compensation payable to Executive for the purpose of determining the total amount due Executive pursuant to the SERP. (b) If the employment of Executive with the Company is terminated (i) by the Company for Cause, or (ii) by the Executive other than for Good Reason, then the Executive shall be entitled to receive, and the Company shall pay to Executive, (x) all accrued and unpaid Base Salary and amounts due Executive in respect of perquisites provided him hereunder through the Date of Termination at the rate in effect at the time Notice of Termination is given, (y) Base Salary payable in lieu of accrued and unused vacation days in accordance with the policies of the Company from time to time in effect, and (z) all accrued and unpaid benefits payable to Executive pursuant to any benefit plan or otherwise through the Date of Termination. Upon the payment of the foregoing amounts, the Company shall have no further obligations to Executive under this Agreement. 5.6 Limited Payment Cap. (a) Notwithstanding any other provision in this Agreement to the contrary, this Section 5.6 will apply in the event that the Executive would receive payments under this Agreement or under any other plan, agreement, program, or policy that is sponsored by the Company, which relate to a change in 10 control of the Company ("parachute payments"), and any such parachute payments are determined by the Company to be subject to excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") ("excess parachute payments"). If it is determined that such excise tax would cause the net after-tax parachute payments to be paid to or on behalf of the Executive to be less than what he would have netted, after federal, state and local income and social security taxes, had the present value of his total parachute payments equalled $1 less than three times his "base amount," as defined under Section 280G(b)(3)(A) of the Code, then such Executive's total parachute payments shall be reduced (but by the minimum possible amount), so that their aggregate present value equals $1 less than three times the Executive's base amount. If it is determined that any payment to or on behalf of the Executive will be an excess parachute payment, the Company shall promptly give the Executive notice to that effect, a copy of the detailed calculation thereof, and an explanation of the calculation of the reduction (if any) required hereunder. If a reduction hereunder is required, the Executive may then elect which payments shall be eliminated or reduced (as long as after such election the aggregate present value of the remaining parachute payments is less than three times the 11 Executive's base amount). The Executive shall advise the Company in writing of his election within 10 days of his receipt of this notice. If no such election is made by the Executive, the Company may elect which and how much of such payments to eliminate or reduce to accomplish this required reduction, and shall promptly thereafter pay or distribute for the Executive's benefit such amounts as become due under this Agreement. (b) It shall be assumed for purposes of the calculations described in subsection (a) above that the Executive's income tax rate will be computed based upon the maximum effective marginal federal, state and local income tax rates and Medicare tax on earned income, with such maximum effective federal income tax rate to be computed with regard to Section 68 of the Code, and applying any available deduction of state and local income taxes for federal income tax purposes. In the event that the Executive and the Company are unable to agree as to the amount of the reduction described in subsection (a) above, if any, the Executive shall select a law firm or public accounting firm from among those regularly consulted by the Company regarding federal income tax matters, such law firm or accounting firm shall determine the amount of such 12 reduction, and such firm's determination shall be final and binding upon the Executive and the Company. 6. Death or Disability. 6.1 Death. If Executive dies during the Term, this Employment Agreement, other than the provisions of Section 6.3 hereof, shall terminate. 6.2 Disability. If, during the Term, Executive becomes physically or mentally disabled, whether totally or partially, so that he is unable substantially to perform his services hereunder for (i) a period of six (6) consecutive months or (ii) for shorter periods aggregating six (6) months during any eighteen (18) month period, the Company may at any time after the last day of the six (6) consecutive months of disability or the day on which the shorter periods of disability equal an aggregate of six (6) months, by written notice to Executive (the "Disability Notice"), terminate the Term of the Executive's employment hereunder. 6.3 Payments upon Death or Disability. Upon a termination due to the death or disability of Executive, Executive (or, in the event of a termination as a result of the death of Executive, Executive's estate (or a designated beneficiary thereof)) shall be entitled to receive from the Company, and the Company shall pay to Executive (or Execu- 13 tive's estate, if applicable) the amount of any accrued and unpaid Base Salary and other benefits and reimbursement of expenses payable to the Executive hereunder pursuant to Sections 4.3 and 4.4 hereof as of the date of Executive's death or the date of the Disability Notice, as applicable. In addition, for a period of thirty (30) months following the date of such termination, the Company shall continue to pay and provide to Executive and Executive's dependents at the Date of Termination all medical benefits pursuant to any plans and programs in which Executive was entitled to participate immediately prior to the Date of Termination as if Executive were still employed by the Company pursuant hereto. If Executive's participation in any plan or program pursuant to which such medical benefits are provided to Executive is barred as a result of such termination, the Company shall arrange to provide Executive and Executive's dependents with benefits substantially similar on an after tax basis to those which Executive was entitled to receive under such plan or program. 7. Non-Competition; Confidentiality. 7.1 Non-Competition. Executive agrees that, during the Term and for a period of two years following the date of a termination of Executive's employment under Section 5 hereof (the "Restricted Period"), he will not, 14 directly or indirectly, own, manage, operate or control, or participate in the ownership, management, operation or control of, or be connected as an officer, employee, partner, director or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, any entity or business which competes with any material business conducted by the Company or by any group, division or subsidiary of the Company, in any area where such business is being conducted, or for which negotiations to conduct business are pending, at the date of such termination (a "Competitive Operation"); provided, however, that Executive may acquire, solely as an investment and through market purchases, securities of any corporation that are traded on any national securities exchange or listed on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), if Executive is not a controlling person of, or a member of a group which controls, such corporation; and Executive does not, directly or indirectly, own more than one percent (1%) of any class of securities of such corporation. 7.2 Confidential Information; Personal Relationships. Executive agrees that, during the Term and thereafter, he shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit 15 of others, any and all confidential information relating to the Company, including, without limitation, trade secrets, customer lists, financial plans or projections, pricing policies, marketing plans or strategies, business acquisition or divestiture plans, new personnel acquisition plans, technical processes, inventions and other research projects heretofore or hereafter learned by Executive, and he shall not disclose any such information to anyone outside the Company or any of its subsidiaries, except as required by law in connection with any judicial or administrative proceeding or inquiry (provided prior written notice thereof is given by Executive to the Company) or except with the Company's prior written consent, unless such information is known generally to the public or the trade through sources other than Executive's unauthorized disclosure. 7.3 Property of the Company. All memoranda, notes, lists, records and other documents or papers (and all copies thereof), including such items stored in computer memories, or microfiche or by any other means, made or compiled by or on behalf of Executive, or made available to Executive, relating to the Company or any successors thereto, are and shall be the property of the Company or any such successor and shall be delivered to the Company or any such successor promptly at any time on request. 16 7.4 Employees of the Company. During the Restricted Period, the Executive shall not, directly or indirectly, hire, solicit or encourage to leave the employment of the Company, any of its employees or hire any such employee who has left the employment of the Company. 7.5 Rights and Remedies Upon Breach. If Executive breaches, or threatens to commit a breach of, any of the provisions of this Section 7 (the "Restrictive Covenants"), the Company and any successor thereto shall have the following rights and remedies, each of which shall be independent of the other and severally enforceable, and all of which shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity. (a) Specific Performance. The right and remedy to have the Restrictive Covenants specifically enforced by any arbitrator or any court having equity jurisdiction, it being acknowledged and agreed by Executive that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. (b) Accounting. The right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or 17 other benefits (collectively, "Benefits") derived or received by Executive as the result of any transactions constituting a breach of any of the Restrictive Covenants, and Executive shall account for and pay over such Benefits to the Company. 7.6 Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in geographical and temporal scope and in all other respects. Notwithstanding the foregoing, if any arbitrator or court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable or should be reduced, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect without regard to the invalid Restrictive Covenants or portions thereof. 8. Insurance. The Company may, from time to time, apply for and take out, in its own name and at its own expense, naming itself or others as the designated beneficiary (which it may change from time to time), policies for health, accident, disability or other insurance upon Executive in any amount that it may deem necessary or appropriate to protect its interest. Executive agrees to aid the Company in procuring such insurance by submitting to reasonable medical examinations and by filling out, executing and 18 delivering such applications and other instruments in writing as may reasonably be required by any insurance company to which the Company may apply for insurance. 9. Indemnification. To the fullest extent permitted or required by the laws of the State of Ohio, the Company shall indemnify and hold harmless Executive, in accordance with the terms of such laws, if Executive is made a party, or threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive is or was an officer or director of the Company, or any subsidiary or affiliate of the Company in which capacity Executive is or was serving at the Company's request, against expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement, all as actually and reasonably incurred by him in connection with such action, suit or proceeding. In the event it becomes necessary for Executive to take any action to enforce the indemnity provided herein, Executive shall be promptly reimbursed by the Company for all costs and expenses associated therewith (including reasonable attorneys' fees). 10. Arbitration. All disputes arising under or related to this Agreement shall be resolved by arbitration. 19 Such arbitration shall be conducted by an arbitrator mutually selected by the Company and Executive (or, if the Company and Executive are unable to agree upon an arbitrator within ten (10) days, then the Company and Executive shall each select an arbitrator, and the arbitrators so selected shall mutually select a third arbitrator, who shall resolve such dispute). Such arbitration shall be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company shall pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also shall pay Executive's reasonable legal fees and expenses incurred in connection with any successful enforcement by Executive of his rights hereunder. 11. Miscellaneous. 11.1 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telecopied or sent by certified or registered mail, postage prepaid, or by Federal Express or similar overnight courier. Any such notice shall be deemed given when delivered: 20 (i) if to the Company, to: Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Attn: General Counsel Telecopy No.: (513) 721-3404 (ii) if to Executive, to: Carroll D. Curless Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Telecopy No.: (513) 721-2779 11.2 Waivers and Amendments. This Agreement may not be amended, modified, superseded or cancelled except by a written instrument signed by the Company and Executive. No delay on the part of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right or remedy, nor any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. 11.3 Survival. The provisions of Sections 7 and 9 hereof shall survive the Term, irrespective of the reasons for termination of Executive's employment hereunder. 11.4 Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Ohio applicable to agreements made and to be performed entirely within such State. 21 11.5 Entire Agreement. This Agreement (including the schedules, annexes and exhibits hereto) contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, proposals or representations, arrangements or understandings, written or oral, with respect thereto. 11.6 Assignment. This Agreement, and any rights and obligations hereunder, may not be assigned by any party hereto without the prior written consent of the other party. 11.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By /s/ THOMAS E. PETRY ------------------------- Name: Thomas E. Petry Title: Chairman of the Board of Directors and Chief Executive Officer /s/ CARROLL D. CURLESS ------------------------- Carroll D. Curless 22 ANNEX A TO EMPLOYMENT AGREEMENT OF CARROLL D. CURLESS ------------------ Position: Vice President and Controller Duties: Directs and has responsibility for the Company's accounting practices, the maintenance of its fiscal records, and the preparation of its financial reports. Directs and has overall supervisory responsibility for general and property accounting, internal auditing, cost accounting, and budgetary controls. Appraises operating results in terms of costs, budgets, policies of operations, trends and increased profit opportunities. EMPLOYMENT AGREEMENT AGREEMENT, dated as of November 29, 1996, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201, and Andries Ruijssenaars (the "Executive"), residing at 4875 Councilrock Lane, Cincinnati, Ohio 45243. W I T N E S S E T H : WHEREAS, the Executive is employed on a full-time basis by the Company and is currently serving as President and Chief Operating Officer of the Company; and WHEREAS, on January 7, 1991, the Company and certain of its affiliates (collectively, the "Debtors") each filed a petition for relief under chapter 11, title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Ohio, Western Division (the "Bankruptcy Court"); and WHEREAS, by order dated November 18, 1996 (the "Confirmation Order") the Bankruptcy Court and the United States District Court for the Southern District of Ohio, Western Division, confirmed the Third Amended Consolidated Plan of Reorganization, dated August 28, 1996 (the "Plan"), in the Debtors' chapter 11 cases; and WHEREAS, the Plan contemplates that the Company and the Executive will enter into this Agreement which is to 1 become effective on the Effective Date (as such term is defined in the Plan). NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Employment; Effectiveness of Agreement. The obligation of the Company to employ the Executive, and of the Executive to serve the Company, pursuant to this Agreement shall become effective automatically on the Effective Date. 2. Term. The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and shall continue thereafter until the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court, unless terminated earlier as hereinafter provided. 3. Duties and Extent of Services. During the Term, Executive agrees to continue to serve as the President and Chief Operating Officer of the Company faithfully and to the best of his ability under the direction of the Chief Executive Officer and the Board of Directors of the Company (the "Board"), and agrees to devote substantially all of his business time, energy and skill to such employment. 2 Executive agrees to perform the duties commensurate with the position of President and Chief Operating Officer of the Company, which shall include, without limitation, the duties set forth on Annex A hereto. Executive agrees also to perform such specific duties and services of a senior executive nature as the Chief Executive Officer of the Company or the Board shall reasonably request consistent with Executive's position as President and Chief Operating Officer. The principal place of employment of Executive shall be Cincinnati, Ohio and, subject to such reasonable travel as the performance of his duties may require, such principal place of employment shall not be changed unless the Executive otherwise consents. 4. Compensation. 4.1 Base Salary. The Company agrees to pay or cause to be paid to Executive during the Term, a base salary equal to the amount of his base salary as at the date immediately preceding the Effective Date, subject to adjustment as provided below (as so adjusted, the "Base Salary"). The Base Salary shall be payable in accordance with the regular payroll policies of the Company from time to time in effect, less such deductions as shall be required to be withheld by applicable law and regulations. On each December 1 during the Term, the Board or a committee 3 thereof, shall review Executive's Base Salary as then in effect and may, but shall not be obligated to, increase such salary by such amount as the Board (or such committee), in its sole discretion, shall determine. 4.2 Discretionary Bonus. In addition to Base Salary, the Executive shall be entitled to receive an annual cash bonus based on the performance of the Company and of the Executive, the amount of which, if any, shall be determined by the Board (or a committee thereof). Determinations made by the Board (or such committee) with respect to the amount, if any, of annual bonuses to be paid to Executive under this Agreement shall be final and conclusive. 4.3 Benefits and Perquisites. During the Term, the Company shall provide Executive with and Executive shall be entitled to the following benefits and perquisites: (a) participation in and the receipt of benefits under (i) all of the Company's employee benefit plans and arrangements in effect from time to time applicable to salaried employees of the Company, (ii) all short-term and long-term incentive plans of the Company as in effect from time to time, (iii) a supplemental executive retirement plan (the "SERP") substantially in accordance with and no less favorable to Executive than the terms, 4 provisions and benefits under the supplemental executive retirement plan currently provided by the Company, and (iv) any life insurance, health and accident plan or arrangement made available by the Company, now or in the future, to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. (b) four (4) weeks of paid vacation in each calendar year. (c) an automobile paid for by the Company for use in the performance of his services under this Agreement, in a manner substantially consistent with past practices. (d) membership fees paid for by the Company with respect to any of the Executive's business-related club memberships (it being understood that such membership fees shall not include any fees for country clubs or other similar, primarily social, clubs). The Company also shall implement, as soon as reasonably practicable after the Effective Date, a long-term incentive plan. Although the ability to receive stock of the Company may not be available for such plan, the plan nevertheless shall provide the Executive with opportunities and incentives reasonably economically equivalent to those 5 provided by similar companies, many of which do provide stock options and/or other types of stock grants as components of their long-term incentive plans. 4.4 Expenses. Subject to such policies as may from time to time be established by the Board, the Company shall pay or reimburse Executive for all reasonable expenses actually incurred or paid by Executive during the Term in the performance of his services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as the Company may require. 5. Termination. 5.1 Cause. The Company may terminate Executive's employment hereunder for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate Executive's employment hereunder only by reason of any one or more of the following: (i) Executive's commission of any crime (whether or not involving the Company or any of its subsidiaries) which constitutes a felony in the jurisdiction involved; or (ii) Executive's commission of an act of fraud upon the Company or any or its subsidiaries; or (iii) Executive's willful failure to perform in all material respects his duties hereunder in accordance with the terms of this Agreement which failure (other than by reason of death or disability) continues 6 uncorrected for a period of ten (10) days after Executive shall have received written notice from the Board stating with specificity the nature of such failure or refusal. 5.2 Termination by the Executive. Executive may terminate his employment hereunder upon thirty (30) days' prior written notice to the Company for Good Reason. For purposes of this Agreement, "Good Reason" shall mean (i) the material diminution of the nature or scope of the duties assigned to Executive from that contemplated by Section 3 hereof, (ii) a reduction in Executive's Base Salary, or a material reduction in Executive's fringe benefits or any other material failure by the Company to comply with Section 4 hereof, other than any such reduction or failure as shall apply to all salaried employees of the Company generally, (iii) ceased participation by Executive, for any reason other than as a result of any action by Executive, in any employee benefit plan of the Company with respect to which Executive is or was, prior to such time, eligible to participate, (iv) the relocation of Executive's principal place of employment more than twenty (20) miles from the location specified in Section 3 hereof without Executive's consent, (v) the requirement that Executive engage in a substantial amount of additional travel (as compared to Executive's past practices) in the performance of his duties 7 hereunder without Executive's consent, or (vi) any other material breach by the Company of its obligations under this Agreement. Good Reason shall not exist in the event of a sale or disposition of a subsidiary or division of the Company and Executive either (a) voluntarily agrees to be employed by such subsidiary or division, or (b) is offered a comparable position with the Company. For purposes hereof, comparable shall encompass such items as salary, benefits, duties and geographic location. 5.3 Notice of Termination. Any termination by the Company pursuant to Section 5.1 above or by Executive pursuant to Section 5.2 above shall be communicated by written notice (the "Notice of Termination"), which notice shall indicate the specific termination provision in this Agreement relied upon for such termination. 5.4 Date of Termination. "Date of Termination" shall mean (i) if Executive's employment is terminated pursuant to Section 5.1 or 5.2 hereof, the date specified in the Notice of Termination, and (ii) if Executive's employment is terminated by the Company other than for Cause or by Executive other than for Good Reason, the date on which a Notice of Termination is given. 5.5 Payments upon Termination. (a) If the employment of Executive with the Company is terminated (i) 8 by the Company other than for Cause or (ii) by the Executive for Good Reason, then Executive shall be entitled to receive from the Company, and the Company shall pay to Executive, a lump sum severance payment equal to the greater of (x) the aggregate Base Salary (at the rate in effect at the Date of Termination) that Executive would have received for the remainder of the Term if his employment had not been terminated, or (y) the aggregate amount of the Base Salary (at the rate in effect at the Date of Termination) which would be paid for a period of twenty-four (24) months, plus, in either case, such other benefits or reimbursement of expenses payable to the Executive pursuant to Sections 4.3 and 4.4 hereof (including, without limitation, the SERP), and less such amounts as shall be required to be withheld by the Company pursuant to applicable laws and regulations (the "Severance Amount"). The Severance Amount shall not be present-valued and shall be payable by the Company to Executive within thirty (30) days after Executive's termination. Executive shall not be required to mitigate the Company's obligation to pay the full Severance Amount by seeking employment or otherwise and the Severance Amount shall not be decreased or otherwise offset as a result of any compensation received by Executive from employment in any capacity. The Severance Amount shall be deemed 9 compensation payable to Executive for the purpose of determining the total amount due Executive pursuant to the SERP. (b) If the employment of Executive with the Company is terminated (i) by the Company for Cause, or (ii) by the Executive other than for Good Reason, then the Executive shall be entitled to receive, and the Company shall pay to Executive, (x) all accrued and unpaid Base Salary and amounts due Executive in respect of perquisites provided him hereunder through the Date of Termination at the rate in effect at the time Notice of Termination is given, (y) Base Salary payable in lieu of accrued and unused vacation days in accordance with the policies of the Company from time to time in effect, and (z) all accrued and unpaid benefits payable to Executive pursuant to any benefit plan or otherwise through the Date of Termination. Upon the payment of the foregoing amounts, the Company shall have no further obligations to Executive under this Agreement. 5.6. Limited Payment Cap. (a) Notwithstanding any other provision in this Agreement to the contrary, this Section 5.6 will apply in the event that the Executive would receive payments under this Agreement or under any other plan, agreement, program, or policy that is sponsored by the Company, which relate to a change in 10 control of the Company ("parachute payments"), and any such parachute payments are determined by the Company to be subject to excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") ("excess parachute payments"). If it is determined that such excise tax would cause the net after-tax parachute payments to be paid to or on behalf of the Executive to be less than what he would have netted, after federal, state and local income and social security taxes, had the present value of his total parachute payments equalled $1 less than three times his "base amount," as defined under Section 280G(b)(3)(A) of the Code, then such Executive's total parachute payments shall be reduced (but by the minimum possible amount), so that their aggregate present value equals $1 less than three times the Executive's base amount. If it is determined that any payment to or on behalf of the Executive will be an excess parachute payment, the Company shall promptly give the Executive notice to that effect, a copy of the detailed calculation thereof, and an explanation of the calculation of the reduction (if any) required hereunder. If a reduction hereunder is required, the Executive may then elect which payments shall be eliminated or reduced (as long as after such election the aggregate present value of the remaining parachute payments is less than three times the 11 Executive's base amount). The Executive shall advise the Company in writing of his election within 10 days of his receipt of this notice. If no such election is made by the Executive, the Company may elect which and how much of such payments to eliminate or reduce to accomplish this required reduction, and shall promptly thereafter pay or distribute for the Executive's benefit such amounts as become due under this Agreement. (b) It shall be assumed for purposes of the calculations described in subsection (a) above that the Executive's income tax rate will be computed based upon the maximum effective marginal federal, state and local income tax rates and Medicare tax on earned income, with such maximum effective federal income tax rate to be computed with regard to Section 68 of the Code, and applying any available deduction of state and local income taxes for federal income tax purposes. In the event that the Executive and the Company are unable to agree as to the amount of the reduction described in subsection (a) above, if any, the Executive shall select a law firm or public accounting firm from among those regularly consulted by the Company regarding federal income tax matters, such law firm or accounting firm shall determine the amount of such 12 reduction, and such firm's determination shall be final and binding upon the Executive and the Company. 6. Death or Disability. 6.1 Death. If Executive dies during the Term, this Employment Agreement, other than the provisions of Section 6.3 hereof, shall terminate. 6.2 Disability. If, during the Term, Executive becomes physically or mentally disabled, whether totally or partially, so that he is unable substantially to perform his services hereunder for (i) a period of six (6) consecutive months or (ii) for shorter periods aggregating six (6) months during any eighteen (18) month period, the Company may at any time after the last day of the six (6) consecutive months of disability or the day on which the shorter periods of disability equal an aggregate of six (6) months, by written notice to Executive (the "Disability Notice"), terminate the Term of the Executive's employment hereunder. 6.3 Payments upon Death or Disability. Upon a termination due to the death or disability of Executive, Executive (or, in the event of a termination as a result of the death of Executive, Executive's estate (or a designated beneficiary thereof)) shall be entitled to receive from the Company, and the Company shall pay to Executive (or Executive's 13 estate, if applicable) the amount of any accrued and unpaid Base Salary and other benefits and reimbursement of expenses payable to the Executive hereunder pursuant to Sections 4.3 and 4.4 hereof as of the date of Executive's death or the date of the Disability Notice, as applicable. In addition, for a period of thirty (30) months following the date of such termination, the Company shall continue to pay and provide to Executive and Executive's dependents at the Date of Termination all medical benefits pursuant to any plans and programs in which Executive was entitled to participate immediately prior to the Date of Termination as if Executive were still employed by the Company pursuant hereto. If Executive's participation in any plan or program pursuant to which such medical benefits are provided to Executive is barred as a result of such termination, the Company shall arrange to provide Executive and Executive's dependents with benefits substantially similar on an after tax basis to those which Executive was entitled to receive under such plan or program. 7. Non-Competition; Confidentiality. 7.1 Non-Competition. Executive agrees that, during the Term and for a period of two years following the date of a termination of Executive's employment under Section 5 hereof (the "Restricted Period"), he will not, 14 directly or indirectly, own, manage, operate or control, or participate in the ownership, management, operation or control of, or be connected as an officer, employee, partner, director or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, any entity or business which competes with any material business conducted by the Company or by any group, division or subsidiary of the Company, in any area where such business is being conducted, or for which negotiations to conduct business are pending, at the date of such termination (a "Competitive Operation"); provided, however, that Executive may acquire, solely as an investment and through market purchases, securities of any corporation that are traded on any national securities exchange or listed on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), if Executive is not a controlling person of, or a member of a group which controls, such corporation; and Executive does not, directly or indirectly, own more than one percent (1%) of any class of securities of such corporation. 7.2 Confidential Information; Personal Relationships. Executive agrees that, during the Term and thereafter, he shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit 15 of others, any and all confidential information relating to the Company, including, without limitation, trade secrets, customer lists, financial plans or projections, pricing policies, marketing plans or strategies, business acquisition or divestiture plans, new personnel acquisition plans, technical processes, inventions and other research projects heretofore or hereafter learned by Executive, and he shall not disclose any such information to anyone outside the Company or any of its subsidiaries, except as required by law in connection with any judicial or administrative proceeding or inquiry (provided prior written notice thereof is given by Executive to the Company) or except with the Company's prior written consent, unless such information is known generally to the public or the trade through sources other than Executive's unauthorized disclosure. 7.3 Property of the Company. All memoranda, notes, lists, records and other documents or papers (and all copies thereof), including such items stored in computer memories, or microfiche or by any other means, made or compiled by or on behalf of Executive, or made available to Executive, relating to the Company or any successors thereto, are and shall be the property of the Company or any such successor and shall be delivered to the Company or any such successor promptly at any time on request. 16 7.4 Employees of the Company. During the Restricted Period, the Executive shall not, directly or indirectly, hire, solicit or encourage to leave the employment of the Company, any of its employees or hire any such employee who has left the employment of the Company. 7.5 Rights and Remedies Upon Breach. If Executive breaches, or threatens to commit a breach of, any of the provisions of this Section 7 (the "Restrictive Covenants"), the Company and any successor thereto shall have the following rights and remedies, each of which shall be independent of the other and severally enforceable, and all of which shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity. (a) Specific Performance. The right and remedy to have the Restrictive Covenants specifically enforced by any arbitrator or any court having equity jurisdiction, it being acknowledged and agreed by Executive that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. (b) Accounting. The right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or 17 other benefits (collectively, "Benefits") derived or received by Executive as the result of any transactions constituting a breach of any of the Restrictive Covenants, and Executive shall account for and pay over such Benefits to the Company. 7.6 Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in geographical and temporal scope and in all other respects. Notwithstanding the foregoing, if any arbitrator or court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable or should be reduced, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect without regard to the invalid Restrictive Covenants or portions thereof. 8. Insurance. The Company may, from time to time, apply for and take out, in its own name and at its own expense, naming itself or others as the designated beneficiary (which it may change from time to time), policies for health, accident, disability or other insurance upon Executive in any amount that it may deem necessary or appropriate to protect its interest. Executive agrees to aid the Company in procuring such insurance by submitting to reasonable medical examinations and by filling out, executing and 18 delivering such applications and other instruments in writing as may reasonably be required by any insurance company to which the Company may apply for insurance. 9. Indemnification. To the fullest extent permitted or required by the laws of the State of Ohio, the Company shall indemnify and hold harmless Executive, in accordance with the terms of such laws, if Executive is made a party, or threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive is or was an officer or director of the Company, or any subsidiary or affiliate of the Company in which capacity Executive is or was serving at the Company's request, against expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement, all as actually and reasonably incurred by him in connection with such action, suit or proceeding. In the event it becomes necessary for Executive to take any action to enforce the indemnity provided herein, Executive shall be promptly reimbursed by the Company for all costs and expenses associated therewith (including reasonable attorneys' fees). 10. Arbitration. All disputes arising under or related to this Agreement shall be resolved by arbitration. 19 Such arbitration shall be conducted by an arbitrator mutually selected by the Company and Executive (or, if the Company and Executive are unable to agree upon an arbitrator within ten (10) days, then the Company and Executive shall each select an arbitrator, and the arbitrators so selected shall mutually select a third arbitrator, who shall resolve such dispute). Such arbitration shall be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company shall pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also shall pay Executive's reasonable legal fees and expenses incurred in connection with any successful enforcement by Executive of his rights hereunder. 11. Miscellaneous. 11.1 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telecopied or sent by certified or registered mail, postage prepaid, or by Federal Express or similar overnight courier. Any such notice shall be deemed given when delivered: 20 (i) if to the Company, to: Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Attn: General Counsel Telecopy No.: (513) 721-3404 (ii) if to Executive, to: Andries Ruijssenaars Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Telecopy No.: (513) 721-2779 11.2 Waivers and Amendments. This Agreement may not be amended, modified, superseded or cancelled except by a written instrument signed by the Company and Executive. No delay on the part of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right or remedy, nor any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. 11.3 Survival. The provisions of Sections 7 and 9 hereof shall survive the Term, irrespective of the reasons for termination of Executive's employment hereunder. 11.4 Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Ohio applicable to agreements made and to be performed entirely within such State. 21 11.5 Entire Agreement. This Agreement (including the schedules, annexes and exhibits hereto) contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, proposals or representations, arrangements or understandings, written or oral, with respect thereto. 11.6 Assignment. This Agreement, and any rights and obligations hereunder, may not be assigned by any party hereto without the prior written consent of the other party. 11.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By /s/ THOMAS E. PETRY ---------------------------- Name: Thomas E. Petry Title: Chairman of the Board of Directors and Chief Executive Officer /s/ ANDRIES RUIJSSENAARS ---------------------------- Andries Ruijssenaars 22 ANNEX A TO EMPLOYMENT AGREEMENT OF ANDRIES RUIJSSENAARS Position: President and Chief Operating Officer Duties: Directs, administers and coordinates the activities of the Company in accordance with policies, goals and objectives established by the Chief Executive Officer and the Board of Directors. Assists the Chief Executive Officer in the development of Company policies and goals for, among others, operations, personnel, financial performance and growth. Has direct line responsibility for all operating units. EMPLOYMENT AGREEMENT AGREEMENT, dated as of November 29, 1996, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201, and James A. Ralston (the "Executive"), residing at 2486 Royalview Court, Cincinnati, Ohio 45244. W I T N E S S E T H : WHEREAS, the Executive is employed on a full-time basis by the Company and is currently serving as Vice President, General Counsel and Secretary of the Company; and WHEREAS, on January 7, 1991, the Company and certain of its affiliates (collectively, the "Debtors") each filed a petition for relief under chapter 11, title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Ohio, Western Division (the "Bankruptcy Court"); and WHEREAS, by order dated November 18, 1996 (the "Confirmation Order") the Bankruptcy Court and the United States District Court for the Southern District of Ohio, Western Division, confirmed the Third Amended Consolidated Plan of Reorganization, dated August 28, 1996 (the "Plan"), in the Debtors' chapter 11 cases; and WHEREAS, the Plan contemplates that the Company and the Executive will enter into this Agreement which is to become effective on the Effective Date (as such term is defined in the Plan). NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Employment; Effectiveness of Agreement. The obligation of the Company to employ the Executive, and of the Executive to serve the Company, pursuant to this Agreement shall become effective automatically on the Effective Date. 2. Term. The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and shall continue thereafter until the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court, unless terminated earlier as hereinafter provided. 3. Duties and Extent of Services. During the Term, Executive agrees to continue to serve as the Vice President, General Counsel and Secretary of the Company faithfully and to the best of his ability under the direction of the Chief Executive Officer and the Board of Directors of the Company (the "Board"), and agrees to devote substantially all of his business time, energy and skill to 2 such employment. Executive agrees to perform the duties commensurate with the position of Vice President, General Counsel and Secretary of the Company, which shall include, without limitation, the duties set forth on Annex A hereto. Executive agrees also to perform such specific duties and services of a senior executive nature as the Chief Executive Officer of the Company or the Board shall reasonably request consistent with Executive's position as Vice President, General Counsel and Secretary. The principal place of employment of Executive shall be Cincinnati, Ohio and, subject to such reasonable travel as the performance of his duties may require, such principal place of employment shall not be changed unless the Executive otherwise consents. 4. Compensation. 4.1 Base Salary. The Company agrees to pay or cause to be paid to Executive during the Term, a base salary equal to the amount of his base salary as at the date immediately preceding the Effective Date, subject to adjustment as provided below (as so adjusted, the "Base Salary"). The Base Salary shall be payable in accordance with the regular payroll policies of the Company from time to time in effect, less such deductions as shall be required to be withheld by applicable law and regulations. On each December 1 during the Term, the Board or a committee 3 thereof, shall review Executive's Base Salary as then in effect and may, but shall not be obligated to, increase such salary by such amount as the Board (or such committee), in its sole discretion, shall determine. 4.2 Discretionary Bonus. In addition to Base Salary, the Executive shall be entitled to receive an annual cash bonus based on the performance of the Company and of the Executive, the amount of which, if any, shall be determined by the Board (or a committee thereof). Determinations made by the Board (or such committee) with respect to the amount, if any, of annual bonuses to be paid to Executive under this Agreement shall be final and conclusive. 4.3 Benefits and Perquisites. During the Term, the Company shall provide Executive with and Executive shall be entitled to the following benefits and perquisites: (a) participation in and the receipt of benefits under (i) all of the Company's employee benefit plans and arrangements in effect from time to time applicable to salaried employees of the Company, (ii) all short-term and long-term incentive plans of the Company as in effect from time to time, (iii) a supplemental executive retirement plan (the "SERP") substantially in accordance with and no less favorable to Executive than the terms, 4 provisions and benefits under the supplemental executive retirement plan currently provided by the Company, and (iv) any life insurance, health and accident plan or arrangement made available by the Company, now or in the future, to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. (b) four (4) weeks of paid vacation in each calendar year. (c) an automobile paid for by the Company for use in the performance of his services under this Agreement, in a manner substantially consistent with past practices. (d) membership fees paid for by the Company with respect to any of the Executive's business-related club memberships (it being understood that such membership fees shall not include any fees for country clubs or other similar, primarily social, clubs). The Company also shall implement, as soon as reasonably practicable after the Effective Date, a long-term incentive plan. Although the ability to receive stock of the Company may not be available for such plan, the plan nevertheless shall provide the Executive with opportunities and incentives reasonably economically equivalent to those 5 provided by similar companies, many of which do provide stock options and/or other types of stock grants as components of their long-term incentive plans. 4.4 Expenses. Subject to such policies as may from time to time be established by the Board, the Company shall pay or reimburse Executive for all reasonable expenses actually incurred or paid by Executive during the Term in the performance of his services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as the Company may require. 5. Termination. 5.1 Cause. The Company may terminate Executive's employment hereunder for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate Executive's employment hereunder only by reason of any one or more of the following: (i) Executive's commission of any crime (whether or not involving the Company or any of its subsidiaries) which constitutes a felony in the jurisdiction involved; or (ii) Executive's commission of an act of fraud upon the Company or any or its subsidiaries; or (iii) Executive's willful failure to perform in all material respects his duties hereunder in accordance with the terms of this Agreement which failure (other than by reason of death or disability) continues 6 uncorrected for a period of ten (10) days after Executive shall have received written notice from the Board stating with specificity the nature of such failure or refusal. 5.2 Termination by the Executive. Executive may terminate his employment hereunder upon thirty (30) days' prior written notice to the Company for Good Reason. For purposes of this Agreement, "Good Reason" shall mean (i) the material diminution of the nature or scope of the duties assigned to Executive from that contemplated by Section 3 hereof, (ii) a reduction in Executive's Base Salary, or a material reduction in Executive's fringe benefits or any other material failure by the Company to comply with Section 4 hereof, other than any such reduction or failure as shall apply to all salaried employees of the Company generally, (iii) ceased participation by Executive, for any reason other than as a result of any action by Executive, in any employee benefit plan of the Company with respect to which Executive is or was, prior to such time, eligible to participate, (iv) the relocation of Executive's principal place of employment more than twenty (20) miles from the location specified in Section 3 hereof without Executive's consent, (v) the requirement that Executive engage in a substantial amount of additional travel (as compared to Executive's past practices) in the performance of his duties 7 hereunder without Executive's consent, or (vi) any other material breach by the Company of its obligations under this Agreement. Good Reason shall not exist in the event of a sale or disposition of a subsidiary or division of the Company and Executive either (a) voluntarily agrees to be employed by such subsidiary or division, or (b) is offered a comparable position with the Company. For purposes hereof, comparable shall encompass such items as salary, benefits, duties and geographic location. 5.3 Notice of Termination. Any termination by the Company pursuant to Section 5.1 above or by Executive pursuant to Section 5.2 above shall be communicated by written notice (the "Notice of Termination"), which notice shall indicate the specific termination provision in this Agreement relied upon for such termination. 5.4 Date of Termination. "Date of Termination" shall mean (i) if Executive's employment is terminated pursuant to Section 5.1 or 5.2 hereof, the date specified in the Notice of Termination, and (ii) if Executive's employment is terminated by the Company other than for Cause or by Executive other than for Good Reason, the date on which a Notice of Termination is given. 5.5 Payments upon Termination. (a) If the employment of Executive with the Company is terminated (i) 8 by the Company other than for Cause or (ii) by the Executive for Good Reason, then Executive shall be entitled to receive from the Company, and the Company shall pay to Executive, a lump sum severance payment equal to the greater of (x) the aggregate Base Salary (at the rate in effect at the Date of Termination) that Executive would have received for the remainder of the Term if his employment had not been terminated, or (y) the aggregate amount of the Base Salary (at the rate in effect at the Date of Termination) which would be paid for a period of twenty-four (24) months, plus, in either case, such other benefits or reimbursement of expenses payable to the Executive pursuant to Sections 4.3 and 4.4 hereof (including, without limitation, the SERP), and less such amounts as shall be required to be withheld by the Company pursuant to applicable laws and regulations (the "Severance Amount"). The Severance Amount shall not be present-valued and shall be payable by the Company to Executive within thirty (30) days after Executive's termination. Executive shall not be required to mitigate the Company's obligation to pay the full Severance Amount by seeking employment or otherwise and the Severance Amount shall not be decreased or otherwise offset as a result of any compensation received by Executive from employment in any capacity. The Severance Amount shall be deemed 9 compensation payable to Executive for the purpose of determining the total amount due Executive pursuant to the SERP. (b) If the employment of Executive with the Company is terminated (i) by the Company for Cause, or (ii) by the Executive other than for Good Reason, then the Executive shall be entitled to receive, and the Company shall pay to Executive, (x) all accrued and unpaid Base Salary and amounts due Executive in respect of perquisites provided him hereunder through the Date of Termination at the rate in effect at the time Notice of Termination is given, (y) Base Salary payable in lieu of accrued and unused vacation days in accordance with the policies of the Company from time to time in effect, and (z) all accrued and unpaid benefits payable to Executive pursuant to any benefit plan or otherwise through the Date of Termination. Upon the payment of the foregoing amounts, the Company shall have no further obligations to Executive under this Agreement. 5.6 Limited Payment Cap. (a) Notwithstanding any other provision in this Agreement to the contrary, this Section 5.6 will apply in the event that the Executive would receive payments under this Agreement or under any other plan, agreement, program, or policy that is sponsored by the Company, which relate to a change in 10 control of the Company ("parachute payments"), and any such parachute payments are determined by the Company to be subject to excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") ("excess parachute payments"). If it is determined that such excise tax would cause the net after-tax parachute payments to be paid to or on behalf of the Executive to be less than what he would have netted, after federal, state and local income and social security taxes, had the present value of his total parachute payments equalled $1 less than three times his "base amount," as defined under Section 280G(b)(3)(A) of the Code, then such Executive's total parachute payments shall be reduced (but by the minimum possible amount), so that their aggregate present value equals $1 less than three times the Executive's base amount. If it is determined that any payment to or on behalf of the Executive will be an excess parachute payment, the Company shall promptly give the Executive notice to that effect, a copy of the detailed calculation thereof, and an explanation of the calculation of the reduction (if any) required hereunder. If a reduction hereunder is required, the Executive may then elect which payments shall be eliminated or reduced (as long as after such election the aggregate present value of the remaining parachute payments is less than three times the 11 Executive's base amount). The Executive shall advise the Company in writing of his election within 10 days of his receipt of this notice. If no such election is made by the Executive, the Company may elect which and how much of such payments to eliminate or reduce to accomplish this required reduction, and shall promptly thereafter pay or distribute for the Executive's benefit such amounts as become due under this Agreement. (b) It shall be assumed for purposes of the calculations described in subsection (a) above that the Executive's income tax rate will be computed based upon the maximum effective marginal federal, state and local income tax rates and Medicare tax on earned income, with such maximum effective federal income tax rate to be computed with regard to Section 68 of the Code, and applying any available deduction of state and local income taxes for federal income tax purposes. In the event that the Executive and the Company are unable to agree as to the amount of the reduction described in subsection (a) above, if any, the Executive shall select a law firm or public accounting firm from among those regularly consulted by the Company regarding federal income tax matters, such law firm or accounting firm shall determine the amount of such 12 reduction, and such firm's determination shall be final and binding upon the Executive and the Company. 6. Death or Disability. 6.1 Death. If Executive dies during the Term, this Employment Agreement, other than the provisions of Section 6.3 hereof, shall terminate. 6.2 Disability. If, during the Term, Executive becomes physically or mentally disabled, whether totally or partially, so that he is unable substantially to perform his services hereunder for (i) a period of six (6) consecutive months or (ii) for shorter periods aggregating six (6) months during any eighteen (18) month period, the Company may at any time after the last day of the six (6) consecutive months of disability or the day on which the shorter periods of disability equal an aggregate of six (6) months, by written notice to Executive (the "Disability Notice"), terminate the Term of the Executive's employment hereunder. 6.3 Payments upon Death or Disability. Upon a termination due to the death or disability of Executive, Executive (or, in the event of a termination as a result of the death of Executive, Executive's estate (or a designated beneficiary thereof)) shall be entitled to receive from the Company, and the Company shall pay to Executive (or Executive's 13 estate, if applicable) the amount of any accrued and unpaid Base Salary and other benefits and reimbursement of expenses payable to the Executive hereunder pursuant to Sections 4.3 and 4.4 hereof as of the date of Executive's death or the date of the Disability Notice, as applicable. In addition, for a period of thirty (30) months following the date of such termination, the Company shall continue to pay and provide to Executive and Executive's dependents at the Date of Termination all medical benefits pursuant to any plans and programs in which Executive was entitled to participate immediately prior to the Date of Termination as if Executive were still employed by the Company pursuant hereto. If Executive's participation in any plan or program pursuant to which such medical benefits are provided to Executive is barred as a result of such termination, the Company shall arrange to provide Executive and Executive's dependents with benefits substantially similar on an after tax basis to those which Executive was entitled to receive under such plan or program. 7. Non-Competition; Confidentiality. 7.1 Non-Competition. Executive agrees that, during the Term and for a period of two years following the date of a termination of Executive's employment under Section 5 hereof (the "Restricted Period"), he will not, 14 directly or indirectly, own, manage, operate or control, or participate in the ownership, management, operation or control of, or be connected as an officer, employee, partner, director or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, any entity or business which competes with any material business conducted by the Company or by any group, division or subsidiary of the Company, in any area where such business is being conducted, or for which negotiations to conduct business are pending, at the date of such termination (a "Competitive Operation"); provided, however, that Executive may acquire, solely as an investment and through market purchases, securities of any corporation that are traded on any national securities exchange or listed on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), if Executive is not a controlling person of, or a member of a group which controls, such corporation; and Executive does not, directly or indirectly, own more than one percent (1%) of any class of securities of such corporation. 7.2 Confidential Information; Personal Relationships. Executive agrees that, during the Term and thereafter, he shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit 15 of others, any and all confidential information relating to the Company, including, without limitation, trade secrets, customer lists, financial plans or projections, pricing policies, marketing plans or strategies, business acquisition or divestiture plans, new personnel acquisition plans, technical processes, inventions and other research projects heretofore or hereafter learned by Executive, and he shall not disclose any such information to anyone outside the Company or any of its subsidiaries, except as required by law in connection with any judicial or administrative proceeding or inquiry (provided prior written notice thereof is given by Executive to the Company) or except with the Company's prior written consent, unless such information is known generally to the public or the trade through sources other than Executive's unauthorized disclosure. 7.3 Property of the Company. All memoranda, notes, lists, records and other documents or papers (and all copies thereof), including such items stored in computer memories, or microfiche or by any other means, made or compiled by or on behalf of Executive, or made available to Executive, relating to the Company or any successors thereto, are and shall be the property of the Company or any such successor and shall be delivered to the Company or any such successor promptly at any time on request. 16 7.4 Employees of the Company. During the Restricted Period, the Executive shall not, directly or indirectly, hire, solicit or encourage to leave the employment of the Company, any of its employees or hire any such employee who has left the employment of the Company. 7.5 Rights and Remedies Upon Breach. If Executive breaches, or threatens to commit a breach of, any of the provisions of this Section 7 (the "Restrictive Covenants"), the Company and any successor thereto shall have the following rights and remedies, each of which shall be independent of the other and severally enforceable, and all of which shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity. (a) Specific Performance. The right and remedy to have the Restrictive Covenants specifically enforced by any arbitrator or any court having equity jurisdiction, it being acknowledged and agreed by Executive that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. (b) Accounting. The right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or 17 other benefits (collectively, "Benefits") derived or received by Executive as the result of any transactions constituting a breach of any of the Restrictive Covenants, and Executive shall account for and pay over such Benefits to the Company. 7.6 Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in geographical and temporal scope and in all other respects. Notwithstanding the foregoing, if any arbitrator or court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable or should be reduced, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect without regard to the invalid Restrictive Covenants or portions thereof. 8. Insurance. The Company may, from time to time, apply for and take out, in its own name and at its own expense, naming itself or others as the designated beneficiary (which it may change from time to time), policies for health, accident, disability or other insurance upon Executive in any amount that it may deem necessary or appropriate to protect its interest. Executive agrees to aid the Company in procuring such insurance by submitting to reasonable medical examinations and by filling out, executing and 18 delivering such applications and other instruments in writing as may reasonably be required by any insurance company to which the Company may apply for insurance. 9. Indemnification. To the fullest extent permitted or required by the laws of the State of Ohio, the Company shall indemnify and hold harmless Executive, in accordance with the terms of such laws, if Executive is made a party, or threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive is or was an officer or director of the Company, or any subsidiary or affiliate of the Company in which capacity Executive is or was serving at the Company's request, against expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement, all as actually and reasonably incurred by him in connection with such action, suit or proceeding. In the event it becomes necessary for Executive to take any action to enforce the indemnity provided herein, Executive shall be promptly reimbursed by the Company for all costs and expenses associated therewith (including reasonable attorneys' fees). 10. Arbitration. All disputes arising under or related to this Agreement shall be resolved by arbitration. 19 Such arbitration shall be conducted by an arbitrator mutually selected by the Company and Executive (or, if the Company and Executive are unable to agree upon an arbitrator within ten (10) days, then the Company and Executive shall each select an arbitrator, and the arbitrators so selected shall mutually select a third arbitrator, who shall resolve such dispute). Such arbitration shall be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company shall pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also shall pay Executive's reasonable legal fees and expenses incurred in connection with any successful enforcement by Executive of his rights hereunder. 11. Miscellaneous. 11.1 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telecopied or sent by certified or registered mail, postage prepaid, or by Federal Express or similar overnight courier. Any such notice shall be deemed given when delivered: 20 (i) if to the Company, to: Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Attn: President Telecopy No.: (513) 721-2779 (ii) if to Executive, to: James A. Ralston Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Telecopy No.: (513) 721-3404 11.2 Waivers and Amendments. This Agreement may not be amended, modified, superseded or cancelled except by a written instrument signed by the Company and Executive. No delay on the part of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right or remedy, nor any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. 11.3 Survival. The provisions of Sections 7 and 9 hereof shall survive the Term, irrespective of the reasons for termination of Executive's employment hereunder. 11.4 Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Ohio applicable to agreements made and to be performed entirely within such State. 21 11.5 Entire Agreement. This Agreement (including the schedules, annexes and exhibits hereto) contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, proposals or representations, arrangements or understandings, written or oral, with respect thereto. 11.6 Assignment. This Agreement, and any rights and obligations hereunder, may not be assigned by any party hereto without the prior written consent of the other party. 11.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By /s/ Thomas E. Petry -------------------------------- Name: Thomas E. Petry Title: Chairman of the Board of Directors and Chief Executive Officer /s/ James A. Ralston ----------------------------- James A. Ralston 22 ANNEX A TO EMPLOYMENT AGREEMENT OF JAMES A. RALSTON Position: Vice President, General Counsel and Secretary Duties: As chief legal officer directs the legal affairs of the Company. Provides legal counsel and guidance in the ordinary and special activities of the Company to insure maximum protection of its legal rights utilizing broad familiarity with most legal disciplines. Participates in senior management policy deliberations. Directs the defense of suits or claims and manages the prosecution of the Company's claims against others. Supervises the legal aspects of Company transactions and the preparation of reports and statements of a legal nature. Supervises the environmental compliance function within the Company. Serves as Secretary in accordance with the charter, by-laws, and other legal requirements. Coordinates meetings of the Board of Directors and keeps minutes of such meetings. Attends to Company notices and correspondence, and conducts relations with shareholders on matters concerning meetings of shareholders or share holdings. EMPLOYMENT AGREEMENT AGREEMENT, dated as of November 29, 1996, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201, and David N. Hall (the "Executive"), residing at 8200 Brill Road, Cincinnati, Ohio 45243. W I T N E S S E T H : WHEREAS, the Executive is employed on a full-time basis by the Company and is currently serving as Senior Vice President and Chief Financial Officer of the Company; and WHEREAS, on January 7, 1991, the Company and certain of its affiliates (collectively, the "Debtors") each filed a petition for relief under chapter 11, title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Ohio, Western Division (the "Bankruptcy Court"); and WHEREAS, by order dated November 18, 1996 (the "Confirmation Order") the Bankruptcy Court and the United States District Court for the Southern District of Ohio, Western Division, confirmed the Third Amended Consolidated Plan of Reorganization, dated August 28, 1996 (the "Plan"), in the Debtors' chapter 11 cases; and WHEREAS, the Plan contemplates that the Company and the Executive will enter into this Agreement which is to become effective on the Effective Date (as such term is defined in the Plan). NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Employment; Effectiveness of Agreement. The obligation of the Company to employ the Executive, and of the Executive to serve the Company, pursuant to this Agreement shall become effective automatically on the Effective Date. 2. Term. The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and shall continue thereafter until the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court, unless terminated earlier as hereinafter provided. 3. Duties and Extent of Services. During the Term, Executive agrees to continue to serve as the Senior Vice President and Chief Financial Officer of the Company faithfully and to the best of his ability under the direction of the Chief Executive Officer and the Board of Directors of the Company (the "Board"), and agrees to devote substantially all of his business time, energy and skill to 2 such employment. Executive agrees to perform the duties commensurate with the position of Senior Vice President and Chief Financial Officer of the Company, which shall include, without limitation, the duties set forth on Annex A hereto. Executive agrees also to perform such specific duties and services of a senior executive nature as the Chief Executive Officer of the Company or the Board shall reasonably request consistent with Executive's position as Senior Vice President and Chief Financial Officer. The principal place of employment of Executive shall be Cincinnati, Ohio and, subject to such reasonable travel as the performance of his duties may require, such principal place of employment shall not be changed unless the Executive otherwise consents. 4. Compensation. 4.1 Base Salary. The Company agrees to pay or cause to be paid to Executive during the Term, a base salary equal to the amount of his base salary as at the date immediately preceding the Effective Date, subject to adjustment as provided below (as so adjusted, the "Base Salary"). The Base Salary shall be payable in accordance with the regular payroll policies of the Company from time to time in effect, less such deductions as shall be required to be withheld by applicable law and regulations. On each December 1 during the Term, the Board or a committee 3 thereof, shall review Executive's Base Salary as then in effect and may, but shall not be obligated to, increase such salary by such amount as the Board (or such committee), in its sole discretion, shall determine. 4.2 Discretionary Bonus. In addition to Base Salary, the Executive shall be entitled to receive an annual cash bonus based on the performance of the Company and of the Executive, the amount of which, if any, shall be determined by the Board (or a committee thereof). Determinations made by the Board (or such committee) with respect to the amount, if any, of annual bonuses to be paid to Executive under this Agreement shall be final and conclusive. 4.3 Benefits and Perquisites. During the Term, the Company shall provide Executive with and Executive shall be entitled to the following benefits and perquisites: (a) participation in and the receipt of benefits under (i) all of the Company's employee benefit plans and arrangements in effect from time to time applicable to salaried employees of the Company, (ii) all short-term and long-term incentive plans of the Company as in effect from time to time, (iii) a supplemental executive retirement plan (the "SERP") substantially in accordance with and no less favorable to Executive than the terms, 4 provisions and benefits under the supplemental executive retirement plan currently provided by the Company, and (iv) any life insurance, health and accident plan or arrangement made available by the Company, now or in the future, to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. (b) four (4) weeks of paid vacation in each calendar year. (c) an automobile paid for by the Company for use in the performance of his services under this Agreement, in a manner substantially consistent with past practices. (d) membership fees paid for by the Company with respect to any of the Executive's business-related club memberships (it being understood that such membership fees shall not include any fees for country clubs or other similar, primarily social, clubs). The Company also shall implement, as soon as reasonably practicable after the Effective Date, a long-term incentive plan. Although the ability to receive stock of the Company may not be available for such plan, the plan nevertheless shall provide the Executive with opportunities and incentives reasonably economically equivalent to those 5 provided by similar companies, many of which do provide stock options and/or other types of stock grants as components of their long-term incentive plans. 4.4 Expenses. Subject to such policies as may from time to time be established by the Board, the Company shall pay or reimburse Executive for all reasonable expenses actually incurred or paid by Executive during the Term in the performance of his services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as the Company may require. 5. Termination. 5.1 Cause. The Company may terminate Executive's employment hereunder for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate Executive's employment hereunder only by reason of any one or more of the following: (i) Executive's commission of any crime (whether or not involving the Company or any of its subsidiaries) which constitutes a felony in the jurisdiction involved; or (ii) Executive's commission of an act of fraud upon the Company or any or its subsidiaries; or (iii) Executive's willful failure to perform in all material respects his duties hereunder in accordance with the terms of this Agreement which failure (other than by reason of death or disability) continues 6 uncorrected for a period of ten (10) days after Executive shall have received written notice from the Board stating with specificity the nature of such failure or refusal. 5.2 Termination by the Executive. Executive may terminate his employment hereunder upon thirty (30) days' prior written notice to the Company for Good Reason. For purposes of this Agreement, "Good Reason" shall mean (i) the material diminution of the nature or scope of the duties assigned to Executive from that contemplated by Section 3 hereof, (ii) a reduction in Executive's Base Salary, or a material reduction in Executive's fringe benefits or any other material failure by the Company to comply with Section 4 hereof, other than any such reduction or failure as shall apply to all salaried employees of the Company generally, (iii) ceased participation by Executive, for any reason other than as a result of any action by Executive, in any employee benefit plan of the Company with respect to which Executive is or was, prior to such time, eligible to participate, (iv) the relocation of Executive's principal place of employment more than twenty (20) miles from the location specified in Section 3 hereof without Executive's consent, (v) the requirement that Executive engage in a substantial amount of additional travel (as compared to Executive's past practices) in the performance of his duties 7 hereunder without Executive's consent, or (vi) any other material breach by the Company of its obligations under this Agreement. Good Reason shall not exist in the event of a sale or disposition of a subsidiary or division of the Company and Executive either (a) voluntarily agrees to be employed by such subsidiary or division, or (b) is offered a comparable position with the Company. For purposes hereof, comparable shall encompass such items as salary, benefits, duties and geographic location. 5.3 Notice of Termination. Any termination by the Company pursuant to Section 5.1 above or by Executive pursuant to Section 5.2 above shall be communicated by written notice (the "Notice of Termination"), which notice shall indicate the specific termination provision in this Agreement relied upon for such termination. 5.4 Date of Termination. "Date of Termination" shall mean (i) if Executive's employment is terminated pursuant to Section 5.1 or 5.2 hereof, the date specified in the Notice of Termination, and (ii) if Executive's employment is terminated by the Company other than for Cause or by Executive other than for Good Reason, the date on which a Notice of Termination is given. 5.5 Payments upon Termination. (a) If the employment of Executive with the Company is terminated (i) 8 by the Company other than for Cause or (ii) by the Executive for Good Reason, then Executive shall be entitled to receive from the Company, and the Company shall pay to Executive, a lump sum severance payment equal to the greater of (x) the aggregate Base Salary (at the rate in effect at the Date of Termination) that Executive would have received for the remainder of the Term if his employment had not been terminated, or (y) the aggregate amount of the Base Salary (at the rate in effect at the Date of Termination) which would be paid for a period of twenty-four (24) months, plus, in either case, such other benefits or reimbursement of expenses payable to the Executive pursuant to Sections 4.3 and 4.4 hereof (including, without limitation, the SERP), and less such amounts as shall be required to be withheld by the Company pursuant to applicable laws and regulations (the "Severance Amount"). The Severance Amount shall not be present-valued and shall be payable by the Company to Executive within thirty (30) days after Executive's termination. Executive shall not be required to mitigate the Company's obligation to pay the full Severance Amount by seeking employment or otherwise and the Severance Amount shall not be decreased or otherwise offset as a result of any compensation received by Executive from employment in any capacity. The Severance Amount shall be deemed 9 compensation payable to Executive for the purpose of determining the total amount due Executive pursuant to the SERP. (b) If the employment of Executive with the Company is terminated (i) by the Company for Cause, or (ii) by the Executive other than for Good Reason, then the Executive shall be entitled to receive, and the Company shall pay to Executive, (x) all accrued and unpaid Base Salary and amounts due Executive in respect of perquisites provided him hereunder through the Date of Termination at the rate in effect at the time Notice of Termination is given, (y) Base Salary payable in lieu of accrued and unused vacation days in accordance with the policies of the Company from time to time in effect, and (z) all accrued and unpaid benefits payable to Executive pursuant to any benefit plan or otherwise through the Date of Termination. Upon the payment of the foregoing amounts, the Company shall have no further obligations to Executive under this Agreement. 5.6 Limited Payment Cap. (a) Notwithstanding any other provision in this Agreement to the contrary, this Section 5.6 will apply in the event that the Executive would receive payments under this Agreement or under any other plan, agreement, program, or policy that is sponsored by the Company, which relate to a change in 10 control of the Company ("parachute payments"), and any such parachute payments are determined by the Company to be subject to excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") ("excess parachute payments"). If it is determined that such excise tax would cause the net after-tax parachute payments to be paid to or on behalf of the Executive to be less than what he would have netted, after federal, state and local income and social security taxes, had the present value of his total parachute payments equalled $1 less than three times his "base amount," as defined under Section 280G(b)(3)(A) of the Code, then such Executive's total parachute payments shall be reduced (but by the minimum possible amount), so that their aggregate present value equals $1 less than three times the Executive's base amount. If it is determined that any payment to or on behalf of the Executive will be an excess parachute payment, the Company shall promptly give the Executive notice to that effect, a copy of the detailed calculation thereof, and an explanation of the calculation of the reduction (if any) required hereunder. If a reduction hereunder is required, the Executive may then elect which payments shall be eliminated or reduced (as long as after such election the aggregate present value of the remaining parachute payments is less than three times the 11 Executive's base amount). The Executive shall advise the Company in writing of his election within 10 days of his receipt of this notice. If no such election is made by the Executive, the Company may elect which and how much of such payments to eliminate or reduce to accomplish this required reduction, and shall promptly thereafter pay or distribute for the Executive's benefit such amounts as become due under this Agreement. (b) It shall be assumed for purposes of the calculations described in subsection (a) above that the Executive's income tax rate will be computed based upon the maximum effective marginal federal, state and local income tax rates and Medicare tax on earned income, with such maximum effective federal income tax rate to be computed with regard to Section 68 of the Code, and applying any available deduction of state and local income taxes for federal income tax purposes. In the event that the Executive and the Company are unable to agree as to the amount of the reduction described in subsection (a) above, if any, the Executive shall select a law firm or public accounting firm from among those regularly consulted by the Company regarding federal income tax matters, such law firm or accounting firm shall determine the amount of such 12 reduction, and such firm's determination shall be final and binding upon the Executive and the Company. 6. Death or Disability. 6.1 Death. If Executive dies during the Term, this Employment Agreement, other than the provisions of Section 6.3 hereof, shall terminate. 6.2 Disability. If, during the Term, Executive becomes physically or mentally disabled, whether totally or partially, so that he is unable substantially to perform his services hereunder for (i) a period of six (6) consecutive months or (ii) for shorter periods aggregating six (6) months during any eighteen (18) month period, the Company may at any time after the last day of the six (6) consecutive months of disability or the day on which the shorter periods of disability equal an aggregate of six (6) months, by written notice to Executive (the "Disability Notice"), terminate the Term of the Executive's employment hereunder. 6.3 Payments upon Death or Disability. Upon a termination due to the death or disability of Executive, Executive (or, in the event of a termination as a result of the death of Executive, Executive's estate (or a designated beneficiary thereof)) shall be entitled to receive from the Company, and the Company shall pay to Executive (or Execu- 13 tive's estate, if applicable) the amount of any accrued and unpaid Base Salary and other benefits and reimbursement of expenses payable to the Executive hereunder pursuant to Sections 4.3 and 4.4 hereof as of the date of Executive's death or the date of the Disability Notice, as applicable. In addition, for a period of thirty (30) months following the date of such termination, the Company shall continue to pay and provide to Executive and Executive's dependents at the Date of Termination all medical benefits pursuant to any plans and programs in which Executive was entitled to participate immediately prior to the Date of Termination as if Executive were still employed by the Company pursuant hereto. If Executive's participation in any plan or program pursuant to which such medical benefits are provided to Executive is barred as a result of such termination, the Company shall arrange to provide Executive and Executive's dependents with benefits substantially similar on an after tax basis to those which Executive was entitled to receive under such plan or program. 7. Non-Competition; Confidentiality. 7.1 Non-Competition. Executive agrees that, during the Term and for a period of two years following the date of a termination of Executive's employment under Section 5 hereof (the "Restricted Period"), he will not, 14 directly or indirectly, own, manage, operate or control, or participate in the ownership, management, operation or control of, or be connected as an officer, employee, partner, director or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, any entity or business which competes with any material business conducted by the Company or by any group, division or subsidiary of the Company, in any area where such business is being conducted, or for which negotiations to conduct business are pending, at the date of such termination (a "Competitive Operation"); provided, however, that Executive may acquire, solely as an investment and through market purchases, securities of any corporation that are traded on any national securities exchange or listed on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), if Executive is not a controlling person of, or a member of a group which controls, such corporation; and Executive does not, directly or indirectly, own more than one percent (1%) of any class of securities of such corporation. 7.2 Confidential Information; Personal Relationships. Executive agrees that, during the Term and thereafter, he shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit 15 of others, any and all confidential information relating to the Company, including, without limitation, trade secrets, customer lists, financial plans or projections, pricing policies, marketing plans or strategies, business acquisition or divestiture plans, new personnel acquisition plans, technical processes, inventions and other research projects heretofore or hereafter learned by Executive, and he shall not disclose any such information to anyone outside the Company or any of its subsidiaries, except as required by law in connection with any judicial or administrative proceeding or inquiry (provided prior written notice thereof is given by Executive to the Company) or except with the Company's prior written consent, unless such information is known generally to the public or the trade through sources other than Executive's unauthorized disclosure. 7.3 Property of the Company. All memoranda, notes, lists, records and other documents or papers (and all copies thereof), including such items stored in computer memories, or microfiche or by any other means, made or compiled by or on behalf of Executive, or made available to Executive, relating to the Company or any successors thereto, are and shall be the property of the Company or any such successor and shall be delivered to the Company or any such successor promptly at any time on request. 16 7.4 Employees of the Company. During the Restricted Period, the Executive shall not, directly or indirectly, hire, solicit or encourage to leave the employment of the Company, any of its employees or hire any such employee who has left the employment of the Company. 7.5 Rights and Remedies Upon Breach. If Executive breaches, or threatens to commit a breach of, any of the provisions of this Section 7 (the "Restrictive Covenants"), the Company and any successor thereto shall have the following rights and remedies, each of which shall be independent of the other and severally enforceable, and all of which shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity. (a) Specific Performance. The right and remedy to have the Restrictive Covenants specifically enforced by any arbitrator or any court having equity jurisdiction, it being acknowledged and agreed by Executive that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. (b) Accounting. The right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or 17 other benefits (collectively, "Benefits") derived or received by Executive as the result of any transactions constituting a breach of any of the Restrictive Covenants, and Executive shall account for and pay over such Benefits to the Company. 7.6 Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in geographical and temporal scope and in all other respects. Notwithstanding the foregoing, if any arbitrator or court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable or should be reduced, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect without regard to the invalid Restrictive Covenants or portions thereof. 8. Insurance. The Company may, from time to time, apply for and take out, in its own name and at its own expense, naming itself or others as the designated beneficiary (which it may change from time to time), policies for health, accident, disability or other insurance upon Executive in any amount that it may deem necessary or appropriate to protect its interest. Executive agrees to aid the Company in procuring such insurance by submitting to reasonable medical examinations and by filling out, executing and 18 delivering such applications and other instruments in writing as may reasonably be required by any insurance company to which the Company may apply for insurance. 9. Indemnification. To the fullest extent permitted or required by the laws of the State of Ohio, the Company shall indemnify and hold harmless Executive, in accordance with the terms of such laws, if Executive is made a party, or threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive is or was an officer or director of the Company, or any subsidiary or affiliate of the Company in which capacity Executive is or was serving at the Company's request, against expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement, all as actually and reasonably incurred by him in connection with such action, suit or proceeding. In the event it becomes necessary for Executive to take any action to enforce the indemnity provided herein, Executive shall be promptly reimbursed by the Company for all costs and expenses associated therewith (including reasonable attorneys' fees). 10. Arbitration. All disputes arising under or related to this Agreement shall be resolved by arbitration. 19 Such arbitration shall be conducted by an arbitrator mutually selected by the Company and Executive (or, if the Company and Executive are unable to agree upon an arbitrator within ten (10) days, then the Company and Executive shall each select an arbitrator, and the arbitrators so selected shall mutually select a third arbitrator, who shall resolve such dispute). Such arbitration shall be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company shall pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also shall pay Executive's reasonable legal fees and expenses incurred in connection with any successful enforcement by Executive of his rights hereunder. 11. Miscellaneous. 11.1 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telecopied or sent by certified or registered mail, postage prepaid, or by Federal Express or similar overnight courier. Any such notice shall be deemed given when delivered: 20 (i) if to the Company, to: Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Attn: General Counsel Telecopy No.: (513) 721-3404 (ii) if to Executive, to: David N. Hall Eagle-Picher Industries, Inc. 580 Walnut Street Cincinnati, Ohio 45201 Telecopy No.: (513) 721-2779 11.2 Waivers and Amendments. This Agreement may not be amended, modified, superseded or cancelled except by a written instrument signed by the Company and Executive. No delay on the part of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right or remedy, nor any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. 11.3 Survival. The provisions of Sections 7 and 9 hereof shall survive the Term, irrespective of the reasons for termination of Executive's employment hereunder. 11.4 Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Ohio applicable to agreements made and to be performed entirely within such State. 21 11.5 Entire Agreement. This Agreement (including the schedules, annexes and exhibits hereto) contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, proposals or representations, arrangements or understandings, written or oral, with respect thereto. 11.6 Assignment. This Agreement, and any rights and obligations hereunder, may not be assigned by any party hereto without the prior written consent of the other party. 11.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By /s/ Thomas E. Petry --------------------------- Name: Thomas E. Petry Title: Chairman of the Board of Directors and Chief Executive Officer /s/ David N. Hall --------------------------- David N. Hall 22 ANNEX A TO EMPLOYMENT AGREEMENT OF DAVID N. HALL POSITION: Senior Vice President and Chief Financial Officer DUTIES: Plans, directs and controls the Company's overall financial plans and policies, and its accounting practices, and conducts the Company's relationship with lending institutions and the financial community. Directs treasury, budgeting, audit, tax, accounting, information management, insurance and certain administrative functions. Develops and coordinates necessary and appropriate accounting and statistical data for all departments. EX-10.23 24 EXHIBIT 10.23 AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT, dated as of August 5, 1997, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201 and Thomas E. Petry (the "Executive"), residing at Four Lexington Circle, Terrace Park, Ohio 45174. W I T N E S S E T H : WHEREAS, the Company and the Executive entered into an Employment Agreement, dated as of November 29, 1996 (the "Employment Agreement"); and WHEREAS, the Company and the Executive desire to amend the Employment Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Extension of Term. Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: "The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and, unless terminated earlier as hereinafter provided, shall continue until the later of (i) the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court and (ii) the second anniversary of any Change in Control occurring on or prior to December 31, 1998." 2. Lump Sum Severance Payment. Any lump sum severance payment calculated by reference to Base Salary in accordance with Section 5.5(a) of the Employment Agreement shall be calculated solely in accordance with clause (y) thereof and without regard to clause (x). 3. Definitions. For purposes of this Amendment and the Employment Agreement, the term "Change in Control" means the earlier of (i) the date on which the Eagle-Picher Industries Personal Injury Settlement Trust receives, following June 20, 1997, at least $500 million in cash in respect of any capital stock of the Company or principal amount of Company debt, or (ii) the date on which the Company, following June 20, 1997, sells all or substantially all of its assets. Any other capitalized words used in this Amendment without definition shall have the meaning given to such words in the Employment Agreement. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By: /s/ ANDRIES RUIJSSENAARS --------------------------------------- Name: Andries Ruijssenaars Title: President & Chief Operating Officer /s/ THOMAS E. PETRY ------------------------------------------ Thomas E. Petry -2- AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT, dated as of August 5, 1997, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201 and Carroll D. Curless (the "Executive"), residing at 2117 Beechcreek Lane, Cincinnati, Ohio 45233. W I T N E S S E T H : WHEREAS, the Company and the Executive entered into an Employment Agreement, dated as of November 29, 1996 (the "Employment Agreement"); and WHEREAS, the Company and the Executive desire to amend the Employment Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Extension of Term. Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: "The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and, unless terminated earlier as hereinafter provided, shall continue until the later of (i) the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court and (ii) the second anniversary of any Change in Control occurring on or prior to December 31, 1998." 2. Lump Sum Severance Payment. Any lump sum severance payment calculated by reference to Base Salary in accordance with Section 5.5(a) of the Employment Agreement shall be calculated solely in accordance with clause (y) thereof and without regard to clause (x). 3. Definitions. For purposes of this Amendment and the Employment Agreement, the term "Change in Control" means the earlier of (i) the date on which the Eagle-Picher Industries Personal Injury Settlement Trust receives, following June 20, 1997, at least $500 million in cash in respect of any capital stock of the Company or principal amount of Company debt, or (ii) the date on which the Company, following June 20, 1997, sells all or substantially all of its assets. Any other capitalized words used in this Amendment without definition shall have the meaning given to such words in the Employment Agreement. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By: /s/ THOMAS E. PETRY --------------------------------------- Name: Thomas E. Petry Title: Chief Executive Officer /s/ CARROLL D. CURLESS ------------------------------------------ Carroll D. Curless -2- AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT, dated as of August 5, 1997, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201 and Andries Ruijssenaars (the "Executive"), residing at 3021 Ononta Avenue, Cincinnati, Ohio 45226. W I T N E S S E T H : WHEREAS, the Company and the Executive entered into an Employment Agreement, dated as of November 29, 1996 (the "Employment Agreement"); and WHEREAS, the Company and the Executive desire to amend the Employment Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Extension of Term. Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: "The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and, unless terminated earlier as hereinafter provided, shall continue until the later of (i) the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court and (ii) the second anniversary of any Change in Control occurring on or prior to December 31, 1998." 2. Lump Sum Severance Payment. Any lump sum severance payment calculated by reference to Base Salary in accordance with Section 5.5(a) of the Employment Agreement shall be calculated solely in accordance with clause (y) thereof and without regard to clause (x). 3. Definitions. For purposes of this Amendment and the Employment Agreement, the term "Change in Control" means the earlier of (i) the date on which the Eagle-Picher Industries Personal Injury Settlement Trust receives, following June 20, 1997, at least $500 million in cash in respect of any capital stock of the Company or principal amount of Company debt, or (ii) the date on which the Company, following June 20, 1997, sells all or substantially all of its assets. Any other capitalized words used in this Amendment without definition shall have the meaning given to such words in the Employment Agreement. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By: /s/ THOMAS E. PETRY --------------------------------------- Name: Thomas E. Petry Title: Chief Executive Officer /s/ ANDRIES RUIJSSENAARS ------------------------------------------ Andries Ruijssenaars -2- AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT, dated as of August 5, 1997, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201 and David N. Hall (the "Executive"), residing at 8200 Brill Road, Cincinnati, Ohio 45243. W I T N E S S E T H : WHEREAS, the Company and the Executive entered into an Employment Agreement, dated as of November 29, 1996 (the "Employment Agreement"); and WHEREAS, the Company and the Executive desire to amend the Employment Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Extension of Term. Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: "The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and, unless terminated earlier as hereinafter provided, shall continue until the later of (i) the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court and (ii) the second anniversary of any Change in Control occurring on or prior to December 31, 1998." 2. Lump Sum Severance Payment. Any lump sum severance payment calculated by reference to Base Salary in accordance with Section 5.5(a) of the Employment Agreement shall be calculated solely in accordance with clause (y) thereof and without regard to clause (x). 3. Definitions. For purposes of this Amendment and the Employment Agreement, the term "Change in Control" means the earlier of (i) the date on which the Eagle-Picher Industries Personal Injury Settlement Trust receives, following June 20, 1997, at least $500 million in cash in respect of any capital stock of the Company or principal amount of Company debt, or (ii) the date on which the Company, following June 20, 1997, sells all or substantially all of its assets. Any other capitalized words used in this Amendment without definition shall have the meaning given to such words in the Employment Agreement. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By: /s/ THOMAS E. PETRY --------------------------------------- Name: Thomas E. Petry Title: Chief Executive Officer /s/ DAVID N. HALL ------------------------------------------ David N. Hall -2- AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT, dated as of August 5, 1997, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201 and James A. Ralston (the "Executive"), residing at 2486 Royalview Court, Cincinnati, OH 45244. W I T N E S S E T H : WHEREAS, the Company and the Executive entered into an Employment Agreement, dated as of November 29, 1996 (the "Employment Agreement"); and WHEREAS, the Company and the Executive desire to amend the Employment Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Extension of Term. Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: "The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and, unless terminated earlier as hereinafter provided, shall continue until the later of (i) the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court and (ii) the second anniversary of any Change in Control occurring on or prior to December 31, 1998." 2. Lump Sum Severance Payment. Any lump sum severance payment calculated by reference to Base Salary in accordance with Section 5.5(a) of the Employment Agreement shall be calculated solely in accordance with clause (y) thereof and without regard to clause (x). 3. Definitions. For purposes of this Amendment and the Employment Agreement, the term "Change in Control" means the earlier of (i) the date on which the Eagle-Picher Industries Personal Injury Settlement Trust receives, following June 20, 1997, at least $500 million in cash in respect of any capital stock of the Company or principal amount of Company debt, or (ii) the date on which the Company, following June 20, 1997, sells all or substantially all of its assets. Any other capitalized words used in this Amendment without definition shall have the meaning given to such words in the Employment Agreement. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By: /s/ THOMAS E. PETRY --------------------------------------- Name: Thomas E. Petry Title: Chief Executive Officer /s/ JAMES A. RALSTON ------------------------------------------ James A. Ralston -2- AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT, dated as of August 5, 1997, between EAGLE-PICHER INDUSTRIES, INC. (the "Company"), having its principal executive offices at 580 Walnut Street, Cincinnati, Ohio 45201 and Wayne R. Wickens (the "Executive"), residing at 7470 Pinehurst, Cincinnati, Ohio 45244. W I T N E S S E T H : WHEREAS, the Company and the Executive entered into an Employment Agreement, dated as of November 29, 1996 (the "Employment Agreement"); and WHEREAS, the Company and the Executive desire to amend the Employment Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, the parties hereto agree as follows: 1. Extension of Term. Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: "The term of Executive's employment hereunder (hereinafter referred to as the "Term") shall commence on the Effective Date and, unless terminated earlier as hereinafter provided, shall continue until the later of (i) the date which is thirty (30) months from and after the date on which the Confirmation Order was entered by the Bankruptcy Court and (ii) the second anniversary of any Change in Control occurring on or prior to December 31, 1998." 2. Lump Sum Severance Payment. Any lump sum severance payment calculated by reference to Base Salary in accordance with Section 5.5(a) of the Employment Agreement shall be calculated solely in accordance with clause (y) thereof and without regard to clause (x). 3. Definitions. For purposes of this Amendment and the Employment Agreement, the term "Change in Control" means the earlier of (i) the date on which the Eagle-Picher Industries Personal Injury Settlement Trust receives, following June 20, 1997, at least $500 million in cash in respect of any capital stock of the Company or principal amount of Company debt, or (ii) the date on which the Company, following June 20, 1997, sells all or substantially all of its assets. Any other capitalized words used in this Amendment without definition shall have the meaning given to such words in the Employment Agreement. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. EAGLE-PICHER INDUSTRIES, INC. By: /s/ THOMAS E. PETRY --------------------------------------- Name: Thomas E. Petry Title: Chief Executive Officer /s/ WAYNE R. WICKENS ------------------------------------------ Wayne R. Wickens -2- EX-10.24 25 EXHIBIT 10.24 EAGLE-PICHER INDUSTRIES, INC. SALE INCENTIVE BONUS PLAN EAGLE-PICHER INDUSTRIES, INC. SALE INCENTIVE BONUS PLAN 1. Purpose 1 2. Definitions 1 3. Administration 2 (a) Authority of the Committee. 2 (b) Manner of Exercise of Committee Authority. 2 (c) Limitation of Liability. 2 4. Sale Incentive Bonus. 3 5. General Provisions. 3 (a) Transferability; Beneficiaries. 3 (b) Adjustments. 3 (c) Taxes. 3 (d) Changes to the Plan and Awards. 4 (e) Limitation on Rights Conferred under Plan. 4 (f) Unfunded Status of Awards. 4 (g) Nonexclusivity of the Plan. 4 (h) Governing Law. 4 (i) Plan Effective Date. 4
EAGLE-PICHER INDUSTRIES, INC. SALE INCENTIVE BONUS PLAN 1. PURPOSE. The purpose of this Sale Incentive Bonus Plan (the "Plan") is to assist Eagle-Picher Industries, Inc. and its subsidiaries in attracting, retaining and rewarding high-quality executives by providing such persons with a performance incentive to expend their maximum efforts in the creation of shareholder value. 2. DEFINITIONS. For purposes of the Plan, the following terms shall be defined as set forth below, in addition to such terms defined in Section 1 hereof: (a) "Board" means the Company's Board of Directors. (b) "Cause" means the Participant's (i) commission of a felony, (ii) commission of an act of fraud upon the Company or any successor to the Company, or (iii) willful failure to perform his or her employment duties in all material respects which failure (other than by reason of death or disability) continues uncorrected for 10 days after his or her receipt of written notice from the Committee stating with specificity the nature of such failure. (c) "Change in Control" means the earlier of (i) the date on which the Trust receives, following June 20, 1997, at least $500 million in cash in respect of any capital stock of the Company or principal amount of Company debt, or (ii) the date on which the Company, following June 20, 1997, sells all or substantially all of its assets. (d) "Committee" means the Compensation Committee designated by the Board. (e) "Company" means Eagle-Picher Industries, Inc. and any successor thereto. (f) "Eligible Person" means each officer or other key employee of the Company or any of its subsidiaries, including any such person who may also be a director of the Company. (g) "Participant" means a person who has been designated in writing by the Committee as a participant in the Plan. (h) "Present Value After-Tax Proceeds" means an amount, as determined in good faith by the Committee promptly following a Change in Control, equal to the present value (using a 12% discount rate) as of January 1, 1998 of (i) all cash, stock, debt instruments or other property received or payable to the Trust after June 20, 1997, in respect of any capital stock of the Company or principal amount of Company debt plus (ii) any common stock of the Company held by the Trust immediately following a Change in Control minus (iii) all federal and state income taxes payable by the Trust with respect to (A) the receipt of items described in clause (i) and (B) a taxable disposition of items described in clauses (i) and (ii). The Committee's determination of Present Value After-Tax Proceeds shall be conclusive and binding on all parties. (i) "Stretch Performance" means Present Value After-Tax Proceeds of $750 million. (j) "Target Performance" means Present Value After-Tax Proceeds of $650 million. (k) "Threshold Performance" means Present Value After-Tax Proceeds of $550 million. (l) "Trust" means the Eagle-Picher Industries Personal Injury Settlement Trust. 3. ADMINISTRATION. (a) Authority of the Committee. The Plan shall be administered by the Committee. The Committee shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants, determine the terms and conditions of, and all other matters relating to, awards under the Plan, prescribe award agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan, construe and interpret the Plan and award agreements and correct defects, supply omissions or reconcile inconsistencies therein, and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan. (b) Manner of Exercise of Committee Authority. Any action of the Committee shall be final, conclusive and binding on all persons, including the Company, its subsidiaries, shareholders, Participants, and other persons claiming rights from or through a Participant. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Company or any subsidiary, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including administrative functions, as the Committee may determine. The Committee may appoint agents to assist it in administering the Plan. (c) Limitation of Liability. The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or employee of the Company or a subsidiary, the Company's independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee and any officer or employee of the Company or a subsidiary acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination. 4. SALE INCENTIVE BONUS. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) the Participant's employment by the Company or any of its subsidiaries continues until such Change in Control, (iii) the Participant puts forth his or her best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), and (iv) the Present Value After-Tax Proceeds are more than $550 million, the Participant will be entitled to a Sale Incentive Bonus in an amount set forth in the award letter by which the Committee has designated such person as a Participant in the Plan. Such Sale Incentive Bonus shall be payable in a cash lump sum promptly following the Committee's determination of Present Value After-Tax Proceeds; provided, however, that if any property included in the calculation of Present Value After-Tax Proceeds consists of preferred stock and/or debt instruments, payment of any Sale Incentive Bonus attributable to such property shall be deferred until such time as the Trust's ownership of such property is sold, disposed, redeemed or otherwise liquidated. 5. GENERAL PROVISIONS. (a) Transferability; Beneficiaries. No right or interest of a Participant under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party (other than the Company or a subsidiary), or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a beneficiary upon the death of a Participant. (b) Adjustments. In the event that any capital contribution, dividend or other distribution (whether in the form of cash, stock, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the value of the Trust's investment in the Company, whether consisting of capital stock, debt instruments or any combination thereof, such that an adjustment is determined by the Committee to be appropriate under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of the amounts relating to a Change in Control, Threshold Performance, Target Performance, and Stretch Performance. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, awards under the Plan in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence, as well as acquisitions and dispositions of businesses and assets) affecting the Company, any subsidiary or any business unit, or the financial statements of the Company or any subsidiary, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or in view of the Committee's assessment of the business strategy of the Company, any subsidiary or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant. (c) Taxes. The Company and any subsidiary is authorized to withhold from any payment relating to an award under the Plan, including from payroll or any other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any payment relating to an award under the Plan, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any award under the Plan. (d) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue or terminate the Plan without the consent of shareholders or Participants; provided that, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under any outstanding award. The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue or terminate any award theretofore granted and any award agreement relating thereto, except as otherwise provided in the Plan; provided that, without the consent of an affected Participant, no such Committee action may materially and adversely affect the rights of such Participant under such award. (e) Limitation on Rights Conferred under Plan. Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or a subsidiary, (ii) interfering in any way with the right of the Company or a subsidiary to terminate any Eligible Person's or Participant's employment or service at any time, or (iii) giving an Eligible Person or Participant any claim to be granted any award under the Plan or to be treated uniformly with other Participants and employees. (f) Unfunded Status of Awards. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant, nothing contained in the Plan or any award shall give any such Participant any rights that are greater than those of a general creditor of the Company. (g) Nonexclusivity of the Plan. The adoption of the Plan by the Board shall not be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable. (h) Governing Law. The validity, construction and effect of the Plan, any rules and regulations under the Plan, and any award agreement shall be determined in accordance with the laws of the State of Ohio, without giving effect to principles of conflicts of laws. (i) Plan Effective Date. The Plan has been adopted by the Board, and approved by the Trust as the Company's sole shareholder (including for purposes of Section 280G(b)(5) of the Internal Revenue Code), effective as of August 5, 1997. EX-10.25 26 EXHIBIT 10.25 [E-P LOGO] August 5, 1997 Mr. Carroll D. Curless 2117 Beechcreek Lane Cincinnati, Ohio 45233 Dear Bud: As you know, Eagle-Picher Industries, Inc. (the "Company") emerged from bankruptcy with 100% of its outstanding common stock and substantially all of its indebtedness owned by the Eagle-Picher Industries Personal Injury Settlement Trust (the "Trust"). After careful deliberation, the Trust has concluded that it is in the best interests of its beneficiaries to diversify its assets and, therefore, to dispose of substantially all of its investment in the Company. Knowing that the decision to sell its investment in the Company will create uncertainty among the Company's senior management, the Trust has approved the Company's adoption of the Short Term Sale Program (the "Program") in order to assist the Company in retaining and motivating experienced management needed to protect the Trust's investment and to maximize the after-tax sales proceeds realized by the Trust. As a key member of senior management, I am pleased to inform you that you have been selected to participate in this Program. As a participant in the Program, you will be entitled to a STAY PUT BONUS and a SALE INCENTIVE BONUS, subject to the terms and conditions set forth in this letter and the Sale Incentive Bonus Plan (the "Plan") attached hereto as Exhibit A. Capitalized terms used in this letter without definition have the meanings given to such terms in the Plan. Any existing SEVERANCE BENEFITS to which you may be entitled, whether payable pursuant to an employment agreement or otherwise, will continue in force and will not be affected by your participation in the Program. 1. STAY PUT BONUS. One-half of your stay put bonus is payable regardless of whether a Change in Control occurs (the "Initial Stay Put Bonus"). The remaining one-half of your stay put bonus is payable only if a Change in Control occurs on or prior to December 31, 1998 (the "Additional Stay Put Bonus"). (a) Initial Stay Put Bonus. If (i) your employment by the Company or any of its subsidiaries continues until the earlier of a Change in Control or June 30, 1998, and (ii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Compensation Committee of the Company's Board of Directors (the "Committee")), the Company will pay you within 10 days following the earlier of a Change in Control or June 30, 1998, a cash lump sum equal to $120,000. (b) Additional Stay Put Bonus. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, and (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), the Company will pay you within 10 days following the Change in Control a cash lump sum equal to $120,000. Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Additional Stay Put Bonus will be paid to you by the Company on the second anniversary of the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined below), prior to such date, in which case your Additional Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within two years following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Additional Stay Put Bonus will be paid to you by the Company within 10 days following such termination of employment. For purposes of this letter, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to you immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to you immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than your salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from your principal place of employment immediately prior to the Change in Control. "Cause" means your (i) commission of a felony, (ii) commission of an act of fraud upon the Company or any successor to the Company, or (iii) willful failure to perform your employment duties in all material respects which failure (other than by reason of death or disability) continues uncorrected for 10 days after your receipt of written notice from the Committee stating with specificity the nature of such failure. 2. SALE INCENTIVE BONUS. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), and (iv) the Present Value After-Tax Proceeds are more than $550 million, you will be entitled to a Sale Incentive Bonus. The amount of your Sale Incentive Bonus will be: zero if the Present Value After-Tax Proceeds are not more than $550 million ("Threshold Performance"); $240,000 if the Present Value After-Tax Proceeds are $650 million ("Target Performance"); and $480,000 if the Present Value After-Tax Proceeds are $750 million ("Stretch Performance"). If the Present Value After-Tax Proceeds are between Threshold Performance and Stretch Performance, the amount of your Sale Incentive Bonus will be interpolated on a straight-line basis. Similarly, if the Present Value After-Tax Proceeds are in excess of Stretch Performance, the amount of your Sale Incentive Bonus will continue to increase on a straight-line basis. Other terms and conditions regarding your Sale Incentive Bonus are set forth in the Plan attached hereto as Exhibit A. In the event of any conflict between the terms of this letter and the Plan, the Plan will control. 3. GENERAL PROVISIONS. (a) Nothing in this letter is intended to create a contract of employment between you and the Company or any of its subsidiaries, or to interfere in any way with the right of the Company or any of its subsidiaries to terminate your employment at any time. (b) All payments made pursuant to this letter or the Plan will be subject to applicable withholding taxes. (c) Any Stay Put Bonus or Sale Incentive Bonus made pursuant to this letter or the Plan will not be treated as compensation for purposes of calculating your benefits, if any, under the Company's Salaried Pension Plan or Supplemental Executive Retirement Plan, or any other retirement/pension plan maintained by the Company and/or any of its subsidiaries (foreign or domestic). (d) This letter will be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed entirely within such State. (e) No amendment or modification of this letter may be made except by a written instrument signed by the Company and you. (f) All disputes arising under or related to this letter or the Plan will be resolved by arbitration. Such arbitration will be conducted by an arbitrator mutually selected by the Company and you (or, if the Company and you are unable to agree upon an arbitrator within 10 days, then the Company and you will each select an arbitrator, and the arbitrators so selected will mutually select a third arbitrator, who will resolve such dispute). Such arbitration will be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company will pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also will pay your reasonable legal fees and expenses incurred in connection with any successful enforcement by you of your rights hereunder. (g) This letter and its terms should be kept strictly confidential and should not be discussed with anyone except a prospective successor to the Company, your attorney or your financial advisor (and then only if they agree to maintain such confidentiality). (h) The Company hereby agrees that, in the event of a Change in Control occurring on or prior to December 31, 1998, it will take whatever action it legally can in order to cause any assignee or transferee of all or substantially all of the assets of the Company to expressly assume the liabilities, obligations and duties of the Company under this letter and the Plan. Please acknowledge your agreement with the terms of this letter by signing your name in the space provided below and returning a copy of this letter to Tom Petry. If you have any questions concerning this letter or the Plan, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. By: /s/ DARIUS W. GASKINS, JR. ------------------------------------- Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged and Agreed /s/ CARROLL D. CURLESS - -------------------------- Carroll D. Curless [E-P LOGO] August 5, 1997 Mr. David N. Hall 8200 Brill Road Cincinnati, Ohio 45243 Dear Dave: As you know, Eagle-Picher Industries, Inc. (the "Company") emerged from bankruptcy with 100% of its outstanding common stock and substantially all of its indebtedness owned by the Eagle-Picher Industries Personal Injury Settlement Trust (the "Trust"). After careful deliberation, the Trust has concluded that it is in the best interests of its beneficiaries to diversify its assets and, therefore, to dispose of substantially all of its investment in the Company. Knowing that the decision to sell its investment in the Company will create uncertainty among the Company's senior management, the Trust has approved the Company's adoption of the Short Term Sale Program (the "Program") in order to assist the Company in retaining and motivating experienced management needed to protect the Trust's investment and to maximize the after-tax sales proceeds realized by the Trust. As a key member of senior management, I am pleased to inform you that you have been selected to participate in this Program. As a participant in the Program, you will be entitled to a STAY PUT BONUS and a SALE INCENTIVE BONUS, subject to the terms and conditions set forth in this letter and the Sale Incentive Bonus Plan (the "Plan") attached hereto as Exhibit A. Capitalized terms used in this letter without definition have the meanings given to such terms in the Plan. Any existing SEVERANCE BENEFITS to which you may be entitled, whether payable pursuant to an employment agreement or otherwise, will continue in force and will not be affected by your participation in the Program. 1. STAY PUT BONUS. One-half of your stay put bonus is payable regardless of whether a Change in Control occurs (the "Initial Stay Put Bonus"). The remaining one-half of your stay put bonus is payable only if a Change in Control occurs on or prior to December 31, 1998 (the "Additional Stay Put Bonus"). (a) Initial Stay Put Bonus. If (i) your employment by the Company or any of its subsidiaries continues until the earlier of a Change in Control or June 30, 1998, and (ii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Compensation Committee of the Company's Board of Directors (the "Committee")), the Company will pay you within 10 days following the earlier of a Change in Control or June 30, 1998, a cash lump sum equal to $187,500. (b) Additional Stay Put Bonus. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, and (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), the Company will pay you within 10 days following the Change in Control a cash lump sum equal to $187,500. Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Additional Stay Put Bonus will be paid to you by the Company on the second anniversary of the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined below), prior to such date, in which case your Additional Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within two years following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Additional Stay Put Bonus will be paid to you by the Company within 10 days following such termination of employment. For purposes of this letter, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to you immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to you immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than your salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from your principal place of employment immediately prior to the Change in Control. "Cause" means your (i) commission of a felony, (ii) commission of an act of fraud upon the Company or any successor to the Company, or (iii) willful failure to perform your employment duties in all material respects which failure (other than by reason of death or disability) continues uncorrected for 10 days after your receipt of written notice from the Committee stating with specificity the nature of such failure. 2. SALE INCENTIVE BONUS. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), and (iv) the Present Value After-Tax Proceeds are more than $550 million, you will be entitled to a Sale Incentive Bonus. The amount of your Sale Incentive Bonus will be: zero if the Present Value After-Tax Proceeds are not more than $550 million ("Threshold Performance"); $750,000 if the Present Value After-Tax Proceeds are $650 million ("Target Performance"); and $1,500,000 if the Present Value After-Tax Proceeds are $750 million ("Stretch Performance"). If the Present Value After-Tax Proceeds are between Threshold Performance and Stretch Performance, the amount of your Sale Incentive Bonus will be interpolated on a straight-line basis. Similarly, if the Present Value After-Tax Proceeds are in excess of Stretch Performance, the amount of your Sale Incentive Bonus will continue to increase on a straight-line basis. Other terms and conditions regarding your Sale Incentive Bonus are set forth in the Plan attached hereto as Exhibit A. In the event of any conflict between the terms of this letter and the Plan, the Plan will control. 3. GENERAL PROVISIONS. (a) Nothing in this letter is intended to create a contract of employment between you and the Company or any of its subsidiaries, or to interfere in any way with the right of the Company or any of its subsidiaries to terminate your employment at any time. (b) All payments made pursuant to this letter or the Plan will be subject to applicable withholding taxes. (c) Any Stay Put Bonus or Sale Incentive Bonus made pursuant to this letter or the Plan will not be treated as compensation for purposes of calculating your benefits, if any, under the Company's Salaried Pension Plan or Supplemental Executive Retirement Plan, or any other retirement/pension plan maintained by the Company and/or any of its subsidiaries (foreign or domestic). (d) This letter will be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed entirely within such State. (e) No amendment or modification of this letter may be made except by a written instrument signed by the Company and you. (f) All disputes arising under or related to this letter or the Plan will be resolved by arbitration. Such arbitration will be conducted by an arbitrator mutually selected by the Company and you (or, if the Company and you are unable to agree upon an arbitrator within 10 days, then the Company and you will each select an arbitrator, and the arbitrators so selected will mutually select a third arbitrator, who will resolve such dispute). Such arbitration will be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company will pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also will pay your reasonable legal fees and expenses incurred in connection with any successful enforcement by you of your rights hereunder. (g) This letter and its terms should be kept strictly confidential and should not be discussed with anyone except a prospective successor to the Company, your attorney or your financial advisor (and then only if they agree to maintain such confidentiality). (h) The Company hereby agrees that, in the event of a Change in Control occurring on or prior to December 31, 1998, it will take whatever action it legally can in order to cause any assignee or transferee of all or substantially all of the assets of the Company to expressly assume the liabilities, obligations and duties of the Company under this letter and the Plan. Please acknowledge your agreement with the terms of this letter by signing your name in the space provided below and returning a copy of this letter to Tom Petry. If you have any questions concerning this letter or the Plan, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. By: /s/ DARIUS W. GASKINS, JR. ------------------------------------- Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged and Agreed /s/ DAVID N. HALL - -------------------------- David N. Hall [E-P LOGO] August 5, 1997 Mr. Thomas E. Petry Four Lexington Circle Terrace Park, Ohio 45174 Dear Tom: As you know, Eagle-Picher Industries, Inc. (the "Company") emerged from bankruptcy with 100% of its outstanding common stock and substantially all of its indebtedness owned by the Eagle-Picher Industries Personal Injury Settlement Trust (the "Trust"). After careful deliberation, the Trust has concluded that it is in the best interests of its beneficiaries to diversify its assets and, therefore, to dispose of substantially all of its investment in the Company. Knowing that the decision to sell its investment in the Company will create uncertainty among the Company's senior management, the Trust has approved the Company's adoption of the Short Term Sale Program (the "Program") in order to assist the Company in retaining and motivating experienced management needed to protect the Trust's investment and to maximize the after-tax sales proceeds realized by the Trust. As a key member of senior management, I am pleased to inform you that you have been selected to participate in this Program. As a participant in the Program, you will be entitled to a STAY PUT BONUS and a SALE INCENTIVE BONUS, subject to the terms and conditions set forth in this letter and the Sale Incentive Bonus Plan (the "Plan") attached hereto as Exhibit A. Capitalized terms used in this letter without definition have the meanings given to such terms in the Plan. Any existing SEVERANCE BENEFITS to which you may be entitled, whether payable pursuant to an employment agreement or otherwise, will continue in force and will not be affected by your participation in the Program. 1. STAY PUT BONUS. One-half of your stay put bonus is payable regardless of whether a Change in Control occurs (the "Initial Stay Put Bonus"). The remaining one-half of your stay put bonus is payable only if a Change in Control occurs on or prior to December 31, 1998 (the "Additional Stay Put Bonus"). (a) Initial Stay Put Bonus. If (i) your employment by the Company or any of its subsidiaries continues until the earlier of a Change in Control or June 30, 1998, and (ii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Compensation Committee of the Company's Board of Directors (the "Committee")), the Company will pay you within 10 days following the earlier of a Change in Control or June 30, 1998, a cash lump sum equal to $312,500. (b) Additional Stay Put Bonus. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, and (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), the Company will pay you within 10 days following the Change in Control a cash lump sum equal to $312,500. Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Additional Stay Put Bonus will be paid to you by the Company on the second anniversary of the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined below), prior to such date, in which case your Additional Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within two years following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Additional Stay Put Bonus will be paid to you by the Company within 10 days following such termination of employment. For purposes of this letter, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to you immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to you immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than your salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from your principal place of employment immediately prior to the Change in Control. "Cause" means your (i) commission of a felony, (ii) commission of an act of fraud upon the Company or any successor to the Company, or (iii) willful failure to perform your employment duties in all material respects which failure (other than by reason of death or disability) continues uncorrected for 10 days after your receipt of written notice from the Committee stating with specificity the nature of such failure. 2. SALE INCENTIVE BONUS. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), and (iv) the Present Value After-Tax Proceeds are more than $550 million, you will be entitled to a Sale Incentive Bonus. The amount of your Sale Incentive Bonus will be: zero if the Present Value After-Tax Proceeds are not more than $550 million ("Threshold Performance"); $1,250,000 if the Present Value After-Tax Proceeds are $650 million ("Target Performance"); and $2,500,000 if the Present Value After-Tax Proceeds are $750 million ("Stretch Performance"). If the Present Value After-Tax Proceeds are between Threshold Performance and Stretch Performance, the amount of your Sale Incentive Bonus will be interpolated on a straight-line basis. Similarly, if the Present Value After-Tax Proceeds are in excess of Stretch Performance, the amount of your Sale Incentive Bonus will continue to increase on a straight-line basis. Other terms and conditions regarding your Sale Incentive Bonus are set forth in the Plan attached hereto as Exhibit A. In the event of any conflict between the terms of this letter and the Plan, the Plan will control. 3. GENERAL PROVISIONS. (a) Nothing in this letter is intended to create a contract of employment between you and the Company or any of its subsidiaries, or to interfere in any way with the right of the Company or any of its subsidiaries to terminate your employment at any time. (b) All payments made pursuant to this letter or the Plan will be subject to applicable withholding taxes. (c) Any Stay Put Bonus or Sale Incentive Bonus made pursuant to this letter or the Plan will not be treated as compensation for purposes of calculating your benefits, if any, under the Company's Salaried Pension Plan or Supplemental Executive Retirement Plan, or any other retirement/pension plan maintained by the Company and/or any of its subsidiaries (foreign or domestic). (d) This letter will be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed entirely within such State. (e) No amendment or modification of this letter may be made except by a written instrument signed by the Company and you. (f) All disputes arising under or related to this letter or the Plan will be resolved by arbitration. Such arbitration will be conducted by an arbitrator mutually selected by the Company and you (or, if the Company and you are unable to agree upon an arbitrator within 10 days, then the Company and you will each select an arbitrator, and the arbitrators so selected will mutually select a third arbitrator, who will resolve such dispute). Such arbitration will be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company will pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also will pay your reasonable legal fees and expenses incurred in connection with any successful enforcement by you of your rights hereunder. (g) This letter and its terms should be kept strictly confidential and should not be discussed with anyone except a prospective successor to the Company, your attorney or your financial advisor (and then only if they agree to maintain such confidentiality). (h) The Company hereby agrees that, in the event of a Change in Control occurring on or prior to December 31, 1998, it will take whatever action it legally can in order to cause any assignee or transferee of all or substantially all of the assets of the Company to expressly assume the liabilities, obligations and duties of the Company under this letter and the Plan. Please acknowledge your agreement with the terms of this letter by signing your name in the space provided below and returning a copy of this letter to Tom Petry. If you have any questions concerning this letter or the Plan, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. By: /s/ DARIUS W. GASKINS, JR. ------------------------------------- Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged and Agreed /s/ THOMAS E. PETRY - -------------------------- Thomas E. Petry [E-P LOGO] August 5, 1997 Mr. James A. Ralston 2486 Royalview Court Cincinnati, OH 45244 Dear Jim: As you know, Eagle-Picher Industries, Inc. (the "Company") emerged from bankruptcy with 100% of its outstanding common stock and substantially all of its indebtedness owned by the Eagle-Picher Industries Personal Injury Settlement Trust (the "Trust"). After careful deliberation, the Trust has concluded that it is in the best interests of its beneficiaries to diversify its assets and, therefore, to dispose of substantially all of its investment in the Company. Knowing that the decision to sell its investment in the Company will create uncertainty among the Company's senior management, the Trust has approved the Company's adoption of the Short Term Sale Program (the "Program") in order to assist the Company in retaining and motivating experienced management needed to protect the Trust's investment and to maximize the after-tax sales proceeds realized by the Trust. As a key member of senior management, I am pleased to inform you that you have been selected to participate in this Program. As a participant in the Program, you will be entitled to a STAY PUT BONUS and a SALE INCENTIVE BONUS, subject to the terms and conditions set forth in this letter and the Sale Incentive Bonus Plan (the "Plan") attached hereto as Exhibit A. Capitalized terms used in this letter without definition have the meanings given to such terms in the Plan. Any existing SEVERANCE BENEFITS to which you may be entitled, whether payable pursuant to an employment agreement or otherwise, will continue in force and will not be affected by your participation in the Program. 1. STAY PUT BONUS. One-half of your stay put bonus is payable regardless of whether a Change in Control occurs (the "Initial Stay Put Bonus"). The remaining one-half of your stay put bonus is payable only if a Change in Control occurs on or prior to December 31, 1998 (the "Additional Stay Put Bonus"). (a) Initial Stay Put Bonus. If (i) your employment by the Company or any of its subsidiaries continues until the earlier of a Change in Control or June 30, 1998, and (ii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Compensation Committee of the Company's Board of Directors (the "Committee")), the Company will pay you within 10 days following the earlier of a Change in Control or June 30, 1998, a cash lump sum equal to $120,000. (b) Additional Stay Put Bonus. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, and (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), the Company will pay you within 10 days following the Change in Control a cash lump sum equal to $120,000. Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Additional Stay Put Bonus will be paid to you by the Company on the second anniversary of the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined below), prior to such date, in which case your Additional Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within two years following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Additional Stay Put Bonus will be paid to you by the Company within 10 days following such termination of employment. For purposes of this letter, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to you immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to you immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than your salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from your principal place of employment immediately prior to the Change in Control. "Cause" means your (i) commission of a felony, (ii) commission of an act of fraud upon the Company or any successor to the Company, or (iii) willful failure to perform your employment duties in all material respects which failure (other than by reason of death or disability) continues uncorrected for 10 days after your receipt of written notice from the Committee stating with specificity the nature of such failure. 2. SALE INCENTIVE BONUS. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), and (iv) the Present Value After-Tax Proceeds are more than $550 million, you will be entitled to a Sale Incentive Bonus. The amount of your Sale Incentive Bonus will be: zero if the Present Value After-Tax Proceeds are not more than $550 million ("Threshold Performance"); $240,000 if the Present Value After-Tax Proceeds are $650 million ("Target Performance"); and $480,000 if the Present Value After-Tax Proceeds are $750 million ("Stretch Performance"). If the Present Value After-Tax Proceeds are between Threshold Performance and Stretch Performance, the amount of your Sale Incentive Bonus will be interpolated on a straight-line basis. Similarly, if the Present Value After-Tax Proceeds are in excess of Stretch Performance, the amount of your Sale Incentive Bonus will continue to increase on a straight-line basis. Other terms and conditions regarding your Sale Incentive Bonus are set forth in the Plan attached hereto as Exhibit A. In the event of any conflict between the terms of this letter and the Plan, the Plan will control. 3. GENERAL PROVISIONS. (a) Nothing in this letter is intended to create a contract of employment between you and the Company or any of its subsidiaries, or to interfere in any way with the right of the Company or any of its subsidiaries to terminate your employment at any time. (b) All payments made pursuant to this letter or the Plan will be subject to applicable withholding taxes. (c) Any Stay Put Bonus or Sale Incentive Bonus made pursuant to this letter or the Plan will not be treated as compensation for purposes of calculating your benefits, if any, under the Company's Salaried Pension Plan or Supplemental Executive Retirement Plan, or any other retirement/pension plan maintained by the Company and/or any of its subsidiaries (foreign or domestic). (d) This letter will be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed entirely within such State. (e) No amendment or modification of this letter may be made except by a written instrument signed by the Company and you. (f) All disputes arising under or related to this letter or the Plan will be resolved by arbitration. Such arbitration will be conducted by an arbitrator mutually selected by the Company and you (or, if the Company and you are unable to agree upon an arbitrator within 10 days, then the Company and you will each select an arbitrator, and the arbitrators so selected will mutually select a third arbitrator, who will resolve such dispute). Such arbitration will be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company will pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also will pay your reasonable legal fees and expenses incurred in connection with any successful enforcement by you of your rights hereunder. (g) This letter and its terms should be kept strictly confidential and should not be discussed with anyone except a prospective successor to the Company, your attorney or your financial advisor (and then only if they agree to maintain such confidentiality). (h) The Company hereby agrees that, in the event of a Change in Control occurring on or prior to December 31, 1998, it will take whatever action it legally can in order to cause any assignee or transferee of all or substantially all of the assets of the Company to expressly assume the liabilities, obligations and duties of the Company under this letter and the Plan. Please acknowledge your agreement with the terms of this letter by signing your name in the space provided below and returning a copy of this letter to Tom Petry. If you have any questions concerning this letter or the Plan, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. By: /s/ DARIUS W. GASKINS, JR. ------------------------------------- Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged and Agreed /s/ JAMES A. RALSTON - ------------------------------ James A. Ralston [E-P LOGO] August 5, 1997 Mr. Andries Ruijssenaars 3021 Ononta Avenue Cincinnati, Ohio 45226 Dear Andries: As you know, Eagle-Picher Industries, Inc. (the "Company") emerged from bankruptcy with 100% of its outstanding common stock and substantially all of its indebtedness owned by the Eagle-Picher Industries Personal Injury Settlement Trust (the "Trust"). After careful deliberation, the Trust has concluded that it is in the best interests of its beneficiaries to diversify its assets and, therefore, to dispose of substantially all of its investment in the Company. Knowing that the decision to sell its investment in the Company will create uncertainty among the Company's senior management, the Trust has approved the Company's adoption of the Short Term Sale Program (the "Program") in order to assist the Company in retaining and motivating experienced management needed to protect the Trust's investment and to maximize the after-tax sales proceeds realized by the Trust. As a key member of senior management, I am pleased to inform you that you have been selected to participate in this Program. As a participant in the Program, you will be entitled to a STAY PUT BONUS and a SALE INCENTIVE BONUS, subject to the terms and conditions set forth in this letter and the Sale Incentive Bonus Plan (the "Plan") attached hereto as Exhibit A. Capitalized terms used in this letter without definition have the meanings given to such terms in the Plan. Any existing SEVERANCE BENEFITS to which you may be entitled, whether payable pursuant to an employment agreement or otherwise, will continue in force and will not be affected by your participation in the Program. 1. STAY PUT BONUS. One-half of your stay put bonus is payable regardless of whether a Change in Control occurs (the "Initial Stay Put Bonus"). The remaining one-half of your stay put bonus is payable only if a Change in Control occurs on or prior to December 31, 1998 (the "Additional Stay Put Bonus"). (a) Initial Stay Put Bonus. If (i) your employment by the Company or any of its subsidiaries continues until the earlier of a Change in Control or June 30, 1998, and (ii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Compensation Committee of the Company's Board of Directors (the "Committee")), the Company will pay you within 10 days following the earlier of a Change in Control or June 30, 1998, a cash lump sum equal to $262,500. (b) Additional Stay Put Bonus. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, and (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), the Company will pay you within 10 days following the Change in Control a cash lump sum equal to $262,500. Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Additional Stay Put Bonus will be paid to you by the Company on the second anniversary of the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined below), prior to such date, in which case your Additional Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within two years following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Additional Stay Put Bonus will be paid to you by the Company within 10 days following such termination of employment. For purposes of this letter, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to you immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to you immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than your salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from your principal place of employment immediately prior to the Change in Control. "Cause" means your (i) commission of a felony, (ii) commission of an act of fraud upon the Company or any successor to the Company, or (iii) willful failure to perform your employment duties in all material respects which failure (other than by reason of death or disability) continues uncorrected for 10 days after your receipt of written notice from the Committee stating with specificity the nature of such failure. 2. SALE INCENTIVE BONUS. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), and (iv) the Present Value After-Tax Proceeds are more than $550 million, you will be entitled to a Sale Incentive Bonus. The amount of your Sale Incentive Bonus will be: zero if the Present Value After-Tax Proceeds are not more than $550 million ("Threshold Performance"); $1,050,000 if the Present Value After-Tax Proceeds are $650 million ("Target Performance"); and $2,100,000 if the Present Value After-Tax Proceeds are $750 million ("Stretch Performance"). If the Present Value After-Tax Proceeds are between Threshold Performance and Stretch Performance, the amount of your Sale Incentive Bonus will be interpolated on a straight-line basis. Similarly, if the Present Value After-Tax Proceeds are in excess of Stretch Performance, the amount of your Sale Incentive Bonus will continue to increase on a straight-line basis. Other terms and conditions regarding your Sale Incentive Bonus are set forth in the Plan attached hereto as Exhibit A. In the event of any conflict between the terms of this letter and the Plan, the Plan will control. 3. GENERAL PROVISIONS. (a) Nothing in this letter is intended to create a contract of employment between you and the Company or any of its subsidiaries, or to interfere in any way with the right of the Company or any of its subsidiaries to terminate your employment at any time. (b) All payments made pursuant to this letter or the Plan will be subject to applicable withholding taxes. (c) Any Stay Put Bonus or Sale Incentive Bonus made pursuant to this letter or the Plan will not be treated as compensation for purposes of calculating your benefits, if any, under the Company's Salaried Pension Plan or Supplemental Executive Retirement Plan, or any other retirement/pension plan maintained by the Company and/or any of its subsidiaries (foreign or domestic). (d) This letter will be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed entirely within such State. (e) No amendment or modification of this letter may be made except by a written instrument signed by the Company and you. (f) All disputes arising under or related to this letter or the Plan will be resolved by arbitration. Such arbitration will be conducted by an arbitrator mutually selected by the Company and you (or, if the Company and you are unable to agree upon an arbitrator within 10 days, then the Company and you will each select an arbitrator, and the arbitrators so selected will mutually select a third arbitrator, who will resolve such dispute). Such arbitration will be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company will pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also will pay your reasonable legal fees and expenses incurred in connection with any successful enforcement by you of your rights hereunder. (g) This letter and its terms should be kept strictly confidential and should not be discussed with anyone except a prospective successor to the Company, your attorney or your financial advisor (and then only if they agree to maintain such confidentiality). (h) The Company hereby agrees that, in the event of a Change in Control occurring on or prior to December 31, 1998, it will take whatever action it legally can in order to cause any assignee or transferee of all or substantially all of the assets of the Company to expressly assume the liabilities, obligations and duties of the Company under this letter and the Plan. Please acknowledge your agreement with the terms of this letter by signing your name in the space provided below and returning a copy of this letter to Tom Petry. If you have any questions concerning this letter or the Plan, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. By: /s/ DARIUS W. GASKINS, JR. ------------------------------------- Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged and Agreed /s/ ANDRIES RUIJSSENAARS - -------------------------- Andries Ruijssenaars [E-P LOGO] August 5, 1997 Mr. Wayne R. Wickens 7470 Pinehurst Cincinnati, Ohio 45244 Dear Wayne: As you know, Eagle-Picher Industries, Inc. (the "Company") emerged from bankruptcy with 100% of its outstanding common stock and substantially all of its indebtedness owned by the Eagle-Picher Industries Personal Injury Settlement Trust (the "Trust"). After careful deliberation, the Trust has concluded that it is in the best interests of its beneficiaries to diversify its assets and, therefore, to dispose of substantially all of its investment in the Company. Knowing that the decision to sell its investment in the Company will create uncertainty among the Company's senior management, the Trust has approved the Company's adoption of the Short Term Sale Program (the "Program") in order to assist the Company in retaining and motivating experienced management needed to protect the Trust's investment and to maximize the after-tax sales proceeds realized by the Trust. As a key member of senior management, I am pleased to inform you that you have been selected to participate in this Program. As a participant in the Program, you will be entitled to a STAY PUT BONUS and a SALE INCENTIVE BONUS, subject to the terms and conditions set forth in this letter and the Sale Incentive Bonus Plan (the "Plan") attached hereto as Exhibit A. Capitalized terms used in this letter without definition have the meanings given to such terms in the Plan. Any existing SEVERANCE BENEFITS to which you may be entitled, whether payable pursuant to an employment agreement or otherwise, will continue in force and will not be affected by your participation in the Program. 1. STAY PUT BONUS. One-half of your stay put bonus is payable regardless of whether a Change in Control occurs (the "Initial Stay Put Bonus"). The remaining one-half of your stay put bonus is payable only if a Change in Control occurs on or prior to December 31, 1998 (the "Additional Stay Put Bonus"). (a) Initial Stay Put Bonus. If (i) your employment by the Company or any of its subsidiaries continues until the earlier of a Change in Control or June 30, 1998, and (ii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Compensation Committee of the Company's Board of Directors (the "Committee")), the Company will pay you within 10 days following the earlier of a Change in Control or June 30, 1998, a cash lump sum equal to $162,500. (b) Additional Stay Put Bonus. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, and (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), the Company will pay you within 10 days following the Change in Control a cash lump sum equal to $162,500. Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Additional Stay Put Bonus will be paid to you by the Company on the second anniversary of the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined below), prior to such date, in which case your Additional Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within two years following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Additional Stay Put Bonus will be paid to you by the Company within 10 days following such termination of employment. For purposes of this letter, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to you immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to you immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than your salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from your principal place of employment immediately prior to the Change in Control. "Cause" means your (i) commission of a felony, (ii) commission of an act of fraud upon the Company or any successor to the Company, or (iii) willful failure to perform your employment duties in all material respects which failure (other than by reason of death or disability) continues uncorrected for 10 days after your receipt of written notice from the Committee stating with specificity the nature of such failure. 2. SALE INCENTIVE BONUS. If (i) a Change in Control occurs on or prior to December 31, 1998, (ii) your employment by the Company or any of its subsidiaries continues until such Change in Control, (iii) you put forth your best efforts to complete a successful sale of the Company (as determined in good faith by the Committee), and (iv) the Present Value After-Tax Proceeds are more than $550 million, you will be entitled to a Sale Incentive Bonus. The amount of your Sale Incentive Bonus will be: zero if the Present Value After-Tax Proceeds are not more than $550 million ("Threshold Performance"); $650,000 if the Present Value After-Tax Proceeds are $650 million ("Target Performance"); and $1,300,000 if the Present Value After-Tax Proceeds are $750 million ("Stretch Performance"). If the Present Value After-Tax Proceeds are between Threshold Performance and Stretch Performance, the amount of your Sale Incentive Bonus will be interpolated on a straight-line basis. Similarly, if the Present Value After-Tax Proceeds are in excess of Stretch Performance, the amount of your Sale Incentive Bonus will continue to increase on a straight-line basis. Other terms and conditions regarding your Sale Incentive Bonus are set forth in the Plan attached hereto as Exhibit A. In the event of any conflict between the terms of this letter and the Plan, the Plan will control. 3. GENERAL PROVISIONS. (a) Nothing in this letter is intended to create a contract of employment between you and the Company or any of its subsidiaries, or to interfere in any way with the right of the Company or any of its subsidiaries to terminate your employment at any time. (b) All payments made pursuant to this letter or the Plan will be subject to applicable withholding taxes. (c) Any Stay Put Bonus or Sale Incentive Bonus made pursuant to this letter or the Plan will not be treated as compensation for purposes of calculating your benefits, if any, under the Company's Salaried Pension Plan or Supplemental Executive Retirement Plan, or any other retirement/pension plan maintained by the Company and/or any of its subsidiaries (foreign or domestic). (d) This letter will be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed entirely within such State. (e) No amendment or modification of this letter may be made except by a written instrument signed by the Company and you. (f) All disputes arising under or related to this letter or the Plan will be resolved by arbitration. Such arbitration will be conducted by an arbitrator mutually selected by the Company and you (or, if the Company and you are unable to agree upon an arbitrator within 10 days, then the Company and you will each select an arbitrator, and the arbitrators so selected will mutually select a third arbitrator, who will resolve such dispute). Such arbitration will be conducted in accordance with the applicable rules of the American Arbitration Association. Any decision rendered by an arbitrator pursuant hereto may be enforced by a court of competent jurisdiction without review of such decision by such court. The Company will pay all of the fees and expenses of the arbitrators and the other costs of arbitration. The Company also will pay your reasonable legal fees and expenses incurred in connection with any successful enforcement by you of your rights hereunder. (g) This letter and its terms should be kept strictly confidential and should not be discussed with anyone except a prospective successor to the Company, your attorney or your financial advisor (and then only if they agree to maintain such confidentiality). (h) The Company hereby agrees that, in the event of a Change in Control occurring on or prior to December 31, 1998, it will take whatever action it legally can in order to cause any assignee or transferee of all or substantially all of the assets of the Company to expressly assume the liabilities, obligations and duties of the Company under this letter and the Plan. Please acknowledge your agreement with the terms of this letter by signing your name in the space provided below and returning a copy of this letter to Tom Petry. If you have any questions concerning this letter or the Plan, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. By: /s/ DARIUS W. GASKINS, JR. ------------------------------------- Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged and Agreed /s/ WAYNE R. WICKENS - -------------------------- Wayne R. Wickens EX-10.26 27 EXHIBIT 10.26 [E-P LOGO] September 12, 1997 Mr. Carroll D. Curless 2117 Beechcreek Lane Cincinnati, Ohio 45233 Dear Bud: This letter confirms our agreement to amend your entitlement to a Sale Incentive Bonus as originally set forth in our letter agreement dated August 5, 1997 (the "Prior Agreement"). The second and third bullet points in paragraph 2 of the Prior Agreement are hereby amended to read in their entirety as follows: $360,000 if the Present Value After-Tax Proceeds are $650 million ("Target Performance"); and $720,000 if the Present Value After-Tax Proceeds are $750 million ("Stretch Performance"). All other terms and provisions of the Prior Agreement remain the same. Please acknowledge your agreement with the terms of this letter by signing your name in the space provided below and returning a copy of this letter to Tom Petry. Sincerely yours, Eagle-Picher Industries, Inc. /s/ DARIUS W. GASKINS, JR. _________________________________________ By: Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged and Agreed /s/ CARROLL D. CURLESS __________________________________ Carroll D. Curless Eagle-Picher Industries, Inc. P.O. Box 779 Cincinnati, Ohio 45201 (513) 721-7010 EX-10.27 28 EXHIBIT 10.27 [E-P LOGO] EAGLE-PICHER INDUSTRIES, INC. 580 WALNUT STREET CINCINNATI, OH 45202 February 18, 1998 Mr. Carroll D. Curless 2117 Beechcreek Lane Cincinnati, Ohio 45233 Dear Bud: As the closing date for the merger of Eagle-Picher Industries, Inc. (the "Company") with an affiliate of Granaria Holdings B.V. (the "Buyer") approaches, the Company and the Buyer have reviewed the Company's Short Term Sale Program (the "Program") in light of the actual terms of the acquisition. As you will recall, the Program was implemented in August 1997 in order to provide an incentive to senior management to pursue a sale of the Company on favorable terms and to promote a successful transition to new ownership. At the time the Program was designed, the structure of the acquisition was unknown, so the Program was written in general and flexible terms. As the specific terms of the acquisition are being finalized, the Company's Board of Directors and the Compensation Committee have concluded that two relatively minor changes to the Program would be of substantial benefit to the Company and the Buyer. This letter describes the changes to the Program, and asks you to agree and consent to those changes implemented in the amendments set forth in Sections 1, 2, and 3 below. The changes to the Program would affect the initial half of the Stay Put Bonus and the Sale Incentive Bonus, each of which is payable following a Change in Control and if certain other conditions are met, as specified in the Letter Agreement dated August 5, 1997 between the Company and you (the "August 1997 Letter") and in the Company's Sale Incentive Bonus Plan (the "Plan"). The changes would require that, if the initial half of the Stay Put Bonus and/or the Sale Incentive Bonus otherwise become payable upon a Change in Control in accordance with the August 1997 Letter and the Plan, such awards would be paid out only if you continue to be employed by the Company for 30 days after the Change in Control; you would be subject to a risk of forfeiture of these awards during the 30-day period, but only if you voluntarily terminate your employment with the Company or if the Company terminates your employment for Cause (as defined in the August 1997 Letter and Plan). These continued service terms are in effect the same as those that apply during the two-year period following the Change in Control as a condition to earning the remainder of the Stay Put Bonus. Under the current terms of the August 1997 Letter and the Plan, the initial half of the Stay Put Bonus would become payable ten days after the Change in Control, and the Sale Incentive Bonus would become payable promptly following the Committee's determination of the "Present Value After-Tax Proceeds" of the transaction to the Company's shareholder. You also would earn the initial half of the Stay Put Bonus if no Change in Control occurs before June 30, 1998 and other conditions are met, which right is unaffected by the amendments set forth in this letter agreement. At present, it appears that the Committee will be unable to make a final determination of the amount of "Present Value After-Tax Proceeds" for a period of time following the expected closing date, until certain tax issues raised in an IRS audit can be resolved. In consideration of your agreement to the changes proposed herein, the Committee hereby commits that it will make a good faith determination as to the extent of the Sale Incentive Bonus not in issue as a result of such audit, and pay such amount upon the completion of the 30-day period and in accordance with the August 1997 Letter and Plan, as amended by this letter agreement. A final amount, if any, will be paid promptly following the conclusion of the IRS audit. 1. AMENDMENT TO AUGUST 1997 LETTER. The August 1997 Letter is hereby amended by adding, at the end of Section 1(a) (captioned "Initial Stay Put Bonus"), the following: Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined in Section 1(b) below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Initial Stay Put Bonus will be paid to you by the Company on the 30th day following the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined in Section 1(b) below), prior to such date; in the event of such a voluntary termination by you or involuntary termination for Cause prior to the end of such 30-day period, your Initial Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Initial Stay Put Bonus, if any, will be paid to you by the Company on the 30th day following the Change in Control. 2. AMENDMENT TO THE PLAN. Section 4 of the Plan (captioned "Sale Incentive Bonus"), the terms of which are incorporated into the August 1997 Letter, has been amended to add the following language at the end of the current provision: Notwithstanding the foregoing, in the event the Participant is offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Sale Incentive Bonus will be payable by the Company not earlier than the 30th day following the Change in Control provided the Participant has not voluntarily terminated his or her employment with the New Employer (regardless of whether the Participant was then eligible to receive retirement benefits), or been involuntarily terminated for Cause, prior to the end of such 30-day period; in the event of such a voluntary termination by the Participant or involuntary termination for Cause prior to the end of such 30-day period, the Participant's Sale Incentive Bonus will be forfeited. In the event such Participant's employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than the Participant's voluntary termination of employment or involuntary termination of employment for Cause, the Participant's Sale Incentive Bonus, if any, will be paid by the Company on the later of the 30th day following the Change in Control or the date such Sale Incentive Bonus otherwise would be payable under the second sentence of this Section 4. For purposes of this Plan, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to the Participant immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to the Participant immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than the Participant's salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from the Participant's principal place of employment immediately prior to the Change in Control. Section 5(i) of the Plan has been amended to add the following language at the end of the current provision: The Plan has been amended by the Board, and such amendment approved by the Trust as the Company's sole shareholder (including for purposes of Section 280G(b)(5) of the Internal Revenue Code), effective as of February 18, 1998. 3. INTERPRETATION OF PROVISIONS OF THE AUGUST 1997 LETTER, THE PLAN, AND THIS LETTER AGREEMENT. For purposes of the August 1997 Letter, the Plan, and this letter agreement, termination of your employment due to death or disability after the Change in Control will not constitute a voluntary termination of employment by you or an involuntary termination of employment by the Company for Cause, and termination of your employment by you for "Good Reason," as defined in the Employment Agreement between you and the Company, will not constitute a voluntary termination of employment by you. Except as specifically amended by this letter agreement, the provisions of the August 1997 Letter and the Plan remain in full force and effect. * * * Please acknowledge your agreement with the terms of Sections 1, 2, and 3 of this letter, and your consent to the modification of the August 1997 Letter and to your rights under the Plan effected hereby, by signing your name in the space provided below and faxing or otherwise returning a copy of this letter to Tom Petry so that it is received not later than the close of business on Friday, February 20, 1998. If you fax the letter, please promptly send the executed copy by overnight delivery service to Tom Petry. If you have any questions concerning this letter, the August 1997 Letter or the Plan, or need copies of the earlier documents, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. /s/ DARIUS W. GASKINS, JR. --------------------------- By: Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged, Agreed and Consented to: /s/ CARROLL D. CURLESS - --------------------------------------- Carroll D. Curless Date: Feb. 22, 1998 - ---------------------------------- [E-P LOGO] EAGLE-PICHER INDUSTRIES, INC. 580 WALNUT STREET CINCINNATI, OH 45202 February 18, 1998 Mr. David N. Hall 8200 Brill Road Cincinnati, Ohio 45243 Dear Dave: As the closing date for the merger of Eagle-Picher Industries, Inc. (the "Company") with an affiliate of Granaria Holdings B.V. (the "Buyer") approaches, the Company and the Buyer have reviewed the Company's Short Term Sale Program (the "Program") in light of the actual terms of the acquisition. As you will recall, the Program was implemented in August 1997 in order to provide an incentive to senior management to pursue a sale of the Company on favorable terms and to promote a successful transition to new ownership. At the time the Program was designed, the structure of the acquisition was unknown, so the Program was written in general and flexible terms. As the specific terms of the acquisition are being finalized, the Company's Board of Directors and the Compensation Committee have concluded that two relatively minor changes to the Program would be of substantial benefit to the Company and the Buyer. This letter describes the changes to the Program, and asks you to agree and consent to those changes implemented in the amendments set forth in Sections 1, 2, and 3 below. The changes to the Program would affect the initial half of the Stay Put Bonus and the Sale Incentive Bonus, each of which is payable following a Change in Control and if certain other conditions are met, as specified in the Letter Agreement dated August 5, 1997 between the Company and you (the "August 1997 Letter") and in the Company's Sale Incentive Bonus Plan (the "Plan"). The changes would require that, if the initial half of the Stay Put Bonus and/or the Sale Incentive Bonus otherwise become payable upon a Change in Control in accordance with the August 1997 Letter and the Plan, such awards would be paid out only if you continue to be employed by the Company for 30 days after the Change in Control; you would be subject to a risk of forfeiture of these awards during the 30-day period, but only if you voluntarily terminate your employment with the Company or if the Company terminates your employment for Cause (as defined in the August 1997 Letter and Plan). These continued service terms are in effect the same as those that apply during the two-year period following the Change in Control as a condition to earning the remainder of the Stay Put Bonus. Under the current terms of the August 1997 Letter and the Plan, the initial half of the Stay Put Bonus would become payable ten days after the Change in Control, and the Sale Incentive Bonus would become payable promptly following the Committee's determination of the "Present Value After-Tax Proceeds" of the transaction to the Company's shareholder. You also would earn the initial half of the Stay Put Bonus if no Change in Control occurs before June 30, 1998 and other conditions are met, which right is unaffected by the amendments set forth in this letter agreement. At present, it appears that the Committee will be unable to make a final determination of the amount of "Present Value After-Tax Proceeds" for a period of time following the expected closing date, until certain tax issues raised in an IRS audit can be resolved. In consideration of your agreement to the changes proposed herein, the Committee hereby commits that it will make a good faith determination as to the extent of the Sale Incentive Bonus not in issue as a result of such audit, and pay such amount upon the completion of the 30-day period and in accordance with the August 1997 Letter and Plan, as amended by this letter agreement. A final amount, if any, will be paid promptly following the conclusion of the IRS audit. 1. AMENDMENT TO AUGUST 1997 LETTER. The August 1997 Letter is hereby amended by adding, at the end of Section 1(a) (captioned "Initial Stay Put Bonus"), the following: Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined in Section 1(b) below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Initial Stay Put Bonus will be paid to you by the Company on the 30th day following the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined in Section 1(b) below), prior to such date; in the event of such a voluntary termination by you or involuntary termination for Cause prior to the end of such 30-day period, your Initial Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Initial Stay Put Bonus, if any, will be paid to you by the Company on the 30th day following the Change in Control. 2. AMENDMENT TO THE PLAN. Section 4 of the Plan (captioned "Sale Incentive Bonus"), the terms of which are incorporated into the August 1997 Letter, has been amended to add the following language at the end of the current provision: Notwithstanding the foregoing, in the event the Participant is offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Sale Incentive Bonus will be payable by the Company not earlier than the 30th day following the Change in Control provided the Participant has not voluntarily terminated his or her employment with the New Employer (regardless of whether the Participant was then eligible to receive retirement benefits), or been involuntarily terminated for Cause, prior to the end of such 30-day period; in the event of such a voluntary termination by the Participant or involuntary termination for Cause prior to the end of such 30-day period, the Participant's Sale Incentive Bonus will be forfeited. In the event such Participant's employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than the Participant's voluntary termination of employment or involuntary termination of employment for Cause, the Participant's Sale Incentive Bonus, if any, will be paid by the Company on the later of the 30th day following the Change in Control or the date such Sale Incentive Bonus otherwise would be payable under the second sentence of this Section 4. For purposes of this Plan, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to the Participant immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to the Participant immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than the Participant's salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from the Participant's principal place of employment immediately prior to the Change in Control. Section 5(i) of the Plan has been amended to add the following language at the end of the current provision: The Plan has been amended by the Board, and such amendment approved by the Trust as the Company's sole shareholder (including for purposes of Section 280G(b)(5) of the Internal Revenue Code), effective as of February 18, 1998. 3. INTERPRETATION OF PROVISIONS OF THE AUGUST 1997 LETTER, THE PLAN, AND THIS LETTER AGREEMENT. For purposes of the August 1997 Letter, the Plan, and this letter agreement, termination of your employment due to death or disability after the Change in Control will not constitute a voluntary termination of employment by you or an involuntary termination of employment by the Company for Cause, and termination of your employment by you for "Good Reason," as defined in the Employment Agreement between you and the Company, will not constitute a voluntary termination of employment by you. Except as specifically amended by this letter agreement, the provisions of the August 1997 Letter and the Plan remain in full force and effect. * * * Please acknowledge your agreement with the terms of Sections 1, 2, and 3 of this letter, and your consent to the modification of the August 1997 Letter and to your rights under the Plan effected hereby, by signing your name in the space provided below and faxing or otherwise returning a copy of this letter to Tom Petry so that it is received not later than the close of business on Friday, February 20, 1998. If you fax the letter, please promptly send the executed copy by overnight delivery service to Tom Petry. If you have any questions concerning this letter, the August 1997 Letter or the Plan, or need copies of the earlier documents, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. /s/ DARIUS W. GASKINS, JR. --------------------------- By: Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged, Agreed and Consented to: /s/ DAVID N. HALL - --------------------------------------- David N. Hall Date: February 20, 1998 - ---------------------------------- [E-P LOGO] EAGLE-PICHER INDUSTRIES, INC. 580 WALNUT STREET CINCINNATI, OH 45202 February 18, 1998 Mr. Thomas E. Petry Four Lexington Circle Terrace Park, Ohio 45174 Dear Tom: As the closing date for the merger of Eagle-Picher Industries, Inc. (the "Company") with an affiliate of Granaria Holdings B.V. (the "Buyer") approaches, the Company and the Buyer have reviewed the Company's Short Term Sale Program (the "Program") in light of the actual terms of the acquisition. As you will recall, the Program was implemented in August 1997 in order to provide an incentive to senior management to pursue a sale of the Company on favorable terms and to promote a successful transition to new ownership. At the time the Program was designed, the structure of the acquisition was unknown, so the Program was written in general and flexible terms. As the specific terms of the acquisition are being finalized, the Company's Board of Directors and the Compensation Committee have concluded that two relatively minor changes to the Program would be of substantial benefit to the Company and the Buyer. This letter describes the changes to the Program, and asks you to agree and consent to those changes implemented in the amendments set forth in Sections 1, 2, and 3 below. The changes to the Program would affect the initial half of the Stay Put Bonus and the Sale Incentive Bonus, each of which is payable following a Change in Control and if certain other conditions are met, as specified in the Letter Agreement dated August 5, 1997 between the Company and you (the "August 1997 Letter") and in the Company's Sale Incentive Bonus Plan (the "Plan"). The changes would require that, if the initial half of the Stay Put Bonus and/or the Sale Incentive Bonus otherwise become payable upon a Change in Control in accordance with the August 1997 Letter and the Plan, such awards would be paid out only if you continue to be employed by the Company for 30 days after the Change in Control; you would be subject to a risk of forfeiture of these awards during the 30-day period, but only if you voluntarily terminate your employment with the Company or if the Company terminates your employment for Cause (as defined in the August 1997 Letter and Plan). These continued service terms are in effect the same as those that apply during the two-year period following the Change in Control as a condition to earning the remainder of the Stay Put Bonus. Under the current terms of the August 1997 Letter and the Plan, the initial half of the Stay Put Bonus would become payable ten days after the Change in Control, and the Sale Incentive Bonus would become payable promptly following the Committee's determination of the "Present Value After-Tax Proceeds" of the transaction to the Company's shareholder. You also would earn the initial half of the Stay Put Bonus if no Change in Control occurs before June 30, 1998 and other conditions are met, which right is unaffected by the amendments set forth in this letter agreement. At present, it appears that the Committee will be unable to make a final determination of the amount of "Present Value After-Tax Proceeds" for a period of time following the expected closing date, until certain tax issues raised in an IRS audit can be resolved. In consideration of your agreement to the changes proposed herein, the Committee hereby commits that it will make a good faith determination as to the extent of the Sale Incentive Bonus not in issue as a result of such audit, and pay such amount upon the completion of the 30-day period and in accordance with the August 1997 Letter and Plan, as amended by this letter agreement. A final amount, if any, will be paid promptly following the conclusion of the IRS audit. 1. AMENDMENT TO AUGUST 1997 LETTER. The August 1997 Letter is hereby amended by adding, at the end of Section 1(a) (captioned "Initial Stay Put Bonus"), the following: Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined in Section 1(b) below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Initial Stay Put Bonus will be paid to you by the Company on the 30th day following the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined in Section 1(b) below), prior to such date; in the event of such a voluntary termination by you or involuntary termination for Cause prior to the end of such 30-day period, your Initial Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Initial Stay Put Bonus, if any, will be paid to you by the Company on the 30th day following the Change in Control. 2. AMENDMENT TO THE PLAN. Section 4 of the Plan (captioned "Sale Incentive Bonus"), the terms of which are incorporated into the August 1997 Letter, has been amended to add the following language at the end of the current provision: Notwithstanding the foregoing, in the event the Participant is offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Sale Incentive Bonus will be payable by the Company not earlier than the 30th day following the Change in Control provided the Participant has not voluntarily terminated his or her employment with the New Employer (regardless of whether the Participant was then eligible to receive retirement benefits), or been involuntarily terminated for Cause, prior to the end of such 30-day period; in the event of such a voluntary termination by the Participant or involuntary termination for Cause prior to the end of such 30-day period, the Participant's Sale Incentive Bonus will be forfeited. In the event such Participant's employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than the Participant's voluntary termination of employment or involuntary termination of employment for Cause, the Participant's Sale Incentive Bonus, if any, will be paid by the Company on the later of the 30th day following the Change in Control or the date such Sale Incentive Bonus otherwise would be payable under the second sentence of this Section 4. For purposes of this Plan, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to the Participant immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to the Participant immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than the Participant's salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from the Participant's principal place of employment immediately prior to the Change in Control. Section 5(i) of the Plan has been amended to add the following language at the end of the current provision: The Plan has been amended by the Board, and such amendment approved by the Trust as the Company's sole shareholder (including for purposes of Section 280G(b)(5) of the Internal Revenue Code), effective as of February 18, 1998. 3. INTERPRETATION OF PROVISIONS OF THE AUGUST 1997 LETTER, THE PLAN, AND THIS LETTER AGREEMENT. For purposes of the August 1997 Letter, the Plan, and this letter agreement, termination of your employment due to death or disability after the Change in Control will not constitute a voluntary termination of employment by you or an involuntary termination of employment by the Company for Cause, and termination of your employment by you for "Good Reason," as defined in the Employment Agreement between you and the Company, will not constitute a voluntary termination of employment by you. Except as specifically amended by this letter agreement, the provisions of the August 1997 Letter and the Plan remain in full force and effect. * * * Please acknowledge your agreement with the terms of Sections 1, 2, and 3 of this letter, and your consent to the modification of the August 1997 Letter and to your rights under the Plan effected hereby, by signing your name in the space provided below and faxing or otherwise returning a copy of this letter to Tom Petry so that it is received not later than the close of business on Friday, February 20, 1998. If you fax the letter, please promptly send the executed copy by overnight delivery service to Tom Petry. If you have any questions concerning this letter, the August 1997 Letter or the Plan, or need copies of the earlier documents, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. /s/ DARIUS W. GASKINS, JR. --------------------------- By: Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged, Agreed and Consented to: /s/ THOMAS E. PETRY - --------------------------------------- Thomas E. Petry Date: 2-19-98 - ---------------------------------- [E-P LOGO] EAGLE-PICHER INDUSTRIES, INC. 580 WALNUT STREET CINCINNATI, OH 45202 February 18, 1998 Mr. James A. Ralston 2486 Royalview Court Cincinnati, Ohio 45244 Dear Jim: As the closing date for the merger of Eagle-Picher Industries, Inc. (the "Company") with an affiliate of Granaria Holdings B.V. (the "Buyer") approaches, the Company and the Buyer have reviewed the Company's Short Term Sale Program (the "Program") in light of the actual terms of the acquisition. As you will recall, the Program was implemented in August 1997 in order to provide an incentive to senior management to pursue a sale of the Company on favorable terms and to promote a successful transition to new ownership. At the time the Program was designed, the structure of the acquisition was unknown, so the Program was written in general and flexible terms. As the specific terms of the acquisition are being finalized, the Company's Board of Directors and the Compensation Committee have concluded that two relatively minor changes to the Program would be of substantial benefit to the Company and the Buyer. This letter describes the changes to the Program, and asks you to agree and consent to those changes implemented in the amendments set forth in Sections 1, 2, and 3 below. The changes to the Program would affect the initial half of the Stay Put Bonus and the Sale Incentive Bonus, each of which is payable following a Change in Control and if certain other conditions are met, as specified in the Letter Agreement dated August 5, 1997 between the Company and you (the "August 1997 Letter") and in the Company's Sale Incentive Bonus Plan (the "Plan"). The changes would require that, if the initial half of the Stay Put Bonus and/or the Sale Incentive Bonus otherwise become payable upon a Change in Control in accordance with the August 1997 Letter and the Plan, such awards would be paid out only if you continue to be employed by the Company for 30 days after the Change in Control; you would be subject to a risk of forfeiture of these awards during the 30-day period, but only if you voluntarily terminate your employment with the Company or if the Company terminates your employment for Cause (as defined in the August 1997 Letter and Plan). These continued service terms are in effect the same as those that apply during the two-year period following the Change in Control as a condition to earning the remainder of the Stay Put Bonus. Under the current terms of the August 1997 Letter and the Plan, the initial half of the Stay Put Bonus would become payable ten days after the Change in Control, and the Sale Incentive Bonus would become payable promptly following the Committee's determination of the "Present Value After-Tax Proceeds" of the transaction to the Company's shareholder. You also would earn the initial half of the Stay Put Bonus if no Change in Control occurs before June 30, 1998 and other conditions are met, which right is unaffected by the amendments set forth in this letter agreement. At present, it appears that the Committee will be unable to make a final determination of the amount of "Present Value After-Tax Proceeds" for a period of time following the expected closing date, until certain tax issues raised in an IRS audit can be resolved. In consideration of your agreement to the changes proposed herein, the Committee hereby commits that it will make a good faith determination as to the extent of the Sale Incentive Bonus not in issue as a result of such audit, and pay such amount upon the completion of the 30-day period and in accordance with the August 1997 Letter and Plan, as amended by this letter agreement. A final amount, if any, will be paid promptly following the conclusion of the IRS audit. 1. AMENDMENT TO AUGUST 1997 LETTER. The August 1997 Letter is hereby amended by adding, at the end of Section 1(a) (captioned "Initial Stay Put Bonus"), the following: Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined in Section 1(b) below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Initial Stay Put Bonus will be paid to you by the Company on the 30th day following the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined in Section 1(b) below), prior to such date; in the event of such a voluntary termination by you or involuntary termination for Cause prior to the end of such 30-day period, your Initial Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Initial Stay Put Bonus, if any, will be paid to you by the Company on the 30th day following the Change in Control. 2. AMENDMENT TO THE PLAN. Section 4 of the Plan (captioned "Sale Incentive Bonus"), the terms of which are incorporated into the August 1997 Letter, has been amended to add the following language at the end of the current provision: Notwithstanding the foregoing, in the event the Participant is offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Sale Incentive Bonus will be payable by the Company not earlier than the 30th day following the Change in Control provided the Participant has not voluntarily terminated his or her employment with the New Employer (regardless of whether the Participant was then eligible to receive retirement benefits), or been involuntarily terminated for Cause, prior to the end of such 30-day period; in the event of such a voluntary termination by the Participant or involuntary termination for Cause prior to the end of such 30-day period, the Participant's Sale Incentive Bonus will be forfeited. In the event such Participant's employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than the Participant's voluntary termination of employment or involuntary termination of employment for Cause, the Participant's Sale Incentive Bonus, if any, will be paid by the Company on the later of the 30th day following the Change in Control or the date such Sale Incentive Bonus otherwise would be payable under the second sentence of this Section 4. For purposes of this Plan, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to the Participant immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to the Participant immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than the Participant's salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from the Participant's principal place of employment immediately prior to the Change in Control. Section 5(i) of the Plan has been amended to add the following language at the end of the current provision: The Plan has been amended by the Board, and such amendment approved by the Trust as the Company's sole shareholder (including for purposes of Section 280G(b)(5) of the Internal Revenue Code), effective as of February 18, 1998. 3. INTERPRETATION OF PROVISIONS OF THE AUGUST 1997 LETTER, THE PLAN, AND THIS LETTER AGREEMENT. For purposes of the August 1997 Letter, the Plan, and this letter agreement, termination of your employment due to death or disability after the Change in Control will not constitute a voluntary termination of employment by you or an involuntary termination of employment by the Company for Cause, and termination of your employment by you for "Good Reason," as defined in the Employment Agreement between you and the Company, will not constitute a voluntary termination of employment by you. Except as specifically amended by this letter agreement, the provisions of the August 1997 Letter and the Plan remain in full force and effect. * * * Please acknowledge your agreement with the terms of Sections 1, 2, and 3 of this letter, and your consent to the modification of the August 1997 Letter and to your rights under the Plan effected hereby, by signing your name in the space provided below and faxing or otherwise returning a copy of this letter to Tom Petry so that it is received not later than the close of business on Friday, February 20, 1998. If you fax the letter, please promptly send the executed copy by overnight delivery service to Tom Petry. If you have any questions concerning this letter, the August 1997 Letter or the Plan, or need copies of the earlier documents, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. /s/ DARIUS W. GASKINS, JR. --------------------------- By: Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged, Agreed and Consented to: /s/ JAMES A. RALSTON - --------------------------------------- James A. Ralston Date: Feb. 19, 1998 - ---------------------------------- [E-P LOGO] EAGLE-PICHER INDUSTRIES, INC. 580 WALNUT STREET CINCINNATI, OH 45202 February 18, 1998 Mr. Andries Ruijssenaars 3021 Ononta Avenue Cincinnati, Ohio 45226 Dear Andries: As the closing date for the merger of Eagle-Picher Industries, Inc. (the "Company") with an affiliate of Granaria Holdings B.V. (the "Buyer") approaches, the Company and the Buyer have reviewed the Company's Short Term Sale Program (the "Program") in light of the actual terms of the acquisition. As you will recall, the Program was implemented in August 1997 in order to provide an incentive to senior management to pursue a sale of the Company on favorable terms and to promote a successful transition to new ownership. At the time the Program was designed, the structure of the acquisition was unknown, so the Program was written in general and flexible terms. As the specific terms of the acquisition are being finalized, the Company's Board of Directors and the Compensation Committee have concluded that two relatively minor changes to the Program would be of substantial benefit to the Company and the Buyer. This letter describes the changes to the Program, and asks you to agree and consent to those changes implemented in the amendments set forth in Sections 1, 2, and 3 below. The changes to the Program would affect the initial half of the Stay Put Bonus and the Sale Incentive Bonus, each of which is payable following a Change in Control and if certain other conditions are met, as specified in the Letter Agreement dated August 5, 1997 between the Company and you (the "August 1997 Letter") and in the Company's Sale Incentive Bonus Plan (the "Plan"). The changes would require that, if the initial half of the Stay Put Bonus and/or the Sale Incentive Bonus otherwise become payable upon a Change in Control in accordance with the August 1997 Letter and the Plan, such awards would be paid out only if you continue to be employed by the Company for 30 days after the Change in Control; you would be subject to a risk of forfeiture of these awards during the 30-day period, but only if you voluntarily terminate your employment with the Company or if the Company terminates your employment for Cause (as defined in the August 1997 Letter and Plan). These continued service terms are in effect the same as those that apply during the two-year period following the Change in Control as a condition to earning the remainder of the Stay Put Bonus. Under the current terms of the August 1997 Letter and the Plan, the initial half of the Stay Put Bonus would become payable ten days after the Change in Control, and the Sale Incentive Bonus would become payable promptly following the Committee's determination of the "Present Value After-Tax Proceeds" of the transaction to the Company's shareholder. You also would earn the initial half of the Stay Put Bonus if no Change in Control occurs before June 30, 1998 and other conditions are met, which right is unaffected by the amendments set forth in this letter agreement. At present, it appears that the Committee will be unable to make a final determination of the amount of "Present Value After-Tax Proceeds" for a period of time following the expected closing date, until certain tax issues raised in an IRS audit can be resolved. In consideration of your agreement to the changes proposed herein, the Committee hereby commits that it will make a good faith determination as to the extent of the Sale Incentive Bonus not in issue as a result of such audit, and pay such amount upon the completion of the 30-day period and in accordance with the August 1997 Letter and Plan, as amended by this letter agreement. A final amount, if any, will be paid promptly following the conclusion of the IRS audit. 1. AMENDMENT TO AUGUST 1997 LETTER. The August 1997 Letter is hereby amended by adding, at the end of Section 1(a) (captioned "Initial Stay Put Bonus"), the following: Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined in Section 1(b) below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Initial Stay Put Bonus will be paid to you by the Company on the 30th day following the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined in Section 1(b) below), prior to such date; in the event of such a voluntary termination by you or involuntary termination for Cause prior to the end of such 30-day period, your Initial Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Initial Stay Put Bonus, if any, will be paid to you by the Company on the 30th day following the Change in Control. 2. AMENDMENT TO THE PLAN. Section 4 of the Plan (captioned "Sale Incentive Bonus"), the terms of which are incorporated into the August 1997 Letter, has been amended to add the following language at the end of the current provision: Notwithstanding the foregoing, in the event the Participant is offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Sale Incentive Bonus will be payable by the Company not earlier than the 30th day following the Change in Control provided the Participant has not voluntarily terminated his or her employment with the New Employer (regardless of whether the Participant was then eligible to receive retirement benefits), or been involuntarily terminated for Cause, prior to the end of such 30-day period; in the event of such a voluntary termination by the Participant or involuntary termination for Cause prior to the end of such 30-day period, the Participant's Sale Incentive Bonus will be forfeited. In the event such Participant's employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than the Participant's voluntary termination of employment or involuntary termination of employment for Cause, the Participant's Sale Incentive Bonus, if any, will be paid by the Company on the later of the 30th day following the Change in Control or the date such Sale Incentive Bonus otherwise would be payable under the second sentence of this Section 4. For purposes of this Plan, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to the Participant immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to the Participant immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than the Participant's salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from the Participant's principal place of employment immediately prior to the Change in Control. Section 5(i) of the Plan has been amended to add the following language at the end of the current provision: The Plan has been amended by the Board, and such amendment approved by the Trust as the Company's sole shareholder (including for purposes of Section 280G(b)(5) of the Internal Revenue Code), effective as of February 18, 1998. 3. INTERPRETATION OF PROVISIONS OF THE AUGUST 1997 LETTER, THE PLAN, AND THIS LETTER AGREEMENT. For purposes of the August 1997 Letter, the Plan, and this letter agreement, termination of your employment due to death or disability after the Change in Control will not constitute a voluntary termination of employment by you or an involuntary termination of employment by the Company for Cause, and termination of your employment by you for "Good Reason," as defined in the Employment Agreement between you and the Company, will not constitute a voluntary termination of employment by you. Except as specifically amended by this letter agreement, the provisions of the August 1997 Letter and the Plan remain in full force and effect. * * * Please acknowledge your agreement with the terms of Sections 1, 2, and 3 of this letter, and your consent to the modification of the August 1997 Letter and to your rights under the Plan effected hereby, by signing your name in the space provided below and faxing or otherwise returning a copy of this letter to Tom Petry so that it is received not later than the close of business on Friday, February 20, 1998. If you fax the letter, please promptly send the executed copy by overnight delivery service to Tom Petry. If you have any questions concerning this letter, the August 1997 Letter or the Plan, or need copies of the earlier documents, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. /s/ DARIUS W. GASKINS, JR. --------------------------- By: Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged, Agreed and Consented to: /s/ ANDRIES RUIJSSENAARS - --------------------------------------- Andries Ruijssenaars Date: Feb. 20, 1998 - ---------------------------------- [E-P LOGO] EAGLE-PICHER INDUSTRIES, INC. 580 WALNUT STREET CINCINNATI, OH 45202 February 18, 1998 Mr. Wayne R. Wickens 7470 Pinehurst Cincinnati, Ohio 45244 Dear Wayne: As the closing date for the merger of Eagle-Picher Industries, Inc. (the "Company") with an affiliate of Granaria Holdings B.V. (the "Buyer") approaches, the Company and the Buyer have reviewed the Company's Short Term Sale Program (the "Program") in light of the actual terms of the acquisition. As you will recall, the Program was implemented in August 1997 in order to provide an incentive to senior management to pursue a sale of the Company on favorable terms and to promote a successful transition to new ownership. At the time the Program was designed, the structure of the acquisition was unknown, so the Program was written in general and flexible terms. As the specific terms of the acquisition are being finalized, the Company's Board of Directors and the Compensation Committee have concluded that two relatively minor changes to the Program would be of substantial benefit to the Company and the Buyer. This letter describes the changes to the Program, and asks you to agree and consent to those changes implemented in the amendments set forth in Sections 1, 2, and 3 below. The changes to the Program would affect the initial half of the Stay Put Bonus and the Sale Incentive Bonus, each of which is payable following a Change in Control and if certain other conditions are met, as specified in the Letter Agreement dated August 5, 1997 between the Company and you (the "August 1997 Letter") and in the Company's Sale Incentive Bonus Plan (the "Plan"). The changes would require that, if the initial half of the Stay Put Bonus and/or the Sale Incentive Bonus otherwise become payable upon a Change in Control in accordance with the August 1997 Letter and the Plan, such awards would be paid out only if you continue to be employed by the Company for 30 days after the Change in Control; you would be subject to a risk of forfeiture of these awards during the 30-day period, but only if you voluntarily terminate your employment with the Company or if the Company terminates your employment for Cause (as defined in the August 1997 Letter and Plan). These continued service terms are in effect the same as those that apply during the two-year period following the Change in Control as a condition to earning the remainder of the Stay Put Bonus. Under the current terms of the August 1997 Letter and the Plan, the initial half of the Stay Put Bonus would become payable ten days after the Change in Control, and the Sale Incentive Bonus would become payable promptly following the Committee's determination of the "Present Value After-Tax Proceeds" of the transaction to the Company's shareholder. You also would earn the initial half of the Stay Put Bonus if no Change in Control occurs before June 30, 1998 and other conditions are met, which right is unaffected by the amendments set forth in this letter agreement. At present, it appears that the Committee will be unable to make a final determination of the amount of "Present Value After-Tax Proceeds" for a period of time following the expected closing date, until certain tax issues raised in an IRS audit can be resolved. In consideration of your agreement to the changes proposed herein, the Committee hereby commits that it will make a good faith determination as to the extent of the Sale Incentive Bonus not in issue as a result of such audit, and pay such amount upon the completion of the 30-day period and in accordance with the August 1997 Letter and Plan, as amended by this letter agreement. A final amount, if any, will be paid promptly following the conclusion of the IRS audit. 1. AMENDMENT TO AUGUST 1997 LETTER. The August 1997 Letter is hereby amended by adding, at the end of Section 1(a) (captioned "Initial Stay Put Bonus"), the following: Notwithstanding the foregoing, in the event you are offered Comparable Employment (as defined in Section 1(b) below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Initial Stay Put Bonus will be paid to you by the Company on the 30th day following the Change in Control provided you have not voluntarily terminated your employment with the New Employer (regardless of whether you are then eligible to receive retirement benefits), or been involuntarily terminated for Cause (as defined in Section 1(b) below), prior to such date; in the event of such a voluntary termination by you or involuntary termination for Cause prior to the end of such 30-day period, your Initial Stay Put Bonus will be forfeited. In the event your employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than your voluntary termination of employment or your involuntary termination of employment for Cause, your Initial Stay Put Bonus, if any, will be paid to you by the Company on the 30th day following the Change in Control. 2. AMENDMENT TO THE PLAN. Section 4 of the Plan (captioned "Sale Incentive Bonus"), the terms of which are incorporated into the August 1997 Letter, has been amended to add the following language at the end of the current provision: Notwithstanding the foregoing, in the event the Participant is offered Comparable Employment (as defined below) with the Company, any of its subsidiaries, or any successor to the Company or any of its subsidiaries after such Change in Control (each a "New Employer"), such Sale Incentive Bonus will be payable by the Company not earlier than the 30th day following the Change in Control provided the Participant has not voluntarily terminated his or her employment with the New Employer (regardless of whether the Participant was then eligible to receive retirement benefits), or been involuntarily terminated for Cause, prior to the end of such 30-day period; in the event of such a voluntary termination by the Participant or involuntary termination for Cause prior to the end of such 30-day period, the Participant's Sale Incentive Bonus will be forfeited. In the event such Participant's employment with the New Employer is terminated within 30 days following the Change in Control for any reason other than the Participant's voluntary termination of employment or involuntary termination of employment for Cause, the Participant's Sale Incentive Bonus, if any, will be paid by the Company on the later of the 30th day following the Change in Control or the date such Sale Incentive Bonus otherwise would be payable under the second sentence of this Section 4. For purposes of this Plan, "Comparable Employment" means employment (i) with duties and responsibilities not materially inconsistent with the duties and responsibilities assigned to the Participant immediately prior to the Change in Control, (ii) with pension, health and group life insurance benefits (including non-qualified supplemental retirement benefits, if applicable) substantially comparable to those provided to the Participant immediately prior to the Change in Control, (iii) at an annual salary and bonus opportunity not less than the Participant's salary and bonus opportunity immediately prior to the Change in Control, and (iv) at a geographic location not more than 35 miles from the Participant's principal place of employment immediately prior to the Change in Control. Section 5(i) of the Plan has been amended to add the following language at the end of the current provision: The Plan has been amended by the Board, and such amendment approved by the Trust as the Company's sole shareholder (including for purposes of Section 280G(b)(5) of the Internal Revenue Code), effective as of February 18, 1998. 3. INTERPRETATION OF PROVISIONS OF THE AUGUST 1997 LETTER, THE PLAN, AND THIS LETTER AGREEMENT. For purposes of the August 1997 Letter, the Plan, and this letter agreement, termination of your employment due to death or disability after the Change in Control will not constitute a voluntary termination of employment by you or an involuntary termination of employment by the Company for Cause, and termination of your employment by you for "Good Reason," as defined in the Employment Agreement between you and the Company, will not constitute a voluntary termination of employment by you. Except as specifically amended by this letter agreement, the provisions of the August 1997 Letter and the Plan remain in full force and effect. * * * Please acknowledge your agreement with the terms of Sections 1, 2, and 3 of this letter, and your consent to the modification of the August 1997 Letter and to your rights under the Plan effected hereby, by signing your name in the space provided below and faxing or otherwise returning a copy of this letter to Tom Petry so that it is received not later than the close of business on Friday, February 20, 1998. If you fax the letter, please promptly send the executed copy by overnight delivery service to Tom Petry. If you have any questions concerning this letter, the August 1997 Letter or the Plan, or need copies of the earlier documents, please contact Dave Evans at 513-629-2529. Sincerely yours, Eagle-Picher Industries, Inc. /s/ DARIUS W. GASKINS, JR. --------------------------- By: Darius W. Gaskins, Jr. Chairman of the Compensation Committee Acknowledged, Agreed and Consented to: /s/ WAYNE R. WICKENS - --------------------------------------- Wayne R. Wickens Date: Feb. 20, 1998 - ---------------------------------- EX-10.28 29 EXHIBIT 10.28 EAGLE-PICHER HOLDINGS, INC. E-P ACQUISITION, INC. February 23, 1998 Eagle Picher Industries, Inc. Personal Injury Settlement Trust 8260 NorthCreek Drive Suite 200 Cincinnati, OH 45236 Re: Amendments to the Short Term Sale Program of the Company Ladies and Gentlemen: This letter, and the exhibit hereto, set forth our understanding concerning the amendments to the Short Term Sale Program of Eagle-Picher Industries, Inc., an Ohio corporation (the "Company"). In consideration of the mutual covenants and agreements contained in this letter agreement and in the Merger Agreement, dated as of February 23, 1998, among Eagle-Picher Industries, Inc. Personal Injury Settlement Trust, an Ohio trust (the "Trust"), the Company, Eagle-Picher Holdings, Inc., a Delaware corporation ("Holdings"), and E-P Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of Holdings ("Acquisition"), as amended by Amendment No. 1 dated as of February 23, 1998, among the Trust, the Company, Holdings and Acquisition (the "Merger Agreement"), the parties hereto agree that, notwithstanding any other provision in the Merger Agreement, Holdings and Acquisition (i) shall not make a claim of any kind (including, without limitation, under Section 4.7 of the Merger Agreement) against any Trust Indemnified Party with respect to the Plan Amendments and (ii) shall, jointly and severally, defend, indemnify and hold harmless the Trust Indemnified Parties from and against and in respect of any and all Losses which any of them may incur as a result of the Plan Amendments. As used herein, "Plan Amendments" means the amendments to the Short Term Sale Program of the Company, as specified in the letter agreement, dated February 18, 1998, between the Company and the participants in such program, in the form attached hereto as Exhibit A. This letter agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed to be an original, but all of which together shall together constitute and be the same instrument. This letter agreement shall in all respects be interpreted, construed and governed by and in accordance with the laws of the State of New York, disregarding any conflict of laws provisions which might otherwise require the application of the law of another jurisdiction. 2 Please acknowledge your agreement with the terms of this letter agreement by executing this letter agreement in the space provided below. Sincerely yours, EAGLE-PICHER HOLDINGS, INC. By: /s/ JOEL P. WYLER -------------------------------- Name: Joel P. Wyler Title: Chairman and President E-P ACQUISITION, INC. By: /s/ JOEL P. WYLER ------------------------------- Name: Joel P. Wyler Title: Chairman and President Accepted and agreed: EAGLE-PICHER INDUSTRIES, INC. PERSONAL INJURY SETTLEMENT TRUST By: /s/ RUTH R. MCMULLIN ----------------------------------- Name: Ruth R. McMullin Title: Chairperson of the Trustees EX-12.1 30 EXHIBIT 12.1 RATIOS OF EARNINGS TO FIXED CHARGES
Unaudited Three Months Ended February 28, Years Ended November 30 ------------------ --------------------------------------------------- (Dollars in thousands) 1998 1997 1997 1996 1995 1994 1993 ------------------ --------------------------------------------------- Income (loss) before taxes, extraordinary items and accounting changes 4,907 1,816 14.046 674,656 (934,871) 53,749 (1,139,770) Fixed charges: Interest 6,940 8,927 31,261 3,083 1,926 1,809 2,070 Interest factor portion of rentals 199 262 1,043 828 612 500 400 --------------- -------------------------------------------------- Total fixed charges 7,139 9,189 32,304 3,911 2.538 2,309 2,470 --------------- -------------------------------------------------- Earnings before income taxes and fixed charges 12,046 11,005 46,350 678,567 (932,333) 56,058 (1,137,300) =============== ================================================== Ratio of earnings to fixed charges 1.69 1.20 1.43 173.50 (367.35) 24.28 (460.45) =============== ================================================== Earnings inadequate to cover fixed charges 934,871 1,139,770 ========= ===========
EX-16.1 31 EXHIBIT 16.1 [LETTERHEAD OF PEAT MARWICK LLP] May 19, 1998 Securities and Exchange Commission Washington, D.C. 20549 Ladies and Gentleman: We were previously principal accountants for Eagle-Picher Industries, Inc. and, under the date of February 5, 1997, we reported on the consolidated financial statements of Eagle-Picher Industries, Inc. and subsidiaries as of November 30, 1996 and for each year of the years in the two-year period ended November 30, 1996. On February 5, 1997, our appointment as principal accountants was terminated. We have read Eagle-Picher Industries, Inc.'s statements included in its registration statements on Amendments No. 1 to Form S-4 (Registration Nos. 333-49957 and 333-44971), and we agree with such statements, except that we are not in a position to agree or disagree with Eagle-Picher Industries, Inc.'s statement that the board of directors approved our dismissal upon the recommendation of the audit committee of the board of directors and we are not in a position to agree or disagree with Eagle-Picher Industries, Inc.'s statement that Deloitte & Touche LLP was not consulted regarding matters of accounting principles, practices or financial statement disclosure prior to Deloitte & Touche LLP being engaged as auditors. Very truly yours, /s/ KPMG Peat Marwick LLP EX-21.1 32 EXHIBIT 21.1 Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------- Name Jurisdiction Other names under which Subsidiary Percentage of Incorporation does business Beneficial Ownership - ------------------------------------------------------------------------------------------------------------------------- 1. DOMESTIC OPERATING SUBSIDIARIES - ------------------------------------------------------------------------------------------------------------------------- Daisy Parts, Inc. Michigan Eagle-Picher 100 Eagle-Picher Industries - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Development Company, Delaware Eagle-Picher 100 Inc. Eagle-Picher Industries - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Far East, Inc. Delaware Eagle-Picher 100 Eagle-Picher Industries - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Fluid Systems, Inc. Michigan Eagle-Picher 100 Eagle-Picher Industries Eagle-Picher Automotive Eagle-Picher Fluid Systems - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Minerals, Inc. Nevada Eagle-Picher 100 Eagle-Picher Industries Eagle-Picher Automotive Eagle-Picher Fluid Systems - ------------------------------------------------------------------------------------------------------------------------- Hillsdale Tool & Manufacturing Co. Michigan Eagle-Picher 100 Eagle-Picher Industries Eagle-Picher Automotive Daisy Parts Hillsdale Tool Hillsdale Tool & Manufacturing - ------------------------------------------------------------------------------------------------------------------------- Michigan Automotive Research Michigan Eagle-Picher 100 Corporation Eagle-Picher Industries Eagle-Picher Automotive MARCO Michigan Automotive Research Corporation - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Technologies, LLC Delaware Eagle-Picher 100 Eagle-Picher Industries Technologies Chemsyn Science Laboratories - ------------------------------------------------------------------------------------------------------------------------- 2. FOREIGN SUBSIDIARIES - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Automotive GmbH Germany 100 - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Espana, S.A. Spain 100 - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Fluid Systems Ltd. England & Wales 100 - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Hillsdale Limited England & Wales 100 - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Industries Europe B.V. Netherlands 100 - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Technologies GmbH Germany 100 - -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- Name Jurisdiction Other names under which Subsidiary Percentage of Incorporation does business Beneficial Ownership - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Industries of Canada Ontario, Canada 100 Limited - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Minerals International France 100 S.A.R.L. - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher UK Limited England & Wales 100 - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Wolverine GmbH Germany 100 - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher, Inc. Virgin Islands 100 - ------------------------------------------------------------------------------------------------------------------------- EPTEC, S.A. de C.V. Mexico 100 - ------------------------------------------------------------------------------------------------------------------------- Equipos de Acuna, S.A. de C.V. Mexico 100* - ------------------------------------------------------------------------------------------------------------------------- United Minerals GmbH & Co. KG Germany 100 - ------------------------------------------------------------------------------------------------------------------------- United Minerals Verwaltungs-und Germany 100 Beteiligungs GmbH - ------------------------------------------------------------------------------------------------------------------------- 3. IMMATERIAL SUBSIDIARIES - ------------------------------------------------------------------------------------------------------------------------- Ross Aluminum Foundries, Inc. Ohio 100 - ------------------------------------------------------------------------------------------------------------------------- Cincinnati Industrial Machinery Sales Ohio 100 Company - ------------------------------------------------------------------------------------------------------------------------- 4. PARTIALLY-OWNED SUBSIDIARIES - ------------------------------------------------------------------------------------------------------------------------- Diehl & Eagle-Picher GmbH Germany 45 - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher-Boge, L.L.C. Delaware 45 - ------------------------------------------------------------------------------------------------------------------------- Yamanaka EP Corporation Japan 35 - ------------------------------------------------------------------------------------------------------------------------- Eagle-Picher Imperial Auto Industries Private Limited India 50 - -------------------------------------------------------------------------------------------------------------------------
* One qualifying share is held by James A. Ralston. EX-23.1 33 EXHIBIT 23.1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Amendment No. 1 to Registration Statement No. 333-49957 of Eagle-Picher Industries, Inc. related to the $220,000,000 Senior Subordinated Notes due 2008 of our report dated January 15, 1998, except for Notes G and M, as to which the date is February 24, 1998, on our audit of the consolidated financial statements of Eagle-Picher Industries, Inc. as of and for the year ended November 30, 1997, and our report dated January 15, 1998 on our audit of the balance sheet of Eagle-Picher Holdings, Inc. as of December 22, 1997 appearing in the Prospectus, which is a part of such Registration Statement, and to the reference to us under the heading 'Experts' in such Prospectus. /s/ Deloitte & Touche LLP Cincinnati, Ohio May 19, 1998 EX-23 34 EXHIBIT 23.2 Exhibit 23.2 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Eagle-Picher Industries, Inc.: We consent to the use of our report included herein and to the reference to our firm under the heading 'Experts' in the prospectus. Our report dated February 5, 1997 was unqualified except for consistency in the application of accounting principles as a result of the Company's change in its method of computing LIFO for certain inventories. /s/ KPMG PEAT MARWICK LLP ------------------------------- KPMG Peat Marwick LLP Cincinnati, Ohio May 19, 1998 EX-27.1 35 ART. 5 FDS FOR FORM S-4
5 This schedule contains summary financial information extracted from the consolidated statement of income (loss) and the consolidated balance sheet and is qualified in its entirety by reference to such financial statements 30927 EAGLE-PICHER INDUSTRIES, INC. YEAR NOV-30-1997 DEC-01-1996 NOV-30-1997 53,739 0 132,541 1,614 92,196 301,970 279,847 36,309 746,881 114,002 269,994 341,807 0 0 (5,690) 746,881 906,077 906,077 725,010 725,010 135,509 0 31,261 14,046 17,900 (3,854) 0 0 0 (3,854) (.39) (.39) EX-27.1 36 ART. 5 FDS FOR FORM S-4
5 This schedule contains summary financial information extracted from the consolidated statement of income (loss) and the consolidated balance sheet and is qualified in its entirety by reference to such financial statements 30927 EAGLE-PICHER INDUSTRIES, INC. YEAR NOV-30-1996 DEC-01-1995 NOV-30-1996 32,725 0 135,108 2,233 102,901 376,736 256,351 0 848,880 164,928 316,061 341,807 0 0 0 848,880 891,287 891,287 716,926 716,926 112,255 0 3,083 674,656 52,570 622,086 0 1,525,540 (1,235) 2,146,391 194.40 194.40 EX-27.1 37 ART. 5 FDS FOR FORM S-4
5 This schedule contains summary financial information extracted from the consolidated statement of income (loss) and the consolidated balance sheet and is qualified in its entirety by reference to such financial statements 30927 EAGLE-PICHER INDUSTRIES, INC. 3-MOS NOV-30-1998 DEC-01-1997 FEB-28-1998 18,967 0 137,282 1,650 95,048 280,682 239,337 0 867,139 118,232 536,340 180,005 0 0 0 867,139 205,842 205,842 162,796 162,796 32,019 0 6,940 4,907 4,100 807 0 0 0 807 .08 .08 EX-27.1 38 ART. 5 FDS FOR FORM S-4
5 This schedule contains summary financial information extracted from the consolidated statement of income (loss) and the consolidated balance sheet and is qualified in its entirety by reference to such financial statements 30927 EAGLE-PICHER INDUSTRIES, INC. 3-MOS NOV-30-1997 DEC-01-1996 FEB-28-1997 19,376 0 147,095 2,290 106,120 357,419 271,181 10,331 831,943 149,046 318,160 341,807 0 0 (3,165) 831,943 223,607 223,607 180,401 180,401 34,166 0 8,927 1,816 3,036 (1,220) 0 0 0 (1,220) (.12) (.12) EX-99.1 39 EXHIBIT 99.1 LETTER OF TRANSMITTAL EAGLE-PICHER INDUSTRIES, INC. OFFER TO EXCHANGE ALL OF ITS OUTSTANDING 9 3/8% SENIOR SUBORDINATED NOTES DUE 2008 FOR UP TO $220,000,000 AGGREGATE PRINCIPAL AMOUNT OF ITS NEW 9 3/8% SENIOR SUBORDINATED NOTES DUE 2008 PURSUANT TO THE PROSPECTUS DATED MAY , 1998 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE"). - -------------------------------------------------------------------------------- The Exchange Agent for the Exchange Offer is: THE BANK OF NEW YORK
By Facsimile By Hand or Overnight Courier (eligible institutions only): By Registered or Certified Mail: 101 Barclay Street, (212) 815-6339 101 Barclay Street, Corporate Trust Window New York, New York 10286 Ground Level Attn: Reorganization Section, 7E; New York, New York 10286 To Confirm Facsimile or for Santino Ginocchietti Attn: Reorganization Section, Information Call: 7E; Santino Ginocchietti (212) 815-2963
DELIVERY OF THIS LETTER OF TRANSMITTAL (THE "LETTER OF TRANSMITTAL") TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID TENDER OF EAGLE-PICHER INDUSTRIES, INC. 9 3/8% SENIOR SUBORDINATED NOTES DUE 2008 (THE "INITIAL NOTES"). THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED AND SIGNED. All capitalized terms used herein and not defined herein shall have the meaning ascribed to them in the Prospectus (as defined below). This Letter of Transmittal is to be used by registered holders of Initial Notes ("Holders") if: (i) certificates representing Initial Notes are to be physically delivered to the Exchange Agent by such Holders; (ii) tender of Initial Notes is to be made by book-entry transfer to the Exchange Agent's account at The Depository Trust Company ("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedures set forth in the Prospectus, dated May , 1998 (as the same may be amended from time to time, the "Prospectus") under the caption "The Notes Exchange Offer--Book-Entry Transfer" by any financial institution that is a participant in DTC and whose name appears on a security position listing as the owner of Initial Notes or (iii) delivery of Initial Notes is to be made according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Notes Exchange Offer--Guaranteed Delivery Procedures," and, in each case, instructions are not being transmitted through the DTC. Automated Tender Program ("ATOP"). DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. In order to properly complete this Letter of Transmittal, a Holder must (i) complete the box entitled "Method of Delivery" by checking one of the three boxes therein and supplying the appropriate information, (ii) complete the box entitled "Description of Initial Notes," (iii) if such Holder is a Participating Broker-Dealer (as defined below) and wishes to receive additional copies of the Prospectus for delivery in connection with resales of Exchange Notes (as defined below), check the applicable box, (iv) sign this Letter of Transmittal by completing the box entitled "Please Sign Here," (v) if appropriate, check and complete the boxes relating to the "Special Issuance Instructions" and "Special Delivery Instructions" and (vi) complete the Substitute Form W-9. Each Holder should carefully read the detailed Instructions below prior to the completing this Letter of Transmittal. See "The Notes Exchange Offer--Procedures For Tendering" in the Prospectus. Holders of Initial Notes that are tendering by book-entry transfer to the Exchange Agent's account at DTC can execute the tender through ATOP, for which the transaction will be eligible. DTC participants that are accepting the Exchange Offer should transmit their acceptance to DTC, which will edit and verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send an Agent's message to the Exchange Agent for its acceptance. Delivery of the Agent's Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agent's Message. DTC participants may also accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through ATOP. If Holders desire to tender Initial Notes pursuant to the Exchange Offer and (i) certificates representing such Initial Notes are not lost but are not immediately available, (ii) time will not permit this Letter of Transmittal, certificates representing such Holder's Initial Notes and all other required documents to reach the Exchange Agent prior to the Expiration Date or (iii) the procedures for book-entry transfer cannot be completed prior to the Expiration Date, such Holders may effect a tender of such Initial Notes in accordance with the guaranteed delivery procedures set forth in the Prospectus under the caption "The Notes Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2 below. A Holder having Initial Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contract such broker, dealer, commercial bank, trust company or other nominee if they desire to accept the Exchange Offer with respect to the Initial Notes so registered. THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS OF INITIAL NOTES BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. Your bank or broker can assist you in completing this form. The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Exchange Agent, whose address and telephone number appear on the front cover of this Letter of Transmittal. See Instruction 11 below. 2 - -------------------------------------------------------------------------------- METHOD OF DELIVERY - -------------------------------------------------------------------------------- [ ] CHECK HERE IF CERTIFICATES FOR TENDERED INITIAL NOTES ARE BEING DELIVERED HEREWITH. [ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ____________________________________________ Account Number: ________________ Transaction Code Number: ______________ [ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT PURSUANT TO INSTRUCTION 2 BELOW AND COMPLETE THE FOLLOWING: Name of Registered Holder(s):___________________________________________ Window ticket No. (if any): ____________________________________________ Date of Execution of Notice of Guaranteed Delivery: ____________________ Name of Eligible Institution that Guaranteed Delivery:__________________ If Delivered by Book-Entry Transfer (yes or no): _______________________ Account Number: ________________ Transaction Code Number: ___________ - -------------------------------------------------------------------------------- List below the Initial Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, list the certificate numbers and principal amounts on a separately signed schedule and affix the schedule to this Letter of Transmittal. - -------------------------------------------------------------------------------- DESCRIPTION OF INITIAL NOTES - --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF AGGREGATE AGGREGATE HOLDER(S) (PLEASE CERTIFICATE PRINCIPAL AMOUNT PRINCIPAL AMOUNT FILL IN, IF BLANK) NUMBER(S) REPRESENTED TENDERED - ------------------------------------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- TOTAL - -------------------------------------------------------------------------------------
3 - -------------------------------------------------------------------------------- FOR PARTICIPATING BROKER-DEALERS ONLY - -------------------------------------------------------------------------------- [ ] CHECK HERE AND PROVIDE THE INFORMATION REQUESTED BELOW IF YOU ARE A PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND, DURING THE NINE-MONTH PERIOD FOLLOWING THE CONSUMMATION OF THE EXCHANGE OFFER, 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO, AS WELL AS ANY NOTICES FROM THE COMPANY TO SUSPEND AND RESUME USE OF THE PROSPECTUS. BY TENDERING ITS INITIAL NOTES AND EXCUTING THIS LETTER OF TRANSMITTAL, EACH PARTICIPATING BROKER-DEALER AGREES TO USE ITS REASONABLE BEST EFFORTS TO NOTIFY THE COMPANY OR THE EXCHANGE AGENT WHEN IT HAS SOLD ALL OF ITS EXCHANGE NOTES. (IF NO PARTICIPATING BROKER-DEALERS CHECK THIS BOX, OR IF ALL PARTICIPATING BROKER-DEALERS WHO HAVE CHECKED THIS BOX SUBSEQUENTLY NOTIFY THE COMPANY OR THE EXCHANGE AGENT THAT ALL THEIR EXCHANGE NOTES HAVE BEEN SOLD, THE COMPANY WILL NOT BE REQUIRED TO MAINTAIN THE EFFECTIVENESS OF THE EXCHANGE OFFER REGISTRATION STATEMENT OR TO UPDATE THE PROSPECTUS AND WILL NOT PROVIDE ANY NOTICES TO ANY HOLDERS TO SUSPEND OR RESUME USE OF THE PROSPECTUS.) PROVIDE THE NAME OF THE INDIVIDUAL WHO SHOULD RECEIVE, ON BEHALF OF THE HOLDER, ADDITIONAL COPIES OF THE PROSPECTUS, AND AMENDMENTS AND SUPPLEMENTS THERETO, AND ANY NOTICES TO SUSPEND AND RESUME USE OF THE PROSPECTUS: NAME: __________________________________________________________________________ ADDRESS: _______________________________________________________________________ TELEPHONE NO.: _________________________________________________________________ FACSIMILE NO.: _________________________________________________________________ - -------------------------------------------------------------------------------- NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY 4 Ladies and Gentlemen: By execution hereof, the undersigned acknowledges receipt of the Prospectus, dated May , 1998 (as the same may be amended from time to time, the "Prospectus" and, together with this Letter of Transmittal, the "Exchange Offer"), of Eagle-Picher Industries, Inc., an Ohio corporation (the "Company") and this Letter of Transmittal and the instructions hereto, which together constitute Company's offer to exchange $1,000 principal amount of its 9 3/8% Senior Notes due 2008 (the "Exchange Notes") of the Company, upon the terms and subject to the conditions set forth in The Exchange Offer, for each $1,000 principal amount of their outstanding 9 3/8% Senior Notes due 2008 (the "Initial Notes"). Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of Initial Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Initial Notes tendered herewith, the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Initial Notes. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Company) with respect to such Initial Notes with full power of substitution (such power-of-attorney being deemed to be an irrevocable power coupled with an interest) to (i) present such Initial Notes and all evidences of transfer and authenticity to, or transfer ownership of, such Initial Notes on the account books maintained by the Book-Entry Transfer Facility to, or upon the order of, the Company, (ii) present such Initial Notes for transfer of ownership on the books of the Company or the trustee under the Indenture (the "Trustee") and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Initial Notes, all in accordance with the terms and conditions of the Exchange Offer as described in the Prospectus. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Initial Notes tendered hereby and to acquire Exchange Notes issuable upon the exchange of such tendered Initial Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Initial Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim or right. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the Initial Notes tendered hereby or transfer ownership of such Initial Notes on the account books maintained by the book-entry transfer facility. The Exchange Offer is subject to certain conditions as set forth in the Prospectus under the caption "The Notes Exchange Offer--Conditions." The undersigned recognizes that as a result of these conditions (which may be waived by the Company, in whole or in part, in the reasonable discretion of the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the Initial Notes tendered hereby and, in such event, the Initial Notes not exchanged will be returned to the undersigned at the address shown above. THE EXCHANGE OFFER IS NOT BEING MADE TO ANY BROKER-DEALER WHO PURCHASED INITIAL NOTES DIRECTLY FROM THE COMPANY FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT OR ANY PERSON THAT IS AN "AFFILIATE" OF THE COMPANY OR EAGLE-PICHER HOLDINGS, INC. ("PARENT") WITHIN THE MEANING OF RULE 405 UNDER THE SECURITIES ACT. THE UNDERSIGNED UNDERSTANDS AND AGREES THAT THE COMPANY RESERVES THE RIGHT NOT TO ACCEPT TENDERED INITIAL NOTES FROM ANY TENDERING HOLDER IF THE COMPANY DETERMINES, IN ITS REASONABLE DISCRETION, THAT SUCH ACCEPTANCE COULD RESULT IN A VIOLATION OF APLICABLE SECURITIES LAWS. The undersigned, if the undersigned is a beneficial holder, represents (or, if the undersigned is a broker, dealer, commercial bank, trust company or other nominee, represents that it has received representations from the beneficial owners of the Initial Notes (the "Beneficial Owner") stating) that, (i) the Exchange Notes to be acquired in connection with the Exchange Offer by the Holder and each Beneficial Owner of the Initial Notes 5 are being acquired by the Holder and each such Beneficial Owner in the ordinary course of their business, (ii) the Holder and each such Beneficial Owner are not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes, (iii) the Holder and each Beneficial Owner acknowledge and agree that any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes cannot rely on the interpretations of the staff of the Commission discussed in the Prospectus under the caption "The Notes Exchange Offer--Purpose and Effect of the Notes Exchange Offer" and may only sell the Exchange Notes acquired by such person pursuant to a registration statement containing the selling securityholder information required by Item 507 of Regulation S-K under the Securities Act, (iv) if the Holder is a broker-dealer that acquired Initial Notes as a result of market-making activities or other trading activities, it will deliver a prospectus in connection with any resale of Exchange Notes acquired in the Exchange Offer (but by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act) and (v) neither the Holder nor any such Beneficial Owner is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company or of Parent or is a broker-dealer who purchased Initial Notes directly from the Company for resale pursuant to Rule 144A under the Securities Act. EACH BROKER-DEALER WHO ACQUIRED INITIAL NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH INTIAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF EXCHANGE NOTES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF THE EXCHANGE NOTES MAY BE RESUMED, AS THE CASE MAY BE. EACH PARTICIPATING BROKER-DEALER SHOULD CHECK THE BOX HEREIN UNDER THE CAPTION "FOR PARTICIPATING BROKER-DEALERS ONLY" IN ORDER TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS, AND ANY AMENDMENTS AND SUPPLEMENTS THERETO, FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE NOTES, AS WELL AS ANY NOTICES FROM THE COMPANY TO SUSPEND AND RESUME USE OF THE PROSPECTUS. BY TENDERING ITS INITIAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, EACH PARTICIPATING BROKER-DEALER AGREES TO USE ITS REASONABLE BEST EFFORTS TO NOTIFY THE COMPANY OR THE EXCHANGE AGENT WHEN IT HAS SOLD ALL OF ITS EXCHANGE NOTES. IF NO PARTICIPATING BROKER-DEALERS CHECK SUCH BOX, OR IF ALL PARTICIPATING BROKER-DEALERS WHO HAVE CHECKED SUCH BOX SUBSEQUENTLY NOTIFY THE COMPANY OR THE EXCHANGE AGENT THAT ALL THEIR EXCHANGE NOTES HAVE BEEN SOLD, THE COMPANY WILL NOT BE REQUIRED TO MAINTAIN THE EFFECTIVENESS OF THE EXCHANGE OFFER REGISTRATION STATEMENT OR TO UPDATE THE PROSPECTUS AND WILL NOT PROVIDE ANY HOLDERS WITH ANY NOTICES TO SUSPEND OR RESUME USE OF THE PROSPECTUS. The undersigned understands that tenders of the Initial Notes pursuant to any one of the procedures described under "The Notes Exchange Offer--Procedures for Tendering" in the Prospectus and in the 6 instructions hereto will constitute a binding agreement between the undersigned and the Company in accordance with the terms and subject to the conditions of the Exchange Offer. All authority herein conferred or agreed to be conferred by this Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the heirs, legal representatives, successors and assigns, executors, administrators and trustees in bankruptcy of the undersigned and shall survive the death or incapacity of the undersigned. Tendered Initial Notes may be withdrawn at any time prior to 5:00 p.m. on the Expiration Date in accordance with the terms of the Exchange Offer. The undersigned understands that by tendering Initial Notes pursuant to one of the procedures described under "The Notes Exchange Offer--Procedures for Tendering" in the Prospectus and the instructions hereto, the tendering Holder will be deemed to have waived the right to receive any payment in respect of interest on the Initial Notes accrued up to the date of issuance of the Exchange Notes. The undersigned also understands and acknowledges that the Company reserves the right in its sole discretion to purchase or make offers for any Initial Notes that remain outstanding subsequent to the Expiration Date in the open market, in privately negotiated transactions, through subsequent exchange offers or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer. The undersigned understands that the delivery and surrender of the Initial Notes is not effective, and the risk of loss of the Initial Notes does not pass to the Exchange Agent, until receipt by the Exchange Agent of this Letter of Transmittal, or a manually signed facsimile hereof, properly completed and duly executed, with any required signature guarantees, together with all accompanying evidences of authority and any other required documents in form satisfactory to the Company. All questions as to form of all documents and the validity (including time of receipt) and acceptance of tenders and withdrawals of Initial Notes will be determined by the Company, in its sole discretion, which determination shall be final and binding. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions," the undersigned hereby requests that any Initial Notes representing principal amounts not tendered or not accepted for exchange be issued in the name(s) of the undersigned and that Exchange Notes be issued in the name(s) of the undersigned (or, in the case of Initial Notes delivered by book-entry transfer, by credit to the account at the Book-Entry Transfer Facility). Similarly, unless otherwise indicated herein in the box entitled "Special Delivery Instructions," the undersigned hereby requests that any Initial Notes representing principal amounts not tendered or not accepted for exchange and Exchange Notes be delivered to the undersigned at the address(es) shown above. The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance Instructions" box or "Special Delivery Instructions" box to transfer any Initial Notes from the name of the registered Holder(s) thereof if the Company does not accept for exchange any of the principal amount of such Initial Notes so tendered. 7 - -------------------------------------------------------------------------------- PLEASE SIGN HERE (TO BE COMPLETED BY ALL HOLDERS OF INITIAL NOTES REGARDLESS OF WHETHER INITIAL NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH) This Letter of Transmittal must be signed by the Holder(s) of Initial Notes exactly as their name(s) appear(s) on certificate(s) for Initial Notes or, if delivered by a participant in the Book-Entry Transfer Facility, exactly as such participant's name appears on a security position listing as the owner of Initial Notes, or by person(s) authorized to become Holder(s) by endorsements and documents transmitted with this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below under "Capacity" and submit evidence satisfactory to the Company of such person's authority to so act. See Instruction 4 below. If the signature appearing below is not of the record holder(s) of the Initial Notes, then the record holder(s) must sign a valid bond power. X _____________________________________________________________________________ X _____________________________________________________________________________ SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY DATE: __________________________________________________________________________ NAME: __________________________________________________________________________ CAPACITY: ______________________________________________________________________ ADDRESS: _______________________________________________________________________ _______________________________________________________________________ (INCLUDING ZIP CODE) AREA CODE AND TELEPHONE NO.: ___________________________________________________ PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER DEALER WHO ACQUIRED THE INITIAL NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. NAME: __________________________________________________________________________ ADDRESS: _______________________________________________________________________ - -------------------------------------------------------------------------------- 8 - -------------------------------------------------------------------------------- MEDALLION SIGNATURE GUARANTEE (SEE INSTRUCTION 4 BELOW) (CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION) ________________________________________________________________________________ (NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNITURES) ________________________________________________________________________________ ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF FIRM) ________________________________________________________________________________ (AUTHORIZED SIGNITURE) ________________________________________________________________________________ (PRINTED NAME) ________________________________________________________________________________ (TITLE) DATE: __________________________________________________________________________ - -------------------------------------------------------------------------------- 9 - ---------------------------------------------- -------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3, 4, 5 and 7) (SEE INSTRUCTIONS 4 AND 9) To be completed ONLY if Initial Notes in To be completed ONLY if Initial Notes a principal amount not tendered or not in a principal amount not tendered or accepted for exchange are to be issued not accepted for exchange or Exchange in the name of, or Exchange Notes are to Notes are to be sent to someone other be issued in the name of, someone other than the persons whose signature(s) than the person or persons whose appear(s) within this letter of signature(s) appear(s) within this transmittal or to an address Letter of Transmittal. different from that shown in the box entitled "Description of Initial Notes" within this Letter of Transmittal. Issue [ ] Initial Notes [ ] Exchange Notes (check as applicable) Issue [ ] Initial Notes [ ] Exchange Notes Name ___________________________________ (check as applicable) (Please Print) Name __________________________________ Address_________________________________ (Please Print) __________________________________________ Address________________________________ (Include Zip Code) ________________________________________ __________________________________________ (Include Zip Code) (Tax Identification or Social Security Number) (SEE SUBSTITUTE FORM W-9 HEREIN) Credit Initial Notes not tendered or not exchanged by book entry transfer to the Book Entry Transfer Facility account setbelow: ___________________________________________ (Book Entry Transfer Facility Account Number) Credit Exchange Notes to the Book Entry Transfer Facility account set below: ______________________________________________ (Book Entry Transfer Facility Account Number) - ---------------------------------------------- --------------------------------------------
10 INSTRUCTIONS TO LETTER OF TRANSMITTAL FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR INITIAL NOTES OR BOOK-ENTRY CONFIRMATION; WITHDRAWAL OF TENDERS. To tender Initial Notes in the Exchange Offer, physical delivery of certificates for Initial Notes or confirmation of a book-entry transfer into the Exchange Agent's account with a Book-Entry Transfer Facility of Initial Notes tendered electronically, as well as a properly completed and duly executed copy or manually signed facsimile of this Letter of Transmittal, or in the case of a book-entry transfer, an Agent's Message, and any other Documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m. New York time on the Expiration Date. Tenders of Initial Notes in the Exchange Offer may be made prior to the Expiration Date in the manner described in the preceding sentence and otherwise in compliance with this Letter of Transmittal. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, CERTIFICATES FOR INITIAL NOTES AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT, INCLUDING DELIVERY THROUGH DTC AND ANY ACCEPTANCE OF AN AGENT'S MESSAGE TRANSMITTED THROUGH ATOP, IS AT THE ELECTION AND RISK OF THE HOLDER TENDERING INITIAL NOTES. IF SUCH DELIVERY IS MADE BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND THAT SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS OF INITIAL NOTES WILL BE ACCEPTED. Except as otherwise provided below, the delivery will be made when actually received by the Exchange Agent. THIS LETTER OF TRANSMITTAL, CERTIFICATES FOR THE INITIAL NOTES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO THE COMPANY, THE TRUSTEE OR DTC. Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m. New York time on the Expiration Date. In order to be valid, notice of withdrawal of tendered Initial Notes must comply with the requirements set forth in the Prospectus under the caption "The Notes Exchange Offer--Withdrawal of Tenders." 2. GUARANTEED DELIVERY PROCEDURES. If Holders desire to tender Initial Notes pursuant to the Exchange Offer and (i) certificates representing such Initial Notes are not lost but are not immediately available, (ii) time will not permit this Letter of Transmittal, certificates representing such Holder's Initial Notes and all other required documents to reach the Exchange Agent prior to the Expiration Date or (iii) the procedures for book-entry transfer cannot be completed prior to the Expiration Date, such Holders may effect a tender of Initial Notes in accordance with the guaranteed delivery procedures set forth in the Prospectus under the caption "The Notes Exchange Offer--Guaranteed Delivery Procedures." Pursuant to the guaranteed delivery procedures: (i) such tender must be made by or through an Eligible Institution; (ii) prior to the Expiration Date the Exchange Agent must have received from such Eligible Institution at one of the addresses set forth on the cover of this Letter of Transmittal a properly completed and validly executed Notice of Guaranteed Delivery (by manually signed facsimile transmission mail or hand delivery) in substantially the form provided with the Prospectus, setting forth the name(s) and address(es) of the registered Holder(s) and the principal amount of Initial Notes being tendered and stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange ("NYSE") trading days from the date of the Notice of Guaranteed Delivery, the Letter 11 of Transmittal (or a manually signed facsimile thereof) properly completed and duly executed, or, in the case of a book-entry transfer an Agent's Message together with certificates representing the Initial Notes (or confirmation of book-entry transfer of such Initial Notes into the Exchange Agent's account at a Book Entry Transfer Facility), and any other documents required by this Letter of Transmittal and the instructions thereto, will be deposited by such Eligible Institution with the Exchange Agent; and (iii) this Letter of Transmittal (or a manually signed facsimile thereof), properly completed and validly executed with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, together with certificates for all Initial Notes in proper form for transfer (or a Book-Entry Confirmation with respect to all tendered Initial Notes), and any other required documents must be received by the Exchange Agent within three NYSE trading days after the date of such Notice of Guaranteed Delivery. 3. PARTIAL TENDERS. If less than the entire principal amount of any Initial Notes evidenced by a submitted certificate is tendered, the tendering Holder must fill in the principal amount tendered in the last column of the box entitled "Description of Initial Notes" herein. The entire principal amount represented by the certificates for all Initial Notes delivered to the Exchange Agent will be deemed to have been tendered, unless otherwise indicated. The entire principal amount of all Initial Notes not tendered or not accepted for exchange will be sent (or, if tendered by book-entry transfer, returned by credit to the account at the Book-Entry Transfer Facility designated herein) to the Holder unless otherwise provided in the "Special Issuance Instructions" or "Special Delivery Instructions" boxes of this Letter of Transmittal. 4. SIGNATURES ON THIS LETTER OF TRANSMITAL, BOND POWERS AND ENDORSEMENTS; GUARANTEE 0F SIGNATURES. If this Letter of Transmittal is signed by the Holder(s) of the Initial Notes tendered hereby the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If this Letter of Transmittal is signed by a participant in one of the Book-Entry Transfer Facilities whose name is shown as the owner of the Initial Notes tendered hereby, the signature must correspond with the name shown on the security position listing as the owner of the Initial Notes. If any of the Initial Notes tendered hereby are registered in the name of two or more Holders, all such Holders must sign this Letter of Transmittal. If any tendered Initial Notes are registered in client names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of transmittal and any necessary accompanying documents as there are different names in which certificates are held. If this Letter of transmittal or any certificates for Initial Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted with this Letter of Transmittal. IF THIS LETTER OF TRANSMITTAL IS EXECUTED BY A PERSON OR ENTITY WHO IS NOT THE REGISTERED HOLDER, THEN THE REGISTERED HOLDER MUST SIGN A VALID BOND POWER WITH THE SIGNATURE OF SUCH REGISTERED HOLDER GUARANTEED BY A PARTICIPANT IN A RECOGNIZED MEDALLION SIGNATURE PROGRAM (A "MEDALLION SIGNATURE GUARANTOR"). 12 No signature guarantee is required if (i) this Letter of Transmittal is signed by the registered Holder(s) of the Initial Notes tendered herewith (or by a participant in one of the Book-Entry Transfer Facilities whose name appears on a security position listing as the owner of Initial Notes) and certificates for Exchange Notes or for any Initial Notes for principal amounts not tendered or not accepted for exchange are to be issued directly to such Holder(s) or, if tendered by a participant in one of the Book-Entry Transfer Facilities, any Initial Notes for principal amounts not tendered or not accepted for exchange are to be credited to such participant's account at such Book-Entry Transfer Facility and neither the "Special Issuance Instructions" box nor the "Special Delivery Instructions" box of this Letter of Transmittal has been completed or (ii) such Initial Notes are tendered for the account of an Eligible Institution. IN ALL OTHER CASES ALL SIGNATURES ON LETTERS OF TRANSMITTAL ACCOMPANYING INITIAL NOTES MUST BE GUARANTEED BY A MEDALLION SIGNATURE GUARANTOR. In all such other cases (including if this Letter of Transmittal is not signed by the Holder), the Holder must either properly endorse the certificates for Initial Notes tendered or transmit a separate, properly completed bond power with this Letter of Transmittal (in either case, executed exactly as the name(s) of the registered Holder(s) appear(s) on such Initial Notes, and, with respect to a participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Initial Notes, exactly as the name(s) of the participant(s) appear(s) on such security position listing), with the signature on the endorsement or bond power guaranteed by a Medallion Signature Guarantor, unless such certificates or bond powers are executed by an Eligible Institution. Endorsements on certificates for Initial Notes and signatures on bond powers provided in accordance with this Instruction 4 by registered Holders not executing this Letter of Transmittal must be guaranteed by a Medallion Signature Guarantor. 5. SPECIAL ISSUANCE AND SPECIAL DELIVERY INSTRUCTIONS. Tendering Holders should indicate in the applicable box or boxes the name and address to which Initial Notes for principal amounts not tendered or not accepted for exchange or certificates for Exchange Notes, if applicable, are to be issued or sent, if different from the name and address of the Holder signing this Letter of Transmittal. In the case of payment to a different name, the taxpayer identification or social security number of the person named must also be indicated. 6. TAXPAYER IDENTIFICATION NUMBER. Each tendering Holder is required to provide the Exchange Agent with the Holder's social: security or Federal employer identification number, on Substitute Form W-9 which is provided under "Important Tax Information" below, or alternatively to establish another basis for exemption from backup withholding. A Holder must cross out Item (2) in the Certification box in Part III of Substitute Form W-9 if such Holder is subject to backup withholding. Failure to provide the information on the form may subject such Holder to 31% Federal backup withholding tax on any payment made to the Holder with respect to the Exchange Offer. The appropriate box in Part I of Substitute Form W-9 should be checked if the tendering or consenting Holder has not been issued a Taxpayer Identification Number ("TIN") and has either applied for a TIN or intends to apply for a TIN in the near future. If the box in Part I of Substitute Form W-9 is checked, the Holder should also sign the attached Certification of Awaiting Taxpayer Identification Number. If the Exchange Agent is not provided with a TIN within 60 days thereafter, the Exchange Agent will withhold 31% on all such payments of the Exchange Notes until a TIN is provided to the Exchange Agent. 7. TRANSFER TAXES. The Company will pay all transfer taxes applicable to the exchange and transfer of lnitial Notes pursuant to the Exchange Offer, except if (i) deliveries of certificates for Initial Notes for principal amounts not tendered or not accepted for exchange are registered or issued in the name of any person other than the Holder of 13 Initial Notes tendered thereby, (ii) tendered certificates are registered in the name of any person other than the person signing this Letter of Transmittal or (iii) a transfer tax is imposed for any reason other than the exchange of Initial Notes pursuant to the Exchange Offer, in which case the amount of any transfer taxes (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith the amount of taxes will be billed directly to such tendering Holder. 8. IRREGULARITIES. All questions as to the form of all documents and the validity (including time of receipt) and acceptance of all tenders and withdrawals of Initial Notes will be determined by the Company, in its sole discretion which determination shall be final and binding. ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS OF INITIAL NOTES WILL NOT BE CONSIDERED VALID. The Company reserves the absolute right to reject any and all tenders of Initial Notes that are not in proper form or the acceptance of which, in the Company's opinion, would be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Initial Notes. The Company's interpretations of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding. Any defect or irregularity in connection with tenders of Initial Notes must be cured within such time as the Company determines, unless waived by the Company. Tenders of Initial Notes shall not be deemed to have been made until all defects or irregularities have been waived by the Company or cured. A defective tender (which defect is not waived by the Company or cured by the Holder) will not constitute a valid tender of Initial Notes and will not entitle the Holder to Exchange Notes. None of the Company, the Trustee, the Exchange Agent or any other person will be under any duty to give notice of any defect or irregularity in any tender or withdrawal of any Initial Notes, or incur any liability to Holders for failure to give any such notice. 9. WAIVER OF CONDITIONS. The Company reserves the right, in its reasonable discretion, to amend or waive any of the conditions to the Exchange Offer. 10. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES FOR INITIAL NOTES. Any Holder whose certificates for Initial Notes have been mutilated, lost, stolen or destroyed should write to or telephone the Trustee at the address or telephone number set forth on the cover of this Letter of Transmittal for the Exchange Agent. 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering Initial Notes and requests for assistance or additional copies of the Prospectus, this Letter of Transmittal, the Notice of Guaranteed Delivery or other documents may be directed to the Exchange Agent, whose address and telephone number appear on the cover of this Letter of Transmittal. IMPORTANT TAX INFORMATION Under Federal income tax laws, a Holder who tenders Initial Notes prior to receipt of the Exchange Notes is required to provide the Exchange Agent with such Holder's correct TIN on the Substitute Form W-9 below or otherwise establish a basis for exemption from backup withholding. If such Holder is an individual, the TIN is his or her social security number. If the Exchange Agent is not provided with the correct TIN, a $50 penalty may be imposed by the Internal Revenue Service ("IRS") and payments, including any Exchange Notes, 14 made to such Holder with respect to Initial Notes exchanged pursuant to the Exchange Offer may be subject to backup withholding. Certain Holders (including among others, all corporations and certain foreign persons) are not subject to these backup withholding and reporting requirements. Exempt Holders should indicate their exempt status on the Substitute Form W-9. A foreign person may qualify as an exempt recipient by submitting to the Exchange Agent a properly completed IRS Form W-8 signed under penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. Holders are urged to consult their own tax advisors to determine whether they are exempt. If backup withholding applies, the Exchange Agent is required to withhold 31% of any payments made to the Holder or other payee. Backup withholding is not an additional Federal income tax. Rather, the Federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the IRS. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments, including any Exchange Notes, made with respect to Initial Notes exchanged pursuant to the Exchange Offer, the Holder is required to provide the Exchange Agent with (i) the Holder's correct TIN by completing the form below, certifying that the TIN provided on the Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that (A) such Holder is exempt from backup withholding, (B) the Holder has not been notified by the IRS that the Holder is subject to backup withholding as a result of failure to report all interest or dividends or (C) the IRS has notified the Holder that the Holder is no longer subject to backup withholding, and (ii) if applicable, an adequate basis for exemption. WHAT NUMBER TO GIVE THE EXCHANGE AGENT The Holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered Holder. If the Initial Notes are held in more than one name or are held not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 15 - -------------------------------------------------------------------------------- PAYOR'S NAME: EAGLE-PICHER INDUSTRIES, INC. - -------------------------------------------------------------------------------- PAYEE INFORMATION (Please print or type): Individual or business name (if joint account list first and circle the name of person or entity whose number you furnish in Part 1 below): --------------------------------------------------------------------------- SUBSTITUTE Check appropriate box: Form W-9 [ ] Individual/Sole Proprietor [ ] Corporation [ ] Partnership [ ] Other Department of the Treasury Internal _________________________________________________________________________ Revenue Service Address _________________________________________________________________________ City, State and Zip Code _________________________________________________________________________ _________________________________________________________________________ PART I TAXPAYER IDENTIFICATION NUMBER Social security number: ("TIN"): Enter your TIN in the box at right. For individuals this is your social security _______________________ number; for other entities it is your employer identification number. Refer to the chart on page 1 of the Guidelines for Certification of Taxpayer Identification Employer identification Number on Substitute Form W-9 (the number: "Guidelines") for further clarification. If you do not have a TIN, see instructions on ________________________ how to obtain a TIN on page 2 of the Guidelines, check the appropriate box below indicating that you have applied for a TIN and, in addition to the Part III APPLIED FOR TIN [ ] Certification, sign the attached Certification of Awaiting Taxpayer Identification Number. ------------------------------------------------------------------------ PART II Payees Exempt From Backup Withholding: Check box. (See page 2 of the Guidelines for further clarification. Even if you are exempt from backup withholding, you should still complete and sign the certification below): Exempt [ ] - --------------------------------------------------------------------------------------------------- REQUEST FOR TAXPAYER PART III CERTIFICATION: You must cross out item 2 below if you IDENTIFICATION NUMBER have been notified by the Internal Revenue Service (the "IRS") AND CERTIFICATION that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return (See page 2 of the Guidelines for further clarification). Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me) and 2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, (b) I have not been notified by the IRS that I am subject to backup withholding as a result of a failure to report all interest or dividends or (c) the IRS has notified me that I am no longer subject to backup withholding. Signature: ___________________________ Date:______________________ - ------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS. 16 - -------------------------------------------------------------------------------- YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU CHECKED THE BOX "APPLIED FOR TIN" IN PART I OF SUBSTITUTE FORM W-9 CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify, under penalties of perjury, that a TIN has not been issued to me, and either (a) I have mailed or delivered an application to receive a TIN to the appropriate IRS Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that I must provide a TIN to the payor within 60 days of submitting this Substitute Form W-9 and that if I do not provide a TIN to the payor within 60 days, the payor is required to withhold 31% of all reportable payments thereafter to me until I furnish the payor with a TIN. Signature: ________________________________________ Date: ______________________ - -------------------------------------------------------------------------------- 17 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 A. TIN--The Taxpayer Identification Number for most individuals is their social security number. Refer to the following chart to determine the appropriate number:
- ------------------------------------------------------------------------------------------ GIVE THE SOCIAL SECURITY OR EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF: - ------------------------------------------------------------------------------------------ 1. Individual The individual 2. Two or more individuals (joint The actual owner of the account or, if account) combined funds, the first individual on the account (1) 3. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. Revocable savings trust (grantor The grantor-trustee(1) is also trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under State law 5. Sole proprietorship The owner(3) 6. A valid trust, estate or pension Legal entity(4) trust 7. Corporate The corporation 8. Association, club, religious, The organization charitable, educational or other tax exempt organization 9. Partnership The partnership 10. A broker or registered nominee The broker or nominee 11. Account with the Department of The public entity Agriculture - --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's name and social security number. (3) Show the individual's name. You may also enter your business name or "doing business as" name. You may use either your Social Security number or your employer identification number. (4) List first and circle the name of the legal trust, estate or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. B. EXEMPT PAYEES--The following lists exempt payees. If you are exempt, you must nonetheless complete the form and provide your TIN in order to establish that you are exempt. Check the box in Part II of the form, sign and date the form. For this purpose, Exempt Payees include: (1) a corporation; (2) an organization exempt from tax under section 501(a), or an individual retirement plan (IRA) or a custodial account under section 403(b)(7); (3) the United States or any of its agencies or instrumentalities; (4) a state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities; (5) a foreign government or any of its political subdivisions, agencies or instrumentalities; (6) an international organization or any of its agencies or instrumentalities; (7) a foreign central bank of issue; (8) a dealer in securities or commodities required to register in the U.S. or a possession of the U.S.; (9) a real estate investment trust; (10) an entity or person registered at all times during the tax year under the Investment Company Act of 1940; (11) a common trust fund operated by a bank under section 584(a); and (12) a financial institution. 18 C. OBTAINING A NUMBER--If you do not have a taxpayer identification number or you do not know your number, obtain Form SS-5, application for a Social Security Number, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. D. PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, interest or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not payees are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend and certain other payments to a payee who does not furnish a taxpayer identification number. Certain penalties may also apply. E. PENALTIES-- (1) Penalty for Failure to Furnish Taxpayer Identification Number. If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) Failure to Report Certain Dividend and Interest Payments. If you fail to include any portion of an includable payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) Civil Penalty for False Information with Respect to Withholding. If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) Criminal Penalty for Falsifying Information. Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. 19 INSTRUCTIONS TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF 9 3/8% SENIOR SUBORDINATED NOTES DUE 2008 OF EAGLE-PICHER INDUSTRIES, INC. The undersigned hereby acknowledges receipt of the Prospectus dated May , 1998 (the "Prospectus") of Eagle-Picher Industries, Inc., an Ohio corporation (the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Company's offer (the "Exchange Offer") to exchange $1,000 in principal amount of its 9 3/8% Senior Subordinated Notes due 2008 (the "Exchange Notes") for each $1,000 in principal amount of its outstanding 9 3/8% Senior Subordinated Notes due 2008 (the "Initial Notes"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder, as to the action to be taken by you relating to the Exchange Offer with respect to the Initial Notes held by you for the account of the undersigned. The aggregate face amount of the Initial Notes held by you for the account of the undersigned is (fill in amount): $____________ of the 9 3/8% Senior Subordinated Notes due 2008. With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): [ ] To TENDER the following Initial Notes held by you for the account of the undersigned (insert principal amount of Initial Notes to be tendered*, if any): * The minimum permitted tender is $1,000 in principal amount of Initial Notes. All tenders must be in integral multiples of $1,000 of principal amount. [ ] NOT to TENDER any Initial Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Initial Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a Beneficial Owner (as defined in the Letter of Transmittal), including but not limited to representations to the effect that (i) the undersigned's principal residence is in the state of (fill in state) _________________, (ii) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (iii) the undersigned is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution (within the meaning of the Securities Act) of the Exchange Notes, (iv) except as otherwise disclosed in writing herewith, the undersigned acknowledges that any person participating in the Exchange Offer with the intention or for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale of Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission set forth in the no-action letters that are discussed in the section of the Prospectus entitled "The Notes Exchange Offer--Purpose and Effect of the Notes Exchange Offer"; (b) to make such agreements, representations and warranties on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as may be necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of such Initial Notes. 20 - -------------------------------------------------------------------------------- SIGN HERE Name of Beneficial Owner(s): ___________________________________________________ Signature(s): __________________________________________________________________ Name(s) (please print): ________________________________________________________ Address: _______________________________________________________________________ ________________________________________________________________________________ Telephone Number:_______________________________________________________________ Taxpayer Identification or Social Security Number: _____________________________ Date: __________________________________________________________________________ - -------------------------------------------------------------------------------- 21 EX-99.2 40 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY OF 9 3/8% SENIOR SUBORDINATED NOTES DUE 2008 OF EAGLE-PICHER INDUSTRIES, INC. This form, or one substantially equivalent hereto, must be used by any Holder of 9 3/8% Senior Subordinated Notes due 2008, (the "Initial Notes") of Eagle-Picher Industries, Inc., an Ohio corporation (the "Company"), who wishes to tender Initial Notes pursuant to the Company's Exchange Offer, as defined in the Prospectus dated May [ ] 1998 (the "Prospectus"), and (i) whose Initial Notes are not immediately available or (ii) who cannot deliver such Initial Notes or any other documents required by the Letter of Transmittal on or before the Expiration Date (as defined in the Prospectus) or (iii) who cannot comply with the book-entry transfer procedure on a timely basis. This form may be delivered by facsimile transmission, mail or hand delivery to the Exchange Agent. See "The Notes Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. EAGLE-PICHER INDUSTRIES, INC. NOTICE OF GUARANTEED DELIVERY THE BANK OF NEW YORK, AS EXCHANGE AGENT By Facsimile By Hand or Overnight Courier (eligible institutions only): By Registered or Certified Mail: 101 Barclay Street, (212) 815-6339 101 Barclay Street, Corporate Trust Window New York, New York 10286 Ground Level Attn: Reorganization Section, 7E; New York, New York 10286 To Confirm Facsimile or Santino Ginocchietti Attn: Reorganization Section, for Information Call: 7E; Santino Ginocchietti (212) 815-2963
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to the Company upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Initial Notes specified below pursuant to the guaranteed delivery procedures set forth under the caption "The Notes Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. By so tendering, the undersigned does hereby make, at and as of the date hereof, the representations and warranties of a tendering Holder of Initial Notes set forth in the Letter of Transmittal. The undersigned hereby tenders the Initial Notes listed below: Certificate Number(s) (If Available) Principal Amount Tendered - ---------------------------------------------- ------------------------------------------ - ---------------------------------------------- ------------------------------------------ - ---------------------------------------------- ------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the death, incapacity, or dissolution of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. If Initial Notes will be tendered by book-entry transfer please provide the following information: Name of Tendering Institution: - ---------------------------------------------- ------------------------------------------ The Depository Trust Company Account Number: ------------------------------------------ Signature(s) - ---------------------------------------------- ------------------------------------------ ------------------------------------------ Name(s) (please print) ------------------------------------------ Street Address ------------------------------------------ City, State and Zip Code - ---------------------------------------------- ------------------------------------------ Date Area Code and Telephone Number
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a participant in a Recognized Signature Guarantee Medallion Program, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or a facsimile thereof), together with the Initial Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Initial Notes into the Exchange Agent's account at the Depository Trust Company, pursuant to the procedure for book-entry transfer set forth in the Prospectus, and any other required documents, all by 5:00 p.m., New York City time, on the third New York Stock Exchange trading day following the Expiration Date (as defined in the Prospectus). - ---------------------------------------------- ------------------------------------------ Name of Firm Authorized Signature - ---------------------------------------------- ------------------------------------------ Street Address Name (please print) - ---------------------------------------------- City, State and Zip Code - ---------------------------------------------- ------------------------------------------- Area Code and Telephone Number Date
DO NOT SEND CERTIFICATES FOR INITIAL NOTES WITH THIS FORM. ACTUAL SURRENDER OR CERTIFICATES FOR INITIAL NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. INSTRUCTIONS 1. Delivery of this Notice of Guaranteed Delivery. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at one of its addresses set forth on the cover hereof prior to the Expiration Date. The method of delivery to the Exchange Agent of this Notice of Guaranteed Delivery and all other required documents is at the election and risk of the Holder but, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that Holders use an overnight or hand delivery service, properly insured. If such delivery is by mail, it is recommended that the Holder use properly insured, registered mail with return receipt requested. For a further description of the guaranteed delivery procedures, see the Prospectus under the caption "The Notes Exchange Offer--Guaranteed Delivery Procedures." In all cases, sufficient time should be allowed to assure timely delivery. No Notice of Guaranteed Delivery should be sent to the Company. 2. Signature on this Notice of Guaranteed Delivery; Guarantee of Signatures. If this Notice of Guaranteed Delivery is signed by the registered Holder(s) of the Initial Notes referred to herein, then the signature must correspond with the name(s) as written on the face of the Initial Notes without alteration, addition or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing and, unless waived by the Company, evidence satisfactory to the Company of their authority so to act must be submitted with this Notice of Guaranteed Delivery. 2. Requests for Assistance or Additional Copies. Questions relating to the Exchange Offer or the procedure for consenting and tendering as well as requests for assistance or for additional copies of the Prospectus, the Letter of Transmittal and this Notice of Guaranteed Delivery, may be directed to the Exchange Agent at the address set forth on the cover hereof or to your broker, dealer, commercial bank or trust company. -----END PRIVACY-ENHANCED MESSAGE-----