-----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, IX9MOyuApqc6rfMXIAwXhwXd51wsSTr6RoTBtccr9ofXPku7wnMHO1DTbuAduiB/ ZsmQlYSsp7xYy1ypRUgimw== 0000950152-99-001470.txt : 19990305 0000950152-99-001470.hdr.sgml : 19990305 ACCESSION NUMBER: 0000950152-99-001470 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19981130 FILED AS OF DATE: 19990301 DATE AS OF CHANGE: 19990304 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER INDUSTRIES INC CENTRAL INDEX KEY: 0000030927 STANDARD INDUSTRIAL CLASSIFICATION: 3714 IRS NUMBER: 310268670 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49957 FILM NUMBER: 99554836 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: 250 E FIFTH ST STREET 2: STE 500 CITY: CINCINNATI STATE: OH ZIP: 45201-0779 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: 3711 IRS NUMBER: 133989553 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49957-01 FILM NUMBER: 99554837 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: 250 E FIFTH ST STREET 2: STE 500 CITY: CINCINNATI STATE: OH ZIP: 45201-0779 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAISY PARTS INC CENTRAL INDEX KEY: 0001059567 STANDARD INDUSTRIAL CLASSIFICATION: 3714 IRS NUMBER: 381406772 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49957-02 FILM NUMBER: 99554838 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: 3714 IRS NUMBER: 311215706 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49957-03 FILM NUMBER: 99554839 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: 3714 IRS NUMBER: 311235685 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49957-04 FILM NUMBER: 99554840 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: 3714 IRS NUMBER: 311452637 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49957-05 FILM NUMBER: 99554841 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: 3714 IRS NUMBER: 311188662 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49957-06 FILM NUMBER: 99554842 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: 3714 IRS NUMBER: 380946293 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49957-07 FILM NUMBER: 99554843 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: 250 E FIFTH ST STREET 2: STE 500 CITY: CINCINNATI STATE: OH ZIP: 45202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICHIGAN AUTOMOTIVE RESEARCH CORP CENTRAL INDEX KEY: 0001059575 STANDARD INDUSTRIAL CLASSIFICATION: 3714 IRS NUMBER: 382185909 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49957-08 FILM NUMBER: 99554844 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: 250 E FIFTH ST ST CITY: CINCINNATI STATE: OH ZIP: 45202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER TECHNOLOGIES LLC CENTRAL INDEX KEY: 0001059576 STANDARD INDUSTRIAL CLASSIFICATION: 3714 IRS NUMBER: 311587660 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49957-09 FILM NUMBER: 99554845 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 10-K 1 EAGLE-PICHER INDUSTRIES, INC. 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------ Form 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended November 30, 1998 Commission file number 333-49957 ------------------------------------ EAGLE-PICHER INDUSTRIES, INC. An Ohio Corporation I.R.S. Employer Identification NO. 31-0268670 ------------------------------------ 250 EAST FIFTH STREET, SUITE 500, P. O. BOX 779, CINCINNATI, OHIO 45201 Registrant's telephone number, including area code: 513-721-7010 ------------------------------------ Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] No voting stock is held by non-affiliates of the registrant. Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [X] No [ ] 100 shares of common capital stock, no par value, were outstanding at February 24, 1999. 2 TABLE OF ADDITIONAL REGISTRANTS
JURISDICTION COMMISSION IRS EMPLOYER OF INCORPORATION FILE IDENTIFICATION NAME OR ORGANIZATION NUMBER NUMBER ---- ---------------- ------------ -------------- Eagle-Picher Holdings, Inc....................... Delaware 333-49957-01 13-3989553 Daisy Parts, Inc................................. Michigan 333-49957-02 38-1406772 Eagle-Picher Development Co., Inc................ Delaware 333-49957-03 31-1215706 Eagle-Picher Far East, Inc....................... Delaware 333-49957-04 31-1235685 Eagle-Picher Fluid Systems, Inc.................. Michigan 333-49957-05 31-1452637 Eagle-Picher Minerals, Inc....................... Nevada 333-49957-06 31-1188662 Eagle-Picher Technologies, LLC................... Delaware 333-49957-09 31-1587660 Hillsdale Tool & Manufacturing Co................ Michigan 333-49957-07 38-0946293 Michigan Automotive Research Corp................ Michigan 333-49957-08 38-2185909
\ 3 TABLE OF CONTENTS
ITEM PAGE - - ---- ---- PART I 1. Business.................................................... 3 2. Properties.................................................. 8 3. Legal Proceedings........................................... 9 4. Submission of Matters to a Vote of Security Holders......... 14 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters......................................... 14 6. Selected Financial Data..................................... 14 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 15 7a. Quantitative and Qualitative Disclosures About Market Risk........................................................ 24 8. Financial Statements and Supplementary Data................. 26 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 67 PART III 10. Directors and Executive Officers of the Registrant.......... 67 11. Executive Compensation...................................... 69 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 76 13. Certain Relationships and Related Transactions.............. 77 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................................... 78 Signatures.................................................. Exhibit Index...............................................
4 PART I ITEM 1. BUSINESS. General Development of Business Eagle-Picher Industries, Inc. ("Company"), a diversified manufacturing, mining and technology company, was incorporated in 1867 under the laws of the State of Ohio as an outgrowth of a business enterprise founded in Cincinnati, Ohio in 1843. The Company was acquired by Eagle-Picher Holdings, Inc. ("Parent"), a majority-owned subsidiary of Granaria Industries B.V., on February 24, 1998 from the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust ("PI Trust") ("Acquisition") for $702.5 million. On November 18, 1996, the U.S. Bankruptcy Court together with the U.S. District Court for the Southern District of Ohio issued an order confirming the Third Amended Plan of Reorganization ("Plan") of the Company and seven of its domestic subsidiaries, which became effective November 29, 1996. The Company had filed for protection under chapter 11 of the U.S. Bankruptcy Code in 1991 as a consequence of a cash shortfall resulting from the Company's inability to satisfy certain immediate asbestos litigation liabilities. 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 and the Company has no further liability in connection with such claims. Those claims will be channeled to the PI Trust, which is an independently administered qualified settlement trust which was established to resolve and satisfy those claims. Under the terms of the Plan, all of the then outstanding common stock of the Company was canceled and all of the newly issued common stock of the reorganized Company was contributed to the PI Trust, together with certain notes and cash. The Company conducts its business through both unincorporated divisions and separately incorporated subsidiaries, both of which are referred to herein as divisions. Financial Information About Industry Segments. The Company's major industry segments are: 1. Automotive; 2. Machinery; and 3. Industrial. Industry Segment Data is included in Item 8 below, the Company's Consolidated Financial Statements for the nine months ended November 30, 1998, the three months ended February 28, 1998 and the years ended November 20, 1997 and 1996. (See Note Q.) Narrative Description of Business THE AUTOMOTIVE GROUP The Automotive Group is primarily engaged in the production and sale of mechanical parts for passenger cars, trucks, vans and sport utility vehicles primarily to the major automotive manufacturers and their suppliers in North America, Europe and Asia. The Automotive Group is composed of the following product groups: Precision Machined Components, Rubber Coated Metal Products and Other Automotive Products and Services which consists of Fluid Systems Products, Molded Rubber Products, Aluminum Casting Products and Automotive Services. 3 5 The following table sets forth the percentage of the Company's revenue contributed by each product line:
1998 1997 1996 ---- ---- ---- Precision Machined Components............................... 28.2% 22.7% 20.4% Rubber Coated Metal Products................................ 9.2 8.9 9.4 Other Automotive Products and Services...................... 10.6 8.9 8.0 Divested Automotive Products................................ 3.0 7.6 11.5 ---- ---- ---- Total............................................. 51.0% 48.1% 49.3% ==== ==== ====
Precision Machined Components. The Hillsdale Tool Division specializes in the design, manufacture and distribution of precision-machined aluminum and steel parts. Typical machined parts would include transmission pump assemblies, vibration dampening devices and a variety of other precision machined castings and forgings which are designed and engineered for engine, transmission and driveline applications. These parts are also produced in Mexico and the United Kingdom. The market for precision machined components tends to have a few strong and well-positioned competitors, including the original equipment manufacturers ("OEM's") themselves. The Automotive Group competes in this market primarily on the basis of price, delivery, quality and service. Rubber Coated Metal Products. The Wolverine Gasket Division coats steel and aluminum with elastomeric compounds and produces materials that are particularly suitable for high compression and high temperature applications. These materials are typically used in sealing and insulating products such as compressor gaskets for air conditioning units, brake noise insulators and powertrain applications such as head gaskets. Many of these parts are also manufactured in Germany. The market for rubber coated metal products is highly fragmented. While the Automotive Group competes against a variety of different companies in the geographical areas it supplies, it has no primary competitor in this market. Other Automotive Products and Services. The Fluid Systems Divisions, located both in the United States and the United Kingdom, employ the elastomeric extrusion process to produce multi-layered tubing and hose assemblies for fuel, emission, brake, clutch and suspension systems. The Company is developing new products to meet new environmental fuel, fluid and emission requirements. Customers include some of the world's major OEM's and Tier I suppliers. The Rubber Molding Division manufactures small precision injection molded rubber parts used in sealing shock absorbing and noise reduction applications. Similar parts are manufactured at a plant in Spain. Although the Company is one of the top three suppliers for many of the seals it produces, the market for these products is highly fragmented. In niche markets in which the Company competes, it competes primarily on the basis of quality and cost. The Ross Aluminum Foundries Division produces aluminum turbocharger components, primarily for diesel engines, and other engine and specialty automotive components. The Company believes it is a relatively small participant in the market for automotive castings in aluminum. The Michigan Automotive Research Corporation offers vehicle and vehicle system manufacturers a comprehensive range of testing programs for engines, power trains and power train components. Its customers include the OEM's, their suppliers and manufacturers of other types of vehicles. The Automotive Group distributes its products primarily through internal sales personnel. The Group also has sales and engineering offices in Japan and Europe to serve those markets. Generally, competitive conditions for this Group are characterized by a decreasing amount of competitors, an increasing amount of foreign competition, an increased emphasis on quality and intense pricing pressures from major customers. Consolidated sales to the Ford Motor Company amounted to $121.0 million in the nine months ended November 30, 1998, $39.8 million in the three months ended February 28, 1998, $170.5 million in 1997 and $167.7 million in 1996. No other customer in the Automotive Group or any other Group accounted for 10% or more of consolidated net sales. 4 6 THE MACHINERY GROUP The Machinery Group is involved in manufacturing products for various industrial markets. Its products can be segregated into three product lines: Special Purpose Batteries, Construction Equipment and Other Machinery Products. The following table sets forth the percentage of the Company's total net sales contributed by each product line:
1998 1997 1996 ---- ---- ---- Special Purpose Batteries................................... 15.0% 14.4% 12.2% Construction Equipment...................................... 12.8 10.7 10.7 Other Machinery Products.................................... 3.4 3.3 4.0 Divested Machinery Products................................. -- 1.4 2.0 ---- ---- ---- Total............................................. 31.2% 29.8% 28.9% ==== ==== ====
Special Purpose Batteries. The Machinery Group designs, manufactures and tests special purpose batteries for advanced value-added products for telecommunications, aerospace and defense applications, such as satellites, launch vehicles and missiles. Major customers for these batteries include the U.S. Government, satellite builders and aircraft manufacturers. The Company is a recognized leader in this business. It bids competitively for numerous fixed price government contracts for special purpose batteries and competes primarily on the basis of quality, performance and cost. It has a few competitors for some highly technological products, but many large and small competitors for its other products such as lead-acid batteries, which are used in toys and emergency lighting systems. Construction Equipment. The Construction Equipment Division manufactures primarily three construction equipment products: wheel tractor scrapers, heavy-duty industrial forklift trucks and component parts for construction machinery. The Company is the exclusive source of certain models of wheel tractor scrapers to Caterpillar, Inc. The Company sells its own branded line of heavy-duty industrial forklift trucks, which are primarily sold to independent rental fleets and also to paper and automotive manufacturers. The industrial forklift market is highly fragmented, however, the Company participates in niche markets, such as the rough terrain market, where it enjoys significant market share. Other Machinery Products. The Cincinnati Industrial Machinery Division produces high-volume metal cleaning and finishing systems for industrial applications, including specialized high-volume can washing and coating machinery for the manufacturers of two-piece cans for the food and beverage industry. Other products produced by this Group include complex aluminum castings. THE INDUSTRIAL GROUP The Industrial Group produces a variety of products for industrial markets, principally manufacturers of consumer products. It is composed of Specialty Materials and Other Industrial Products. The following table sets forth the percentage of the Company's total net sales contributed by each product line:
1998 1997 1996 ---- ---- ---- Specialty Materials......................................... 9.5% 11.3% 9.9% Other Industrial Products................................... 8.3 7.5 7.5 Divested Industrial Products................................ -- 3.3 4.4 ---- ---- ---- Total............................................. 17.8% 22.1% 21.8% ==== ==== ====
Specialty Materials. The Company manufactures and tests high-purity specialty material compounds for a wide range of services and products. The Company is a major source for high purity isotopically enriched boron compounds used in nuclear applications. The boron isotope produced by the Company is a material that absorbs neutrons and is used as a moderator in nuclear reactors. There are few competitors in this market, but there is competition from products made from alternate materials. This Division also refines rare metals, such as high purity germanium compounds. Germanium is used in satellite applications such as substrates for solar cells which are used to power satellites. The major customers for germanium products include satellite builders and other 5 7 aerospace companies. The Industrial Group also manufactures bulk pharmaceutical products and industrial chemicals, and produces a wide range of super-clean containers, which meet strict EPA protocols, for environmental sampling. Other Industrial Products. The Minerals Division mines and refines diatomaceous earth products and perlite filter aid products, which are used in high purity filtration applications primarily by the food and beverage industry and as industrial absorbents. The Minerals Division is second to the Allegheny Corporation in the sale of certain filter aid products that are sold both directly and through distributors to many large and small customers. In the North American market for industrial absorbents, the Company has a variety of competitors due to a number of other materials, such as clay, which are also being used for this purpose. The Industrial Group also manufactures injection molded rubber parts used in plumbing and packaging applications. DIVESTED DIVISIONS During the fiscal year ended November 30, 1997, the Company sold a number of divisions to fund repayment of notes issued during the reorganization process. These divisions were the Plastics Division, Fabricon Products Division and the Transicoil Division. The Company received net cash proceeds of $39.0 million and the aggregate loss on these transactions was $2.4 million. In June 1997, the assets of the former Suspension Systems Division were contributed to a joint venture ("E-P-Boge") with Fichtel & Sachs Industries, Inc. ("F & S"). The Company maintained a 45% interest in E-P-Boge, however F & S exercised its option to purchase the Company's interest in E-P-Boge in November 1998 for $5.0 million. At the same time, the Company's $2.8 million note from E-P-Boge was repaid. The Company sold its Trim Division as of October 31, 1998 for $14.5 million, however the transaction was held in escrow until certain conditions were met in December 1998. OTHER INFORMATION Raw Materials. The prices of raw materials are subject to volatility. The Company's principal raw materials are rubber, steel, zinc, nickel, germanium, boron and aluminum. 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. Intellectual Property. The Company holds more than 50 patents, primarily in the United States. 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. Backlog. At November 30, 1998 and 1997, the Company's order backlog was approximately $200.0 million and $250.0 million, respectively. The decline in backlog is due primarily to a decline in demand for special purpose batteries and semiconductor materials due to the completion of a major satellite project. The Company expects the order backlog outstanding at November 30, 1998 to be filled within the 1999 fiscal year. As is customary in the automotive industry, the Company enters into blanket purchase orders with its 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 backlog for the Automotive Group is not significant. Government Contracts. The Company's Industrial and Machinery Groups have contracts with the U.S. Government that have standard termination provisions. The U.S. Government retains the right to terminate the 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 the 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. 6 8 Research and Development. The Company spent approximately $14.1 million on research and development activities, primarily for the development of new products or the improvement of existing products in 1998. Comparable costs were $14.8 million in 1997 and $18.0 million in 1996. Amounts have declined due to the divestiture of divisions in 1997. Environmental Regulatory Compliance. The Company had capital expenditures of $.8 million and operating expenses (excluding depreciation) of approximately $9.8 million in the year ended November 30, 1998 for environmental matters. The Company estimates that its capital expenditures and operating expenses, including expenses for remedial activities, will be approximately $1.5 million and $13.3 million, respectively, in 1999. As of November 30, 1998, the Company has reserved $9.5 million in connection with environmental matters, and believes such reserves to be adequate under the circumstances. See Item 3.(c) for information with respect to various other environmental proceedings. Employees. As of November 30, 1998, the Company employed approximately 6,600 persons in its operations, of whom approximately 1,650 were salaried employees and 4,950 were hourly employees. Approximately 18% of the Company's hourly employees are represented by one of six labor organizations. The Company believes that its relations with its employees are generally good. Financial Information about Foreign and Domestic Operations and Export Sales Financial information about Foreign and Domestic Operations and Export Sales is included in Item 8 below, the Company's Consolidated Financial Statements for the nine months ended November 30, 1998, the three months ended February 28, 1998 and the years ended November 30, 1997 and 1996. (See Note Q.) 7 9 ITEM 2. PROPERTIES. The principal fixed assets of the Company consist of its manufacturing, processing and storage facilities and its transportation and plant vehicles. Substantially all of the Company's owned properties and assets are pledged as collateral under its syndicated senior loan facility. The following sets forth selected information regarding the Company's active manufacturing and processing facilities:
DESCRIPTION OF BUSINESS GROUP LOCATION PROPERTY INTEREST -------------- -------- ----------------- AUTOMOTIVE Domestic Ann Arbor, Michigan owned Blacksburg, Virginia (2 plant locations) owned Brighton, Michigan leased Hillsdale, Michigan (4 plant locations) owned Hamilton, Indiana owned Inkster, Michigan owned Jonesville, Michigan owned Leesburg, Florida owned Manchester, Tennessee leased(1) Norwich, Connecticut owned Pine Bluff, Arkansas leased Sidney, Ohio (2 plant locations) 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 (2 plant locations) owned & leased Grove, Oklahoma owned Joplin, Missouri (5 plant locations) owned & leased Lubbock, Texas owned Seneca, Missouri owned Sharonville, Ohio owned Stella, Missouri owned International Acuna, Coahuila, Mexico owned INDUSTRIAL(2) Domestic Clark Station, Nevada owned Galena, Kansas owned Harrisonville, Missouri owned Joplin, Missouri owned Lenexa, Kansas owned Lovelock, Nevada owned Miami, Oklahoma (3 plant locations) owned & leased Quawpaw, Oklahoma (2 plant locations) owned Vale, Oregon leased(1)
- - --------------- (1) The Company will become owner of each property upon payment in full of all existing industrial revenue bond obligations in connection with such property. (2) In addition to the facilities listed, the Company's Minerals Division has mining locations and numerous claims in Nevada, Oregon and California. 8 10 The Company owns or leases additional office space, including its corporate headquarters in Cincinnati, Ohio and sales offices in Europe and Asia, and warehouse space for certain of its operations. The Company's properties are adequate and suitable for its business and generally have capacity for expansion of existing buildings on owned real estate. Substantially all of its buildings have been well maintained and are in sound operating condition and regular use. 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 ("mining properties"). Not all of the mining properties are currently being mined. 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 transported by truck to separate processing facilities. As ore deposits are depleted, the Company reclaims the land in accordance with reclamation plans approved by the relevant federal, state and local regulators. A total of approximately 321,000 tons of materials were extracted from the Company's active mining properties in fiscal year 1998. The Company believes its diatomaceous earth reserves to range from 15 to 75 years and its perlite reserves to be in excess of 50 years at the current levels of extraction based on estimates prepared by its mining and exploration personnel. ITEM 3. LEGAL PROCEEDINGS. (A) Chapter 11 Proceedings. On January 7, 1991 ("Petition Date"), the Company and seven of its domestic subsidiaries each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Ohio, Western Division, in Cincinnati, Ohio ("Bankruptcy Court"). The subsidiaries that filed chapter 11 petitions are Daisy Parts, Inc., Transicoil Inc., Michigan Automotive Research Corporation ("MARCO"), EDI, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher Europe, Inc., and Hillsdale Tool & Manufacturing Co. On November 30, 1991, substantially all of the assets of EDI, Inc. were sold pursuant to authority granted by the Bankruptcy Court. In August 1997, all of the Company's shares of Transicoil Inc. were sold. All of the chapter 11 cases were consolidated for procedural purposes only under the caption: "In re Eagle-Picher Industries, Inc., et al.," Consolidated Case No. 1-91-00100, before the Honorable Burton Perlman, United States Bankruptcy Judge. In August 1996, the Company, together with the Injury Claimants' Committee and the Representative for Future Claimants who was appointed by the Bankruptcy Court, proposed the Plan. The Bankruptcy Court and the United States District Court for the Southern District of Ohio (the "Ohio District Court") jointly issued an order (the "Order") confirming the Plan on November 18, 1996 (the "Confirmation Date"). The Plan became effective and was consummated on November 29, 1996 (the "Consummation Date"). The major component of the Plan was a settlement of the Company's liability for present and future asbestos-related and lead-related personal injury claims arising out of business operations prior to the Petition Date. Under the Plan, it was agreed that these claims had a total value of $2 billion. Pursuant to the Plan, (i) the PI Trust was established and the Company contributed assets to the PI Trust valued at approximately $730 million in the aggregate (representing an approximately 37% distribution upon the $2 billion allowed claim of the asbestos and lead 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) a trust for the benefit of property damage claimants ("PD Trust") is to be established with $3 million in cash, an obligation of the Company which has been fully funded and is set aside pending establishment of the PD Trust. Pursuant to the Plan, the asbestos-related and lead-related claims were discharged and the Company has no further liability in connection with such claims. As a result, the Company was relieved 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 Company. In addition, the Order includes an injunction (the "Injunction"), which prohibits claimants with asbestos-related or lead-related claims from bringing actions against the Company, and instead requires these claimants to assert such claims only against the PI Trust or, as to 9 11 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 PI Trust assumed all liability and responsibility for asbestos-related and lead-related personal injury claims against the Company, and the PD Trust will assume 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 with respect to any past, present, or future asbestos-related or lead-related liabilities arising from or based upon business operations prior to the petition date. 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 the Company in asbestos personal injury lawsuits and have asserted claims against the Company for contribution, indemnity and subrogation. The allowance of contribution claims against the Company 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 United States Circuit Court of Appeals for the Sixth Circuit (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, is unconstitutional. The Sixth Circuit, in a decision and order issued December 21, 1998, affirmed the Order and dismissed the subject appeal as moot. Although the Co-Defendants could seek a review of the Sixth Circuit decision by the United States Supreme Court, the Company believes the likelihood of such an appeal is remote. As a result, the Order is expected to be final and nonappealable as of March 23, 1999. The Bankruptcy Court and the 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 the Ohio District Court determined that the PI 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. 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 theoretical possibility 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 10 12 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 Company (as compared to the tens of thousands of asbestos-related claims asserted against the Company). On and shortly after the Consummation Date, the Company 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 PI Trust, $3.0 million set aside for the PD Trust 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 (the "Final Distribution"). Two claims asserted during the chapter 11 proceeding remain unresolved, an environmental claim and a product liability claim. As of November 30, 1998, the Company recorded a reserve on the Company's balance sheet in the amount of approximately $11.1 million for the Final Distribution (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, to be resolved, exclusive of administrative expenses, for an amount not in excess of the Final Distribution Reserve. Although a bankruptcy plan of reorganization generally serves to resolve all claims that arose prior to the chapter 11 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 Company has entered into the Environmental Settlement, discussed below, which is intended to relieve the Company of the burden of defending against certain claims asserted under Environmental Laws relating to conditions occurring prior to the date of the bankruptcy petition. The Environmental Settlement also governs certain environmentally related claims that have been or may yet be asserted against the Company 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 Company 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 chapter 11 proceedings. See " -- Environmental Matters." (B) Other. On January 25, 1996, Richard Darrell Peoples, a former employee of the Company, filed a Qui Tam suit under seal in the 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, allegedly on behalf of the U.S. Government. The U.S. Government, which has the ability to intervene in, and take control of, a Qui Tam suit, has declined the opportunity to intervene or take control of this Qui Tam suit. 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 accounting, manufacturing and testing procedures in connection with certain U.S. Government contracts. The allegations are similar to 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 matters. The Company, which believes that the U.S. Government did not incur any expense as a result of these matters, 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. On June 16, 1998, the Missouri Court granted the Company's Motion to Dismiss the Qui Tam suit. The Court, however, allowed Mr. Peoples to amend his complaint. Mr. Peoples filed an amended complaint, and Company's Motion to Dismiss the Amended Complaint was denied on January 20, 1999. 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. 11 13 On May 8, 1997, Caradon Doors and Windows, Inc. ("Caradon"), filed suit against the Company in the United States District Court for the Northern District of Georgia (the "Georgia Court") alleging breach of contract, negligent misrepresentation, and contributory infringement and seeking contribution and indemnification in an amount not less than $10 million (the "Caradon suit"). The Caradon suit arose out of patent infringement litigation between Caradon and Therma-Tru Corporation extending over the 1989-1996 time period, the result of which was for Caradon to be held liable for patent infringement in amount believed to be almost $10 million. In June 1997, the Company filed a Motion with the Bankruptcy Court seeking an order enforcing the Plan and the Confirmation Order against Caradon, and enjoining the Caradon suit from going forward. The Bankruptcy Court in a decision entered on December 24, 1997, held that the Caradon suit did violate the Plan and the Confirmation Order and enjoined Caradon from pursuing the Caradon suit. Caradon appealed the Bankruptcy Court's decision to the United States District Court for the Southern District of Ohio (the "District Court"), and in a decision entered on February 3, 1999, the District Court reversed and remanded the matter back to the Bankruptcy Court. 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. On May 29, 1997, Therma-Tru Corporation ("Therma-Tru") sought leave to file an amended complaint (the "Amended Complaint") adding the Company as a defendant in a suit filed by Therma-Tru in January 1997 (the "Therma-Tru suit") against Pease Industries, Inc. ("Pease") in the United States District Court for the Eastern District of Michigan (the "Michigan Court"). The Therma-Tru suit involves allegations of infringement by Pease for doors manufactured by Pease using fiber-reinforced plastic exterior skins supplied by the Company or its successor. In June 1997, the Company filed a Motion with the Bankruptcy Court seeking an order enforcing the Plan and the Confirmation Order against Therma-Tru, and enjoining the Therma-Tru suit from going forward as against the Company. The Bankruptcy Court in a decision entered on December 24, 1997, held that the Amended Complaint would violate the Confirmation Order only insofar as the Amended Complaint seeks relief for acts of the Company preceding the Confirmation Date. The Bankruptcy Court did not enjoin the prosecution of the Amended Complaint insofar as it related to acts of the Company after the Confirmation Date. Therma-Tru has appealed the Bankruptcy Court's decision with regard to the Company's acts prior to the Confirmation Date. That appeal remains pending. On September 15, 1997, Therma-Tru filed a separate amended complaint in the Therma-Tru suit adding Cambridge Industries, Inc. ("Cambridge") as an additional defendant. Cambridge was the purchaser of the Company's former Plastics Division and the Company is obligated to defend the Therma-Tru suit as it relates to Cambridge pursuant to an indemnity the Company gave to Cambridge when the Company sold its Plastics Division. That indemnity was for any door skins sold through October 31, 1997, that were later found to infringe on the Therma-Tru patent. The Company is vigorously defending the Therma-Tru suit as it proceeds against both the Company and Cambridge for sales of door skins after the Confirmation Date. 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. (C) Environmental Matters. During the pendency of the chapter 11 proceedings, the Company entered into a settlement agreement (the "Environmental Settlement") with the United States Environmental Protection Agency (the "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 Company in the bankruptcy proceeding. The Environmental Settlement resolved the majority of the approximately 1,100 environmental liability-related claims filed against the Company in the chapter 11 proceedings. In addition to resolving those claims filed in the chapter 11 proceedings, the Environmental Settlement provided that any additional claims by the Settling Parties against the Company 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 chapter 11 proceedings. Accordingly, if the Company is found 12 14 liable or settles any Additional Site claim, payment is limited to approximately 37% of the liability or settlement amount. Since entering into the Environmental Settlement, the Company has received notice from one or more of the Settling Parties that the Company may have liability in connection with 21 Additional Sites. The Company may be insured for a portion of these claims. The Company believes that its potential liability at 19 of these Additional Sites is not material to the Company's financial condition, results of operations or cash flows. The remaining two Additional Sites may require significant expenditures by the Company: the Henryetta Smelter Site at Henryetta, Oklahoma, and the RSR Smelter Site at Dallas, Texas. Henryetta Smelter Site. The Company received a notice from the 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 EPA performed remedial activities at the site at a cost of approximately $6.3 million. The Company expects to settle this claim with the EPA for some portion of that amount, and has offered to settle this claim for approximately $3.8 million. RSR Smelter Site. The Company received a notice from the 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 a date in or about 1984, for a period of at least one year in the early 1950s. The EPA has conducted and continues to conduct extensive remedial activities at this site, and the EPA's total expenses may amount to $60 million or more. The Company is one of more than 1,000 PRPs identified by the EPA in connection with this site and is not identified by the EPA as one of the 14 significant PRPs. The Company and the EPA have agreed in principle to settle this claim for $2.1 million. 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 approximately 37% of any amount for which it may be found liable or settle the claim. The Company expects that, pursuant to the terms of the Plan, such payments will be credited against the Final Distribution. The Company is undertaking remedial actions at a number of its current and former facilities and properties which are not covered under the Environmental Settlement Agreement. In connection with certain sales of its assets, including the Plastics and Transicoil Divisions sold in 1997 and the Bearings Division sold in 1989, the Company has agreed to undertake remedial actions 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 neither these remedial actions nor any claims under these indemnity provisions will have a material adverse effect on the Company's financial condition, results of operations or cash flows. The Company is undertaking closure and corrective actions under RCRA at two of its current 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 Company has entered into a Compliance Order on Consent with the State of Colorado's Department of Public Health and Environment effective January 28, 1999 (the "Consent Order"). Pursuant to the Consent Order, the Company will complete the closure of four former hazardous waste impoundments and evaluate appropriate remedial actions to address contaminated groundwater and soil at and around the facility. 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. 13 15 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. [NOT APPLICABLE] ITEM 6. SELECTED FINANCIAL DATA.
NINE MONTHS THREE MONTHS ENDED ENDED NOVEMBER 30 FEBRUARY 28 1998 1998 1997 1996 1995 1994 ------------ ------------- ------------- ------------- ------------- ------------- PREDECESSOR A PREDECESSOR A PREDECESSOR B PREDECESSOR B PREDECESSOR B (UNAUDITED) (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE) Net sales(A).................. $ 645,984 $ 205,842 $ 906,077 $ 891,287 $ 848,548 $ 756,741 Operating income(B)........... 15,470 11,027 45,558 62,106 63,087 58,281 Adjustment for asbestos litigation.................. -- -- -- 502,197 (1,005,511) -- Fresh-start revaluation(C).... -- -- -- 118,684 -- -- Interest expense.............. (36,313) (6,940) (31,261) (3,083) (1,926) (1,809) Income (loss) before taxes, extraordinary items and accounting changes.......... (19,064) 4,907 14,046 674,656 (934,871) 53,749 Income (loss) before extraordinary items and accounting changes.......... (14,364) 807 (3,854) 622,086 (944,171) 48,749 Extraordinary items and accounting changes(D)....... -- -- -- 1,524,305 -- -- Net income (loss)............. (14,364) 807 (3,854) 2,146,391 (944,171) 48,749 EBITDA(E)..................... 87,436 26,969 104,080 94,931 94,193 85,676 Basic earnings (loss) per common share: Income (loss) before extraordinary items and accounting change......... (143,640.00) 0.08 (0.39) 56.34 (85.51) 4.42 Extraordinary items and accounting changes........ -- -- -- 138.06 -- -- Basic earnings (loss) per common share.............. (143,640.00) 0.08 (0.39) 194.40 (85.51) 4.42 Weighted average number of common shares outstanding... 100 9,555,560 10,000,000 11,040,932 11,040,932 11,040,932 Dividends per share........... -- -- -- -- -- -- Total assets.................. 816,327 N/A 746,881 848,880 580,073 521,107 Total long-term debt(F)....... 484,356 N/A 273,397 386,439 20,628 21,622
- - --------------- (A) Includes net sales attributed to Divested Divisions of $18,600 in the nine months ended November 30, 1998, $7,076 in the three months ended February 28, 1998, $111,294 in 1997, $159,777 in 1996, $166,082 in 1995, and $157,009 in 1994. (B) Operating income is not indicative of trends as the results for the nine months ended November 30, 1998 (subsequent to the Acquisition) and those of both Predecessor A and Predecessor B were derived using different bases. (See Management's Discussion and Analysis Effects of the Acquisition and Reorganization on Operations and Financial Condition.) 14 16 (C) Fresh-start revaluation 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" (SOP 90-7"). (D) Reflects a gain of $1,525,540 in 1996 related to emergence from bankruptcy and reorganization in accordance with SOP 90-7 and a loss of $1,235 in 1996 due to an accounting change of the method used for computing LIFO inventories of boron, germanium and other rare metals. (E) EBITDA as used herein is defined as earnings before interest expense, income taxes, depreciation and amortization, certain one-time management compensation expenses, gain (loss) on sale of divisions, reorganization items and other non-cash charges. EBITDA is presented because management believes it is an indicator of a company's ability to service and incur debt. Includes EBITDA attributable to Divested Divisions of $446 in the nine months ended November 30, 1998, $(185) in the three months ended February 28, 1998, $4,302 in 1997, $5,543 in 1996, $11,252 in 1995 and $12,898 in 1994. (F) Long-term debt of $62,000 in 1995 and 1994 was included in liabilities subject to compromise. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. 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:
NINE MONTHS THREE MONTHS YEAR ENDED NOVEMBER 30, ENDED ENDED ------------------------------ NOV. 30, 1998 FEB. 28, 1998 1996 1997 ------------- ------------- ------------- ------------- (IN MILLIONS OF DOLLARS) PREDECESSOR A PREDECESSOR A PREDECESSOR B Net sales by segment: Automotive........................... $330.6 $103.7 $435.2 $439.6 Machinery............................ 201.8 64.4 270.8 257.6 Industrial........................... 113.6 37.7 200.1 194.1 ------ ------ ------ ------ Total........................ $646.0 $205.8 $906.1 $891.3 ====== ====== ====== ====== EBITDA(1) by segment: Automotive........................... $ 49.6 $ 15.4 $ 59.4 $ 57.7 Machinery............................ 29.6 7.7 30.6 28.7 Industrial........................... 23.2 6.7 29.8 27.8 Corporate overhead................... (15.0) (2.8) (15.7) (19.3) ------ ------ ------ ------ Total........................ $ 87.4 $ 27.0 $104.1 $ 94.9 ====== ====== ====== ======
- - --------------- (1) For these purposes, EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization, certain one-time management compensation expenses in 1998, gain (loss) on sale of divisions, reorganization items in 1996 and certain non-cash charges. EFFECTS OF THE ACQUISITION AND REORGANIZATION ON OPERATIONS AND FINANCIAL CONDITION The Acquisition of Eagle-Picher Industries, Inc. ("Company") by Eagle-Picher Holdings, Inc. ("Parent") was accounted for as a purchase. The purchase price has been allocated to the assets and liabilities of the Company based on their respective fair values as determined primarily by independent appraisals. The excess of the purchase price over the assessed values of the net assets acquired was allocated to excess of acquired net assets over cost, which is being amortized over 15 years. The reorganization value in excess of amounts allocable to identifiable assets, which was the intangible asset created during the Company's emergence from bankruptcy (described below), was assigned no value. Consequently, the results of operations after the Acquisition are not comparable to those in the three months ended February 28, 1998 and in 1997 ("Predecessor A") primarily due to depreciation being calculated on an increased asset base and the difference in amortization of the intangible assets. 15 17 Upon emergence from bankruptcy on November 29, 1996 ("Reorganization"), the Company applied the "fresh-start" provisions of the American Institute of Certified Public Accountants Statement of Position No. 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("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 and amortized using a four year life. Consequently, results of operations in 1996 ("Predecessor B") and 1997 are not comparable, primarily due to the increased depreciation on the property plant and equipment and amortization of the reorganization value in excess of amounts allocable to identifiable assets resulting from the fresh-start adjustments. Interest expense was minimal in 1996 because interest expense was not recorded on unsecured debt or undersecured debt during the duration of the bankruptcy proceedings. Interest expense increased by $28.2 million in 1997, primarily due to the debt issued to the PI Trust and unsecured creditors upon the Company's emergence from bankruptcy. Any of the debt that had been issued when the Company emerged from bankruptcy that was still outstanding was repaid at the time of the Acquisition. Interest expense increased substantially in 1998, after the Acquisition, due to the issuance of debt totaling $524.1 million related to the Acquisition. Adjusting the assets and liabilities to fair value in the Reorganization resulted in the fresh-start revaluation gain of $118.7 million in 1996. Other reorganization items in 1996 were the costs of the reorganization process, net of the interest income earned on accumulated cash balances. The plan of reorganization which was approved by the Bankruptcy Court, included a settlement of $2.0 billion for the Company's aggregate liability on account of present and future asbestos-related personal injury claims. An adjustment of $502.2 million 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 or lead-related personal injury claims from pursuing their claims against the reorganized Company. Those claims will be channeled to the PI Trust, which is an independently administered qualified settlement trust established to resolve and satisfy those claims. The Company's Reorganization resulted in an extraordinary gain of $1.5 billion on the discharge of pre-petition liabilities, including the asbestos liability. The value of consideration distributed and expected to be distributed to the PI Trust and other unsecured creditors is approximately 37% of the amount of the allowed claims. In 1997, the Company received Federal tax refunds totaling $69.1 million resulting from net operating losses ("NOL's") carried back to recover taxes paid in prior years. The majority of the NOL's were created when the Company contributed cash and securities to the PI Trust in the Reorganization. Losses remaining after the carryback were carried forward to reduce taxable income in future years and were capitalized at the statutory rates as deferred tax assets. Other items that were deductible in the future, such as the debt issued in conjunction with the Company's Reorganization which was deductible when it was repaid, were also included in deferred tax assets which totaled $128.5 million at November 30, 1996. These deferred tax benefits were used to reduce taxable income (and, as a result, income taxes paid) in 1997 and the period in 1998 prior to the Acquisition. They were also used to absorb the tax gain resulting from the sale of the Company. Any of the deferred tax benefits that were not absorbed by Predecessor A in 1997, the period in 1998 prior to the Acquisition or by the tax gain on the transaction itself were lost and are not available to reduce taxable income of the Company going forward. In addition to the effects of the Acquisition and the Reorganization, another factor affecting comparability of operations is the sale of the Plastics, Transicoil and Fabricon Products Divisions in 1997. The Company also contributed the assets of its former Suspension Systems Division to Eagle-Picher-Boge, L.L.C., a joint venture in which the Company had a 45% interest, in 1997. In 1998, the majority partner exercised its option to purchase the Company's interest in the joint venture. The Company also sold its Trim Division effective October 31, 1998, although the transaction was held in escrow until certain conditions were met in December 1998. The effects of these transactions on the results of operations were not material. 16 18 1998 COMPARED TO 1997 Net Sales. Sales for the nine months ended November 30, 1998 and the three months ended February 28, 1998 were $646.0 million and $205.8 million, respectively, (a total of $851.8 million) compared to $906.1 million for the year ended November 30, 1997, a decrease of 6.0% for the year. However, sales for the years ended November 30, 1998 and 1997 were $826.1 million and $794.8 million, respectively, or an increase of 3.9%, after excluding the Divested Divisions (Plastics, Transicoil, Fabricon Products, Trim, Suspension Systems and the Orthane divisions). Net sales for the Automotive Group, excluding those of Divested Divisions, increased 11.6%. The increase in sales is due to a strong automotive build in North America and increased market penetration of precision-machined transmission and drive train components and multi-layer fuel transfer systems, many of which are used in light trucks, vans and sport utility vehicles, the popularity of which remains strong. Since the 1980's, original equipment manufacturers ("OEM's") such as the Ford Motor Company and the General Motors Corporation ("GM") have been outsourcing an increasing percentage of their production requirements. OEM's 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. In the Machinery Group, net sales increased 3.2%, excluding net sales of Divested Divisions. Increases in demand for construction equipment and parts and material handling equipment were partially offset by declines in demand for special purpose batteries due to the completion of a major satellite project late last year. In the Industrial Group, net sales, excluding net sales of Divested Divisions, declined 11.3%. The decrease in sales is due primarily to the decreased sales of the metal germanium. Sales of germanium products have been affected by lower market prices which resulted from increased supplies, the completion of a major satellite project and the increased use of recycled germanium by the Company's customers. Customers have increased their recycling of germanium in response to sharp increases in germanium prices which took place in 1996. Revenues have declined since the Company has shifted more toward being a toll refiner of germanium rather than a buyer and seller of the material. Cost of Products Sold. Cost of products sold (excluding depreciation expense) was $503.0 million for the nine months ended November 30, 1998 and $162.8 million for the three months ended February 28, 1998 (a total of $665.8 million) compared to $725.0 million in 1997. Excluding the cost of products sold of Divested Divisions, cost of products sold as a percentage of net sales was 77.8% in 1998 and 78.7% in 1997. Reasons for the decline include improved performance at certain start-up operations, increased efficiencies and changes in product mix involving the special purpose batteries. Since the Company expects strong price pressure to continue across all product lines, particularly in the Automotive Group, the Company will continue to pursue productivity improvements and material cost reductions to mitigate such price pressure. Selling and Administrative. Selling and administrative expenses were $58.5 million and $17.1 million in the nine months ended November 30, 1998 and the three months ended February 28, 1998, respectively (a total of $75.6 million), compared to $77.1 million in 1997. Excluding the Divested Divisions, these expenses increased 5.1% from $69.4 million in 1997 to $72.9 million in 1998. Besides a general increase due to activity relating to increased sales volumes, items contributing to the increase of selling and administrative expenses include management fees now payable to Granaria Holdings B.V. and a retention program for mid-level managers. Management Compensation -- Special. The special management compensation expenses are one-time items related to the Acquisition. See Executive Compensation. Depreciation and Amortization. See comments above regarding the effects of the Acquisition. EBITDA. Due to the increased depreciation and amortization resulting from the Acquisition, a comparison of 1997 and 1998 operating income is not meaningful. The Company's EBITDA, as defined above, was $87.4 million in the nine months ended November 30, 1998 and $27.0 million in the three months ended February 28, 1998 (a total of $114.4 million), compared to $104.1 million for the year ended November 30,1997, an increase of $10.3 million or 9.9%. However, EBITDA for the years ended November 30, 1998 and 1997 was $114.1 million and $99.9 million, respectively, or an increase of 14.2%, after excluding the Divested Divisions. 17 19 The EBITDA of the Automotive Group, excluding Divested Divisions, increased 10.8%. The increased volumes of sales described above resulted in better absorption of fixed costs and EBITDA increased accordingly. However, these increases were slightly offset by the impact on divisions in the Automotive Group of the strike against GM in 1998. The Trim Division, which is one of the Divested Divisions, was impacted the most significantly of the divisions in the Automotive Group by the strike. EBITDA for the Machinery Group, excluding Divested Divisions, increased 27.2% from 1997 to 1998. Although volumes of special purpose batteries declined in 1998, a shift in product mix contributed to the increase in EBITDA. Other contributing factors include the increase in volumes at the operations manufacturing construction and material handling equipment. The increase in EBITDA of the Industrial Group, excluding results of Divested Divisions, was 7.2%. Although net sales of germanium products have declined, margins on these products have remained consistent. Interest Expense. Interest expense was $36.3 million in the nine months ended November 30, 1998 and $6.9 million in the three months ended February 28, 1998 (a total of $43.2 million) as compared to $31.3 million in 1997. The increase is due to the increased debt related to the Acquisition as discussed above. 1997 COMPARED TO 1996 Net Sales. The Company's net sales increased $14.8 million, or 1.7%, from $891.3 million in 1996 to $906.1 million in 1997. Included are sales of the Divested Divisions which, if excluded for both periods, would reflect an increase of 8.6%. In 1996 and 1997, the Divested Divisions contributed net sales of approximately $159.8 million and $111.3 million, respectively. Net sales for the Automotive Group, excluding Divested Divisions, increased 8.6% in 1997. The sales volume increases were primarily in precision machining and trim operations. The precision machining operations produce a variety of parts used on light trucks, vans and sport utility vehicles which have grown in popularity. Several new programs at the Trim division, which had been delayed by customers, began to reach satisfactory volumes. The Company was notified by a major customer of the Automotive Group that such customer was discontinuing certain lines of business with one of the operations. The first program was discontinued in December 1997, and other programs are being discontinued at various times through March 1999. The total amount of annual revenue these programs have contributed is $19.4 million. This revenue has been replaced by new programs currently being implemented. In the Machinery Group, sales increased 7.7%, excluding net sales by Divested Divisions. These increases were due primarily to increased demand for batteries used in satellite applications. Net sales for the Industrial Group, excluding those of Divested Divisions, increased 10.2% primarily due to increased demand for germanium products used in aerospace applications, such as solar cell substrates for satellites. 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. Excluding the cost of products sold of the Divested Divisions, cost of products sold as a percentage of net sales remained consistent at 78.7% in 1997 and 78.6% in 1996. Selling and Administrative. Selling and administrative expenses decreased $4.4 million, or 5.4%, from $81.5 million in 1996 to $77.1 million in 1997. Excluding the expenses of the Divested Divisions, selling and administrative expenses remained constant from 1996 to 1997. Depreciation and Amortization. See comments above regarding the effects of the Reorganization. Loss on Sale of Divisions. In 1997, the Company sold the Plastics, Transicoil and Fabricon Products divisions to fund the repayment of certain notes issued in the reorganization process. The aggregate net cash proceeds from and loss on the transactions were $39.0 million and $2.4 million, respectively. The injection molding operations of the Orthane Division were sold in 1996 for $4.2 million. The effect of this transaction on the results of operations was not material. EBITDA. EBITDA increased from $94.9 million in 1996 to $104.1 million in 1997, or 9.7%. If the results of the Divested Divisions are excluded, EBITDA was $89.4 million in 1996 and $99.9 million in 1997, an increase of 11.7%. 18 20 The EBITDA of the Automotive Group, excluding Divested Divisions, increased 4.5%. The increased volumes of sales described above resulted in better absorption of fixed costs and EBITDA increased accordingly. Currency exchange differences offset volume gains in the European operations, therefore, results of these operations appeared relatively flat. The increased sales volumes of batteries accounted for the majority of the increase in EBITDA, excluding Divested Divisions, of 8.5% for the Machinery Group. Although sales of operations manufacturing heavy-duty forklift trucks and construction equipment were flat, these operations posted operating gains due to increased efficiencies which also contributed to increased EBITDA. The increase in EBITDA of the Industrial Group, excluding results of Divested Divisions, was 8.2%, due primarily to the strength of demand for germanium products. The price of germanium itself stabilized in 1997 after increasing sharply in 1996. In addition, the operation that processes diatomaceous earth products had increased EBITDA due to non-recurring charges taken in 1996. Interest Expense. Interest expense increased by $28.2 million from $3.1 million in fiscal year 1996 to $31.3 million in 1997 for reasons discussed above related to the effects of the Reorganization on the Company's results. Financial Condition OPERATING ACTIVITIES Cash flows provided by operations in the nine months ended November 30, 1998 were $75.5 million and cash flows used in operations in the three months ended February 28, 1998 were $9.1 million, for a net total of cash provided from operations of $66.4 million in 1998. Comparable amounts in 1997 and 1996 were cash provided by operations of $147.9 million and $72.9 million, respectively. In 1997, $69.1 million of the $147.9 million resulted from the tax refund due to NOL carrybacks previously discussed. Cash flows provided by operations in 1997, excluding the tax refund, were $78.8 million. EBITDA was $87.4 million in the nine months November 30, 1998, $27.0 million in the three months ended February 28, 1998 (totaling $114.4 million in 1998), $104.1 million in 1997 and $94.9 million in 1996. EBITDA, as defined above, with certain adjustments, could be used as an approximation of cash flows provided by operations before interest and taxes. The following table set forth a reconciliation of EBITDA to cash provided by (used in) operations for the years ended November 30:
(DOLLARS IN MILLIONS) 1998 1997 1996 --------------------- ------ ------ ----- EBITDA per above......................................... $114.4 $104.1 $94.9 Management compensation -- special....................... (28.9) -- -- Interest paid............................................ (35.3) (31.0) (2.8) Income taxes paid -- net................................. (3.1) (4.3) (17.3) Proceeds from insurance settlements...................... 14.8 -- -- Working capital and other................................ 4.5 10.0 (1.9) ------ ------ ----- Cash provided by operating activities (net of tax refund in 1997)............................................... $ 66.4 $ 78.8 $72.9 ====== ====== =====
In 1998, the management compensation is related to the Acquisition and is non-recurring. (See Executive Compensation.) Interest paid increased in 1997 due to the Reorganization and in 1998 due to the Acquisition as previously discussed. Income taxes paid declined in 1997 due to the NOL's resulting from the Reorganization that were available to reduce taxable income as previously discussed. These NOL's were available only through the Acquisition date in 1998 and are not available to the Company on a going forward basis. The proceeds from insurance settlements in 1998 related to pre-Acquisition contingencies. In 1998, the increase in cash provided by operating activities attributable to working capital was due primarily to the use of cash in an employee benefits trust to pay for such benefits, rather than using the Company's cash. This resulted in a decrease in the use of cash to the Company of approximately $8.0 million. The difference is attributable to increases in working capital due to growth of the business. In 1997, the increase in cash provided by operating activities attributable to working 19 21 capital was due to certain divisions being able to negotiate better terms on their accounts payable after emerging from bankruptcy. INVESTING ACTIVITIES Capital expenditures totaled $32.0 million in year ended November 30, 1998. These expenditures included small expansions to plants that manufacture construction machinery and bulk pharmaceuticals, equipment needed for new programs in the Automotive Group and maintenance capital. 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 in 1996. 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 gasket materials in 1995, significant expenditures have been made in recent years to increase machine capacity at existing facilities or improve processes, particularly in the Automotive Group. The Company does not have any plans for major expansions to existing facilities in the short-term. The Company has signed a letter of intent to acquire the stock of Charterhouse Automotive Group, Inc., a holding company whose only operating subsidiary is Carpenter Enterprises, Ltd. ("Carpenter"), a manufacturer of precision-machined automotive parts, for approximately $41.0 million in cash. It is expected that Carpenter will have approximately $32.0 million of debt at the closing, of which $20.0 million will be refinanced from the Company's revolving credit facility and the remainder will be assumed. The Acquisition will be accounted for as a purchase. The transaction is expected to be consummated at the end of the first quarter of 1999, subject to the results of a due diligence investigation and various conditions including negotiation of a mutually acceptable stock purchase agreement. The Company sold its Trim Division as of October 31, 1998, however the transaction remained in escrow until certain conditions were met in December 1998. At that time, the Company received $12.4 million cash and a $2.1 million note due in 2000 which is secured by a first mortgage on the real estate. In 1997, The Company contributed the assets of its former Suspension Systems Division to Eagle-Picher -- Boge, L.L.C., a joint venture in which the Company had a 45% interest, and received a note from the joint venture in the amount of $2.8 million. In 1998, the majority partner exercised its option to purchase the Company's interest in the joint venture. At that time, the note was also repaid resulting in proceeds totaling $7.9 million. The Company sold the Plastics, Fabricon Products and the Transicoil 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. The Company intends to sell its Ross Aluminum Division. The Company anticipates the transaction would close late in the second quarter of 1999. The Company does not anticipate a loss on this transaction. No other divestitures have been announced or committed to at this time. FINANCING ACTIVITIES To finance the Acquisition, the Company issued $180.0 million in common stock to the Parent. The Company also issued $220.0 million of publicly traded senior subordinated notes and borrowed $225.0 million in term loans and $79.1 million in revolving loans under a syndicated senior bank loan facility ("Credit Agreement"). At the time of the Acquisition, the Company repaid the $250.0 million Senior Sinking Fund Debentures that had been issued to the PI Trust at the time of the Reorganization. As of November 30, 1998, $5.2 million of the term loans had been repaid. In 1999, scheduled payments of the term loans are $10.3 million, however, the Credit Agreement requires the Company to make mandatory prepayments of 60% of annual excess cash flow as defined by the Credit Agreement, the net proceeds from sales of assets (subject to certain conditions), the net proceeds of new debt issued and 50% of the net proceeds of any equity securities issued. Pursuant to these terms, the Company will make additional payments on the term loans of $8.5 million in the first quarter of 1999. Scheduled payments under the Credit Agreement for 2000 and 2001 are $15.3 million and $20.3 million, respectively. 20 22 The Company's revolving credit facility ("Facility") under the Credit Agreement is $160.0 million and is available for both borrowings and the issuance of letters of credit. At November 30, 1998, the Company had outstanding borrowings and letters of credit under the Facility of $19.8 million and $26.3 million, respectively, leaving the Company with available borrowing capacity of $113.9 million. Subsequent to November 30, 1998, all borrowings under the Facility have been repaid. However, it is anticipated that more than $60.0 million would be drawn to finance the Carpenter acquisition. In addition, in the first quarter of 1999, it is anticipated the Company will issue approximately $14.0 million in additional letters of credit associated with existing environmental remediation that are necessitated by financial assurance requirements set forth by the United States Environmental Protection Agency. While these transactions will significantly reduce the available liquidity of the Company, the Company does not expect to need more borrowing capacity than will be available to it to fund normal operations. The Company's European operations also have several lines of credit totaling $28.7 million at November 30, 1998, of which $6.7 million was borrowed, leaving $22.0 million in borrowing capacity at that date. These 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. The Company used the proceeds of the tax refunds totaling $69.1 million received in 1997 to redeem the $69.1 million Tax Refund Notes which were issued to the PI Trust in connection with the Reorganization. The $50.0 million of Divestiture Notes, which were issued to the PI Trust and other unsecured creditors in connection with the bankruptcy, were also repaid in 1997, primarily with the proceeds from the divestiture of divisions. 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. The Company issued an $8.0 million Industrial Revenue Bond to finance the new facility in Manchester, Tennessee and incurred $5.0 million debt in Europe to finance expansion activities. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents were $13.7 million at November 30, 1998 compared to $53.7 million and $32.7 million at November 30, 1997 and 1996, respectively. The Company estimates that it needs approximately $10.0 million to $12.0 million in cash for operations. 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. Other YEAR 2000 READINESS DISCLOSURE The Year 2000 problem arose because many existing computer programs use only the last two digits to refer to a year. Therefore, these computer programs do not properly recognize a year that begins with "20." If not corrected, many computer programs could fail or cause erroneous results. Failures of this nature could cause interruptions to manufacturing processes, business and financial functions and communications with customers and suppliers. Due to the diverse nature of the Company's operations, each operating division has its own discrete computer systems. The Company currently has a Year 2000 program in place which includes a comprehensive review to identify areas of concern in each of the systems affected by the Year 2000 issue and follows up with design and implementation of measures to address those issues. The Company is assessing its information technology systems such as business computing systems, end user computer systems and technical infrastructure, as well as embedded systems commonly found in manufacturing and service equipment, testing equipment and environmental operations. The assessments also include the Company's products and evaluations of the readiness of its suppliers and service providers. 21 23 The Company's Year 2000 program involves a five step process applied to each of eight different application areas within each operation, and at the corporate level. The Company first inventories areas of potential risk based on a comparison to guidelines published by the Automotive Industry Action Group ("AIAG"). Each component identified in the inventory is then evaluated for its risk of failure and the impact of potential failure to the Company's operations and its customers. Once the risks are assessed, remediation is commenced. Options for remediation may include replacement, modification or continued use depending on information gathered during the inventory and assessment stages. The remediated system is then tested and reviewed before the determination is made as to the readiness of the system. A project committee meets regularly to review the status of the investigation into and resolution of Year 2000 issues. Most of the Company's divisions have completed the inventory and assessment phases and are working on remediation and testing. The remaining divisions have the inventory and assessment phases underway. The Company expects that all divisions will have completed the inventory and assessment phases by March 31, 1999 and will have implemented initial remediation attempts and testing thereof by June 30, 1999. The final step of the program is review by the Company's outside consultant for Year 2000 readiness, a review that is ongoing. The Company maintains a record of its progress to date for each of its domestic divisions, and publishes those reports on its web site at www.epcorp.com. The Company's remaining costs to remediate the Year 2000 problem are not expected to exceed $3.5 million. Of this amount, approximately $1.0 million will be spent in the form of capital for systems replacement and approximately $1.5 million will be incremental costs. The remaining costs relate to the redeployment of the Company's existing resources to assess and remediate the Year 2000 problem. Projects being deferred by this issue include items such as system enhancements that would improve performance or functionality. To date, the Company estimates it has spent approximately $2.5 million in assessing and remediating the Year 2000 problem, of which $1.0 million was for capital equipment, $.8 million related to incremental costs and $.7 million related to the redeployment of the Company's resources. The Company believes its greatest risk lies within its financial computer systems and Electronic Data Interchange ("EDI") capabilities with its customers and suppliers. The Company relies on customer requirements and outside services for most of its EDI capabilities and therefore is dependent on such parties addressing Year 2000 issues. If these systems were to fail, the Company would encounter difficulty performing functions such as compiling financial data, invoicing customers, accepting electronic customer orders or informing customers of shipment electronically. While some of these functions could be performed manually, the Company presently is not certain what the extent of the impact on operations would be. There is also risk associated with certain suppliers, including utility companies, over which the Company has little control. The Company is presently working on contingency plans on a case by case basis to address issues related to potential failures of critical systems due to Year 2000 problems identified in the risk assessment phase, and it expects to have those plans in place by May 31, 1999. The Company believes that the most likely worst case scenario will be limited to isolated disruptions that will affect individual business processes, facilities, suppliers or customers for a relatively short time. 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 not materially impair the Company's ability to conduct business. EURO CONVERSION On January 1, 1999, eleven members of the European Union adopted the euro as their common legal currency and established fixed conversion rates between their existing local currencies and the euro. During the transition period, which runs from January 1, 1999 through December 31, 2002, transactions may take place using either the euro or a local currency. However, conversion rates will no longer be computed directly from one local currency to another, but be converted from one local currency into an amount denominated in euro, then be converted from the euro denominated amount into the second local currency. On July 1, 2002, the local currencies will no longer be legal tender for any transactions. 22 24 The Company has both operating divisions and domestic export customers located in Europe. In 1998, combined revenues from these sources were approximately 15% of total revenues. The Company has operations in Germany, the Netherlands, France and Spain, which are participating in the euro conversion, and the United Kingdom, which has elected not to participate at this time. The affected operations plan to make the euro the functional currency sometime during the transition period, although certain of the Company's European operations have already entered into euro-based transactions, such as bank borrowing and collection of accounts receivable. It is difficult to assess the competitive impact of the euro conversion on the Company's operations, both in Europe and in the United States. In markets where sales are made in U.S. dollars, there may be pressures to denominate sales in the euro, however, exchange risks resulting from these transactions could be mitigated through hedging. Pressures to price products in euro may be more urgent for operations located in the United Kingdom, particularly in the automotive industry, as the European automotive industry is somewhat dominated by German companies. The currency risk to the operations located in the United Kingdom could also be hedged, however the risk is greater on a regional level that the hedging could result in additional costs that could harm the cost competitiveness of those operations. It is not anticipated that changes to information technology and other systems which are necessary for the euro conversion will be material. The Company is currently assessing the impact the euro conversion may have on items such as taxation and other issues. RECENTLY ISSUED ACCOUNTING STANDARDS The following three new accounting standards will be effective for the fiscal year ended November 30, 1999: In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income and its components. This statement requires the Company to report the components of comprehensive income, a measure of performance that includes all non-owner sources of changes in equity, such as unrealized gains and losses on securities available for sale and foreign currency translation adjustments. In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The standard requires that companies disclose "operating segments" based on the way management disaggregates the company for making internal operating decisions, regardless of how a company defines its operating segments. In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." This standard does not change the measurement or recognition of those plans, but standardizes disclosure requirements for such plans. The Company believes that although these standards may require expanded disclosure for the Company's consolidated financial statements, the impact of these standards is not expected to be material. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which addresses the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The accounting for gains and losses resulting from changes in the fair value of a derivative depends on the its intended use and the resulting designation. The provisions of this statement are effective for the first quarter of the fiscal year ending November 30, 2000. The Company has not yet determined the impact this statement will have on its financial position or the results of its operations. FORWARD-LOOKING STATEMENTS This Form 10-K contains statements which, to the extent that they are not recitations of historical fact, constitute "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934. The words "estimate," "anticipate," "project," "intend," "believe," "expect," and similar expressions are intended to identify forward-looking statements. Such forward looking information involves important risks 23 25 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 customers; the ability of the Company to successfully implement productivity improvements, cost reduction initiatives and facilities expansion; the ability of the Company to develop, market and sell new products and the ability of the Company 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 Form 10-K are cautioned that such forward-looking 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. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is exposed to market risk, including changes in interest rates, currency exchange rates, and commodity prices. To manage the volatility relating to these exposures, the Company enters into hedging instruments pursuant to the Company's policies. The financial impacts of these instruments are offset by corresponding changes in the underlying exposures being hedged. The Company does not hold or issue derivative financial instruments for trading purposes. Interest Rate Management The Company's policy is to manage interest cost using a mix of fixed and variable rate debt. To manage this mix in a cost-efficient manner, the Company has entered into an interest rate swap, in which the Company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to a notional principal amount of $150.0 million. This swap is designed to hedge a majority of the underlying Term Loan Facility ($219.8 million balance at November 30, 1998). For all interest rate hedges, the rate differential is reflected in current interest expense over the life of the swaps. The remaining $69.8 million of the Term Loan Facility bears interest at the variable rates described in Note F to the Consolidated Financial Statements. In addition, the Company has a Revolving Loan Facility with a balance at November 30, 1998 of $19.8 million which also bears interest at the variable rates described in Note F to the Consolidated Financial Statements. Accordingly, the combined effect of a 1% increase in an applicable index rate would result in additional interest expense of approximately $.9 million per year. The following table presents information for all dollar-denominated interest rate instruments. In addition, the Company has several working capital facilities denominated in deutchmark and pound sterling (see Note F to the Consolidated Financial Statements). The fair value presented below approximates the cost to settle the outstanding contract.
EXPECTED MATURITY DATE -------------------------------------------------------------------------- 1999 2000 2001 2002 2003 THEREAFTER TOTAL FAIR VALUE ---- ---- ----- ---- ---- ---------- ----- ---------- (IN MILLIONS OF DOLLARS) LIABILITIES Long-Term Debt Variable Rate Debt ($)................. 18.8 15.3 20.3 25.3 21.6 156.3 257.6 257.6 Average Interest Rate................ 6.83% 6.65% 6.50% 6.44% 6.53% 6.99% 6.65% Fixed Rate ($)......................... -- -- -- -- -- 220.0 220.0 206.6 Average Interest Rate................ 9.38% 9.38% 9.38% 9.38% 9.38% 9.38% 9.38% INTEREST RATE DERIVATIVES Interest Rate Swaps Variable to Fixed ($).................. -- -- 150.0 -- -- -- 150.0 (2.5) Average Pay Rate..................... 5.81% 5.81% 5.81% 5.81% Average Receive Rate................. 5.03% 5.03% 5.03% 5.03%
24 26 Currency Rate Management The Company manufactures and sells its products in a number of countries throughout the world and, as a result, is exposed to movements in foreign currency exchange rates. The major foreign currency exposures involve the markets in Western Europe. The primary purpose of the Company's foreign currency hedging activities is to protect against the volatility associated with: (1) foreign currency purchases of materials and other assets; (2) foreign currency sales of goods; and (3) intercompany purchase transactions. The Company utilizes forward exchange contracts with duration of generally less than 12 months. Gains and losses related to hedges of foreign currency firm commitments or anticipated transactions are included in the basis of the underlying transactions. To the extent an anticipated transaction is no longer likely to occur, the related hedge is closed with gains or losses charged to earnings on a current basis. In the cases of (1) and (2) above, the Company places contracts on a transaction-by-transaction basis matching foreign currency supply with requirements. As such, the Company believes these contracts to be perfected hedges. In the case of (3) above, the Company has several foreign operations that purchase material from domestic divisions. The Company will place foreign exchange contracts to cover a portion of anticipated yearly purchase requirements for these foreign operations. At year end the Company had foreign currency instruments of this type in notional amounts totaling $9.2 million. Gains or losses on these instruments were not material. Credit Risk Credit risk arising from the inability of a counterparty to meet the terms of the Company's financial instrument contracts is generally limited to the amounts, if any, by which the counterparty's obligations exceed the obligations of the Company. It is the Company's policy to enter into financial instruments with a diversity of creditworthy counterparties. Therefore, the Company does not expect to incur material credit losses on its risk management or other financial instruments. 25 27 ITEM 8. FINANCIAL STATEMENTS EAGLE-PICHER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS)
THREE MONTHS NINE MONTHS ENDED YEAR ENDED NOVEMBER 30, ENDED FEBRUARY 28, ------------------------------ NOVEMBER 30, 1998 1997 1996 1998 PREDECESSOR A PREDECESSOR A PREDECESSOR B ------------ ------------- ------------- ------------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) Net Sales............................. $ 645,984 $205,842 $906,077 $ 891,287 ------------ -------- -------- ---------- OPERATING COSTS AND EXPENSES Cost of products sold (exclusive of depreciation shown separately below).............................. 502,973 162,796 725,010 716,926 Selling and administrative............ 58,460 17,141 77,109 81,505 Management compensation -- special.... 26,808 2,056 -- -- Depreciation.......................... 29,926 8,983 39,671 30,338 Amortization of intangibles........... 12,317 3,839 16,318 412 Loss on sale of divisions or assets... 30 -- 2,411 -- ------------ -------- -------- ---------- 630,514 194,815 860,519 829,181 ------------ -------- -------- ---------- OPERATING INCOME...................... 15,470 11,027 45,558 62,106 Adjustment for asbestos litigation.... -- -- -- 502,197 Provision for other claims............ -- -- -- (4,244) Interest expense (contractual interest of $9,889 in 1996).................. (36,313) (6,940) (31,261) (3,083) Other income (expense)................ 1,779 820 (251) 1,345 ------------ -------- -------- ---------- INCOME (LOSS) BEFORE REORGANIZATION ITEMS, TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE.............................. (19,064) 4,907 14,046 558,321 Fresh start revaluation............... -- -- -- 118,684 Reorganization items.................. -- -- -- (2,349) ------------ -------- -------- ---------- INCOME (LOSS) BEFORE TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE......... (19,064) 4,907 14,046 674,656 INCOME TAXES (BENEFIT)................ (4,700) 4,100 17,900 52,570 ------------ -------- -------- ---------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE................... (14,364) 807 (3,854) 622,086 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)................... $ (14,364) $ 807 $ (3,854) $2,146,391 ============ ======== ======== ========== BASIC EARNINGS (LOSS) PER COMMON SHARE: INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE................ $(143,640.00) $ .08 $ (.39) $ 56.34 EXTRAORDINARY ITEM -- GAIN ON DISCHARGE OF PRE-PETITION LIABILITIES...................... -- -- -- 138.17 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INVENTORIES....... -- -- -- (.11) ------------ -------- -------- ---------- BASIC EARNINGS (LOSS) PER COMMON SHARE............................... $(143,640.00) $ .08 $ (.39) $ 194.40 ============ ======== ======== ==========
See accompanying notes to consolidated financial statements. 26 28 EAGLE-PICHER INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS NOVEMBER 30
1997 1998 PREDECESSOR A -------- ------------- (IN THOUSANDS OF DOLLARS) ASSETS CURRENT ASSETS Cash and cash equivalents................................... $ 13,680 $ 53,739 Receivables, less allowances of $1,529 in 1998 and $1,614 in 1997...................................................... 144,844 133,952 Inventories................................................. 88,873 92,196 Prepaid expenses............................................ 8,338 8,290 Deferred income taxes....................................... 10,851 13,793 -------- -------- Total Current Assets.............................. 266,586 301,970 -------- -------- PROPERTY, PLANT AND EQUIPMENT Land and land improvements.................................. 18,288 19,832 Buildings................................................... 62,868 65,289 Machinery and equipment..................................... 182,003 173,909 Construction in progress.................................... 15,902 20,817 -------- -------- 279,061 279,847 Less accumulated depreciation............................... 30,524 36,309 -------- -------- Net Property, Plant and Equipment................. 248,537 243,538 -------- -------- DEFERRED INCOME TAXES....................................... -- 98,991 -------- -------- EXCESS OF ACQUIRED NET ASSETS OVER COST, net of accumulated amortization of $12,300................................... 228,910 -- -------- -------- REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS, net of accumulated amortization of $16,284 in 1997........................................... -- 48,837 -------- -------- OTHER ASSETS................................................ 72,293 53,545 -------- -------- TOTAL ASSETS...................................... $816,326 $746,881 ======== ========
See accompanying notes to consolidated financial statements. 27 29 EAGLE-PICHER INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS NOVEMBER 30
1997 1998 PREDECESSOR A --------- -------------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable............................................ $ 50,307 $ 52,886 Compensation and employee benefits.......................... 32,761 22,630 Long-term debt - current portion............................ 25,173 3,403 Income taxes................................................ 6,282 2,294 Reorganization items........................................ 12,480 13,128 Other accrued liabilities................................... 29,019 19,661 -------- -------- Total Current Liabilities......................... 156,022 114,002 -------- -------- LONG-TERM DEBT, less current portion........................ 459,183 269,994 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS................. 17,590 21,681 DEFERRED INCOME TAXES....................................... 8,304 -- OTHER LONG-TERM LIABILITIES................................. 7,229 5,087 -------- -------- TOTAL LIABILITIES................................. 648,328 410,764 -------- -------- SHAREHOLDER'S EQUITY Common stock - no par value: authorized 20,000,000 shares; issued and outstanding 100 and 10,000,000 shares.......... 180,005 341,807 Deficit..................................................... (14,364) (3,854) Foreign currency translation gain (loss).................... 2,357 (1,836) -------- -------- TOTAL SHAREHOLDER'S EQUITY........................ 167,998 336,117 -------- -------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY........ $816,326 $746,881 ======== ========
See accompanying notes to consolidated financial statements. 28 30 EAGLE-PICHER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS NINE MONTHS ENDED YEAR ENDED NOVEMBER 30, ENDED FEBRUARY 28, ----------------------------- NOVEMBER 30, 1998 1997 1996 1998 PREDECESSOR A PREDECESSOR A PREDECESSOR B ------------ ------------- ------------- ------------- (IN THOUSANDS OF DOLLARS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss).............................. $(14,364) $ 807 $ (3,854) $2,146,391 Adjustments to reconcile net income (loss) to net cash provided by (used in) 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) Provision for other claims................ -- -- -- 4,244 Cumulative effect of accounting change.... -- -- -- 1,235 Depreciation and amortization............. 44,309 12,822 55,989 30,750 Proceeds from insurance settlements....... 14,784 -- -- -- Loss on sale of divisions................. -- -- 2,411 -- Changes in assets and liabilities, net of effects of divestitures: Receivables.......................... 2,690 (4,705) (14,562) (7,664) Income tax refunds receivable........ 736 1,024 70,695 3,535 Inventories.......................... 4,378 (2,235) (3,393) (6,283) Deferred income taxes................ (11,900) 2,600 15,700 29,170 Accounts payable..................... 1,522 (2,787) 16,351 657 Accrued liabilities.................. 25,983 (5,488) 7,698 3,167 Other................................ 7,409 (11,121) 848 14,080 -------- -------- -------- ---------- Net cash provided by (used in) operating activities.............. 75,547 (9,083) 147,883 72,861 -------- -------- -------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of divisions................ 7,872 -- 39,007 4,248 Capital expenditures........................... (26,260) (5,692) (51,324) (44,957) Other.......................................... 1,770 (1,042) (1,510) (1,061) -------- -------- -------- ---------- Net cash used in investing activities........................ (16,618) (6,734) (13,827) (41,770) -------- -------- -------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt..................... 2,094 445,000 12,997 -- Reduction of long-term debt.................... (5,600) (250,360) (126,039) (3,198) Borrowings (repayments) under revolving credit agreement................................... (59,275) 79,100 -- -- Redemption of common stock..................... -- (446,638) -- -- Issuance of common stock....................... -- 180,005 -- -- Debt issuance costs............................ (1,435) (26,062) -- -- -------- -------- -------- ---------- Net cash used in financing activities........................ (64,216) (18,955) (113,042) (3,198) -------- -------- -------- ---------- CASH PAYMENTS ON EFFECTIVE DATE OF PLAN OF REORGANIZATION................................. -- -- -- (88,498) -------- -------- -------- ---------- Net increase (decrease) in cash and cash equivalents.................................... (5,287) (34,772) 21,014 (60,605) -------- -------- -------- ---------- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD... 18,967 53,739 32,725 93,330 -------- -------- -------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD......... $ 13,680 $ 18,967 $ 53,739 $ 32,725 ======== ======== ======== ==========
See accompanying notes to consolidated financial statements. 29 31 EAGLE-PICHER INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) NINE MONTHS ENDED NOVEMBER 30, 1998, THREE MONTHS ENDED FEBRUARY 28, 1998 AND YEARS ENDED NOVEMBER 30, 1997 AND 1996
UNREALIZED FOREIGN TOTAL ADDITIONAL GAIN (LOSS) CURRENCY SHAREHOLDERS' COMMON PAID-IN ON TRANSLATIONS TREASURY EQUITY STOCK CAPITAL DEFICIT INVESTMENTS GAIN (LOSS) STOCK (DEFICIT) (IN THOUSANDS OF DOLLARS) --------- ---------- ----------- ----------- ------------ -------- ------------- BALANCE NOVEMBER 30, 1995.... $ 13,906 $36,378 $(2,261,289) $333 $1,277 $(1,913) $(2,211,308) Net income................. -- -- 2,146,391 -- -- -- 2,146,391 Foreign currency translation.............. -- -- -- -- 129 -- 129 Unrealized loss on investment............... -- -- -- (141) -- -- (141) Cancellation of the former common shares per the Plan of Reorganization... (13,906) (36,378) 48,371 -- -- 1,913 -- Issuance of the new common shares per the Plan of Reorganization........... 341,807 -- -- -- -- -- 341,807 Fresh-start revaluation.... -- -- 66,527 (192) (1,406) -- 64,929 --------- ------- ----------- ---- ------ ------- ----------- BALANCE NOVEMBER 30, 1996.... 341,807 -- -- -- -- -- 341,807 Net loss................... -- -- (3,854) -- -- -- (3,854) Foreign currency translation.............. -- -- -- -- (1,836) -- (1,836) --------- ------- ----------- ---- ------ ------- ----------- BALANCE NOVEMBER 30, 1997.... 341,807 -- (3,854) -- (1,836) -- 336,117 Net income................. -- -- 807 -- -- -- 807 Foreign currency translation.............. -- -- -- -- (1,809) -- (1,809) Redemption of common stock.................... (341,807) -- (104,831) -- -- -- (446,638) Issuance of common stock... 180,005 -- -- -- -- -- 180,005 Revaluation of net assets due to effects of the Acquisition.............. -- -- 107,878 -- 3,645 -- 111,523 --------- ------- ----------- ---- ------ ------- ----------- BALANCE FEBRUARY 28, 1998.... 180,005 -- -- -- -- -- 180,005 Net loss................... -- -- (14,364) -- -- -- (14,364) Foreign currency translation.............. -- -- -- -- 2,357 -- 2,357 BALANCE NOVEMBER 30, 1998.... $ 180,005 -- $ (14,364) $ -- $2,357 $ -- $ 167,998 ========= ======= =========== ==== ====== ======= ===========
See accompanying notes to consolidated financial statements. 30 32 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED NOVEMBER 30, 1998, THREE MONTHS ENDED FEBRUARY 28, 1998 AND YEARS ENDED NOVEMBER 30, 1997 AND 1996 (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) A. SIGNIFICANT ACCOUNTING POLICIES Purchase Accounting Eagle-Picher Holdings, Inc. ("Parent") acquired Eagle-Picher Industries, Inc. ("Company") on February 24, 1998 ("Acquisition") (See Note B). The Company, which is the operating entity, is a wholly-owned subsidiary of the Parent, which was formed as an acquisition vehicle. The Acquisition was accounted for as a purchase. The purchase price has been allocated to the assets and liabilities of the Company based on their respective fair values as determined primarily by independent appraisals. The excess of the purchase price over the assessed values of the net assets was allocated to Excess of Acquired Net Assets Over Cost and is being amortized over 15 years. If it becomes apparent that additional purchase price allocations are necessary, such adjustments would be made before February 24, 1999. It is not expected that additional adjustments would be material. A vertical black line is shown in the consolidated financial statements to separate operations after the Acquisition from those prior to the Acquisition since such financial statements have not been prepared on a comparable basis. Periods prior to the Acquisition are labeled with certain "Predecessor" designations, as described below. Reporting for Reorganization The Company 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 C). The Company emerged from reorganization November 29, 1996 ("Effective Date") and, in accordance with SOP 90-7, adopted fresh-start reporting. 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, which resulted in a fresh-start revaluation gain of $118,684 in 1996. The adjustments to reflect the Company's emergence from bankruptcy and fresh-start reporting 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. The consolidated financial statements for the periods prior to the Acquisition but subsequent to the Effective Date are labeled "Predecessor A" to indicate they were prepared after adopting fresh-start reporting. The consolidated financial statements for the year ended November 30, 1996 are labeled "Predecessor B." Principles of Consolidation The consolidated financial statements of the Company 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 31 33 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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, long-term debt and preferred stock. The carrying values of these financial instruments, with the exception of long-term debt and preferred stock, approximate fair value (See Notes F and G). Financial instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of cash and cash equivalents and 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, 1998. 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 its investment 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 purchase accounting, property, plant and equipment in service at February 24, 1998 were stated at fair value, based on independent appraisals, as of that date. Intangible Assets The excess of acquired net assets over cost is being amortized on a straight-line basis over 15 years. The recoverability of the asset is evaluated periodically as events or circumstances indicate a possible inability to recover its carrying amount. The reorganization value in excess of amounts allocable to identifiable assets was being amortized using the straight-line method over four years. Accounting for Long-Lived Assets Impairment losses are recorded on long-lived assets used in operations when impairment indicators are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying value of such assets. 32 34 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. The estimated liabilities are not discounted or reduced for possible recoveries from insurance carriers. 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. Gains and losses from foreign currency transactions are included in the determination of net income (loss) and were not material. Reclassifications Certain prior year amounts have been reclassified to conform with the 1998 consolidated financial statement presentation. New Accounting Standards In 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." Adoption of SFAS No. 128, which revised the manner in which earnings per share is calculated, did not impact the Company's previously reported earnings per share. The following three new accounting standards will be effective for the fiscal year ended November 30, 1999: In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income," which established standards for reporting and display of comprehensive income and its components. This statement requires the Company to report, for each period presented, the components of comprehensive income, a measure of performance that includes all non-owner sources of changes in equity. In addition to net income, comprehensive income would include unrealized gains and losses on securities available for sale and foreign currency translation adjustments. In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The standard requires that companies disclose "operating segments" based on the way management disaggregates the company for making internal operating decisions, regardless of how a company defines its operating segments. In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." This standard does not change the measurement or recognition of those plans, but standardizes disclosure requirements for such plans. The Company believes that although these standards may require expanded disclosure for the Company's consolidated financial statements, the impact of these standards is not expected to be material. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which addresses the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The accounting for changes 33 35 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) in the fair value of a derivative (that is gains and losses) depends on the intended use of the derivative and the resulting designation. The provisions of this statement are effective for the first quarter of the fiscal year ending November 30, 2000. The Company has not yet determined the effects this standard will have on its financial position or the results of its operations. B. ACQUISITION OF EAGLE-PICHER INDUSTRIES, INC. On February 24, 1998 ("Closing Date"), the Parent, which is a majority-owned subsidiary of Granaria Industries B.V. ("Granaria Industries"), acquired the Company from the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust ("PI Trust"). The PI Trust was established pursuant to the Company's Plan of Reorganization upon its emergence from bankruptcy (See Note C). The PI Trust was paid $702,500 in consideration, of which $255,900 was for repayment of the Senior Sinking Fund Debentures ("Debentures"), held by the PI Trust, with interest. The Company issued 100 shares of common stock to the Parent, the total proceeds of which were $180,005. The Company issued $220,000 of 9 3/8% Senior Subordinated Notes ("Subordinated Notes") and borrowed $225,000 in term loans and $79,100 in revolving loans under a syndicated senior loan facility (See Note F). Fees and expenses related to the Acquisition and the related financing transactions were approximately $27,500, including fees paid to Granaria Holdings B.V. ("Granaria Holdings"), which owns a majority of the outstanding common stock of Granaria Industries (See Note P). Shortly after the Acquisition, the Company also funded a trust established for the benefit of certain members of Senior Management (See Note J). The consolidated financial statements as of and for the three months ended February 28, 1998 include the effects of the Acquisition as of February 24, 1998. Accordingly, the 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 A") and (2) the four days ended February 28, 1998 of the Company, which have been reflected as Predecessor Company A due to their immaterial impact of the results of operations and cash flows. The following pro forma information for the years ended November 30, 1998 and 1997 gives effect to the Acquisition as if it had been consummated on December 1, 1997 and 1996, respectively. This information is not 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.
1998 1997 ------------ ------------ (UNAUDITED) Net Sales........................................ $ 851,826 $ 906,077 Net income (loss)................................ $ (16,637) $ (26,931) Net income (loss) per share...................... $(166,370.00) $(269,310.00) Average number of shares outstanding............. 100 100
C. REORGANIZATION AND EMERGENCE FROM CHAPTER 11 On November 18, 1996, the U.S. Bankruptcy Court for the Southern District of Ohio, Western Division ("Bankruptcy Court"), together with the U.S. District Court for the Southern District of Ohio, Western Division issued an order ("Confirmation Order") confirming the Third Amended Consolidated Plan of Reorganization ("Plan") of the Company and seven of its domestic subsidiaries, which became effective on November 29, 1996 ("Effective Date"). 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 34 36 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) reorganized Company. Those claims will be channeled to the PI Trust, which is an independently administered qualified settlement trust which was established to resolve and satisfy those claims. The Plan was based on a settlement of $2,000,000 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 $2,502,197, the amount the Bankruptcy Court had previously estimated as the Company's liability for asbestos-related personal injury 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 Company's then-existing shareholders received no distribution and their shares were canceled. 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 $1,525,540. It is anticipated that a final distribution will be made to the PI Trust and all unsecured claimants, other than those holding convenience claims ("Final Distribution"), when all claims asserted in the chapter 11 cases prior to the Confirmation Order (other than those channeled to the PI Trust and a separate trust to be established to resolve property damage claims) 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 Unofficial Asbestos Co-Defendants' Committee filed an appeal with respect to the Confirmation Order. On December 22, 1998, the United States Court of Appeals for the Sixth Circuit affirmed the Confirmation Order. D. INVENTORIES Inventories consisted of:
1998 1997 ------- ------------- PREDECESSOR A Raw materials and supplies............................. $52,657 $51,797 Work-in-process........................................ 20,839 25,932 Finished goods......................................... 15,873 14,840 ------- ------- 89,369 92,569 Adjustment to state inventory at LIFO value............ (496) (373) ------- ------- $88,873 $92,196 ======= =======
The percentage of inventories valued using the LIFO method was 81% in 1998 and 1997. In conjunction with purchase accounting and fresh-start reporting, new LIFO base layers were established based on inventory levels at both March 1, 1998 and December 1, 1996, respectively. The effects of liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years were not material. 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 $1,200 on an after tax basis. The effect of this change was to increase net income $8,100 in fiscal year 1996. 35 37 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) E. OTHER ASSETS Other assets consisted of:
1998 1997 ------- ------------- PREDECESSOR A Prepaid pension cost -- Note K......................... $42,813 $36,621 Debt issuance costs, net of accumulated amortization of $2,066............................................... 22,430 -- Investments in and receivables from unconsolidated affiliates........................................... 461 8,732 Notes receivable -- Note O............................. 3,601 3,920 Other.................................................. 2,988 4,272 ------- ------- $72,293 $53,545 ======= =======
The debt issuance costs are being amortized on a straight-line basis over the term of the related debt. On June 1, 1997, the Company contributed certain of the assets of the former Suspension Systems Division totaling $5,100 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 or loss on this transaction. The Company accounted 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. On November 30, 1998, the note was repaid and the majority partner exercised its option to purchase the Company's interest in E-P-Boge. The impact of this transaction on the consolidated net loss was not material. Included in the Consolidated Statements of Income (Loss) are the following results of the former Suspension Systems Division:
1997 1996 ------------- ------------- PREDECESSOR A PREDECESSOR B Net Sales........................................... $10,577 $19,606 ======= ======= Operating Income (Loss)............................. $ 96 $ (998) ======= =======
F. LONG-TERM DEBT, SHORT TERM BORROWINGS AND LEASE COMMITMENTS On the Closing Date, the Company's existing $60,000 unsecured committed revolving credit facility was terminated. It was replaced by a syndicated senior secured loan facility ("Credit Agreement") which provided $225,000 in term loans ("Term Loans") and a $160,000 revolving credit facility ("Facility"), of which $79,100 was drawn at the time of closing. The Facility is also available for issuance of letters of credit. At November 30, 1998, letters of credit totaling $26,300 were outstanding, which together with borrowings of $19,800, left the Company with $113,900 of borrowing capacity. The Credit Agreement is guaranteed by the Parent and the United States subsidiaries of the Company. It is secured by the capital stock of the Company and its United States subsidiaries, up to 65% of the capital stock of foreign subsidiaries and substantially all other property of the Company and its United States subsidiaries. The Credit Agreement contains covenants which restrict or limit the Company's ability to declare dividends or redeem capital stock, incur additional debt or liens, alter existing debt agreements, make loans or investments, form joint ventures, undergo a change in control or engage in mergers, acquisitions or asset sales. These covenants also limit the annual amount of capital expenditures and require the Company to meet certain minimum financial coverages. The Company was in compliance with all covenants at November 30, 1998. 36 38 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Long-term debt consisted of:
1998 1997 -------- ------------- PREDECESSOR A New Credit Agreement: Revolving Credit Facility................................. $ 19,825 $ -- 7.28%, due 2004 Term Loans: Traunche A............................................. 95,000 -- 7.28%, due 2003 Traunche B............................................. 49,900 -- 7.66%, due 2005 Traunche C............................................. 74,900 -- 7.91%, due 2006 Senior Subordinated Notes................................... 220,000 -- 9 3/8%, due 2008 Senior Unsecured Sinking Fund Debentures.................... -- 250,000 10%, due 2006 Industrial Revenue Bonds.................................... 18,000 18,400 3.6 % to 5.0 %, due 2005 and 2012 Debt of Foreign Subsidiaries................................ 6,731 4,997 -------- -------- 484,356 273,397 Less current portion........................................ 25,173 3,403 -------- -------- Long-term debt, less current portion........................ $459,183 $269,994 ======== ========
The Facility 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. If the Company meets certain financial benchmarks, the interest rate spreads and commitment fees may be reduced. The Term Loans 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%. If the Company meets certain financial benchmarks, the interest rate spreads may be reduced. In addition to regularly scheduled payments, the Company is required to make mandatory prepayments, which are applied on a pro rata basis to the Term Loans, of 60% of annual excess cash flow as defined in the Credit Agreement, 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. For the year ended November 30, 1998, the excess cash flow payment, which will be applied in the first quarter of 1999, was calculated to be $8,477. To manage its variable interest rate exposure on the Term Loans, the Company entered into a three year interest rate swap agreement ("Swap Agreement"), in which the Company agreed to exchange, at specified intervals, the difference between fixed and variable interest amounts based on a notional principal amount of $150,000. The Swap Agreement effectively fixes the interest rate on $150,000 of the Terms Loans at a weighted rate of 8.35%. The difference between the amount of interest to be paid and the amount of interest to be received under the Swap Agreement due to changing interest rates is charged or credited to interest expense over the life of the agreement. The fair value of the Swap Agreement, which was determined using discounted cash flow analysis based on current rates offered for similar issues of debt, is approximately $(2,550). As interest rates on the remaining Term Loans and the outstanding amounts under the Facility are not fixed, the effect of a one percent 37 39 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) increase in the applicable index rate would result in approximately $900 in additional interest expense annually, based on balances outstanding at November 30, 1998. The Subordinated Notes, which are unsecured, 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. The Indenture for the Subordinated Notes contains covenants which restrict or limit the Subsidiary's ability to declare or pay dividends, incur additional debt or liens, issue stock, engage in affiliate transactions, undergo a change in control or sell assets. The Subordinated Notes are also guaranteed by the Parent and the United States Subsidiaries of the Company. The Company issued the Debentures to the PI Trust on the Effective Date in the amount of $250,000. The Debentures were repaid in conjunction with the Acquisition. The Company's industrial revenue bonds bear interest at variable rates based on the market for similar issues and are secured by letters of credit. Several of the Company's foreign subsidiaries have entered into agreements with various banks which provide lines of credit totaling approximately $28,700 at November 30, 1998. At November 30, 1998, $6,700 of borrowings were outstanding leaving $22,000 in borrowing capacity. These agreements, of which the substantial majority is unsecured, are either committed lines of credit expiring in 2001 and 2002 or short-term money market or overdraft facilities, generally due on demand or within a year. The annual rates of interest on these lines of credit generally range from .75% to 1.5% over the banks' base rates. The commitment fees range from .25% to .35% per annum on the unused portion of the committed facilities. These agreements also contain covenants which include minimum financial requirements. The Company is in compliance with these covenants at November 30, 1998. Long term debt had an estimated fair value of approximately $471,000 and $287,000 at November 30, 1998 and 1997, respectively. The estimated fair value of long-term debt was calculated based on market prices for publicly traded issues and was calculated using discounted cash flow analysis based on current rates offered for similar issues for all other long-term debt. The Company paid interest of $28,886 in the nine months ended November 30, 1998 and $6,390, which included the interest paid on the Debentures at the time of the Acquisition, during the three months ended February 28, 1998, $31,044 in 1997 and $2,767 in 1996. Long-term debt is scheduled to mature over the next five years as follows: $25,173 in 1999, $15,300 in 2000, $20,635 in 2001, $25,300 in 2002 and $21,600 in 2003. SUBSEQUENT EVENT In the first quarter of 1999, the Company will require an additional $14,100 in letters of credit over and above the $26,300 that existed at November 30, 1998. The new letters of credit are associated with existing environmental remediation and are necessitated by financial assurance requirements set forth by the United States Environmental Protection Agency. These additional letters of credit will reduce available borrowing capacity. LEASE COMMITMENTS Future minimum rental commitments over the next five years as of November 30, 1998 under noncancellable operating leases, which expire at various dates, are as follows: $3,100 in 1999, $2,500 in 2000, $1,300 in 2001, $600 in 2002 and $400 in 2003. Rental expense was approximately $3,700 in the nine months ended November 30, 1998, $1,200 in the three months ended February 28, 1998, and $4,900 and $5,000 in 1997 and 1996, respectively. 38 40 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) G. SUPPLEMENTAL GUARANTOR INFORMATION (UNAUDITED) 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 and the Parent ("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 unaudited supplemental condensed combining financial statements present information regarding the Company ("Issuer"), subsidiary Guarantors and the subsidiaries that did not guarantee the debt. 39 41 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS) NINE MONTHS ENDED NOVEMBER 30, 1998
NON-GUARANTORS SUBSIDIARY FOREIGN ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- ---------- -------------- ------------ -------- (UNAUDITED) Net Sales Customers......................... $195,851 $374,337 $75,796 $ -- $645,984 Intercompany...................... 11,183 6,491 5,157 (22,831) -- Operating Costs and Expenses Cost of products sold............. 154,001 303,620 68,074 (22,722) 502,973 Selling and administrative........ 33,481 17,439 7,672 (132) 58,460 Management compensation........... 26,808 -- -- -- 26,808 Intercompany charges.............. (5,919) 5,919 (132) 132 -- Depreciation...................... 8,810 18,196 3,142 (222) 29,926 Amortization of intangibles....... 4,259 7,317 741 -- 12,317 Loss on sale of assets............ (25) 18 37 -- 30 -------- -------- ------- -------- -------- Total........................ 221,415 352,509 79,534 (22,944) 630,514 -------- -------- ------- -------- -------- Operating Income (Loss)................ (14,381) 28,319 1,419 113 15,470 Other Income (Expense) Interest expense.................. (35,888) -- (425) -- (36,313) Other income (expense)............ 978 313 490 (2) 1,779 -------- -------- ------- -------- -------- Income (Loss) Before Taxes............. (49,291) 28,632 1,484 111 (19,064) Income Taxes........................... (14,353) 7,803 1,850 -- (4,700) -------- -------- ------- -------- -------- Net Income (Loss)...................... $(34,938) $ 20,829 $ (366) $ 111 $(14,364) ======== ======== ======= ======== ========
40 42 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS) THREE MONTHS ENDED FEBRUARY 28, 1998 PREDECESSOR A
NON-GUARANTORS SUBSIDIARY FOREIGN ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL ------- ---------- -------------- ------------ -------- (UNAUDITED) 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............... 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 (Loss) 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 ======= ======== ======= ======= ========
41 43 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEETS AS OF NOVEMBER 30, 1998
NON-GUARANTORS SUBSIDIARY FOREIGN ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- ---------- -------------- ------------ -------- (UNAUDITED) ASSETS Cash and cash equivalents............... $ 7,464 $ 712 $ 5,125 $ 379 $ 13,680 Receivables............................. 55,611 74,292 14,941 -- 144,844 Intercompany accounts receivable........ -- -- 7,442 (7,442) -- Inventories............................. 30,755 43,708 15,785 (1,375) 88,873 Prepaid expenses........................ 4,073 3,614 651 -- 8,338 Deferred income taxes................... 10,851 -- -- -- 10,851 -------- -------- ------- --------- -------- Total current assets............... 108,754 122,326 43,944 (8,438) 266,586 Property, Plant and Equipment........... 66,500 143,872 38,165 -- 248,537 Investment in Subsidiaries.............. 87,019 6,252 -- (93,271) -- Excess of Assets Acquired Over Cost..... 78,838 136,253 13,819 -- 228,910 Other Assets............................ 54,187 17,675 431 -- 72,293 -------- -------- ------- --------- -------- Total Assets....................... $395,298 $426,378 $96,359 $(101,709) $816,326 ======== ======== ======= ========= ======== LIABILITIES AND SHAREHOLDER'S EQUITY Accounts payable........................ $ 15,149 $ 24,664 $10,494 $ -- $ 50,307 Intercompany accounts payable........... -- -- 7,662 (7,662) -- Long-term debt -- current portion....... 18,777 -- 6,396 -- 25,173 Income taxes............................ 5,296 -- 986 -- 6,282 Other current liabilities............... 45,744 24,464 4,052 -- 74,260 -------- -------- ------- --------- -------- Total current liabilities.......... 84,966 49,128 29,590 (7,662) 156,022 Long-term Debt -- less current portion............................... 458,848 -- 335 -- 459,183 Deferred Income Taxes................... 8,304 -- -- -- 8,304 Other Liabilities....................... 24,819 -- -- -- 24,819 -------- -------- ------- --------- -------- Total liabilities.................. 576,937 49,128 29,925 (7,662) 648,328 Intercompany Accounts................... (326,706) 309,571 29,768 (12,633) -- Shareholder's Equity.................... 145,067 67,679 36,666 (81,414) 167,998 -------- -------- ------- --------- -------- Total Liabilities and Shareholder's Equity........................... $395,298 $426,378 $96,359 $(101,709) $816,326 ======== ======== ======= ========= ========
42 44 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS NINE MONTHS ENDED NOVEMBER 30, 1998
NON-GUARANTORS SUBSIDIARY FOREIGN ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- ---------- -------------- ------------ -------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)....................... $(34,938) $ 20,829 $ (366) $ 111 $(14,364) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation and amortization......... 15,135 25,513 3,883 (222) 44,309 Proceeds from insurance settlement.... 14,784 -- -- -- 14,784 Change in assets and liabilities, net of effect of divestitures.......... 18,960 13,808 (1,263) (687) 30,818 -------- -------- ------- ------- -------- Net cash provided by (used in) operating activities.......... 13,941 60,150 2,254 (798) 75,547 -------- -------- ------- ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of divisions......... 7,872 -- -- -- 7,872 Capital expenditures.................... (7,793) (10,062) (8,405) -- (26,260) Other................................... (2,793) (53) 2,188 2,428 1,770 -------- -------- ------- ------- -------- Net cash provided by (used in) investing activities.......... (2,714) (10,115) (6,217) 2,428 (16,618) -------- -------- ------- ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt.............. -- -- 2,094 -- 2,094 Reduction of long-term debt............. (5,600) -- -- -- (5,600) Borrowings (repayments) on revolving credit agreement...................... (59,275) -- -- -- (59,275) Debt issue cost......................... (1,435) -- -- -- (1,435) -------- -------- ------- ------- -------- Net cash provided by (used in) financing activities.......... (66,310) -- 2,094 -- (64,216) -------- -------- ------- ------- -------- Increase (decrease) in cash and cash equivalents........................... (55,083) 50,035 (1,869) 1,630 (5,287) Intercompany accounts................... 50,432 (50,468) 1,481 (1,445) -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................ 12,115 1,145 5,513 194 18,967 -------- -------- ------- ------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD................................ $ 7,464 $ 712 $ 5,125 $ 379 $ 13,680 ======== ======== ======= ======= ========
43 45 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS FOR THREE MONTHS ENDED FEBRUARY 28, 1998 PREDECESSOR A
NON-GUARANTORS SUBSIDIARY FOREIGN ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL --------- ---------- -------------- ------------ --------- (UNAUDITED) 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, net of divestitures.............. (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............ 445,000 -- -- -- 445,000 Reduction of long-term debt........... (250,000) -- -- -- (250,360) Borrowings under revolving credit agreement........................... 79,100 -- -- -- 79,100 Redemption of common stock............ (446,638) -- -- -- (446,638) Issuance of common stock.............. 180,005 -- -- -- 180,005 Debt issue cost....................... (26,062) -- -- -- (26,062) --------- ------- ------- ------ --------- Net cash provided by (used in) financing activities........ (18,595) -- -- -- (18,955) --------- ------- ------- ------ --------- Increase (decrease) in cash and cash equivalents......................... (38,459) 2,324 630 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 $ 5,873 $ 194 $ 18,967 ========= ======= ======= ====== =========
44 46 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS) YEAR ENDED NOVEMBER 30, 1997 PREDECESSOR A
NON-GUARANTORS ------------------------ SUBSIDIARY FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL -------- ---------- ------------ --------- ------------ -------- (UNAUDITED) 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) ======== ======== ======= ======= ======== ========
45 47 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEETS AS OF NOVEMBER 30, 1997 PREDECESSOR A
NON-GUARANTORS SUBSIDIARY FOREIGN ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL ------ ---------- -------------- ------------ ----- (UNAUDITED) ASSETS Cash and cash equivalents............... $ 48,834 $ 561 $ 4,344 $ -- $ 53,739 Receivables............................. 39,566 72,992 21,394 -- 133,952 Intercompany accounts receivable........ 2,982 3,295 -- (6,277) -- 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 Identifiable 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 Accounts payable........................ $ 16,974 $ 28,257 $ 7,655 $ -- $ 52,886 Intercompany accounts payable........... -- -- 6,247 (6,247) -- Long-term debt -- current portion....... 80 -- 3,323 -- 3,403 Income taxes............................ 2,284 -- 10 -- 2,294 Other current liabilities............... 29,404 22,440 3,713 (138) 55,419 -------- -------- ------- -------- -------- Total 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 ======== ======== ======= ======== ========
46 48 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS YEAR ENDED NOVEMBER 30, 1997 PREDECESSOR A
NON-GUARANTORS ------------------------ SUBSIDIARY FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL --------- ---------- ------------ --------- ------------ --------- (UNAUDITED) 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 net 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 Changes in assets and liabilities, net of effect of divestitures: Income tax refunds receivable............. 70,695 -- -- -- -- 70,695 Working capital and other.................. 14,016 9,991 (5,655) 3,051 1,239 22,642 --------- -------- -------- ------- ------- --------- 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 PERIOD......... 26,089 553 5,985 98 -- 32,725 --------- -------- -------- ------- ------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD................... $ 48,834 $ 561 $ 4,344 $ -- $ -- $ 53,739 ========= ======== ======== ======= ======= =========
47 49 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS) YEAR ENDED NOVEMBER 30, 1996 PREDECESSOR B
NON-GUARANTORS ------------------------ SUBSIDIARY FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL ---------- ---------- ------------ --------- ------------ ---------- (UNAUDITED) 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 ========== ======== ======= ======== ======== ==========
48 50 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS YEAR ENDED NOVEMBER 30, 1996 PREDECESSOR B
NON-GUARANTORS ------------------------ SUBSIDIARY FOREIGN DIVESTED ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL ----------- ---------- ------------ --------- ------------ ----------- (UNAUDITED) 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 net 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, net of effect of divestitures... 46,214 (15,532) 636 6,505 (1,161) 36,662 ----------- -------- ------- ------- ------- ----------- Net cash provided by (used in) operating activities.......... 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 PERIOD......... 86,966 1,061 5,026 277 -- 93,330 ----------- -------- ------- ------- ------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD................... $ 26,089 $ 553 $ 5,985 $ 98 $ -- $ 32,725 =========== ======== ======= ======= ======= ===========
49 51 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, in 1996, fresh start revaluation:
NINE MONTHS ENDED THREE MONTHS ENDED NOVEMBER 30, FEBRUARY 28, 1998 1998 1997 1996 ----------------- ------------------ ------------- ------------- PREDECESSOR A PREDECESSOR A PREDECESSOR B Current: Federal.................... $ 4,600 $ 500 $ 1,000 $17,200 Foreign.................... 1,900 550 (600) 4,350 State and local............ 700 450 1,800 1,850 -------- ------ ------- ------- 7,200 1,500 2,200 23,400 -------- ------ ------- ------- Deferred: Federal.................... (11,900) 2,300 11,300 29,170 State and local............ -- 300 4,400 -- -------- ------ ------- ------- (11,900) 2,600 15,700 29,170 -------- ------ ------- ------- $ (4,700) $4,100 $17,900 $52,570 ======== ====== ======= =======
Total net income tax benefit for the year ended November 30, 1996 of $117,880 consisted of $52,570 tax expense from operations and the fresh-start revaluation, $169,785 tax benefit from the extraordinary gain on the discharge of pre-petition liabilities, and $665 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:
NINE MONTHS ENDED THREE MONTHS ENDED NOVEMBER 30, FEBRUARY 28, 1998 1998 1997 1996 ----------------- ------------------ ------------- ------------- PREDECESSOR A PREDECESSOR A PREDECESSOR B United States................ $(21,822) $4,328 $ 7,873 $665,907 Foreign...................... 2,758 579 6,173 8,749 -------- ------ ------- -------- $(19,064) $4,907 $14,046 $674,656 ======== ====== ======= ========
50 52 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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:
NINE MONTHS ENDED THREE MONTHS ENDED NOVEMBER 30, FEBRUARY 28, 1998 1998 1997 1996 ----------------- ------------------ ------------- ------------- PREDECESSOR A PREDECESSOR A PREDECESSOR B Income tax expense (benefit) at Federal statutory rate........... $(6,700) $1,700 $ 4,900 $ 236,130 Change in valuation allowance...... -- -- 1,200 (187,950) Foreign taxes rate differential.... (200) 300 (3,800) 900 State and local taxes, net of Federal benefit.................. 500 600 3,600 1,200 Non-deductible amortization of reorganization value in excess of amounts allocable to identifiable assets........................... -- 1,300 5,700 -- Non-deductible amortization and other items relating to excess of acquired net assets over cost.... 600 -- -- -- Non-deductible management compensation..................... 1,300 -- -- -- Non-deductible fresh start items... -- -- -- 4,100 Expired tax credits................ -- -- 5,900 -- Other.............................. (200) 200 400 (1,810) ------- ------ ------- --------- Total income tax expense (benefit)........................ $(4,700) $4,100 $17,900 $ 52,570 ======= ====== ======= =========
Components of deferred tax balances as of November 30 are as follows:
1998 1997 -------- ------------- PREDECESSOR A Current deferred tax assets attributable to: Accrued liabilities................................. $ 8,042 $ 12,576 Net operating less carryforwards.................... -- 2,000 Other............................................... 2,809 1,948 Valuation allowance................................. -- (2,731) -------- --------- Current deferred tax asset....................... 10,851 13,793 -------- --------- Noncurrent deferred tax assets (liabilities) attributable to: Property, plant and equipment....................... 2,207 (46,331) Notes to former creditors........................... -- 87,500 Net operating loss carryforwards.................... -- 72,142 Credit carryforwards................................ -- 14,686 Prepaid pension..................................... (14,985) (12,817) Postretirement benefit liability.................... 497 7,588 Amortization of intangibles......................... 1,001 -- Other............................................... 2,976 1,734 Valuation allowance................................. -- (25,511) -------- --------- Net noncurrent deferred tax asset (liability).... (8,304) 98,991 -------- --------- Net deferred tax assets.......................... $ 2,547 $ 112,784 ======== =========
51 53 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A tax election to treat the purchase of stock as a purchase of assets ("Election") was made in connection with the acquisition of the Company on February 24, 1998. Accordingly, a deemed final tax return of the Predecessor Company was filed for the tax period ended on the date of the Acquisition. On this tax return, the total purchase price, for tax purposes, was allocated to the assets of the Company to the extent of each asset's fair market value, and gain was recognized on each asset as if sold at that price. As a result, going forward, the assets were assigned the same value for book and tax purposes as of the date of the Acquisition. The net operating loss carryforward of $178,147 from Predecessor Company's tax year ended November 30, 1997 and the deduction resulting from the redemption of the Subordinated Notes were available to be utilized against the resulting transaction gain. Any net operating loss carryforwards not absorbed by the gain were lost and are not available to the Company. Additionally, tax credits which had been carried forward totaling $9,708 at November 30, 1997 were lost as a result of the transaction and are not available to the Company. The Company has no net operating loss or tax credit carryforwards available to offset future taxable income or tax liability, respectively, at November 30, 1998. The net operating loss carryforward at November 30, 1997 resulted from the distribution of cash and stock to the PI Trust and other creditors on the Effective Date and the redemption of notes, which were also distributed to the PI Trust and other creditors on the Effective Date, in 1997. A portion of the net operating loss generated on the Effective Date had been applied to prior years taxable income to generate a Federal tax refund of $69,146 which was received in 1997. As a result of the Acquisition, tax goodwill was established for the amount by which the purchase price for tax purposes exceeded the fair market value of the assets at the date of the Acquisition. The tax goodwill, the net amount of which was $141,100 at November 30, 1998, is being amortized and deducted over fifteen years, the same period over which the Excess of Acquired Net Assets over Cost is being amortized in the Consolidated Financial Statements. Certain liabilities assumed by the Company in the Acquisition, which are contingent for tax purposes, will result in additional tax goodwill as they are paid. This additional goodwill will also be amortized and deducted over the same period as the Excess of Acquired Net Assets over Cost. The potential additional tax goodwill, resulting from these liabilities, totaled $56,100 at November 30, 1998. In 1997, the Company's valuation allowance resulted from uncertainties related to the reorganization process and tax credits that were expected to expire unutilized. These items were related to the Predecessor Company and have no bearing on deferred tax benefits in 1998. 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 recorded. 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. The Company paid income taxes (net of refunds received) of $5,400 in the nine months ended November 30, 1998, $4,300 in 1997 (with the exception of the Federal tax refund received of $69,146), and $17,300 in 1996. The Company received refunds (net of taxes paid) of $2,300 in the three months ended February 28, 1998. I. BASIC AND DILUTED INCOME (LOSS) PER SHARE The calculation of net income (loss) per share is based upon the average number of common shares outstanding which was 100 for the nine months ended November 30, 1998, 9,555,560 for the three months ended February 28, 1998, 10,000,000 in 1997 and 11,040,932 in 1996. No potential common stock was outstanding during the three year period ended November 30, 1998. 52 54 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) J. MANAGEMENT COMPENSATION -- SPECIAL Management compensation expense consisted of the following items:
NINE MONTHS THREE MONTHS ENDED ENDED NOVEMBER 30, FEBRUARY 28, 1998 1998 ------------ ------------- PREDECESSOR A Short Term Sale Program.................................. $ 8,110 $2,020 Management Trust -- Restricted Stock Award............... 12,580 -- Severance................................................ 5,989 -- Other.................................................... 129 36 ------- ------ Total.......................................... $26,808 $2,056 ======= ======
The Company adopted a Short Term Sale Program ("STSP") pursuant to the terms of which it would make payments to certain members of senior management ("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 provided for a "stay-put" bonus equal to an eligible individual's fiscal 1997 base salary and a sales incentive bonus based on a multiple (ranging from 50% to 200%) of an eligible individual's fiscal 1997 base salary. The "stay-put" bonus was payable in two equal parts, the first portion was paid in March 1998, after the Acquisition, and the second is payable on the second anniversary of such change in control, provided that the individual has remained an employee of the Company or, if the individual was terminated by the Company other than for cause, payable upon such termination. The Company has provided a total of $4,066 for the twelve months ended November 30, 1998 in connection with the "stay put" bonus of which $1,611 remains unpaid. The sales incentive bonus is payable if the present value of the after-tax proceeds to the PI Trust in connection with the Acquisition meets a threshold amount set forth in the STSP. In the event that the after-tax proceeds to the PI Trust exceed a specified target amount, the multiple will increase on a straight-line basis. A final determination of the after-tax proceeds to the PI Trust, and the consequent payment of the balance of the sales incentive bonuses, will be made upon the final approval by the Congressional Joint Committee on Taxation of an examination conducted by the Internal Revenue Service of the tax return of the Company for the fiscal year ended November 30, 1996. The Company has provided a total of $6,064 for the twelve months ended November 30, 1998 in 1998 in connection with the sales incentive bonus of which $981 remains unpaid. In 1998, the Company paid $10,000 to the Eagle-Picher Management Trust ("E-P Management Trust") for the benefit of certain senior management of the Company. The $10,000 payment was effectively used by the E-P Management Trust to acquire certain restricted stock of Granaria Industries. Subsequently, the stock of Granaria Industries was later exchanged for the common stock of the Parent. The shares of the Parent held by the E-P Management Trust were allocated to certain members of senior management of the Company. The receipt of such shares was taxable to the holders as income in an amount equal to the value of the shares at the time of vesting. The Company also reimbursed the holders of the shares for their tax obligations associated with the receipt of such shares. The Company has recorded as compensation expense $12,580 for the restricted shares and related tax reimbursements. The Company entered into employment agreements with six executive officers ("Employment Agreements") which became effective on November 29, 1996. Each 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. The Employment Agreements terminate on the later of the second anniversary of any change of control occurring prior to December 31, 1998 or May 18, 1999. The consummation of the Acquisition did constitute a change of control under the Employment Agreements. Three of the six executive officers of the 53 55 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company have received severance benefits pursuant to the Employment Agreements. These payments, as well as severance payments to another former officer, aggregated $5,989. K. 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, including the net periodic pension cost (income), was $900 for the twelve months ended November 30, 1998, $1,900 in 1997 and $2,300 in 1996. 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 $1,314 for the twelve months ended November 30, 1998, $1,058 in 1997 and $1,279 in 1996. 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:
TWELVE MONTHS ENDED NOVEMBER 30, 1998 1997 1996 ------------- ------------- ------------- PREDECESSOR A PREDECESSOR B Service cost -- benefits earned during the period.................................. $ 5,459 $ 4,848 $ 5,497 Interest cost on projected benefit obligations............................. 14,618 14,276 13,701 Actual gain on plan assets................ (21,959) (36,544) (29,296) Net amortization and deferral............. (28) 16,669 10,000 -------- -------- -------- Net Periodic pension cost (income)........ $ (1,910) $ (751) $ (98) ======== ======== ========
In addition, in 1997, the Company recognized a curtailment gain of $1,662 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 8.6% for the twelve months November 30, 1998, 15.3% in 1997 and 13.5% in 1996, and generally reflects the performance of the equity and bond markets. 54 56 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table sets forth the plans' funded status on the measurement dates, November 30, 1998 and 1997, and amounts recognized in the Company's Consolidated Balance Sheets as of those dates.
1998 1997 --------- ------------- PREDECESSOR A Actuarial present value of: Vested benefit obligation............................... $(196,668) $(184,123) ========= ========= Accumulated benefit obligation.......................... $(203,391) $(191,148) ========= ========= Projected benefit obligation............................ $(223,920) $(209,701) Plan assets at fair value................................. 259,522 250,036 --------- --------- Projected benefit obligation less than plan assets........ 35,602 40,335 Unrecognized net (gain) loss.............................. 7,211 (3,761) Unrecognized prior service cost........................... -- 47 --------- --------- Prepaid pension cost recognized........................... $ 42,813 $ 36,621 ========= =========
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 6.75% and 4.2%, and 7.0% and 4.2%, respectively at November 30, 1998 and 1997, respectively. The assumption used for the long-term rate of return on assets was 9.0% in 1998 and 1997. The effect of the change in the discount rate was to increase the projected benefit obligation by $7,183 at November 30, 1998. Upon the Acquisition, all unrecognized reconciling items as of February 24, 1998 were recognized and recorded on the Company's Consolidated Balance Sheet in accordance with purchase accounting. The effect of the Acquisition was to increase the prepaid pension cost recognized by $3,714 at February 24, 1998. The Company also offers 401(k) savings plans to its employees in the United States. In most cases, the participants may contribute up to 15% of their compensation of which 50% of their contribution up to 6% of their compensation is matched by the Company. The cost of these plans to the Company was $1,641 in the nine months ended November 30, 1998, $540 in the three months ended February 28, 1998, $2,344 in 1997 and $2,235 in 1996. L. 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 on an annual basis. 55 57 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of net periodic postretirement benefit cost were as follows:
TWELVE MONTHS ENDED NOVEMBER 30, 1998 1997 1996 ------------- ------------- ------------- PREDECESSOR A PREDECESSOR B Service cost -- benefits earned during the period.................................. $ 534 $ 554 $ 710 Interest cost on accumulated postretirement benefit obligation....... 1,101 1,241 1,424 Amortization of unrecognized net gain..... -- (93) -- -------- ------ ------ Net periodic postretirement benefit cost.................................... $ 1,635 $1,702 $2,134 ======== ====== ======
In addition, in 1997, the Company recognized a curtailment gain of $564 due to the reduction in eligible employees that resulted primarily from the divestiture of divisions. A reconciliation of the accumulated postretirement benefit obligation measured as of November 30, 1998 and 1997 to amounts recognized in the Consolidated Balance Sheets at those dates is as follows:
1998 1997 ------- ------------- PREDECESSOR A Retirees and dependents..................................... $ 8,908 $10,670 Eligible active participants................................ 1,609 2,074 Other active participants................................... 6,442 6,993 ------- ------- Accumulated postretirement benefit obligation............... 16,959 19,737 Unrecognized net gain....................................... 631 1,944 ------- ------- Accrued postretirement benefit costs........................ $17,590 $21,681 ======= =======
Upon the Acquisition, all unrecognized reconciling items as of February 24, 1998 were recognized and recorded on the Company's Consolidated Balance Sheet in accordance with purchase accounting. The effect of the Acquisition was to decrease the accrued postretirement benefit costs by $4,718. Benefit costs were estimated assuming retiree health care costs would initially increase at a 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, 1998 would increase by $1,888 with a corresponding increase of $247 in the postretirement benefit expense in 1998. The discount rates used in determining the accumulated postretirement obligation at November 30, 1998 and 1997 were 6.75% and 6.5%, respectively. The effect of the change in the discount rate was not material to the accumulated postretirement benefit obligation at November 30, 1998. In May 1998, the Company adopted a Stock Appreciation Rights Plan ("SAR Plan") to reward those executives and managers whose individual performance and effort will have a direct impact on achieving the Company's profit and growth objectives. Shares of stock are not actually awarded, however participants are awarded units on which appreciation is calculated based on the Company's equity position. The units vest over five years and are payable any time during the sixth through tenth year following the date of award. The expense related to the SAR Plan was $640 in the nine months ended November 30,1998. 56 58 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) M. ASBESTOS LITIGATION CLAIMS As discussed in Note C, 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 Subsidiary manufactured from 1934 to 1971. The Company expects that the claims that were filed pursuant to the bar date for such claims, and such claims that will arise for several decades into the future, will be administered and resolved by the PI 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 ("property claims") against the Company. The class of holders of property claims voted to accept a settlement for such claims that was contained in the Plan. Pursuant to the settlement, the Company has set aside $3,000 in cash to fund a trust to resolve property claims. Certain of the holders of property 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 property claims to pursue those property claims solely against such trust, will prevent any such claimants from prosecuting property claims against the reorganized Company. N. 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 involved in routine litigation, environmental proceedings and claims pending with respect to matters arising out of the normal course of business. As of November 30, 1998, the Company has reserved $9,500 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 agreement among the Company, the United States Environmental Protection Agency ("US EPA") and the United States Department of Interior ("EPA Settlement Agreement") 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 EPA Settlement Agreement is with respect to "Additional Sites." Additional Sites are those superfund sites, not owned by the Company, 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 57 59 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) reorganization under chapter 11 of the bankruptcy code. Thus, the Company's liability at Additional Sites will be paid at approximately 37% of any amount due. As of November 30, 1998, the Company had received notice that it may have liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 at a number of Additional Sites. The Company believes, after an investigation of these claims, that it has only de minimis liability at all but two of these sites described in the following two paragraphs. The Company received 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 $5,000 to $6,000. The Company has offered to settle this claim for $2,800 (payable at approximately 37%). 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 ("RSR"). The Company allegedly leased the facility, which was in operation until 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, the total expenses of which are estimated at approximately $55,000. The Company is one of more that 1,000 PRP's identified by the US EPA in connection with this site and is not identified by 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. The Company has offered to settle this claim for $1,800 (payable at approximately 37%). The Company believes that the settlements for the RSR and Henryetta sites will be a deduction from the Final Distribution. In addition to the Additional Sites described above, the Company is involved with the following environmental matters not covered by the EPA Settlement Agreement. The Company is undertaking corrective actions under the Resource Conservation and Recovery Act ("RCRA") at its Joplin, Missouri facility. Consistent with the terms of its RCRA permit, the Company has been investigating the nature and extent of contamination present as a result of manufacturing activities during the 130-year operating history of this property. These investigations have identified areas of soil and groundwater contamination, certain of which will likely require the Company to undertake remedial activities. The US EPA has indicated that these actions will likely be required to take place over the next two years. Based on available information, the Company anticipates that these actions will cost between $600 and $2,600. At the Company's Colorado Springs, Colorado facility the closure of four former hazardous waste surface impoundments is being completed. Materials formerly stored in these impoundments have contaminated groundwater and soils at and around the facility. A groundwater remediation system was placed in service in 1995 and continues in operation. The Company will enter into an Order on Consent with the State of Colorado in 1999 to evaluate residual groundwater contamination and soil contamination associated with the site, and to undertake additional remedial actions as appropriate to remediate the contamination. Based on available information, the Company anticipates that these actions will cost approximately $1,800. In August, 1998, Fibrex, Inc., ("Fibrex") which purchased the Company's fibers division in 1982, sent a letter demanding indemnification under the 1982 sale agreement for future environmental remediation costs. The amount of such costs cannot be reliably estimated at this time. The Company filed a motion in the Bankruptcy Court to enforce the Plan against Fibrex. The Company believes that any liability it may have had to Fibrex was 58 60 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) discharged by the Plan and the Bankruptcy Court's Confirmation Order and intends to contest any claim by Fibrex vigorously. In 1998, the Company received $14,784 from insurance companies in settlement of certain claims relating primarily to environmental remediation, with the offset to the Excess of Acquired Net Assets Over Cost because the claim represented a pre-acquisition contingency. 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 C and M, 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 $8,800 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 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 $11,400. The Company asserted, in separate motions 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. The Company believes that it has valid legal and factual defenses and intends to contest vigorously all such claims. O. ACQUISITIONS AND DIVESTITURES The Company has signed a letter of intent to acquire the stock of Charterhouse Automotive Group, Inc., a holding company whose only operating subsidiary is Carpenter Enterprises, Ltd. ("Carpenter"), a manufacturer of precision-machined automotive parts, for approximately $41,000 in cash. It is expected that Carpenter will have approximately $32,000 of debt at the closing, of which approximately $20,000 will be refinanced from the Facility. The acquisition will be accounted for as a purchase. The transaction is expected to be consummated during the first quarter of 1999, subject to the results of a due diligence investigation and various conditions including negotiation of a mutually acceptable stock purchase agreement. The Company sold its Trim Division in November, 1998. The transaction was held in escrow until certain conditions were met in December 1998, resulting in a receivable on the Consolidated Balance Sheet of $14,500 at November 30, 1998. In December 1998, the Company received a $2,100 note due in 2000 which is secured by a 59 61 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) first mortgage on the real estate and the remainder of the proceeds in cash. The impact of this transaction on net income (loss) was not material. The Company is guarantor of tooling receivables due from both original equipment manufacturers and their suppliers. The Company believes the likelihood of customer default of these receivables to be remote. Pursuant to the Plan, in 1997, 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. The aggregate loss on these transactions was $2,411. The Company received a note for $3,719 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 are required on the first and second anniversaries of the note with the balance due on October 31, 2000. The first payment was received in accordance with these terms. 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 $9,000 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):
NINE MONTHS THREE MONTHS ENDED ENDED NOVEMBER 30, FEBRUARY 28, 1998 1998 1997 1996 ------------ ------------- ------------- ------------- PREDECESSOR A PREDECESSOR A PREDECESSOR B Net sales.................... $18,600 $ 7,076 $100,717 $140,169 ======= ======== ======== ======== Operating Income (Loss)...... $ (744) $ 144 $ (552) $ 326 ======= ======== ======== ========
P. TRANSACTIONS WITH RELATED PARTIES In connection with the Acquisition, the Company paid Granaria Holdings a transaction fee of $7,300 (approximately 1% of the transaction value) in consideration for advisory services related to structuring and financing the Acquisition. Granaria Holdings was also reimbursed for other costs incurred related to the Acquisition, issuance of the Subordinated Notes and Preferred Stock offering. Q. INDUSTRY SEGMENT INFORMATION The Company is a diversified manufacturer serving global markets and many industries. United States net sales include export sales to non-affiliated customers of $70,800 in the nine months ended November 30, 1998, $23,600 in the three months ended February 28, 1998, $113,600 in 1997 and $108,500 in 1996. A general description of the products manufactured and the markets served by the Company's three industry segments (listed in order of the magnitude of net sales) is: 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. 60 62 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 were included in the Automotive Segment were $18,600 and $(744) in the nine months ended November 30, 1998, $7,706 and $144 in the 3 months ended February 28, 1998, $68,973 and $(2,790) in 1997 and $102,408 and $(2,614) in 1996. Consolidated sales to Ford Motor Company amounted to $121,100 in the nine months ended November 30, 1998, $39,800 in the three months ended February 28, 1998, $170,500 in 1997 and $167,700 in 1996. No other customer accounted for 10% or more of consolidated sales. MACHINERY The Machinery Segment serves the commercial aerospace, food and beverage and other industrial markets globally and the construction market in the United States. 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 and $834 in 1997 and $18,023 and $934 in 1996. 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 and $1,500 in 1997 and $39,344 and $1,008 in 1996. Sales between segments were not material. 61 63 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company's foreign operations are located primarily in Europe and also in Mexico. Intercompany transactions with foreign operations are made at established transfer prices. Information regarding the Company's domestic and foreign sales, operating income and identifiable assets follows:
TRANSFER SALES/ UNITED STATES FOREIGN ELIMINATIONS CONSOLIDATED ------------- ------- --------------- ------------ NINE MONTHS ENDED NOVEMBER 30, 1998 SALES....................................... $585,664 $80,953 $(20,633) $645,984 ======== ======= ======== ======== OPERATING INCOME............................ $ 13,939 $ 1,419 $ 112 $ 15,470 ======== ======= ======== ======== IDENTIFIABLE ASSETS......................... $773,926 $96,359 $(53,958) $816,327 ======== ======= ======== ======== - - -------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED FEBRUARY 28, 1998 PREDECESSOR A SALES....................................... $189,305 $23,041 $ (6,504) $205,842 ======== ======= ======== ======== OPERATING INCOME............................ $ 10,186 $ 1,018 $ (177) $ 11,027 ======== ======= ======== ======== IDENTIFIABLE ASSETS......................... N/A....... N/A N/A N/A ======== ======= ======== ======== Year Ended November 30, 1997 Predecessor A Sales....................................... $842,195 $88,614 $(24,732) $906,077 ======== ======= ======== ======== Operating income............................ $ 39,744 $ 6,071 $ (257) $ 45,558 ======== ======= ======== ======== Identifiable assets......................... $698,444 $74,477 $(26,040) $746,881 ======== ======= ======== ======== - - -------------------------------------------------------------------------------------------------------- Year Ended November 30, 1996 Predecessor B Sales....................................... $830,013 $83,991 $(22,717) $891,287 ======== ======= ======== ======== Operating income............................ $ 54,139 $ 8,240 $ (273) $ 62,106 ======== ======= ======== ======== Identifiable assets......................... $807,508 $63,843 $(22,471) $848,880 ======== ======= ======== ========
62 64 EAGLE-PICHER INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INDUSTRY SEGMENT INFORMATION
INDUSTRIAL MACHINERY ----------------------------------------- ----------------------------------------- 9 MONTHS 3 MONTHS 9 MONTHS 3 MONTHS ENDED ENDED ENDED ENDED NOV. 30, FEB. 28, NOV. 30, FEB. 28, 1998 1998 1997 1996 1998 1998 1997 1996 -------- -------- -------- -------- -------- -------- -------- -------- PRED. A PRED. A PRED. B PRED. A PRED. A PRED. B (IN MILLIONS OF DOLLARS) Sales................ $113.6 $37.7 $200.1 $194.1 $201.8 $64.4 $270.8 $257.6 ====== ===== ====== ====== ====== ===== ====== ====== Operating Income..... 12.9 3.2 15.0 20.6 19.5 5.4 20.0 22.5 ====== ===== ====== ====== ====== ===== ====== ====== Depreciation and amortization....... 9.5 3.4 14.4 6.9 9.9 2.3 10.3 5.0 ====== ===== ====== ====== ====== ===== ====== ====== Capital expenditures....... 3.8 0.4 10.6 10.8 8.8 1.3 5.9 4.5 ====== ===== ====== ====== ====== ===== ====== ====== Identifiable Assets.. 159.1 N/A 138.1 146.3 210.0 N/A 122.3 136.0 ====== ===== ====== ====== ====== ===== ====== ====== AUTOMOTIVE -------------------------------------------- 9 MONTHS 3 MONTHS ENDED ENDED NOV. 30, FEB. 28, 1998 1998 1997 1996 ----------- -------- -------- -------- PRED. A PRED. A PRED. B (IN MILLIONS OF DOLLARS) Sales................ $330.6 $103.7 $435.2 $439.6 ====== ====== ====== ====== Operating Income..... 26.5 8.2 29.7 38.5 ====== ====== ====== ====== Depreciation and amortization....... 22.7 7.1 30.9 18.7 ====== ====== ====== ====== Capital expenditures....... 13.5 3.8 34.6 29.5 ====== ====== ====== ====== Identifiable Assets.. 333.8 N/A 274.0 292.8 ====== ====== ====== ======
SEGMENT TOTAL CORPORATE --------------------------------------- --------------------------------------------- 9 MONTHS 3 MONTHS 9 MONTHS 3 MONTHS ENDED ENDED ENDED ENDED NOV. 30, FEB. 28, NOV. 30, FEB. 28, 1998 1998 1997 1996 1998 1998 1997 1996 -------- -------- ------- ------- -------- ----------- ---------- ------- PRED. A PRED. A PRED. A PRED. A PRED. B (IN MILLIONS OF DOLLARS) PRED. B Sales................. $646.0 $205.8 $906.1 $891.3 $ - $ -_ $ - $ - ====== ====== ====== ====== ====== ===== ====== ======= Operating Income (loss).............. 58.9 16.8 64.7 81.6 (43.4) (5.8) (19.1) (19.5) ====== ====== ====== ====== ====== ===== ====== ======= Adjustment for asbestos litigation.......... -- -- -- 502.2 Interest expense...... (36.3) (6.9) (31.3) (3.1) Other income (expense)........... 1.8 .8 (0.3) (2.9) Reorganization items............... -- -- -- 116.3 ====== ===== ====== ======= Income (loss) before taxes............... Depreciation and amortization........ 42.1 12.8 55.6 30.6 2.2 -- 0.4 0.2 ====== ====== ====== ====== ====== ===== ====== ======= Capital expenditures........ 26.1 5.5 51.1 44.8 0.2 0.2 0.2 0.2 ====== ====== ====== ====== ====== ===== ====== ======= Identifiable assets... 702.9 N/A 534.4 575.1 113.4 N/A 212.5 273.8 ====== ====== ====== ====== ====== ===== ====== ======= TOTAL ------------------------------------------ 9 MONTHS 3 MONTHS ENDED ENDED NOV. 30, FEB. 28, 1998 1998 1997 1996 ----------- -------- ------- ------- PRED. A PRED. A PRED. B Sales................. $646.0 $205.8 $906.1 $891.3 ====== ====== ====== ====== Operating Income (loss).............. 15.5 11.0 45.6 62.1 ====== ====== ====== ====== Adjustment for asbestos litigation.......... -- -- -- 502.2 Interest expense...... (36.3) (6.9) (31.3) (3.1) Other income (expense)........... 1.8 .8 (0.3) (2.9) Reorganization items............... -- -- -- 116.3 ------ ------ ------ ------ Income (loss) before taxes............... (19.0) 4.9 14.0 674.6(1) ====== ====== ====== ====== Depreciation and amortization........ 44.3 12.8 56.0 30.8 ====== ====== ====== ====== Capital expenditures........ 26.3 5.7 51.3 45.0 ====== ====== ====== ====== Identifiable assets... 816.3 N/A 746.9 848.9 ====== ====== ====== ======
- - --------------- (1) Before extraordinary gain and cumulative effect of accounting change. 63 65 REPORT OF MANAGEMENT The Company's management is responsible for the preparation and presentation of the consolidated financial statements. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles and as such include amounts based on judgements and estimates made by management. The Company's system of internal accounting controls is designed to provide reasonable assurance at reasonable cost that assets are safeguarded from loss or unauthorized use, and that the financial records may be relied upon for the preparation of the consolidated financial statements. The consolidated financial statements have been audited by our independent auditors, Deloitte and Touche LLP. Their audit is conducted in accordance with generally accepted auditing standards and provides an independent assessment as to the fair presentation, in all material respects, of the Company's consolidated financial statements. The Audit Committee of the Board of Directors meets periodically with management and the independent auditors to review internal accounting controls and the quality of financial reporting. Financial management and the independent auditors have full and free access to the Audit Committee. /s/ ANDRIES RUIJSSENAARS Andries Ruijssenaars President and Chief Executive Officer /s/ CARROLL D. CURLESS Carroll D. Curless Vice President and Controller Cincinnati, Ohio January 18, 1999 64 66 INDEPENDENT AUDITORS' REPORT The Board of Directors Eagle-Picher Industries, Inc.: We have audited the accompanying consolidated balance sheet of Eagle-Picher Industries, Inc. (a wholly-owned subsidiary of Eagle-Picher Holdings, Inc.) and subsidiaries as of November 30, 1998 (Successor Company balance sheet), and the related consolidated statements of income (loss), shareholders' equity, and cash flows for the nine month period ended November 30, 1998 (Successor Company operations). In addition, we have audited the accompanying consolidated balance sheet of Eagle-Picher Industries, Inc. and subsidiaries as of November 30, 1997 (Predecessor Company balance sheet under fresh-start accounting), and the related consolidated statements of income (loss), shareholders' equity, and cash flows for the year ended November 30, 1997 and the three month period ended February 28, 1998 (Predecessor Company operations under fresh-start accounting). 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. The Predecessor Company's consolidated statements of income (loss), shareholder's equity and cash flows for the year ended November 30, 1996, were audited by other auditors whose report, dated February 5, 1997, expressed an unqualified opinion on those statements and included explanatory paragraphs related to the Company emerging from Chapter 11 of the United States Bankruptcy Code, described in Notes A and C to the consolidated financial statements, and the Predecessor Company's change in computing LIFO for certain inventories described in Note D to the consolidated financial statements. 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 Successor Company consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Successor Company as of November 30, 1998, and the results of its operations and its cash flows for the nine month period then ended. Further, in our opinion, the Predecessor Company consolidated financial statements under fresh-start accounting referred to above present fairly, in all material respects, the financial position of the Predecessor Company as of November 30, 1997, and the results of its operations and its cash flows for the year ended November 30, 1997, and the three months ended February 28, 1998, in conformity with generally accepted accounting principles. As discussed in Note A 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. As discussed in Notes A and B to the consolidated financial statements, Eagle-Picher Industries, Inc. was acquired on February 24, 1998 by Eagle-Picher Holdings, Inc., a majority-owned subsidiary of Granaria Industries B.V. As a result, the consolidated financial statements as of and for the three month period ended February 28, 1998 include the effects of such acquisition as of February 24, 1998 and, therefore, are not comparable to consolidated financial statements prepared subsequent to February 28, 1998. /s/ DELOITTE & TOUCHE LLP Cincinnati, Ohio January 18, 1999 65 67 INDEPENDENT AUDITORS' REPORT The Board of Directors Eagle-Picher Industries, Inc.: We have audited the accompanying consolidated statements of income (loss), shareholders equity (deficit), and cash flows of Eagle-Picher Industries, Inc. and subsidiaries for the year 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 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, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations of Eagle-Picher Industries, Inc. and subsidiaries and their cash flows for the year ended November 30, 1996 in conformity with generally accepted accounting principles. As discussed in Note A 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 D to the consolidated financial statements, the Company changed its method of computing LIFO for inventories of boron, germanium and other rare metals in 1996. /s/ KPMG LLP Cincinnati, Ohio February 5, 1997 66 68 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The following table sets forth the name, age and position with the Company of the individuals who serve as directors and executive officers of the Company. 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...................... 49 Director, Chairman of the Board Daniel C. Wyler.................... 47 Director Thomas E. Petry.................... 59 Director Dr. Wendelin Wiedeking............. 46 Director Andries Ruijssenaars............... 56 Director, President and Chief Executive Officer Wayne R. Wickens................... 52 Senior Vice President Michael E. Aslanian................ 44 Group Vice President Carroll D. Curless................. 60 Vice President and Controller David G. Krall..................... 37 Vice President, General Counsel and Secretary
Mr. Joel P. Wyler became a Director of the Company and Chairman of its Board upon consummation of the Acquisition. Mr. Wyler has been the Chairman of the Board of Directors of Granaria Holdings B.V. since 1982. Mr. Daniel C. Wyler was appointed as a Director of the Company in January 1999. He has been the Chief Executive Officer of Granaria Holdings B.V. since 1989. Mr. Petry has been a Director of the Company since 1981. Upon 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 is also a director of Cinergy Corp., Firstar Corp., Union Central Life Insurance Co. and The Wm. Powell Company. Mr. Wiedeking was appointed as a Director of the Company in January 1999. He has been the Chairman of the Board of Porsche AG since 1993 where he is also President and Chief Executive Officer. Mr. Ruijssenaars has been President and a Director of the Company since 1994, and upon consummation of the Acquisition, he also became the Company's Chief Executive Officer. He was 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. Wickens has been Senior Vice President of the Company since September 1998. Prior to that time, beginning in December 1994, he was Senior Vice President -- Automotive. 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. 67 69 Mr. Aslanian has been Group Vice President since September 1998. From 1994 until September 1998, he was Division President of the Company's Hillsdale Tool & Manufacturing Co. Mr. Aslanian joined the Company in 1974 with the Company's former Fabricon Automotive Division where he was Production Manager, Plant Manager, and ultimately in 1989 Division Manager of the then newly-formed Trim Division. In 1990, he moved to the Hillsdale Tool & Manufacturing Co. as Vice President of Manufacturing and became President there in 1994. Mr. Curless was first employed by the Company in 1964. He became Assistant Controller in 1978 and Controller in 1984. He has been Vice President and Controller since 1986. Mr. Curless is also currently serving as the Company's interim Chief Financial Officer. Mr. Krall joined the Company in June 1998. Prior to coming to the Company, he had been with Taft, Stettinius & Hollister LLP, a legal firm based in Cincinnati, Ohio, since 1986 and had been a partner there since 1994. Mr. Joel P. Wyler and Mr. Daniel C. Wyler are brothers. 68 70 ITEM 11. EXECUTIVE COMPENSATION. SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION The following Summary Compensation Table sets forth the compensation for the last three fiscal years of those persons who served as (i) the Company's Chief Executive Officer during fiscal 1998, (ii) the Company's four most highly compensated executive officers other than the Chief Executive Officer who were serving as executive officers of the Company at the end of fiscal 1998, and (iii) one additional individual who was among the Company's four most highly compensated executive officers other than the Chief Executive Officer, but was not serving as an executive officer of the Company at the end of fiscal 1998 (collectively, the "Named Executive Officers"): SUMMARY COMPENSATION TABLE
LONG TERM ANNUAL COMPENSATION COMPENSATION ------------------------------------- ----------------- OTHER ANNUAL RESTRICTED ALL OTHER FISCAL YEAR COMPENSATION STOCK AWARDS(S) COMPENSATION NAME AND PRINCIPAL POSITION ENDED SALARY ($) BONUS ($) ($)(1) ($)(2) ($)(3) --------------------------- ----------- ---------- --------- ------------ ----------------- ------------ Andries Ruijssenaars(4)................. 11/30/98 575,000 380,000 1,818,286 1,705,500 1,411,852 President and Chief Executive Officer 11/30/97 525,000 205,000 179,244 -- 208,006 11/30/96 425,000 160,000 174,171 -- 201,233 Thomas E. Petry(5)...................... 11/30/98 208,333 -- 1,032,134 -- 4,049,790 Former Chairman and Chief Executive 11/30/97 625,000 278,000 232,737 -- 261,903 Officer 11/30/96 625,000 239,000 218,919 -- 246,873 Wayne R. Wickens........................ 11/30/98 360,000 150,000 606,154 568,500 807,044 Senior Vice President 11/30/97 325,000 109,000 77,942 -- 93,311 11/30/96 295,000 72,000 99,564 -- 118,199 Michael E. Aslanian(6).................. 11/30/98 211,750 130,000 312,540 337,500 269,584 Group Vice President 11/30/97 180,000 77,000 8,852 -- 17,049 11/30/96 172,000 61,000 9,228 -- 17,553 Carroll D. Curless...................... 11/30/98 250,000 130,000 321,332 284,250 488,229 Vice President and Controller 11/30/97 240,000 67,000 116,456 -- 134,611 11/30/96 230,000 86,000 78,715 -- 93,870 David G. Krall(7)....................... 11/30/98 85,000 65,000 62,582 67,500 132 Vice President, General 11/30/97 -- -- -- -- -- Counsel and Secretary 11/30/96 -- -- -- -- -- David N. Hall(8)........................ 11/30/98 307,500 -- 932,806 284,250 2,648,334 Former Senior Vice 11/30/97 375,000 126,000 166,629 -- 189,963 President -- Finance 11/30/96 360,000 107,000 146,980 -- 167,786
- - --------------- (1) This column includes nothing for perquisites since in no case did perquisites exceed the reporting thresholds (the lesser of 10% of salary plus bonus or $50,000). For fiscal 1996 and 1997, the column is comprised of amounts for the payment of taxes on purchases of annuities under the Company's Supplemental Executive 69 71 Retirement Plan (the "SERP") for each of the Named Officers. In fiscal 1998, the column includes the following:
PAYMENT OF TAXES ON PURCHASES OF PAYMENT OF TAXES ON SHARES AWARDED NAMED EXECUTIVE OFFICER ANNUITIES UNDER THE SERP ($) UNDER THE INCENTIVE STOCK PLAN ($) ----------------------- -------------------------------- ---------------------------------- Andries Ruijssenaars......... 272,780 1,545,506 Thomas E. Petry.............. 1,032,134 -- Wayne R. Wickens............. 105,228 500,926 Michael E. Aslanian.......... 13,276 299,264 Carroll D. Curless........... 66,128 255,204 David G. Krall............... -- 62,582 David N. Hall................ 675,362 257,444
(2) The amounts in this column represent the dollar value of restricted stock awards granted to the Named Executive Officers during fiscal 1998 under the Company's Incentive Stock Plan (as described below), of shares of Class A Common Stock of Parent. Such awards were originally subject to periods of vesting but, pursuant to an amendment to the Incentive Stock Plan, all of such awards were fully vested on or before November 19, 1998 (see "-- Incentive Stock Plan," below). The amounts in this column, which comprise the entire aggregate holdings of each of the Named Executive Officers, represent the following numbers of shares: Mr. Ruijssenaars, 30,000 shares; Mr. Wickens, 10,000 shares; Mr. Aslanian, 6,250 shares; Mr. Curless, 5,000 shares; Mr. Krall, 1,250 shares; and Mr. Hall, 5,000 shares. The total aggregate dollar value of all stock awards under the Incentive Stock Plan is $4,651,500, which represents a total of 83,500 shares, all of which were fully vested on or before November 19, 1998. The EP Management Trust holds us of February 24, 1999, 9,250 unawarded shares of the Parent's Class A Common Stock, (See Note J to the Company's Consolidated Financial Statements at Item 8.) Dividends on the restricted stock, if any are declared, would be payable on the restricted stock. Parent, however, has no obligation to declare dividends and, pursuant to the terms of Parent's Preferred Stock, certain restrictions exist on Parent's ability to declare dividends on the Class A Common Stock. 70 72 (3) This column includes the following amounts:
AMOUNTS COMPANY VALUE OF PAID COST OF CONTRIBUTIONS TO COMPANY PURSUANT TO AMOUNTS PAID IN FISCAL ANNUITY EAGLE-PICHER PAID LIFE SHORT-TERM CONNECTION WITH YEAR UNDER SALARIED 401(K) INSURANCE SALE TERMINATION OF NAMED EXECUTIVE OFFICER ENDED SERP ($) PLAN ($) PREMIUMS ($) PROGRAM ($) EMPLOYMENT ($) TOTAL ($) ----------------------- -------- ---------- ---------------- ------------ ------------ --------------- --------- Andries Ruijssenaars... 11/30/98 302,552 5,000 1,800 1,102,500 -- 1,411,852 11/30/97 201,456 4,750 1,800 -- -- 208,006 11/30/96 195,331 4,750 1,152 -- -- 201,233 Thomas E. Petry....... 11/30/98 1,132,002 4,688 600 1,625,000 1,250,000 4,012,290 11/30/97 255,353 4,750 1,800 -- -- 261,903 11/30/96 240,323 4,750 1,800 -- -- 246,873 Wayne R. Wickens...... 11/30/98 118,152 5,000 1,392 682,500 -- 807,044 11/30/97 87,169 4,750 1,392 -- -- 93,311 11/30/96 111,607 4,750 1,842 -- -- 118,199 Michael E. Aslanian... 11/30/98 16,329 5,000 408 234,000 -- 255,737 11/30/97 11,891 4,750 408 -- -- 17,049 11/30/96 12,395 4,750 408 -- -- 17,553 Carroll D. Curless.... 11/30/98 72,829 5,000 2,400 408,000 -- 488,229 11/30/97 127,461 4,750 2,400 -- -- 134,611 11/30/96 86,720 4,750 2,400 -- -- 93,870 David G. Krall........ 11/30/98 -- -- 132 -- -- 132 11/30/97 -- -- -- -- -- -- 11/30/96 -- -- -- -- -- -- David N. Hall......... 11/30/98 745,684 5,000 1,350 1,116,300 780,000 2,648,334 11/30/97 183,413 4,750 1,800 -- -- 189,963 11/30/96 161,236 4,750 1,800 -- -- 167,786
- - --------------- In addition, for fiscal 1998, this column includes $37,500 paid to Mr. Petry as a director's fee (see "-- Compensation of Directors" below) and $13,847 paid to Mr. Aslanian for relocation expenses. (4) Mr. Ruijssenaars became Chief Executive Officer effective February 24, 1998. Prior to that time, he was President and Chief Operating Officer of the Company. (5) Mr. Petry resigned as Chairman of the Board and Chief Executive Officer effective February 24, 1998. Since that time, Mr. Petry has served as a Director of the Company. (6) Mr. Aslanian assumed his present position on September 1, 1998; prior to that time, he was President of Hillsdale Tool & Manufacturing Co., a wholly-owned subsidiary of the Company. (7) Mr. Krall was first employed by the Company on June 1, 1998, in his present capacity. The amount shown in the "salary" column for Mr. Krall represents amounts actually paid to Mr. Krall during fiscal 1998 based upon his annual salary of $170,000. (8) Mr. Hall's employment with the Company ended on August 31, 1998. LONG-TERM INCENTIVE PLAN The following table sets forth information as to awards to the following Named Executive Officer during fiscal 1998 under the Company's Share Appreciation Plan (the "LTIP"), a long-term incentive plan. No other Named Executive Officer received an award under the LTIP in fiscal 1998. 71 73 LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS NAME NUMBER OF UNITS(#)(1) PERIOD UNTIL MATURATION OR PAYOUT(2) TARGET($)(3) ---- --------------------- ------------------------------------ ------------------------------ David G. 50,000 6/1/2004 250,000 Krall.......
- - --------------- (1) The Named Executive Officer has been granted units under the LTIP which represent the right to receive a cash payment from the Company based on a share of the increase in the Company's "Capitalized Earnings Value" (as defined in the LTIP) above a baseline. "Capitalized Earnings Value" is a formula-derived value considering the Company's EBITDA and cash position, the debt levels of Parent and Company and the total outstanding obligations of Parent with respect to its Preferred Stock, each at the end of each fiscal year. (2) The units will vest at a rate of 20% on each of the first five anniversaries of the award date (except that the units of a participant who dies or is incapacitated while employed by the Company are immediately 100% vested, as are the units of a participant who is employed by the Company on a date in which control of the Company effectively changes). They are exercisable, if the individual remains employed by the Company, after the sixth anniversary of the award date but no later than the tenth anniversary of the award date. Upon termination of employment, all unvested units are forfeited and vested but unexercised units are deemed to have been immediately exercised. (3) The target amount reported is based on the Company's projection of "Capitalized Earnings Value" assuming a growth rate consistent with historical trends (without considering periods of either extraordinary growth or recession or the effect on earnings of events relating to the Company's chapter 11 proceedings). The estimated target payment is provided only for the purposes of this table and is not intended to forecast actual appreciation, if any, in the "Capitalized Earnings Value" of the Company. The LTIP does not provide for a minimum (threshold), target or maximum payout. RETIREMENT BENEFITS 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 SERP:
YEARS OF SERVICE -------------------------------------------------------- REMUNERATION 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 1,050,000............................. 378,000 504,000 630,000 630,000 630,000 1,100,000............................. 396,000 528,000 660,000 660,000 660,000 1,150,000............................. 414,000 552,000 690,000 690,000 690,000
72 74 The Eagle-Picher Salaried Plan (the "Salaried Plan" and, together with the SERP, the "Retirement Plans") is a non-contributory defined benefit pension plan in which the Named Executive Officers are participants. The SERP, 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, bonus and severance payments that would be included in the Retirement Plans are as reported in the Summary Compensation Table, and commissions, if there had been any, would have been included in that Table. The payments pursuant to the Short Term Sale Program (discussed below) are not included in such compensation. The benefits shown by the 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: Andries Ruijssenaars........................................ 24 Thomas E. Petry............................................. 30(A) Wayne R. Wickens............................................ 32 Michael E. Aslanian......................................... 41 Carroll D. Curless.......................................... 36 David G. Krall.............................................. 25 David N. Hall............................................... 21(A)
- - --------------- (A) Represents final credited years of service for purposes of calculating benefits under the Retirement Plans for Mr. Petry and Mr. Hall. COMPENSATION OF DIRECTORS Directors who are not employees of the Company are paid an annual retainer of $50,000, payable in calendar quarters, with no additional fees for attendance or committee membership. The Company does not pay any director retainers or attendance fees (including committee membership fees) to directors who are also employees of the Company. Effective January 1, 1999, Parent adopted an Incentive Stock Plan for outside Directors. Pursuant to that plan, directors of the Company that are also directors of Parent may receive shares of Class A Common Stock of Parent in lieu of a directors' fee. Joel P. Wyler, as a named Director of Parent and Company, provides services on behalf of and pursuant to his employment by Granaria Holdings B.V. All directors' fees due as a result of Mr. Wyler's services as a named Director are paid to Granaria Holdings B.V. 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 In fiscal 1998, until February 24, 1998, Darius W. Gaskins (Committee Chairman), Robert B. Steinberg and Will M. Storey, directors of the Company during that time, constituted the Compensation Committee. None of Messrs. Gaskins, Steinberg and Storey has ever been an employee of the Company or any of its subsidiaries. Since February 24, 1998, there has been no compensation committee of the Board of the Directors. Decisions regarding compensation are passed upon by the Board of Directors as a whole. In fiscal 1998, Joel P. Wyler, Chairman of Granaria Holdings B.V. and Chairman of Parent and the Company, Mr. Ruijssenaars, the Chief 73 75 Executive Officer of Parent and the Company and Mr. Petry, the former Chief Executive Officer of the Company, constituted the entire Board of Directors during the period beginning on February 24, 1998. 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, for a period of six years after February 24, 1998, to indemnify all officers and directors of the Company who served as such prior to February 24, 1998, and to purchase directors and officers liability insurance in their favor. EMPLOYMENT AGREEMENTS; SEVERANCE The Company entered into employment agreements, which became effective on November 29, 1996 (the Consummation Date of the Company's Consolidated Plan of Reorganization), with Messrs. Ruijssenaars, Petry, Wickens, Curless and Hall, as well as with James A. Ralston, the Company's former Vice President, General Counsel and Secretary. Each of the employment agreements 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 of such officers, the employment agreements are substantially identical in their terms. The employment agreements terminate on February 24, 2000. The employment agreements provide that each officer will maintain his then-current duties and responsibilities and will not be relocated from his then-current geographical location. The employment agreements provide for salary continuation at the officer's then-current rate plus customary annual increases and bonuses and discretionary bonuses, as determined by the Board of Directors of the Company (and which are shown in the Summary Compensation Table, above). In addition, the employment agreements provide that each officer 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, the STSP and the Stock Incentive Plan). If the employment of any such officer is terminated by the Company for 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 officer without Good Reason (as defined below), such 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 any such officer is terminated due to death or long term disability, such 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 any such 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 officer's employment agreement) such officer is entitled to receive, in addition to the Accrued Benefits, a lump-sum severance benefit equivalent to two years' current base salary. In fiscal 1998, each of Messrs. Petry, Hall and Ralston received payments pursuant to their employment agreements in connection with the termination of their employment with the Company. Mr. Petry, who resigned as Chairman of the Board and Chief Executive Officer, 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 $741,874 in lieu of the Company's purchase of an annuity and the Company paid $676,424 for the benefit of Mr. Petry for related tax obligations. Mr. Hall received a severance payment in the amount of $780,000. In 74 76 addition, the Company purchased an annuity for the benefit of Mr. Hall pursuant to the SERP, the cost of which was $592,062 and made a payment of $536,227 for the benefit of Mr. Hall for related tax obligations. Mr. Ralston received a severance payment in the amount of $480,000. In addition, Mr. Ralston received a payment in cash pursuant to the SERP of $281,459 in lieu of the Company's purchase of an annuity and the Company paid $255,358 for the benefit of Mr. Ralston 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 was obligated to make payments to certain members of senior management (the "eligible individuals"), in connection with the consummation of the Acquisition. The STSP provided 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") was payable shortly after the Acquisition, and the second ("Second Stay-Put") is payable on the second anniversary of the Acquisition, provided that the individual has remained employed by the Company or, if the individual was terminated by the Company other than for cause, is payable upon such termination. The Sales Incentive, which was payable only if the present value of the after-tax proceeds to the Trust in connection with the Acquisition met a threshold amount set forth in the STSP, increased on a straight-line basis in the event that the Trust's after-tax proceeds exceeded a specified target amount. 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 in fiscal 1998 in the aggregate amount of approximately $8.3 million. The Company expects to make an additional payment of approximately $1.6 million on the second anniversary of the Closing Date for the Second Stay-Put. The Company expects to 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 to exceed $1.0 million. 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 approximately $.7 million, while $4.1 million was recorded in 1998. The STSP provides that the Sales Incentive was earned from the date of the Acquisition through 30 days thereafter. Accordingly, no accrual was made for the Sales Incentive in 1997 and an expense of approximately $6.1 million was recorded in 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 ----------------------- --------------- -------------- Andries Ruijssenaars.................................... $ 840,000 $262,500 Thomas E. Petry......................................... 1,000,000 625,000(A) Wayne R. Wickens........................................ 520,000 162,500 Michael E. Aslanian..................................... 144,000 90,000 Carroll D. Curless...................................... 288,000 120,000 David G. Krall.......................................... -- -- David N. Hall........................................... 741,300(B) 375,000(A)
- - --------------- (A) This amount represents 100% of the stay-put bonus of each of Messrs. Petry and Hall. (B) This amount represents 100% of the estimated Sales Incentive bonus of Mr. Hall. Each of the other Named Executive Officers (other than Mr. Krall, who was not a participant in the STSP) is expected to receive an additional payment in connection with the Sales Incentive upon the final determination of the present value of the after-tax proceeds to the Trust. 75 77 The Company expects to pay the Second Stay-Put to each of the Named Executive Officers, other than Messrs. Petry, Hall and Krall, on February 24, 2000, 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. Mr. Hall received his Second Stay-Put payment at the time his employment with the Company ended. Mr. Krall was not a participant in the STSP. INCENTIVE STOCK PLAN 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 B.V., the proceeds of which were used by the E-P Management Trust to acquire 16% of the Common Stock of Granaria Industries B.V. The stock of Granaria Industries B.V. was subsequently exchanged for shares of Class A Common Stock of Parent. Pursuant to the Incentive Stock Plan, the shares of Parent held by the E-P Management Trust were allocated to certain members of senior management of the Company (including certain of the Named Executive Officers). The Incentive Stock Plan as originally adopted provided that restricted stock would vest over a period of years. However, the Plan was amended during 1998 to provide for immediate vesting such that all shares were fully vested on or before November 19, 1998. The receipt of such shares was taxable to the holders as income in an amount equal to the value of the shares at the time of vesting. Pursuant to the Incentive Stock Plan, the Company made payments in the amount of approximately $4.3 million for the benefit of holders of the shares in connection with their tax obligations associated with their receipt of such shares. The transfer of compensatory property to senior management and the tax payments to the holders of the shares will result in an income tax deduction to the Company in the amount of approximately $8.9 million. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth certain information regarding the beneficial ownership of the Parent's Class A Common Stock as of February 24, 1999, by each person known by the Company to own beneficially 5% or more of the Parent's voting Class A Common Stock, the Parent's only voting security.
SHARES BENEFICIALLY OWNED -------------------------------- NUMBER OF PERCENTAGE OF NAME CLASS A SHARES CLASS A SHARES - - ---- -------------- -------------- Granaria Holdings B.V....................................... 615,751 98.5% Lange Voorhout 16 P.O. Box 233 2501 CE The Hague The Netherlands(1)(2)(3) Joel P. Wyler............................................... 625,001 100.0% Lange Voorhout 16 P.O. Box 233 2501 CE The Hague The Netherlands(4)(5) Daniel C. Wyler............................................. 615,751 98.5% Lange Voorhout 16 P.O. Box 233 2501 CE The Hague The Netherlands(4)
SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth certain information as of February 24, 1999, regarding management's ownership of the Parent's Class A Common Stock, the only voting equity security issued by the Parent (with all 76 78 of the equity securities of the Company being held by the Parent) and the only equity security of the Parent held by the Company's directors or executive officers. All shares are subject both to a Voting Trust Agreement that allows the shares to be voted by Granaria Industries B.V. and to a Shareholders Agreement that restricts their disposition.
SHARES BENEFICIALLY OWNED -------------------------------- NUMBER OF PERCENTAGE OF NAME CLASS A SHARES CLASS A SHARES - - ---- -------------- -------------- Joel P. Wyler(4),(5)........................................ 625,001 100.0% Daniel C. Wyler(4).......................................... 615,751 98.5% Andries Ruijssenaars(5)..................................... 39,250 6.3% Wayne R. Wickens............................................ 10,000 1.6% Thomas E. Petry(5).......................................... 9,250 1.5% Michael E. Aslanian......................................... 6,250 1.0% Carroll D. Curless.......................................... 5,000 * David G. Krall.............................................. 1,250 * David N. Hall............................................... 5,000 * Dr. Wendelin Wiedeking(6)................................... 2,500 * All directors and executive officers as a group (seven persons).................................................. 625,001 100.0%
- - --------------- (*) Less than 1.0%. (1) Granaria Holdings B.V. is 100% owned by Wijler Holding B.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 525,001 shares held by Granaria Industries B.V., which is majority owned by Granaria Holdings B.V. (3) Includes 82,750 shares held by Granaria Holdings B.V. as voting trustee for certain members of management. (4) Includes shares held by Granaria Holdings B.V. (5) Includes 9,250 shares held the by E-P Management Trust, of which Messrs. Joel P. Wyler, Andries Ruijssenaars and Thomas E. Petry are trustees. (6) Represents shares the Parent has agreed to grant Dr. Wiedeking in March 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS. In connection with the Acquisition, the Company paid Granaria Holdings B.V. ("Granaria Holdings") a transaction fee of $7.3 million (approximately 1% of the transaction value) in consideration for advisory services related to structuring and financing the Acquisition. Granaria Holdings was also paid $1.1 million to reimburse them for third party costs incurred related to the Acquisition and issuance of the 9 3/8% Senior Subordinated Notes and the 11 3/4% Cumulative Redeemable Exchangeable Preferred Stock. The Company has an advisory and consulting agreement with Granaria Holdings pursuant to which the Company will pay Granaria Holdings an annual management fee of $1.75 million annually plus out-of-pocket expenses. Fees and expenses relating to these services amounted to $1.5 million in the nine months ended November 30, 1998, of which $.6 million is due Granaria Holdings at November 30, 1998. The Company adopted a Short Term Sale Program ("STSP") prior to the Acquisition which provided for payments to certain executive officers and members of senior management in the event of a change of control. The Acquisition constituted such a change of control. (See Executive Compensation - - -Short Term Sale Program.) The Company recorded an expense of $10.1 million in the year ended November 30, 1998 in connection with the STSP, of which $2.6 million remains unpaid. In 1998, the Company paid $10.0 million to the Eagle-Picher Management Trust ("E-P Management Trust") for the benefit of certain executive officers of the Company. The $10.0 million payment was effectively 77 79 used to acquire certain restricted stock of Granaria Industries B.V. which was later exchanged for common stock of the Parent. Certain of the shares of the Parent held by the E-P Management Trust have been allocated to certain members of senior management of the Company. The Company also reimbursed the holders of the shares for their tax obligations associated with receipt of such shares. (See Executive Compensation - Incentive Stock Plan.) The Company has recorded compensation expense of $12.6 million for the restricted shares and related tax reimbursements. Granaria Holdings B.V. has elected to purchase the shares of the Company which were forfeited by former members of management for $.7 million. This amount is due the Company at November 30, 1998. The Company entered into employment agreements with six executive officers ("Employment Agreements") which became effective November 29, 1996. Each 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. (See Executive Compensation -- Employment Agreements Severance.) Three of the six executive officers of the Company have received severance benefits pursuant to the Employment Agreements. These payments, as well as payments to another former officer, aggregated $6.0 million. 78 80 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. All Financial Statements: -- Financial Statements -- Included in Item 8 in this Report -- Independent Auditors' Report -- Included in Item 8 in this Report 2. Financial Statement Schedules -- None 3. Exhibits (numbers keyed to Item 601, Regulation S-K)
2.1 -- Third Amended Plan of Reorganization of Eagle-Picher Industries, Inc. (the "Company")(1) 2.2 -- Exhibits to Third Amended Plan of Reorganization of the Company(1) 3.1 -- Articles of Incorporation of the Company, as amended(1) 3.2 -- Regulations of the Company(1) 3.3 -- Amended and Restated Certificate of Incorporation of Eagle-Picher Holdings, Inc.(1) 3.4 -- Bylaws of Eagle-Picher Holdings, Inc.(1) 3.5 -- Articles of Incorporation of Daisy Parts, Inc.(2) 3.6 -- Bylaws of Daisy Parts, Inc.(2) 3.7 -- Certificate of Incorporation of Eagle-Picher Development Company, Inc.(2) 3.8 -- Bylaws of Eagle-Picher Development Company, Inc.(2) 3.9 -- Certificate of Incorporation of Eagle-Picher Far East, Inc.(2) 3.10 -- Bylaws of Eagle-Picher Far East, Inc.(2) 3.11 -- Articles of Incorporation of Eagle-Picher Fluid Systems, Inc.(2) 3.12 -- Bylaws of Eagle-Picher Fluid Systems, Inc.(2) 3.13 -- Articles of Incorporation of Eagle-Picher Minerals, Inc.(2) 3.14 -- Bylaws of Eagle-Picher Minerals, Inc.(2) 3.15 -- Certificate of Formation of Eagle-Picher Technologies, LLC(2) 3.16 -- Operating Agreement of Eagle-Picher Technologies, LLC(2) 3.16a -- Amended and Restated Limited Liability Company Agreement of Eagle-Picher Technologies, LLC(3) 3.17 -- Articles of Incorporation of Hillsdale Tool & Manufacturing Co.(2) 3.18 -- Bylaws of Hillsdale Tool & Manufacturing Co.(2) 3.19 -- Articles of Incorporation of Michigan Automotive Research Corporation(2) 3.20 -- Bylaws of Michigan Automotive Research Corporation(2) 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")(1) 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(1) 4.3 -- First Supplemental Indenture dated as of February 24, 1998, between the Company and the Trustee(1) 4.4 -- Form of Global Note (attached as Exhibit A to the Indenture filed as Exhibit 4.1 to the Registration Statement)(1) 9.1 -- Voting Trust Agreement dated November 16, 1998 with owners of Class A (Voting) Common Stock of the Parent 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.(1)
79 81 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.(1) 10.3 -- Supplemental Executive Retirement Plan of the Company(2) 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(1) 10.5 -- Assumption Agreement for the Notes Purchase Agreement, dated as of February 24, 1998, between the Company and the Subsidiary Guarantors(1) 10.6 -- Registration Rights Agreement, dated as of February 24, 1998, between E-P Acquisition, SBC Warburg Dillon Read and ABN AMRO Incorporated(1) 10.7 -- Assumption Agreement for the Registration Rights Agreement, dated as of February 24, 1998, of the Company(1) 10.8 -- Credit Agreement, dated as of February 19, 1998, among E-P Acquisition, Inc. (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(1) 10.9 -- Assumption Agreement dated as of February 24, 1998, between the Company and the Agent(1) 10.10 -- Security Agreement, dated as of February 24, 1998, among the Company, the Agent and the Domestic Subsidiaries(1) 10.11 -- Holdings Pledge Agreement, dated as of February 24, 1998, between Eagle-Picher Holdings, Inc. and the Agent(1) 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(1) 10.13 -- Holdings Guaranty Agreement, dated as of February 24, 1998, by Eagle-Picher Holdings, Inc., accepted and agreed by the Agent(1) 10.14 -- Subsidiary Guaranty Agreement, dated as of February 24, 1998, by the Domestic Subsidiaries, accepted and agreed by the Agent(1) 10.15 -- Trademark Collateral Agreement, dated February 24, 1998, between the Company and the Agent(1) 10.16 -- Patent Collateral Agreement, dated February 24, 1998, between the Company and the Agent(1) 10.17 -- Copyright Collateral Agreement, dated February 24, 1998, between the Company and the Agent(1) 10.18 -- Subordination Agreement, dated as of February 24, 1998, among E-P Acquisition, Inc., the Company and the Domestic Subsidiaries(2) 10.19 -- Management Agreement dated as of February 24, 1998 between the Company and Granaria Holdings B.V.(1) 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")(2) 10.21 -- Incentive Stock Plan of Eagle-Picher Industries, Inc., effective as of February 25, 1998(2) 10.22 -- Employment Agreements dated November 29, 1996 between Registrant and each Named Executive Officer as defined in the Company's Form S-4 filed in 1998, as amended (Messrs. Petry, Ruijssenaars, Hall, Wickens, Curless and Ralston)(2) 10.23 -- Amendments dated August 5, 1997 to Employment Agreements between the Company and each Named Executive Officer as defined in the Company's Form S-4(2) 10.24 -- Sales Incentive Program of the Company(2) 10.25 -- Letter Agreements dated August 5, 1997 between the Company and each Named Executive Officer as defined in the Company's Form S-4 regarding Short Term Sale Program(2) 10.26 -- Letter Agreement dated September 12, 1997 between the Company and Carroll D. Curless regarding Sale Incentive Bonus(2) 10.27 -- Letter Agreements dated February 18, 1998 between the Company and each Named Executive Officer as defined in the Company's Form S-4 regarding Short Term Sale Program(2) 10.28 -- Side Letter, dated February 23, 1998, regarding Amendments to the Short Term Sale Program(2)
80 82 10.29 -- Eagle-Picher Holdings, Inc. (the "Parent") Incentive Stock Plan for Outside Directors effective January 1, 1999 10.30 -- Amended and Restated Incentive Stock Plan for Eagle-Picher Industries, Inc. (the "Company") 10.31 -- Second Amended and Restated Incentive Stock Plan for Eagle-Picher Industries, Inc. (the "Company") 10.32 -- Shareholders Agreement dated October 15, 1998 among Granaria Holdings B.V., Granaria Industries B.V., Eagle-Picher Holdings, Inc. (the "Parent") and Eagle-Picher Industries, Inc. (the "Company") 10.33 -- Share Appreciation Plan of the Company(4) 21.1 -- Subsidiaries of the Company 23.1 -- Consent of Deloitte & Touche LLP 23.2 -- Consent of KPMG LLP 27.1 -- Financial Data Schedule (submitted electronically to the SEC for its information)
- - --------------- (1) Incorporated by reference to the Company's Form S-4 Registration Statement No. 333-49957 filed on April 10, 1998. (2) Incorporated by reference to the Company's Amendment No. 1 to Form S-4 Registration Statement No. 333-49957 filed on May 20, 1998. (3) Incorporated by reference to the Company's Amendment No. 2 to Form S-4 Registration Statement No. 333-49957 filed on June 5, 1998. (4) Incorporated by reference to the Company's Form 10-Q filed on June 29, 1998. - - --------------- (b) 1. Reports on Form 8-K -- None filed in the Company's fourth quarter for the period covered by the report.
81 83 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. EAGLE-PICHER INDUSTRIES, INC. /s/ ANDRIES RUIJSSENAARS By: -------------------------------------- Andries Ruijssenaars President and Chief Executive Officer Date: February 25, 1999 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ ANDRIES RUIJSSENAARS Date: February 25, 1999 - - ----------------------------------------------------------- Andries Ruijssenaars, President, Chief Executive Officer and Director /s/ CARROLL D. CURLESS Date: February 25, 1999 - - ----------------------------------------------------------- Carroll D. Curless, Vice President and Controller (Principal Financial Officer and Principal Accounting Officer) /s/ JOEL P. WYLER Date: February 25, 1999 - - ----------------------------------------------------------- Joel P. Wyler, Director and Chairman of the Board /s/ THOMAS E. PETRY Date: March 1, 1999 - - ----------------------------------------------------------- Thomas E. Petry, Director
84 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADDITIONAL REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. EAGLE-PICHER HOLDINGS, INC. /s/ ANDRIES RUIJSSENAARS By: -------------------------------------- Andries Ruijssenaars President and Chief Executive Officer (Principal Executive Officer) Dated: February 25, 1999 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE ADDITIONAL REGISTRANT, EAGLE-PICHER HOLDINGS, INC., AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ ANDRIES RUIJSSENAARS Date: February 25, 1999 - - ----------------------------------------------------------- Andries Ruijssenaars, President, Chief Executive Officer and Director (Principal Executive Officer) /s/ CARROLL D. CURLESS Date: February 25, 1999 - - ----------------------------------------------------------- Carroll D. Curless, Vice President and Controller (Principal Financial Officer and Principal Accounting Officer) /s/ JOEL P. WYLER Date: February 25, 1999 - - ----------------------------------------------------------- Joel P. Wyler, Director and Chairman of the Board /s/ THOMAS E. PETRY Date: March 1, 1999 - - ----------------------------------------------------------- Thomas E. Petry, Director
85 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADDITIONAL REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. DAISY PARTS, INC. /s/ WILLIAM D. OETERS By: -------------------------------------- William D. Oeters President (Principal Executive Officer) Dated: February 25, 1999 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE ADDITIONAL REGISTRANT, DAISY PARTS, INC., AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ WILLIAM D. OETERS Date: February 25, 1999 - - ----------------------------------------------------------- William D. Oeters, President (Principal Executive Officer) /s/ GARY M. FREYTAG Date: February 25, 1999 - - ----------------------------------------------------------- Gary M. Freytag, Vice President and Treasurer (Principal Financial Officer) /s/ DAVID P. KELLEY Date: February 25, 1999 - - ----------------------------------------------------------- David P. Kelley, Controller (Principal Accounting Officer) /s/ DAVID N. EVANS Date: February 25, 1999 - - ----------------------------------------------------------- David N. Evans, Director /s/ DAVID G. KRALL Date: February 25, 1999 - - ----------------------------------------------------------- David G. Krall, Director
86 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADDITIONAL REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. EAGLE-PICHER DEVELOPMENT CO., INC. /s/ ANDRIES RUIJSSENAARS By: -------------------------------------- Andries Ruijssenaars President (Principal Executive Officer) Dated: February 25, 1999 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE ADDITIONAL REGISTRANT, EAGLE-PICHER DEVELOPMENT CO., INC., AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ ANDRIES RUIJSSENAARS Date: February 25, 1999 - - ----------------------------------------------------------- Andries Ruijssenaars, Director and President (Principal Executive Officer) /s/ GARY M. FREYTAG Date: February 25, 1999 - - ----------------------------------------------------------- Gary M. Freytag, Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer) /s/ DAVID G. KRALL Date: February 25, 1999 - - ----------------------------------------------------------- David G. Krall, Director
87 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADDITIONAL REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. EAGLE-PICHER FAR EAST, INC. /s/ SADAO TAKAHASHI By: -------------------------------------- Sadao Takahashi President (Principal Executive Officer) Dated: February 25, 1999 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE ADDITIONAL REGISTRANT, EAGLE-PICHER FAR EAST, INC., AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ SADAO TAKAHASHI Date: February 25, 1999 - - ----------------------------------------------------------- Sadao Takahashi, President (Principal Executive Officer) /s/ GARY M. FREYTAG Date: February 25, 1999 - - ----------------------------------------------------------- Gary M. Freytag, Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer) /s/ DAVID N. EVANS Date: February 25, 1999 - - ----------------------------------------------------------- David N. Evans, Director /s/ DAVID G. KRALL Date: February 25, 1999 - - ----------------------------------------------------------- David G. Krall, Director
88 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADDITIONAL REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. EAGLE-PICHER FLUID SYSTEMS, INC. /s/ SCOTT F. MALY By: -------------------------------------- Scott F. Maly President (Principal Executive Officer) Dated: February 25, 1999 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE ADDITIONAL REGISTRANT, EAGLE-PICHER FLUID SYSTEMS, INC., AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ SCOTT F. MALY Date: February 25, 1999 - - ----------------------------------------------------------- Scott F. Maly, President (Principal Executive Officer) /s/ GARY M. FREYTAG Date: February 25, 1999 - - ----------------------------------------------------------- Gary M. Freytag, Treasurer (Principal Financial Officer) /s/ DANIEL T. HOAG Date: February 25, 1999 - - ----------------------------------------------------------- Daniel T. Hoag, Controller (Principal Accounting Officer) /s/ DAVID G. KRALL Date: February 25, 1999 - - ----------------------------------------------------------- David G. Krall, Director
89 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADDITIONAL REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. EAGLE-PICHER MINERALS, INC. /s/ WESLEY D. LEE By: -------------------------------------- Wesley D. Lee President (Principal Executive Officer) Date: March 1, 1999 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE ADDITIONAL REGISTRANT, EAGLE-PICHER MINERALS, INC., AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ WESLEY D. LEE Date: March 1, 1999 - - ----------------------------------------------------------- Wesley D. Lee, President (Principal Executive Officer) /s/ GARY M. FREYTAG Date: February 25, 1999 - - ----------------------------------------------------------- Gary M. Freytag, Vice President and Treasurer (Principal Financial Officer) /s/ NANCY C. REED Date: March 1, 1999 - - ----------------------------------------------------------- Nancy C. Reed, Controller (Principal Accounting Officer) /s/ DAVID N. EVANS Date: February 25, 1999 - - ----------------------------------------------------------- David N. Evans, Director /s/ DAVID G. KRALL Date: February 25, 1999 - - ----------------------------------------------------------- David G. Krall, Director
90 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADDITIONAL REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. EAGLE-PICHER TECHNOLOGIES, LLC /s/ WILLIAM E. LONG By: -------------------------------------- William E. Long President (Principal Executive Officer) Dated: February 24, 1999 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE ADDITIONAL REGISTRANT, EAGLE-PICHER TECHNOLOGIES, LLC, AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ WILLIAM E. LONG Date: February 24, 1999 - - ----------------------------------------------------------- William E. Long, President and Director (Principal Executive Officer) /s/ J. D. SELLER Date: February 25, 1999 - - ----------------------------------------------------------- J. D. Seller, Vice President and Controller (Principal Financial Officer and Principal Accounting Officer) /s/ JOEL P. WYLER Date: February 24, 1999 - - ----------------------------------------------------------- Joel P. Wyler, Director /s/ ANDRIES RUIJSSENAARS Date: February 24, 1999 - - ----------------------------------------------------------- Andries Ruijssenaars, Director
91 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADDITIONAL REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. HILLSDALE TOOL & MANUFACTURING CO. /s/ WILLIAM D. OETERS By: -------------------------------------- William D. Oeters President (Principal Executive Officer) Dated: February 25, 1999 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE ADDITIONAL REGISTRANT, HILLSDALE TOOL & MANUFACTURING CO., AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ WILLIAM D. OETERS Date: February 25, 1999 - - ----------------------------------------------------------- William D. Oeters, President (Principal Executive Officer) /s/ GARY M. FREYTAG Date: February 25, 1999 - - ----------------------------------------------------------- Gary M. Freytag, Vice President and Treasurer (Principal Financial Officer) /s/ DAVID P. KELLEY Date: February 25, 1999 - - ----------------------------------------------------------- David P. Kelley, Controller (Principal Accounting Officer) /s/ DAVID N. EVANS Date: February 25, 1999 - - ----------------------------------------------------------- David N. Evans, Director /s/ DAVID G. KRALL Date: February 25, 1999 - - ----------------------------------------------------------- David G. Krall, Director
92 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE ADDITIONAL REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. MICHIGAN AUTOMOTIVE RESEARCH CORPORATION /s/ MICHAEL J. BOERMA By: -------------------------------------- Michael J. Boerma President (Principal Executive Officer) Dated: February 25, 1999 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE ADDITIONAL REGISTRANT, MICHIGAN AUTOMOTIVE RESEARCH CORPORATION, AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ MICHAEL J. BOERMA Date: February 25, 1999 - - ----------------------------------------------------------- Michael J. Boerma, President and Director (Principal Executive Officer) /s/ TERENCE J. RHOADES Date: February 25, 1999 - - ----------------------------------------------------------- Terence J. Rhoades, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer) /s/ DAVID G. KRALL Date: February 25, 1999 - - ----------------------------------------------------------- David G. Krall, Director
93 EXHIBIT INDEX
EXHIBIT NUMBER - - ------- 2.1 -- Third Amended Plan of Reorganization of Eagle-Picher Industries, Inc. (the "Company")* 2.2 -- Exhibits to Third Amended Plan of Reorganization of the Company* 3.1 -- Articles of Incorporation of the Company, as amended* 3.2 -- Regulations of the Company* 3.3 -- Amended and Restated Certificate of Incorporation of Eagle-Picher Holdings, Inc.* 3.4 -- Bylaws of Eagle-Picher Holdings, Inc.* 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* 3.16a -- Amended and Restated Limited Liability Company 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")* 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* 4.3 -- First Supplemental Indenture dated as of February 24, 1998, between the Company and the Trustee* 4.4 -- Form of Global Note (attached as Exhibit A to the Indenture filed as Exhibit 4.1 to the Registration Statement)* 9.1 -- Voting Trust Agreement dated November 16, 1998 with owners of Class A (Voting) Common Stock of the Parent 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.*
94
EXHIBIT NUMBER - - ------- 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.* 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* 10.5 -- Assumption Agreement for the Notes Purchase Agreement, dated as of February 24, 1998, between the Company and the Subsidiary Guarantors* 10.6 -- Registration Rights Agreement, dated as of February 24, 1998, between E-P Acquisition, SBC Warburg Dillon Read and ABN AMRO Incorporated* 10.7 -- Assumption Agreement for the Registration Rights Agreement, dated as of February 24, 1998, of the Company* 10.8 -- Credit Agreement, dated as of February 19, 1998, among E-P Acquisition, Inc. (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* 10.9 -- Assumption Agreement dated as of February 24, 1998, between the Company and the Agent* 10.10 -- Security Agreement, dated as of February 24, 1998, among the Company, the Agent and the Domestic Subsidiaries* 10.11 -- Holdings Pledge Agreement, dated as of February 24, 1998, between Eagle-Picher Holdings, Inc. and the Agent* 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* 10.13 -- Holdings Guaranty Agreement, dated as of February 24, 1998, by Eagle-Picher Holdings, Inc., accepted and agreed by the Agent* 10.14 -- Subsidiary Guaranty Agreement, dated as of February 24, 1998, by the Domestic Subsidiaries, accepted and agreed by the Agent* 10.15 -- Trademark Collateral Agreement, dated February 24, 1998, between the Company and the Agent* 10.16 -- Patent Collateral Agreement, dated February 24, 1998, between the Company and the Agent* 10.17 -- Copyright Collateral Agreement, dated February 24, 1998, between the Company and the Agent* 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.* 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 as defined in the Company's Form S-4 filed in 1998, as amended (Messrs. Petry, Ruijssenaars, Hall, Wickens, Curless and Ralston)* 10.23 -- Amendments dated August 5, 1997 to Employment Agreements between the Company and each Named Executive Officer as defined in the Company's Form S-4* 10.24 -- Sales Incentive Program of the Company* 10.25 -- Letter Agreements dated August 5, 1997 between the Company and each Named Executive Officer as defined in the Company's Form S-4 regarding Short Term Sale Program*
95
EXHIBIT NUMBER - - ------- 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 as defined in the Company's Form S-4 regarding Short Term Sale Program* 10.28 -- Side Letter, dated February 23, 1998, regarding Amendments to the Short Term Sale Program* 10.29 -- Eagle-Picher Holdings, Inc. (the "Parent") Industries Stock Plan for Outside Directors effective January 1, 1999 10.30 -- Amended and Restated Incentive Stock Plan for Eagle-Picher Industries, Inc. (the "Company") 10.31 -- Second Amended and Restated Incentive Stock Plan for Eagle-Picher Industries, Inc. (the "Company") 10.32 -- Shareholders Agreement dated October 15, 1998 among Granaria Holdings B.V., Granaria Industries B.V., Eagle-Picher Holdings, Inc. (the "Parent") Eagle-Picher Industries, Inc. (the "Company") 10.33 -- Share Appreciation Plan of the Company* 21.1 -- Subsidiaries of the Company 23.1 -- Consent of Deloitte & Touche LLP 23.2 -- Consent of KPMG LLP 27.1 -- Financial Data Schedule (submitted electronically to the SEC for its information)
- - --------------- * Incorporated by reference. See Item 14 above. EX-9.1 2 EXHIBIT 9.1 1 EXHIBIT 9.1 VOTING TRUST AGREEMENT, dated as of November 16, 1998, by and among each of the persons designated as a Shareholder on the signature pages of this Agreement (each a "Shareholder" and collectively, the "Shareholders") and Granaria Holdings B.V., a Dutch corporation, as trustee (the "Trustee"). The Shareholders are respectively owners of shares of the Class A (Voting) Common Stock, par value $0.01 per share (the "Common Stock"), of Eagle-Picher Holdings, Inc., a Delaware corporation (the "Company") in the amount set forth by their signature below. With a view to the safe and competent management of the Company in the interests of the Shareholders, and as contemplated by the Shareholders' Agreement, dated October 15, 1998 (the "Shareholders' Agreement"), the Shareholders desire to create this Voting Trust. The Shareholders agree as follows: 1. TRANSFER OF STOCK TO TRUSTEE. Each of the Shareholders assigns and delivers to the Trustee any certificate held by such Shareholder representing shares of Common Stock owned by such Shareholder and shall do all things necessary for the transfer of shares of Common Stock to the Trustee on the books of the Company. 2. TRUSTEE TO HOLD SUBJECT TO AGREEMENT. The Trustee shall hold the said shares of Common Stock so transferred to them for the common benefit of the Shareholders, under the terms and conditions hereinafter set forth. 3. ISSUANCE OF STOCK CERTIFICATES TO TRUSTEE. The Trustee shall surrender to the proper officers of the Company for cancellation of all certificates of Common Stock which shall be assigned and delivered to it as hereinafter provided, and in their stead shall procure a new certificate(s) issued to it as Trustee under this Agreement. 4. VOTING TRUST CERTIFICATES. The Trustee shall issue to each of the Shareholders a Voting Trust Certificate for the number of shares represented by the certificates of Common Stock by such Shareholder transferred to the Trustee. Each such Voting Trust Certificate shall state that it is issued under the Agreement, and shall set forth the nature and proportional amount of the beneficial interest thereunder of the person to whom it is issued, and shall be assignable, subject to the provisions of the Shareholders' Agreement, in the manner of certificates of stock on books to be kept by the Trustee. The Trustee shall keep a list of the shares of the Trust transferred to them, and shall also keep a record of all Voting Trust Certificates issued or transferred on its books, which records shall contain the names of the Voting Trust Certificate holders and the number of shares of Common Stock represented by each such certificate. Such list and record shall be open at all reasonable times to the inspection upon the books of the Trustee by any Voting Trust Certificate holder. 2 The Voting Trust Certificate shall be substantially in the following form: VOTING TRUST CERTIFICATE This is to certify that the undersigned Trustee has received a certificate or certificates issued in the name of _______________________, evidencing the ownership of _______ shares of Class A Common Stock of Eagle-Picher Holdings, Inc., a Delaware corporation (the "Company"), and that such shares are held subject to all the terms and conditions of the Voting Trust Agreement, dated as of November 16, 1998, by and between Granaria Industries B.V., as Trustee, and certain shareholders of the Company. During the term of the voting trust, the Trustee, or its successors, shall, as provided in said agreement, possess and be entitled to exercise the voting power and otherwise represent all of the said shares for all purposes, being agreed that no voting right shall pass to the holder hereof by virtue of the ownership of this certificate. Upon the termination of said voting trust, this certificate shall be surrendered to the Trustee by the holder hereof upon delivery to such holder of a stock certificate representing a like number of shares. The undersigned Trustee has executed this certificate as of the ___ day of __________________, ____. GRANARIA HOLDINGS, B.V., Trustee By: ________________________________ 5. RESTRICTION ON TRANSFER. Each of the beneficiaries agrees that during the term of this Agreement, the Voting Trust Certificates held by them will not be sold or transferred except in accordance with the terms and conditions of the Shareholders' Agreement, so long as such Agreement remains in effect. The Voting Trust Certificates shall be regarded as stock of the Company, within the meaning of any provision of the By-laws or other agreement (including the Shareholders' Agreement) of the Company imposing conditions and restrictions upon the sale of stock of the Company. 6. VOTING. It shall be the duty of the Trustee, and it shall have full power and authority, and is hereby fully empowered and authorized, to represent the holders of such Voting Trust Certificates and the Common Stock transferred to the Trustee as aforesaid, and to vote upon said stock, as in the judgment of the Trustee may be for the best interest of the Company, at all meetings of the Shareholders of the Company, in the election of Directors and upon any and all matters in question, which may be brought before such meetings, as fully as any Shareholder might do if personally present. 7. LIABILITY. The Trustee shall use its business judgment in voting upon the stock transferred to it, but shall not be liable for any vote cast, or consent given, by it in the absence of gross negligence, bad faith, self-dealing or willful misconduct. 8. DIVIDENDS. The Trustee shall collect and receive all dividends that may accrue 2 3 upon the shares of Common Stock subject to this Trust, and shall divide the same among the Voting Trust Certificate holders in proportion to the number of shares respectively represented by their Voting Trust Certificates. 9. INDEMNITY. The Trustee shall be entitled to be indemnified fully against all costs, charges, expenses and other liabilities properly incurred by it in the exercise of any power conferred upon it by this Agreement; and the Shareholders, and each of them hereby covenant with the Trustee that in the event of the monies and securities in its hands being insufficient for that purpose, the Shareholders and each of them will in proportion to the amount of their respective shares and interests hold harmless and keep indemnified the Trustee of and from all loss or damage which it may sustain or be put to by reason of anything it may lawfully and in accordance with this Agreement do in the execution of this Trust. 10. VACANCIES. In the event of the Trustee's resigning or refusing or becoming unable to act, the Trustee shall appoint a Trustee or Trustees to fill the vacancy or vacancies, and any person so appointed shall thereupon be vested with all the duties, powers and authority of a Trustee hereunder as if originally named herein. Prior to the commencement of its duties, each original Trustee and each Trustee subsequently appointed shall sign a copy of the Shareholders' Agreement, relating to the shares of the Company and shall thus signify his consent to be bound thereby and his agreement to perform the terms thereof. All of the terms, provisions and conditions of the Shareholders' Agreement shall apply to all Trustees hereof and hereunder with the same force and effect as if such Trustee had originally signed said Shareholders' Agreement. 11. CONTINUANCE AND TERMINATION OF TRUST. The Trust hereby created shall be continued until the later of Ninety-Nine (99) years from the date hereof or such other term as the Committee of the Second Amended and Restated Incentive Stock Plan of Eagle-Picher Industries, Inc., as amended, shall determine, and shall then terminate, provided that this Voting Trust Agreement shall terminate upon the occurrence of the events for termination set forth in the Shareholders' Agreement. Upon termination of the Trust, the Trustee shall, upon surrender of the Voting Trust Certificates by the respective holders thereof, assign and transfer to them the number of shares thereby represented. 12. LEGEND. All Voting Trust Certificates issued by the Trustee hereunder shall have endorsed thereon a statement that they are held in accordance with and subject to the terms of the Shareholders' Agreement. 13. MISCELLANEOUS. (a) This Voting Trust Agreement is entered into in accordance with the Shareholders' Agreement. In the event of a conflict in the provisions of said Shareholders' Agreement, the provisions of said Shareholders' Agreement shall prevail. (b) An executed copy of this Agreement shall be filed with the Secretary of the Company. The Shareholders shall cause the Company to furnish free of charge to any shareholder thereof a copy of this Agreement upon written request. (c) Any and all notices, designations, consents, offers, acceptances or any other communication provided for herein shall be made by hand delivery, first-class mail (registered or 3 4 certified, return receipt requested), or overnight air courier guaranteeing next day delivery to the address set forth on the signature page hereof. Any Shareholder may change the address listed in the foregoing sentence by giving written notice to the Company and the other Shareholders. Except as otherwise provided in this Agreement, each such notice shall be deemed effective at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (e) THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF OHIO WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. (f) This Agreement shall be binding upon and shall inure to the benefit of each of the Shareholders and their respective executors, administrators and personal representatives and heirs and assigns. IN WITNESS WHEREOF, the Shareholders and the Trustee have duly executed this Agreement. TRUSTEE: -------- Granaria Holdings B.V. By: ---------------------------------------- Name: Title: SHAREHOLDERS: ------------- -------------------------------------------- (Signature) Name: -------------------------------------- Address: ----------------------------------- ----------------------------------- Shares: ---------------------- 4 EX-10.29 3 EXHIBIT 10.29 1 EXHIBIT 10.29 EAGLE-PICHER HOLDINGS, INC. INCENTIVE STOCK PLAN FOR OUTSIDE DIRECTORS Section 1. Purpose. The Plan is intended to further the attainment of the profit and growth objectives of Eagle-Picher Holdings, Inc. and to facilitate the recruiting and retaining of highly qualified directors by providing stock-based incentive to outside directors. 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 U.S. Dollar cash price per share of Restricted Stock equal to the quotient of (A the excess of (1) the sum of 6.54 times EBITDA for the Company's and the Company's Subsidiaries most recently ended fiscal year prior to the closing of a purchase and sale 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 (2) the principal amount of outstanding debt of Holdings and its Subsidiaries owing to banks, or owing with respect to securities issued by Holdings or by any Subsidiary of Holdings and the aggregate liquidation preference of all outstanding preferred stock issued by Holdings, in each case as of the Company's and the Company's Subsidiaries most recently ended fiscal year prior to the closing of a purchase and sale, divided by (B) the total number of outstanding shares of all classes of common stock of Holdings. 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 establishes for an award of 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 did 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 2 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., an Ohio corporation, 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) "Holdings" shall mean Eagle-Picher Holdings, Inc., a Delaware corporation, or any successor corporation. (j) "Incapacitated" shall mean permanently and totally disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended. (k) "Participant" shall mean any person who holds Units and/or Restricted Stock under the Plan. (l) "Plan" shall mean this Incentive Stock Plan for Outside Directors in its entirety, including any amendments, rules and regulations adopted pursuant hereto. (m) "Restricted Stock" means non-voting certificates of beneficial ownership in a voting trust established under Delaware law for the purpose of holding shares of Class A common stock of Holdings. A share of Restricted Stock is an amount of Restricted Stock that represents a beneficial ownership interest in the voting trust corresponding to one share of Class A common stock of Holdings. (n) "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. (o) "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. (p) "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 by the Committee pursuant to the Plan. -2- 3 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 Granaria Industries B.V. (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 Granaria Industries B.V.) 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. (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 Holdings) and other persons to assist or render advice to it, all at the expense of the Company. Section 4. Eligibility. The Committee shall designate those persons who shall be Participants and shall award Units to each Participant. Section 5. Vesting. The Committee, in its sole discretion, shall determine the dates on which Units awarded to a Participant shall vest. In the event that a Participant ceases to be a director of Holdings and the Company 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 cessation shall be immediately forfeited and cancelled without necessity of further action and the shares of Restricted Stock that would have been delivered with respect thereto shall be transferred to Granaria Holdings B.V. The Units of a Participant who dies or is Incapacitated while a director of Holdings and the Company shall be immediately 100% vested as of the date of death or incapacity. The Units of a Participant who is a director of Holdings or the Company on any Change of Control Date shall be immediately 100% vested as of the Change of Control Date. At -3- 4 any time, the Committee may accelerate the vesting schedule applicable to a particular Participant by notifying the Participant in writing. Section 6. Number of Units. The total number of Units issued under the Plan shall be equal to the total number of shares of Class A common stock of Holdings allocated to the Plan by the Committee of the Second Amended And Restated Incentive Stock Plan Of Eagle-Picher Industries, Inc. Section 7. Payout of Units. Upon the earlier of the date as of which a Participant has become 100% vested in all his or her 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 or her 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 attached hereto as Exhibit A and the Voting Trust Agreement attached hereto as Exhibit B. A Participant shall be deemed a Senior Manager under 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. (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 -4- 5 jurisdiction and such payment shall be a complete discharge of the liability of the Plan, Holdings, the Company, the Trustees and the Committee therefor. Section 10. 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 Holdings, the Company and the Trustees under the Plan, shall be subject to all applicable federal, state, and local 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 as a director of Holdings, 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 Holdings, the Company or any Affiliate to terminate such Participant's directorship. (c) Holdings, 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 as may be required to be withheld under applicable laws or regulations in connection with any transaction under the Plan, and to take such other action as the Committee may deem advisable to enable Holdings or the Company to satisfy obligations for the payment of withholding taxes and other tax obligations 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. Each Participant shall be responsible for any tax liability incurred by him or her as a result of the award of Units or receipt of Restricted Stock. (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. -5- 6 (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) Awards and payouts of Units or Restricted Stock will not be considered as compensation for the purpose of computing employee contributions or benefits under any other Company benefit plan. (h) In the event that a Participant breaches any fiduciary duty to Holdings, the Company or any of their Affiliates, then any rights of the Participant under the Plan shall immediately terminate, any Units of the Participant, whether or not vested, shall be forfeited and cancelled, and the Participant shall return to Holdings any cash, Restricted Stock or property received by him or her under the Plan. The Committee may waive the provisions of this paragraph (h) if it determines in its sole discretion that such action is in the best interests of the Company. (i) Any payment by Holdings that is to be made in cash shall be from the general funds of Holdings. 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. (j) No Participant or other person shall have under any circumstances any interest whatever in any particular property or assets of Holdings, the Company or any of their Affiliates. (k) 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 11. Effective Date. This Plan shall be effective as of January 1, 1999. END OF DOCUMENT EX-10.30 4 EXHIBIT 10.30 1 EXHIBIT 10.30 AMENDED AND RESTATED INCENTIVE STOCK PLAN OF EAGLE-PICHER INDUSTRIES, INC. Section 1. Purpose. The 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 U.S. Dollar cash price per share of Restricted Stock equal to the quotient of (A) the product of (i) the excess of (1) the sum of 6.54 times EBITDA for the Company's and the Company's Subsidiaries most recently ended fiscal year prior to the closing of a purchase and sale 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 (2) the principal amount of outstanding debt of the Parent and its Subsidiaries owing to banks, or owing with respect to securities issued by the Parent or by any Subsidiary of the Parent and the aggregate liquidation preference of all outstanding preferred stock issued by the Parent, in each case as of the Company's and the Company's Subsidiaries most recently ended fiscal year prior to the closing of a purchase and sale (or as of February 25, 1998 for fiscal year 1998), and (ii) 10 percent; divided by (B) 1600. 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. 2 (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 person who holds Units and/or Restricted Stock under the Plan or the Incentive Stock Plan of the Company. (m) "Plan" shall mean this Amended and Restated 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 (or a successor voting trust established with respect to shares received in exchange for 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 (or shares received in exchange for 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. (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 by the Committee pursuant to the Plan. -2- 3 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 in writing. The Committee may at any time increase the number of Units awarded to a Participant. -3- 4 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 October 15, 1998. One fourth of a Senior Manager's Units will vest on the 30th day after the Award Date, and three fourths of a Senior Manager's Units will vest on October 15, 1998. 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. In the event that a Participant is awarded Units after the Effective Date, the Committee, in its sole discretion, shall determine the dates on which such Units shall vest. 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. 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 attached hereto as Exhibit A. 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). -4- 5 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. (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. -5- 6 (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 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. Without limiting the generality of the foregoing, at any time after of payment of Units pursuant to Section 7, the Committee may cause the Class B Shares to be exchanged for non-voting shares of common stock of Parent, provided that such shares in the aggregate represent the same indirect proportional ownership in the Company as the Class B Shares represent on the date hereof. In such event, the term "Restricted Stock" shall refer to non-voting certificates of beneficial ownership in a voting trust established under Delaware law for the purpose of holding the non-voting common stock of Parent received in exchange for the Class B Shares. (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. -6- 7 (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 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) The Company or any Affiliate shall have the right to set off any amounts owed by a Participant to the Company or any Affiliate against any amount payable by the Company or any Affiliate to the Participant, including, without limitation, salary, benefits or other amounts. (k) 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. (l) No Participant or other person shall have under any circumstances any interest whatever in any particular property or assets of the Company. (m) 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. (n) This Plan amends and restates the original Incentive Stock Plan of the Company in its entirety. Section 12. Effective Date. This Plan shall be effective as of October 15, 1998 and shall amend and restate the Incentive Stock Plan of Eagle-Picher Industries, Inc. (the "Original Plan") in its entirety, provided that the Committee may void this Plan (thereby reinstating the Original Plan) if all participants under the Original Plan do not consent to the adoption of this Plan. END OF DOCUMENT -7- EX-10.31 5 EXHIBIT 10.31 1 EXHIBIT 10.31 SECOND AMENDED AND RESTATED INCENTIVE STOCK PLAN OF EAGLE-PICHER INDUSTRIES, INC. Section 1. Purpose. The 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 U.S. Dollar cash price per share of Restricted Stock equal to the quotient of (A the excess of (1) the sum of 6.54 times EBITDA for the Company's and the Company's Subsidiaries most recently ended fiscal year prior to the closing of a purchase and sale 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 (2) the principal amount of outstanding debt of the Parent and its Subsidiaries owing to banks, or owing with respect to securities issued by the Parent or by any Subsidiary of the Parent and the aggregate liquidation preference of all outstanding preferred stock issued by the Parent, in each case as of the Company's and the Company's Subsidiaries most recently ended fiscal year prior to the closing of a purchase and sale (or as of February 25, 1998 for fiscal year 1998), divided by (B) the total number of outstanding shares of all classes of common stock of Eagle-Picher Holdings, Inc., a Delaware corporation. 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. 2 (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 person who holds Units and/or Restricted Stock under the Plan or the Incentive Stock Plan of the Company. (m) "Plan" shall mean this Second Amended and Restated 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 in a voting trust established under Delaware law for the purpose of holding shares of Class A common stock of the Parent. A share of Restricted Stock is an amount of Restricted Stock that represents a beneficial ownership interest in the voting trust corresponding to one share of Class A common stock of the Parent. (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. (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 by the Committee pursuant to the Plan. -2- 3 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 100,000; 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 100,000 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 in writing. The Committee may at any time increase the number of Units awarded to a Participant. -3- 4 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 October 15, 1998. One fourth of a Senior Manager's Units will vest on the 30th day after the Award Date, and three fourths of a Senior Manager's Units will vest on October 15, 1998. 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 immediately transferred to Granaria Holdings B.V. 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. In the event that a Participant is awarded Units after the Effective Date, the Committee, in its sole discretion, shall determine the dates on which such Units shall vest. Section 6. The Trust. The Issuer has established the Trust for the benefit of the Participants. Following adoption of this Plan by the Board of Directors of the Company, the Company transferred to the Trust not less than $10 million to fund the Trust's purchase of Class B shares from the Issuer and the Trust's expenses related to such purchase. Such Class B shares were subsequently exchanged for shares of Class A common stock of the Parent. Section 7. Payout of Units. 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 attached hereto as Exhibit A and the Voting Trust Agreement attached hereto as Exhibit B. 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). -4- 5 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. (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 the vesting of Units, any exchange of shares of the Issuer for Restricted Stock 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. -5- 6 (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 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 Committee may waive -6- 7 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) The Company or any Affiliate shall have the right to set off any amounts owed by a Participant to the Company or any Affiliate against any amount payable by the Company or any Affiliate to the Participant, including, without limitation, salary, benefits or other amounts. (k) 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. (l) No Participant or other person shall have under any circumstances any interest whatever in any particular property or assets of the Company. (m) 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. (n) This Plan amends and restates the Amended and Restated Incentive Stock Plan of the Company in its entirety. Section 12. Effective Date. This Plan shall be effective as of November 15, 1998 and shall amend and restate the Amended and Restated Incentive Stock Plan of Eagle-Picher Industries, Inc. in its entirety. END OF DOCUMENT -7- EX-10.32 6 EXHIBIT 10.32 1 EXHIBIT 10.32 SHAREHOLDERS' AGREEMENT, dated as of October 15, 1998 (the "Agreement"), among Granaria Holdings B.V., a Dutch corporation ("Holdings"), Granaria Industries B.V., a Dutch corporation ("Issuer"), Eagle-Picher Holdings, Inc., a Delaware corporation ("Parent"), Eagle-Picher Industries, Inc., an Ohio corporation (the "Company"), and each of the persons designated as a Shareholder on the signature pages of this Agreement and any subsequent holder of Restricted Stock of the Issuer who shall become a signatory to this Agreement (collectively, the "Shareholders"). Introduction ------------ In connection with the acquisition of the Company by the Issuer, the Company adopted the Incentive Stock Plan of Eagle-Picher Industries, Inc. (the "Plan"). Pursuant to the Plan, the Company transferred US$10 million to the Eagle-Picher Management Trust (the "Trust") to fund its purchase of non-voting certificates of beneficial ownership ("Restricted Stock") in a voting trust established under Dutch law. Such voting trust was established for the purpose of holding Class B shares of the Issuer (the "Class B Shares"). In accordance with the Plan, the Committee (as defined in the Plan) granted units (the "Units") to certain Senior Officers (each, a "Senior Officer") and Senior Managers (each, a "Senior Manager"). Each Unit represents the right to receive from the Trust one share of Restricted Stock. Pursuant to the Plan, each Shareholder will receive a specified amount of Restricted Stock upon vesting of the Units, provided such Shareholder enters into this Agreement. As of the date of this Agreement, the Plan was amended and restated (the "Amended Plan") to modify, among other things, the vesting of the Units. In consideration of the premises and of the mutual covenants and obligations hereunder set forth, the parties agree as follows: Section 1. DESIGNATION OF CUSTODIAN. Each Shareholder hereby designates Granaria Industries to act as custodian of such Shareholder's shares of Restricted Stock and to take physical possession of shares of Restricted Stock at the time of the transfer of such shares to a Participant. Section 2. VOTING TRUST. Each Shareholder hereby acknowledges that the shares of Restricted Stock are non-voting certificates of beneficial ownership ("certificaten van aandalen") in a voting trust ("stichting administratie kantoor") established under Dutch law for purposes of holding Class B Shares of the Issuer (or a successor voting trust established with respect to shares received in exchange for Class B shares of the Issuer). Each Shareholder further 2 acknowledges that each share of Restricted Stock represents a beneficial ownership interest in the voting trust corresponding to one Class B Share of the Issuer (or shares received in exchange for one Class B Share of the Issuer). Section 3. TRANSFER RESTRICTIONS. (a) Except as otherwise provided in Sections 3(b), 4, 5, 6, 7 and 8 of this Agreement, no Shareholder shall transfer, sell, assign, pledge, hypothecate or otherwise dispose (each, a "Transfer") of any shares of Restricted Stock at any time. No Transfer of shares in violation hereof shall be made or recorded on the books of the Company and any such Transfer shall be void and of no effect. (b) A Shareholder may Transfer his shares of Restricted Stock: (i) to (A) the spouse, parents, siblings and lineal descendants of such Shareholder, (B) a trust for the benefit of any of the foregoing, (C) any corporation (other than the Company) or partnership controlled by such Shareholder, members of such Shareholder's immediate family and lineal descendants or trusts for the benefit of any of the foregoing and (D) upon the death of the Shareholder, the Shareholder's estate, executors, administrators and personal representatives, and heirs, legatees and distributees; (ii) if such Shareholder has attained the age of 62; (iii) if such Shareholder is a Senior Manager who has held the Units and the associated Restricted Stock for an aggregate period of not less than 10 years from the Award Date; or (iv) in the event of an Initial Public Offering. (c) Any Transfer pursuant to Section 3(b) shall not be effective until such time as the transferee has agreed in writing to be bound by and to comply with all provisions of this Agreement. Section 4. "COME ALONG" OBLIGATION. (a) Each Shareholder shall, if requested by Holdings at any time, transfer for value a pro rata portion of such Shareholder's shares of capital stock to any other person (the "Proposed Buyer") in the manner set forth in this Section 4 in connection with the transfer by Holdings of any of its shares of capital stock. (b) If Holdings elects to exercise its rights under this Section 4, it shall deliver a notice (the "Come Along Notice") to the Shareholders. The Come Along Notice shall set forth the principal terms of the proposed transfer insofar as it relates to the Common Stock or Class B Stock, as the case may be, including the number of shares of capital stock to be transferred, the transfer price, the form of consideration, the name and address of the proposed transferee and the other principal terms of the proposed transaction (the "Come Along Sale"). (c) Each Shareholder shall be bound and obligated to transfer his or its Class B Shares in the Come Along Sale on the same terms and conditions, including price per share (on a proportional basis), as Holdings transfers its capital stock (including an agreement containing customary representations, warranties and indemnities with respect to their ownership of the -2- 3 shares), provided, however, that if the purchaser is an Affiliate, then the terms and conditions, including price, shall be at least as favorable as could be obtained in an arms'-length transaction with an unaffiliated third party. The amount of capital stock to be transferred by a Shareholder shall be determined on a pro rata basis according to the proportion which the number of shares which Holdings intends to transfer in such Come Along Sale bears to the total number of shares held by such Shareholder. Each Shareholder shall also take such actions and execute such documents and instruments as shall be necessary or desirable in order to consummate the Come Along Sale expeditiously and on the same terms as Holdings transfers its Capital Stock. On or before the date selected by Holdings for consummation of the proposed Come Along Sale, each Shareholder shall instruct the custodian to deliver the shares of capital stock to be transferred by such Shareholder, duly endorsed for transfer with signature guaranteed, free and clear of any claims, with any stock transfer tax stamps affixed, against delivery of the applicable purchase price. (d) If more than 120 days elapse from the giving of the Come Along Notice without the consummation of the Come Along Sale, the Shareholders shall be released from their obligation under such Come Along Notice, and it shall be necessary for a separate Come Along Notice to be furnished, and the terms and provisions of this Section 4 separately complied with, in order to consummate a Come Along Sale pursuant to this Section 4. Section 5. RIGHT OF FIRST REFUSAL. (a) If, at any time, a Shareholder is able to transfer its shares of Restricted Stock pursuant to this Agreement and prior to an Initial Public Offering, a Shareholder receives a bona fide offer (the "Offer") to purchase any or all of his shares of Restricted Stock from a third party (the "Offeror") which such Shareholder wishes to accept, the Shareholder shall cause the Offer to be reduced to writing and shall notify Holdings and the Company in writing of such Shareholder's wish to accept such Offer. Such notice shall contain an irrevocable offer to sell such shares of Restricted Stock to the Company (in the manner set forth below) at a purchase price equal to the price contained in, and on the same terms and conditions of, the Offer, and shall be accompanied by a true copy of the Offer (which shall identify the Offeror). During the period 30 days (and, if the Offer includes consideration other than cash, such additional number of days, if any, necessary to determine the equivalent all cash price pursuant to clause (ii) below) after the date of the receipt by Holdings of the Shareholder's notice (the "Option Period"), Holdings (or any of its designees) shall have the right and option to purchase, or to arrange for a third party to purchase, all of the shares of Restricted Stock covered by the Offer either (i) at the same price and on the same terms and conditions as the Offer or (ii) if the Offer includes any consideration other than cash, then at the sole option of Holdings, at the equivalent all cash price (which shall be mutually agreed upon by the parties pursuant to good faith negotiations between the parties within 10 business days after the receipt of such notice or, if the parties cannot so agree within such 10 business day period, determined by an investment banking firm of national reputation mutually and reasonably acceptable to, and promptly selected by, the parties). If such option to purchase is exercised by Holdings, a certified bank check or checks in the appropriate amount shall be delivered to the Shareholder at the principal office of the Company against delivery of certificates or other instruments representing the shares of Restricted Stock so purchased, appropriately endorsed by the Shareholder. (b) If at the end of the Option Period, Holdings has not tendered the purchase price for such shares in the manner set forth above, the Shareholder may during the succeeding 90 -3- 4 day period sell not less than all of the shares of Restricted Stock covered by the Offer to the Offeror at a price and on terms no less favorable to the Shareholder than those contained in the Offer. No sale may be made to any Offeror unless the Offeror agrees in a writing satisfactory to the Company to be bound by and to comply with the provisions of this Agreement. Promptly after such sale, the Shareholder shall notify the Company of the consummation thereof and shall furnish such evidence of the completion and time of completion of such sale and of the terms thereof as may reasonably be requested by the Company. If, at the end of 90 days following the expiration of the Option Period, the Shareholder has not completed the sale of such shares of Restricted Stock as aforesaid, all the restrictions on sale, transfer or assignment contained in this Agreement shall again be in effect with respect to such shares of Restricted Stock. Section 6. SHAREHOLDERS' PUT RIGHTS. (a) At any time prior to an Initial Public Offering, each Affected Shareholder shall have the right, in its sole discretion and on one occasion, to sell to the Company, and the Company shall be required to purchase (the "Put Right"), from such Affected Shareholder all or part of the shares of Restricted Stock then held by such Shareholder at a price per share equal to the Agreed Share Price (as defined in the Amended Plan). If an Affected Shareholder wishes to exercise its Put Right, such Shareholder shall send written notice of such exercise to the Company and Holdings, at least 60 days prior to the proposed closing, which notice shall contain the number of shares of Restricted Stock which is the subject of such exercise. During such 60 day period, Holdings, in its sole discretion, shall have the right to purchase from the Affected Shareholder the number of shares subject to the Put Right at a price per share equal to the Agreed Share Price. If Holdings does not purchase such shares, the closing of the Company's purchase shall take place at the principal office of the Company on the 60th day after the giving of such notice. Each Put Right shall expire and have no further force and effect if such right is not exercised by the Affected Shareholder (by sending a notice as provided above) within 30 days after such Affected Shareholder receives written notice of its Put Right. An "Affected Shareholder" shall mean: (i) a Beneficiary or Incapacitated Shareholder, (ii) a Shareholder, who is or was employed by the Company (or its Affiliates), at the time such Shareholder attains the age 62 and (iii) a Shareholder whose employment with the Company (or any Affiliate) is terminated other than for cause. (b) In addition to the Put Right provided in Section 6(a), each Senior Manager who has held his Units and the associated Restricted Stock for an aggregate period of not less than 10 years from the Award Date shall have the right, in its sole discretion and at any time, to sell to the Company, and the Company shall be required to purchase (the "Manager Put Right"), from such Senior Manager all or part of the shares of Restricted Stock then held by such Shareholder at a price per share equal to the Agreed Share Price (as defined in the Amended Plan). If a Senior Manager wishes to exercise its Manager Put Right, such Senior Manager shall send written notice of such exercise to the Company and Holdings, at least 60 days prior to the proposed closing, which notice shall contain the number of shares of Restricted Stock which is the subject of such exercise. During such 60 day period, Holdings, in its sole discretion, shall have the right to purchase from the Senior Manager the number of shares subject to the Manager Put Right at a price per share equal to the Agreed Share Price. If Holdings does not purchase such shares, the closing of the Company's purchase shall take place at the principal office of the Company on the 60th day after the giving of such notice. Each Manager Put Right shall expire and have no further force and effect at the time when the Senior Manager becomes an Affected Shareholder -4- 5 (c) In addition to the Put Right provided in Section 6(a), each Senior Officer shall have the right following the date upon which the employee is no longer employed by the Company (the "Trigger Date"), in its sole discretion, to sell to the Company, and the Company shall be required to purchase (the "Special Put Right"), (i) on the third anniversary of the Trigger Date, 50% of the shares of Restricted Stock then held by such officer; and (ii) on the fifth anniversary of the Trigger Date, 50% of the shares of Restricted Stock held by such officer as of the third anniversary of the Trigger Date, in each case, at a price per share equal to the Agreed Share Price calculated at the time of each purchase. If a Senior Officer wishes to exercise its Special Put Right, such officer shall send written notice of such exercise to the Company and Holdings at least 90 days prior to third anniversary and fifth anniversary of the Trigger Date, as applicable. If a Senior Officer exercises the Special Put Right, then during the 90 day period prior to the third anniversary or the fifth anniversary of the Trigger Date, as applicable, Holdings, in its sole discretion, shall have the right to purchase from the officer the number of shares subject to the Special Put Right at a price per share equal to the Agreed Share Price. If Holdings does not purchase such shares, the closing of the purchase shall take place at the principal office of the Company on the third anniversary or the fifth anniversary of the Trigger Date, as applicable. Each Special Put Right shall expire and have no further force and effect if such right is not exercised by the Senior Officer by sending a notice as provided above. Section 7. HOLDINGS' CALL RIGHTS. (a) Immediately following the expiration of each Put Right pursuant to the terms of Section 6(a) of this Agreement, Holdings (or its designee) shall have the right, in its sole discretion (the "Call Right"), to purchase any or all of the shares of Restricted Stock then held by such Affected Shareholder or its transferees, if applicable, at a price per share equal to the Agreed Share Price. The Call Right shall not be exercisable by Holdings if the Affected Shareholder is a Senior Officer or a Beneficiary of a Senior Officer. If Holdings wishes to exercise its rights under this Section 7, it shall send written notice (containing the number of shares of Restricted Stock to be purchased) of such exercise to such Affected Shareholder within the 30-day period following the expiration of the Affected Shareholder's Put Right. The closing of such purchase shall occur at the principal office of the Company 30 days after written notice is provided to the Affected Shareholder. The Call Right shall expire and have no further force and effect if such right is not exercised by Holdings or its designees (by sending a notice as provided above) within the 30-day period following the expiration of the Affected Shareholder's Put Right. (b) In the event that a Senior Manager has held his Units and the associated Restricted Stock for an aggregate period of not less than 10 years from the Award Date, Holdings (or its designee) shall have the right, from time to time in its sole discretion (the "Manager Call Right"), to purchase any or all of the shares of Restricted Stock then held by such Senior Manager or its transferees, if applicable, at a price per share equal to the Agreed Share Price. If Holdings wishes to exercise its rights under this Section 7, it shall send written notice (containing the number of shares of Restricted Stock to be purchased) of such exercise to such Senior Manager. The closing of such purchase shall occur at the principal office of the Company 30 days after written notice is provided to the Senior Manager. The Manager Call Right shall expire and have no further force and effect at the time such Senior Manager becomes an Affected Shareholder. -5- 6 (c) On the fifth anniversary of a Senior Officer's Trigger Date, Holdings (or its designee) shall have the right, in its sole discretion (the "Special Call Right"), to purchase any or all of the shares of Restricted Stock then held by such Senior Officer or its transferees, if applicable, at a price per share equal to the Agreed Share Price. If Holdings wishes to exercise its Special Call Right, it shall send written notice (containing the number of shares of Restricted Stock to be purchased) of such exercise to such Senior Officer within the 30-day period following the fifth anniversary of such Senior Officer's Trigger Date. The closing of such purchase shall occur at the principal office of the Company 30 days after written notice is provided to the Senior Officer. The Special Call Right shall expire and have no further force and effect if such right is not exercised by Holdings or its designees (by sending a notice as provided above) within the 30-day period following the fifth anniversary of such Senior Officer's Trigger Date. Section 8. OPTIONAL PUT/CALL RIGHT. (a) Each Shareholder may elect (the "Election") to have the right, exercisable after December 1, 2003 by written notice to the Company received on or before January 31, 2004, to sell to the Company, and the Company shall be required to purchase from such Shareholder, at the Agreed Share Price (the "Elective Put"), (i) within 60 days of the exercise of the Elective Put Right, 25% of the shares of Restricted Stock then held by such Shareholder or Beneficiary, if applicable, and (ii) within 60 days of the one-year anniversary of the exercise of the Elective Put Right, an additional 25% of the shares of Restricted Stock held by such Shareholder or Beneficiary, if applicable, on the date of exercise. During such 60 day periods, Holdings, in its sole discretion, shall have the right to purchase from the Shareholder the number of shares subject to the Elective Put at a price per share equal to the Agreed Share Price. If Holdings does not purchase such shares, the closing of the Company's purchase shall take place at the principal office of the Company on the 60th day after the receipt of such notice. If a Shareholder makes an Election, then Holdings (or its designee) shall have the right to purchase, and the Shareholder shall be required to sell to Holdings (or its designee), up to 50% of the shares of Restricted Stock then held by such Shareholder or his Beneficiary, if applicable, at the Agreed Share Price (the "Elective Call"), exercisable after December 1, 2003 by written notice given on or before December 31, 2003. If Holdings (or its designee) exercises its Elective Call, then the Elective Put shall be void. The closing of any Elective Call shall be at the principal office of the Company on a date selected by Holdings on or before January 31, 2004. (b) In order to make an Election, a Shareholder must notify Holdings and the Company in writing prior to January 31, 1999. Such Election shall be irrevocable and shall be binding on any transferee who subsequently receives such Shares. If a Shareholder fails to make an Election within such time, the Shareholder shall not be entitled to the Elective Put and shall not be subject to the Elective Call. Section 9. SECURITIES LAW COMPLIANCE. (a) Each Shareholder agrees that it will not Transfer any Restricted Stock, other than pursuant to Sections 4, 5, 6 and 8, except upon furnishing to the Company prior to any such Transfer: (i) a written opinion of counsel (which counsel and opinion shall be reasonably satisfactory to the Company) to the effect that the proposed Transfer may be made without registration under the Securities Act of 1933, as amended (the "Act"); and (ii) either (x) a written opinion of counsel (which counsel and opinion shall be reasonably satisfactory to the Company) to the effect that the proposed Transfer may be made without registration or qualification under applicable state securities laws or (y) evidence -6- 7 satisfactory to the Company that all necessary state securities law filings in connection with the proposed Transfer have been made. (b) Each certificate or other instrument evidencing the securities issued upon the Transfer of any Restricted Stock (and each certificate or other instrument evidencing any securities retained by the transferor) shall bear the legend set forth in Section 9. Section 10. LEGEND ON STOCK CERTIFICATES. Each certificate representing shares of Restricted Stock shall bear the following legend, until such time as the shares represented thereby are no longer subject to the provisions hereof: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND CANNOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO REGISTRATION UNDER SAID ACT OR IN COMPLIANCE WITH AN EXEMPTION THEREFROM AND, IN THE CASE OF A TRANSACTION NOT SUBJECT TO SUCH REGISTRATION REQUIREMENTS, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE ACT. ADDITIONALLY, THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A SHAREHOLDERS' AGREEMENT, DATED AS OF SEPTEMBER 30, 1998, AMONG GRANARIA HOLDINGS, B.V., GRANARIA INDUSTRIES, B.V., EAGLE-PICHER HOLDINGS, INC., EAGLE-PICHER INDUSTRIES, INC. (THE "COMPANY") AND THE SHAREHOLDERS NAMED AS PARTIES THERETO, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IN CONTRAVENTION OF SUCH AGREEMENT SHALL BE VALID OR EFFECTIVE. COPIES OF SUCH AGREEMENT MAY BE OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY." Section 11. TERMINATION. This Agreement shall terminate, and the custodian shall distribute all shares of Restricted Stock to the Shareholders, upon (i) an Initial Public Offering, (ii) a merger or consolidation involving the Issuer, or (iii) a sale, lease, exchange or other transfer of all or substantially all of the assets of the Issuer, the Parent or the Company. In its discretion the Committee may delay distribution of Restricted Stock for a reasonable period of time following an event described in this Section 11. Section 12. MISCELLANEOUS. (a) ENTIRE AGREEMENT. This Agreement contains the entire agreement -7- 8 among the parties with respect to the subject matter hereof and supersedes all prior agreements or understandings between or among any of the parties hereto. (b) DEFINITIONS. All defined terms not defined herein shall have the meanings ascribed to them in the Amended Plan. For purposes of this Agreement, the following terms shall have the following meanings: "Affiliate" shall mean 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. "Beneficiary" shall mean the person, persons, trust or trusts which have been designated by a Shareholder who is or was employed by the Company (or its Affiliates) in his or her most recent written beneficiary designation filed with the Committee to receive the Shareholder's rights under the Amended Plan upon the such Shareholder's death, or, if there is no such designation or no such designated person survives the Shareholder, 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 executor or administrator of the Shareholder who is or was employed by the Company (or its Affiliates). "Incapacitated Shareholder" shall mean a Shareholder who is or was employed by the Company (or its Affiliates) and who is permanently and totally disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended. "Initial Public Offering" shall mean the sale of (i) the common stock of the Company or Parent if, at the time of the offering, the shares of Restricted Stock are convertible into or exchangeable for shares of Common Stock of the Company or Parent, as the case may be, or (ii) the Class B Stock of the Issuer, in each case, to the public pursuant to an effective registration statement under the Act (or an equivalent regulatory authority) covering the offering and sale of such shares for the Company, Parent or the Issuer, as applicable, which shares following the offering will be listed on any significant international stock exchange. (c) SEVERABILITY. If any provision of this Agreement 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. (d) HEADINGS. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. (e) NOTICES. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by telecopy (with confirmation of receipt) or sent by overnight courier or registered or certified mail, postage -8- 9 prepaid, return receipt requested, addressed, (i) if to a Shareholder, to such Shareholder's address set forth on such Shareholder's signature page hereto; (ii) if to the Company, to Eagle-Picher Industries, Inc., 250 East Fifth Street, Cincinnati, Ohio 45202, Attention: David G. Krall, Esq., Fax No.: (513) 629-2572; (iii) if to Holdings, to Granaria Holdings B.V., Lange Voorhout 16, P.O. Box 233, 2501 CE The Hague, The Netherlands, Attention: Peter J. Ph. Kortenhorst, Fax No.: 011 31 70 312 11 99; or to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. If mailed as aforesaid, any such communication shall be deemed to have been given on the third business day following that on which the piece of mail containing such communication is posted. (f) COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. From time to time additional Shareholders may become parties to this Agreement by executing a counterpart hereof without necessity of execution by the other parties. (g) ASSIGNMENT. This Agreement shall not be assignable by any party without the written consent of the other parties; PROVIDED, HOWEVER, that the Company shall have the right to assign any or all of its rights or obligations to purchase shares of Restricted Stock pursuant to Sections 3, 4 and 5 hereof. Any purported assignment not permitted hereunder shall be void. (h) MODIFICATION. Except as otherwise provided herein, neither this Agreement nor any provision hereof may be modified, changed, discharged or terminated except by an instrument in writing signed by the Holdings, the Issuer, the Company and Shareholders holding 75% or more of the outstanding Restricted Stock held by all Shareholders. Notwithstanding the foregoing, the Committee may cause the Class B Shares to be exchanged for non-voting shares of common stock of Parent, provided that such shares in the aggregate represent the same indirect proportional ownership in the Company as the Class B Shares represent on the date hereof. In such event, the term "Restricted Stock" shall refer to non-voting certificates of beneficial ownership in a voting trust established under Delaware law for the purpose of holding the non-voting common stock of Parent received in exchange for the Class B Shares. (i) ADDITIONAL ACTIONS. Each Shareholder agrees (i) that the Board and officers of the Company may take any additional corporate action necessary to make effective the provisions hereof, including (without limitation) filing any amendments to the Company's charter and other constitutive documents, and hereby appoints the Company's Secretary its attorney-in-fact for the execution of all such documents, consents and approvals and (ii) that it will vote its shares of Restricted Stock to approve any such action. (j) RIGHTS TO NEGOTIATE REPURCHASE PRICE. Nothing in this Agreement shall be deemed to restrict or prohibit the Company or Holdings (or its designees) from purchasing shares of Restricted Stock from a Shareholder, at any time, upon such terms and conditions, and for such price, as may be mutually agreed upon between the parties, whether or not at the time of such purchase circumstances exist which specifically grant the Company or -9- 10 Holdings (or its designees) the right to purchase, or the Shareholder the right to sell, shares of Restricted Stock under the terms of this Agreement. (k) EMPLOYMENT BY THE COMPANY. Nothing contained in this Agreement or in any other agreement entered into by the Company and the Shareholder contemporaneously with the execution of this Agreement (i) obligates the Company or any subsidiary of the Company to employ the Shareholder in any capacity whatsoever or (ii) prohibits or restricts the Company (or any subsidiary) from terminating the employment, if any, of the Shareholder at any time or for any reason whatsoever, with or without cause, and the Shareholder hereby acknowledges and agrees that neither the Company nor any other person has made any representations or promises whatsoever to the Shareholder concerning the Shareholder's employment or continued employment by the Company. (l) REMEDIES. In the event of a breach or threatened breach by a Shareholder of the provisions of this Agreement, the Company shall be entitled to an injunction restraining such Shareholder from such breach or compelling compliance with such provision. Nothing contained herein shall be construed as prohibiting the Company or any Shareholder from pursuing any other remedies available at law or equity for such breach or threatened breach of this Agreement. (m) SPECIFIC ENFORCEMENT. Each Shareholder expressly agrees that such Shareholder and the Company will be irreparably damaged if this Agreement is not specifically enforced. Upon a breach or threatened breach of the terms, covenants or conditions of this Agreement by a Shareholder, the other Shareholders and the Company shall, in addition to all other remedies, each be entitled to a temporary or permanent injunction, without showing any actual damage, or a decree for specific performance, in accordance with the provisions hereof. (n) CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT FOR THOSE MATTERS REQUIRED TO BE GOVERNED BY THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE. (o) CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF FEDERAL AND STATE COURTS OF OHIO FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND EACH OF THE PARTIES HERETO AGREES NOT TO COMMENCE ANY LEGAL PROCEEDING RELATED THERETO EXCEPT IN SUCH COURT. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING IN ANY SUCH COURT AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY -10- 11 JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. (p) SET-OFF. The Company or any Affiliate shall have the right to set off any amounts owed by a Shareholder to the Company or any Affiliate against any amounts payable by the Company or any Affiliate to a Shareholder. (q) TRANSFER DOCUMENTS. In connection with any put or call right contained herein, a Shareholder shall deliver such instruments and documents as may be reasonably required by the Company or Holdings or their designee, as applicable, to transfer good title to any Restricted Shares transferred, free and clear of any liens or encumbrances whatsoever, and shall warrant the same and indemnify the purchaser for any breach of such warranty, as a condition to receipt of payment therefor. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written or, if such party has dated its signature, on the date(s) set forth below. GRANARIA HOLDINGS, B.V. GRANARIA INDUSTRIES, B.V. By: By: -------------------------------- ------------------------------ Name: Name: Title: Title: EAGLE-PICHER HOLDINGS, INC. EAGLE-PICHER INDUSTRIES, INC. By: By: -------------------------------- ------------------------------ Name: Name: Title: Title: SHAREHOLDERS: - - ---------------------------------- Signature Name: ---------------------------- Please Print ---------------------------- Street Address ---------------------------- City, State, Zip -11 EX-21.1 7 EXHIBIT 21.1 1 EXHIBIT 21.1 EAGLE-PICHER INDUSTRIES, INC. SUBSIDIARIES Cincinnati Industrial Machinery Sales Company [Ohio] Daisy Parts, Inc. [Michigan] Eagle-Picher Development Company, Inc. [Delaware] Michigan Automotive Research Corporation (MARCO) [Michigan] Eagle-Picher Far East, Inc. [Delaware] Eagle-Picher Fluid Systems, Inc. [Michigan] Eagle-Picher, Inc. [Virgin Islands] Eagle-Picher Industries of Canada Limited [Canada] Eagle-Picher Industries Europe B.V. [Netherlands] Eagle-Picher Automotive GmbH [Germany] Eagle-Picher Espana, S.A. [Spain] Eagle-Picher UK Limited [England and Wales] Eagle-Picher Fluid Systems Ltd. [England and Wales] Eagle-Picher Hillsdale Limited [England and Wales] Eagle-Picher Wolverine GmbH [Germany] Eagle-Picher Technologies GmbbH [Germany] Eagle-Picher Minerals, Inc. [Nevada] Eagle-Picher Minerals International S.A.R.L. [France] United Minerals GmbH & Co. KG [Germany] United Minerals Verwaltungs- und Beteiligungs GmbH [Germany] Eagle-Picher Technologies, LLC [Delaware] EPTEC, S.A. de C.V. [Mexico] Equipos de Acuna, S.A. de C.V. [Mexico] Hillsdale Tool & Manufacturing Co. [Michigan] [] Brackets indicate state or country of incorporation and do not form part of corporate name. EX-23.1 8 EXHIBIT 23.1 1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-49957 of Eagle-Picher Industries, Inc. on Form S-4 of our report dated January 18, 1999, appearing in this Annual Report on Form 10-K of Eagle-Picher Industries, Inc. (a wholly owned subsidiary of Eagle-Picher Holdings, Inc.) and subsidiaries for the year ended November 30, 1998. /s/ Deloitte & Touche LLP Cincinnati, Ohio February 26, 1999 EX-23.2 9 EXHIBIT 23.2 1 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. 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 LLP Cincinnati, Ohio February 26, 1999 EX-27 10 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) AND THE CONDENSED CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000030927 Eagle Picher Industries 1000 US DOLLARS 9-MOS NOV-30-1998 DEC-01-1997 NOV-30-1998 1 13,680 0 146,373 1,529 88,873 266,586 279,061 30,524 816,326 156,022 459,183 0 0 180,005 (12,007) 816,326 645,984 645,984 502,973 502,973 127,541 0 36,313 (19,064) (4,700) (14,364) 0 0 0 (14,364) (143,640.00) (143,640.00)
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